Proud history; bright future

OPEC Bulletin Commentary April 2018

Baku, Azerbaijan; Digboi, Assam State, India; Baghdad, Iraq.

At first glance, it is not obvious what links these three distinct places that were the destinations of three OPEC missions over the last month. Digging into their history, however, it becomes clear that each destination constitutes a place of monumental significance in the journey of oil. In fact, if one wanted a brief synopsis of the industry’s history, studying these three places would provide it, as well as offering a prognosis for oil’s future trajectory.

Baku is a city synonymous with oil. The Arabian historian, Ahmed Al-Belaruri, writing in the 9th century, noted the reliance of the Absheron region on oil in ancient times, while Abu-Ishag Istekhri (10th–11th centuries) and Abu-d-Gasan Ali Masudi (10th century) also wrote of oil usage in the Baku region. In 1847–48, oil was first extracted from wells in Bibieybat and later Balakhany for industrial purposes. From the industry’s earliest days, Baku has played a crucial role in its development.

Given its unique status in the history of oil, Azerbaijan has a very special role to play in the fortunes of the industry in the 21st century. The country has fulfilled its responsibilities as a producer admirably, joining the ‘Declaration of Cooperation’ on December 10, 2016. Azerbaijan has consistently had one of the highest rates of conformity with the voluntary production adjustments. Moreover, OPEC’s relations with Azerbaijan are currently at an all-time high. This was the propitious backdrop to the Secretary General, Mohammad Sanusi Barkindo’s Mission to Azerbaijan in March.

Scholars of the history of oil will be familiar with the fabled town of Digboi, in Tinsukia district in the north-eastern part of the state of Assam, India. In the midst of dense jungle, a hotbed for malaria, in the 19th century, oil was accidentally discovered by a team of engineers working for the Assam Railways and Trading Company. According to legend, English engineer, W L Lake, saw oil on the feet of elephants emerging from the jungle and shouted, “Dig boy, dig,” hence the town’s name. This name alone is evocative of the excitement, as well as the bravery, of those involved in the early days of oil discovery.

Digboi Refinery is India’s oldest operating refinery, and is also one of the oldest in the world. The historic refinery has been termed the ‘Gangotri of the Indian hydrocarbon sector.’ Little wonder then, that OPEC’s Secretary General described his visit there as a “pilgrimage” and a “dream fulfilled.” The visit was part of a mission that involved bilateral meetings with Dharmendra Pradhan, India’s Minister for Petroleum and Natural Gas and the Minister for Skill Development and Entrepreneurship; and participation at the 16th IEF Ministerial Meeting and the Meeting of the Heads of JODI partner organizations.

Approximately 100 years after the discovery of oil in Digboi, another event occurred that would change the course of the industry and, indeed, history. On September 14, 1960, at the Al-Shaab Hall in Bab Al-Muadham, Baghdad, OPEC was founded. When a delegation from the OPEC Secretariat visited Iraq in March 2018 to meet leading Iraqi dignitaries and participate at the 4th Iraq Energy Forum, they also had the opportunity to make a pilgrimage to OPEC’s birthplace.

OPEC’s subsequent history has been well traversed, especially in the pages of this publication. The almost 58 years since that momentous day in Iraq has seen change on a tremendous scale; however, one thing remained constant: OPEC’s unwavering commitment to market stability in the interests of producers, consumers and the global economy alike.

The modern manifestation of this commitment is the historic ‘Declaration of Cooperation.’ The age-old principles at the heart of the Organization have been extended to forge an alliance with ten other non-OPEC oil producing countries, in order to fulfil the inherent responsibilities which come with being an oil producer. The initial prognosis of some industry commentators when the ‘Declaration of Cooperation’ first came into being in December 2016 was not promising. They did not think the cooperation would get off the ground, endure or have an impact on the market.

However, the actions of participating OPEC and non-OPEC countries have proven the doomsayers wrong. Current conditions in the market reflect the transformative impact the ‘Declaration of Cooperation’ has had on the global oil industry: market fundamentals are strong, conformity with the voluntary production adjustments is high, international cooperation is working and future prospects for the industry are much brighter.

From Baku-to-Digboi-to-Baghdad: an oil industry journey in three locations. And while all who work in the industry can be proud of petroleum’s role in fueling modern civilization, the spirit of the ‘Declaration of Cooperation’ has shown that this is an industry that has its best days ahead of it.

OPEC Bulletin April 2018

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