Egypt Petroleum Show 2018

Keynote speech delivered by HE Mohammad Sanusi Barkindo, OPEC Secretary General, at the Presidential Opening Ceremony of the Egypt Petroleum Show 2018, 12 February 2018, Cairo, Egypt.

Mr President, Excellencies, distinguished delegates, ladies and gentlemen,

It is a distinct honour, and indeed a great pleasure for me to be here today to deliver this keynote address on the occasion of such an important event as the Egypt Petroleum Show, held under the patronage of His Excellency Abdel Fattah El Sisi, President of Egypt.

On a personal note, I would like to pay my deep respects to the indefatigable President Abdel Fattah El Sisi.  His leadership of Egypt, his great guidance and his vision for the country’s future should be widely acclaimed.

Today, is also an opportunity to thank the President and His Excellency Tarek El Molla, Egypt’s Minister of Petroleum & Mineral Resources for the country’s welcome attendance, engagement and solidarity as an observer at the 173rd Meeting of the OPEC Conference and active participation at the 3rd OPEC and non-OPEC Ministerial Meeting in Vienna on 30 November last year.

I should note here that Egypt has a long history of cooperation with OPEC.  I recall that Cairo hosted the First Arab Petroleum Congress in April 1959, and helped set the path towards the establishment of OPEC.

On the last day of that Congress, a number of visionary leaders, namely Juan Pablo Pérez Alfonzo of Venezuela, Abdullah al-Tariki of Saudi Arabia, Dr Fuad Rouhani of Iran, Dr Tala’at al-Shaibani of Iraq, and Ahmed Sayed Omar of Kuwait, slipped off one by one to meet secretly at the Cairo Yacht Club here in Maadi.

These five founding fathers of OPEC, forged what has become known as a ‘gentlemen's agreement’ in Cairo.  It was here where the idea of OPEC was incubated, before it came into the world in Baghdad in September 1960.

Egypt was also a pioneer non-OPEC producer in terms of its cooperation with OPEC.  The country has shown great foresight in reaching out to others.  It was one of the first observers to the OPEC Conference back in 1984; it contributed to oil market stabilization efforts in the late 1980s; and, this historic city hosted OPEC ministerial level meetings in the 2000s.

Today, Egypt is also fast becoming a key regional hub for energy and a global player in the industry.  Over the last few years it has made great strides in discovering and developing its energy resources, under the able and far-sighted leadership of its President.

This is particularly true in natural gas, with fields such as Zohr, North Alexandria and Nooros, which are expected to make Egypt self-sufficient in natural gas, but also in oil, with new fields being developed in the country.

Egypt’s presence at the landmark meetings of 30 November 2017, alongside a further five additional non-OPEC producing countries should be highly commended.

It meant that at these meetings, 30 oil producers, with 24 producers already part of the ‘Declaration of Cooperation’, affirmed their commitment to restoring stability to the oil market on a sustainable basis, in the interests of producers, consumers, and the global economy.

To put it simply: it is unparalleled in the history of the oil industry.

When researching my speech for today, I came across a number of Egyptian sayings or proverbs that were carved on temples and tomb walls thousands of years ago.  One of these read: “The seed cannot sprout upwards without simultaneously sending roots into the ground.”

It is very apt for the historic cooperation that we have witnessed between OPEC and non-OPEC through the ‘Declaration of Cooperation’.  The roots of this cooperation are the foundation on which the success has been built, and it will remain fundamental to it flowering further in the years ahead as we look to institutionalize the ‘Declaration of Cooperation’, beyond rebalancing the market.

We need to remember that the strength of the team is each individual member.  And the strength of each member is the team.

It is why the ‘Declaration of Cooperation’ remains open to all producers.  We believe it is a continuity partnership that can work for everyone, across all timeframes, to help deliver the sustainable market stability we all desire.

Mr President, Excellencies, ladies and gentlemen,

In looking at the current oil market situation, there is no doubt that the industry is starting to feel a warmer glow.

The overall market fundamentals are strong.

In 2017, the global economic recovery gathered momentum. This positive trend is expected to be maintained in 2018 with an extremely healthy growth forecast of 3.8%.

Correspondingly, global oil demand growth has been robust and strengthening.  It is expected to grow by 1.6 mb/d in 2018, the same level as in 2017.  We now also see global oil demand surpassing the 100 mb/d threshold much earlier than we previously expected.

In addition, the OECD stocks overhang has fallen from around 340 million barrels (mb) against the five-year average at the start of 2017, to a currently reported level of just above 100 mb.

And also significantly, the three benchmark crudes of Brent, WTI and Dubai remain in backwardation.

This rebalancing has evidently been driven by the unprecedented conformity levels of participating OPEC and non-OPEC countries in the ‘Declaration of Cooperation’.

The monthly average conformity level for the first year was a remarkable 107% for the voluntary production adjustments.  Moreover, it hit a record conformity level of 129% in December 2017.

We have gone beyond what was originally envisaged.  The results speak for themselves.  And we continue to have the same focus and commitment as we head into 2018.

We will not be complacent, and we will stay the course in helping bring stocks down to normal levels.

Mr President, Excellencies, ladies and gentlemen,

The world will need more energy in the years ahead.

In OPEC’s World Oil Outlook 2017 published last November, energy demand is set to increase by a huge 35% in the period to 2040.

Moreover, 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.

This will obviously require huge investments, such as those being made by Egypt over the past few years, as well as by OPEC Member Countries who have continued to invest in their industries throughout this recent volatile down-cycle.  This has positioned them well to maintain their leading roles as reliable and dependable suppliers to expanding economies around the world.

However, it is important to remember that globally more than a trillion dollars of capex cuts have been witnessed in recent years, with upstream E&P investments falling by an enormous 27% in both 2015 and 2016.

It is essential to recall that the foundation for investment and growth comes through balance and stability in the oil market.  Stability today begets stability tomorrow.  We need to remember that the short-, medium- and long-terms are inter-linked in multiple ways.

That is why the success of the ‘Declaration of Cooperation’ has proven to be so important to the strong fundamentals of the global oil market today.

Looking ahead, I firmly believe that the future of our industry will be built on cooperation.  And let me say that I also firmly believe that the best for our industry is yet to come.

From OPEC’s perspective, together with our friends from non-OPEC we turned an historic page in December 2016 through the formation of the ‘Declaration of Cooperation’, and today we are helping write a new chapter in the book focused on sustainable stability in the global oil industry.

Let me add that here that the book is not finished.  In fact, it has only just begun.  We expect to write many more chapters in the years ahead.

Thank you.

HE Abdel Fattah El Sisi, President of Egypt (r), welcomes HE Mohammad Sanusi Barkindo, OPEC Secretary General; in Cairo, Egypt

HE Abdel Fattah El Sisi, President of Egypt (r), welcomes HE Mohammad Sanusi Barkindo, OPEC Secretary General; in Cairo, Egypt

HE Barkindo, OPEC Secretary General (second l), pictured with delegates at the Egypt Petroleum Show 2018

HE Barkindo, OPEC Secretary General (second l), pictured with delegates at the Egypt Petroleum Show 2018