Introductory Remarks by OPEC Secretary General

Delivered by HE Mohammad Sanusi Barkindo, OPEC Secretary General, at the ADIPEC C-Suite Dialogue, 13 November 2017, Abu Dhabi, UAE.

Chairman, excellencies, ladies and gentlemen,
Good afternoon.

I had the honour of addressing the ADIPEC 2017 Official Opening Ceremony this morning to speak about the latest developments in OPEC’s unprecedented cooperation with its non-OPEC partners through the Declaration of Cooperation.

I pointed out how these courageous efforts, despite the voices of many who raised doubts at the outset, are now paying off in the form of a rebalancing market and a steady return of stability and predictability to the market.

South African Freedom Fighter and former President, Nelson Mandela, once said: “It always seems impossible until it is done.”

And, indeed, step by step, we are making progress towards achieving our common goal.

Excellencies, ladies and gentlemen,

We all know that we cannot look at the oil market simply from a short-term viewpoint, but rather we must step back and take stock of the larger picture.

That is what I would like to do in the next few minutes.

Just last week, we released our 2017 World Oil Outlook (WOO), the eleventh edition, which is OPEC’s annual flagship publication covering the medium to long-term outlooks for global oil and gas industry. We will also be presenting it today here at ADIPEC in the Middle East Petroleum Club at 4:25 this afternoon, so please attend if you can.

I should also note that, in addition to the print version of the WOO, we also provide an online interactive version that enables users to download specific data and information that support the analysis and commentary.

Excellencies, ladies and gentlemen,

The 2017 WOO paints a comprehensive picture of the path that lies ahead for the global oil market and our industry.

First of all, it tells us that oil and gas will continue to play a major role in the world’s energy mix for the foreseeable future, contributing an estimated 52% of the global energy mix by 2040.

Looking at demand, we see total primary energy demand increasing by 35% in the period to 2040. Long-term oil demand has been revised upward by 1.7 mb/d compared to last year’s WOO, with total demand now projected at over 111 mb/d by 2040. For the first time in history, demand is poised to hit the 100 mb/d mark by 2020.

The majority of this rising demand will come from developing countries, increasing by almost 24 mb/d, to reach 67 mb/d by 2040. The main sectors driving this growth are road transportation (5.4 mb/d), petrochemicals (3.9 mb/d) and aviation (2.9 mb/d).

Let me add here that, despite some common misperceptions among some analysts in the industry, we see no expectation for peak oil demand over the forecasted period. It is clear that oil will continue to play a major role over the long term in helping to meet the rapidly rising needs of these developing countries.

The scope of the challenge cannot be underestimated when you consider that an estimated 1.1 billion people around the world still have no access to electricity and over 2 billion rely predominantly on biomass.

Now, looking at the supply side, non-OPEC liquids supply has been revised upward from last year’s WOO from 57 mb/d to 62 mb/d in 2022. This is largely due to the recovery and improved outlook for US tight oil production, however, when we look further ahead, we see non-OPEC liquids output dropping to 60.4 mb/d by 2040. This is expected to translate into increased demand for OPEC crude, which is anticipated to reach 41.4 mb/d by 2040. The estimated share of OPEC liquids in total global liquids supply is expected to increase to 46% by 2040, up from 40% in 2016.

Another key issue featured in the 2017 WOO and an issue that is being discussed widely in the industry is the crucial need to reinstate adequate levels of long-term investment to the industry.

The recent price crash put a severe dent in industry budgets, with exploration and production spending falling by a massive 27% in both 2015 and 2016. Overall, nearly one trillion dollars in investments were frozen or discontinued, not to mention the many thousands of jobs that were lost.

With the massive upswing in demand forecast for the years ahead, a top priority for the industry will be to urgently restore investment to levels that will secure the energy requirements of future generations. Accomplishing this will be no small task as an estimated $10.5 trillion will need to be invested in the industry from now until 2040.

Although investments are expected to pick up slightly this year and in 2018, we are nowhere near the levels we have seen in the past. In addition, we are seeing more evidence of short-cycle rather than long-cycle projects, which form the basis for future industry growth. In fact, there are industry reports of sharp decreases in funds flowing into shale basins in the US from both public and private equity, which previously fueled the massive expansion.

And, let us remember that this is not only about boosting new production. Oil producers will need to account for natural decline rates, which can be 5% per year. This means that to maintain current production levels, the industry could be required to add more than 4 mb/d each year.

I must point out, though, that the foundation for investment and growth will only come through stability in the market. That is why we must always remind ourselves that long-term security of supply and short-term conditions are directly linked.

And, I am here to respectfully report to you that OPEC and its non-OPEC partners are making headway in restoring balance to the market. With global stocks coming down, a positive economic outlook and robust demand ahead, we are on the right track.

Based on our latest OPEC Monthly Oil Market Report published today, global stock levels are visibly down. Total OECD commercial oil stocks fell in September to stand below 300 mb. Thus, the stock overhang since the beginning of this year alone has dropped by more than 180 mb.

The global economic growth dynamic has continued its momentum with the forecast for 2017 revised up to 3.7%, and the economic outlook is positive into 2018 with the rate remaining at 3.7%. Better-than-expected growth in the OECD area, solid growth in China and India, as well as improving situations in Russia and Brazil are all supporting the growth.

Global demand growth for oil is higher and robust, and is expected to remain above 1.5 mb/d for both 2017 and 2018. This is higher than in the previous assessment and can be attributed, in particular, to a strong performance in Asia.

Excellencies, ladies and gentlemen,

The landmark Declaration of Cooperation, now in its eleventh month, has provided the necessary framework for the development of a lasting stability in the market. At the upcoming 173rd Meeting of the OPEC Conference and the 3rd OPEC-Non-OPEC Ministerial Meeting on 30 November, we will commemorate the one-year anniversary of this path-breaking, landmark cooperation.

These committed efforts will continue until a sustainable stability in the market is achieved. When this occurs, it is not just OPEC and non-OPEC Member Countries that will benefit, but rather the entire industry and all of its stakeholders. It will be a win-win for all.

As we go forth on this path to a lasting stability, we welcome a broader dialogue among other producers outside of the Declaration of Cooperation, as well as consumers. In this regard, we hope to build upon the dialogue with producers in the US that debuted a year ago with my week-long visit to the United States for high-level meetings in Washington and New York, and continued in March of this year at CERA Week in Houston.

All these efforts boil down to one thing — in an increasingly globalized and interdependent global oil industry, stakeholders must work together to achieve their common goals. They face the same daunting challenges and, many times, share the same objectives.

Therefore, I take this opportunity to extend an invitation to the world’s oil producers to join this train of global stability in the oil industry that took off last year in Algiers. Together, let us endeavour to achieve a global oil market that is once again healthy, growing and sustainable for the benefit of this and future generations.

Thank you.

HE Mohammad Sanusi Barkindo, OPEC Secretary General

HE Mohammad Sanusi Barkindo, OPEC Secretary General

HE Mohammad Sanusi Barkindo, OPEC Secretary General, with Ms. Eithne Treanor, ADIPEC Moderator

HE Mohammad Sanusi Barkindo, OPEC Secretary General, with Ms. Eithne Treanor, ADIPEC Moderator

Dr. Ayed S. Al-Qahtani, Director of OPEC's Research Division, presents the WOO 2017 at ADIPEC

Dr. Ayed S. Al-Qahtani, Director of OPEC's Research Division, presents the WOO 2017 at ADIPEC

HE Barkindo, OPEC Secretary General, visits the OPEC stand at the exhibition

HE Barkindo, OPEC Secretary General, visits the OPEC stand at the exhibition