Special Keynote Address by OPEC Secretary General

Delivered by HE Mohammad Sanusi Barkindo, OPEC Secretary General, at the Nigeria Oil and Gas Conference and Exhibition, 3 July 2018, Abuja, Nigeria.

Excellencies, distinguished delegates, ladies and gentlemen,

It is my absolute privilege to address the Nigeria Oil and Gas Conference and Exhibition, which is in its seventeenth year. This is actually my first engagement outside of Austria since one of the busiest weeks in the history of OPEC, which included meetings, conferences and the 7th International OPEC Seminar. This makes it even nicer to return back to our magnificent home country!

I must confess, it does feel somewhat bitter-sweet to participate this year. Sadly, 2018 marked the passing of one of the fathers of this conference- Dr.  Alirio Parra.

[Slide 3]
Although a Venezuelan, Dr. Parra was truly a global citizen and cared passionately about Nigeria. He was so concerned with this country’s welfare that he was gladdened by our successes as much as any Nigerian patriot. I know many of you considered his passing as a loss of one of our own.

He was the quintessential gentleman, a true OPEC pioneer, an oil industry innovator, a man who was always willing to share his great wisdom with others, and a witness to many historic OPEC moments.

How best to encapsulate the loss we all feel of Alirio’s sad passing while expressing the great joy we have in celebrating his momentous life? I can only do so by recalling the timeless Sonnet of William Shakespeare:

When to the sessions of sweet silent thought
I summon up remembrance of things past,
I sigh the lack of many a thing I sought,
And with old woes new wail my dear time's waste:
Then can I drown an eye, unus'd to flow,
For precious friends hid in death's dateless night,
And weep afresh love's long since cancell'd woe,
And moan th' expense of many a vanish'd sight;
Then can I grieve at grievances foregone,
And heavily from woe to woe tell o'er
The sad account of fore-bemoaned moan,
Which I new pay as if not paid before.
But if the while I think on thee, dear friend,
All losses are restor'd, and sorrows end.

The continued success of this conference, typifies the rich legacy he bequeathed all of us.

Alirio worked closely with another great industry icon in creating this conference: Dr. Rilwanu Lukman, former OPEC Secretary General, Presidential Adviser and Minister of Petroleum Resources. Indeed, this conference is a result of their friendship.

As his adopted son, friend and close confidant, I can tell you firsthand that Dr. Lukman’s love of country was truly awe-inspiring. Like many people in this room, I owe him an enormous debt; as he was the greatest mentor I could possibly have hoped for. His legacy is felt as a mining engineer, in geoscience and in the hydrocarbon industry, but more importantly, he was a fundamentally warm and decent human being. He was a man of remarkable vision and embodied those immortal words of the Irish playwright George Bernard Shaw, which I now paraphrase:

Some men see things as they are and say, ‘why?’
Dr. Lukman dreamed things that never were and said, ‘why not?’

The memory of these two titans will inspire the next generation of industry leaders.

This is the second time in six months at which I have had the honour of addressing a premier energy event in Nigeria. In February, I was here at the maiden Nigeria International Petroleum Summit.

It is no surprise that our country continues to blossom as one of the key venues for major petroleum sector discussions. It is testimony to the immensity of Nigerian statesmanship.

[Slide 4]
For this reason, in March, the OPEC Bulletin, our monthly magazine, was a Special Edition dedicated to Nigeria. It was a celebration of the enormous contribution that Nigeria has made to the betterment of our Organization. The wealth and depth of Nigerian statesmanship was also discussed, and I would like to acknowledge some of the pillars who have done so much to elevate the international standing of our country.

I would like to pay tribute to the President of this great country, His Excellency Muhammadu Buhari. President Buhari has made an invaluable contribution to OPEC’s recent landmark decisions and their ongoing successful implementation. He is a tremendous credit to our country through his integrity, Spartan lifestyle and patriotic dedication.

At OPEC, we very much consider President Buhari as ‘one of our own.’ An OPEC veteran, he has been heavily involved in the Organization’s affairs for decades and is currently the only serving Head of State in the world who made his career by being intensely involved in the OPEC family. He has maintained his avid interest in our Organization and we all draw inspiration from his commitment.

Nigeria enjoys world renown as a consensus builder and deal maker. A special gentleman who has made a colossal contribution to this is Dr. Emmanuel Ibe Kachikwu, Minister of State for Petroleum Resources. His diplomatic skill and gravitas were on display last week in Vienna during our bumper agenda of meetings. Once again, I commend you, Excellency, for your stellar work.

Indeed, we are very grateful for the high-level presence of Nigeria at the Seminar through a large delegation, which included many Nigerian companies and oil industry representatives that made a great contribution, including their generous sponsorship.

Further testimony to Nigeria’s prestige in the multilateral system is the fact that I am just one of several of my compatriots who hold senior positions in intergovernmental organizations. Amina J. Mohammed is Deputy Secretary-General of the United Nations (UN); Dr. Akinwumi Adesina is President of the African Development Bank; Dr. Olumuyiwa Benard Aliu is the current President of the International Civil Aviation Organization’s Council; Dr. Benedict Okey Oramah is President of the African Export-Import Bank and Judge Chile Eboe-Osuji is President of the International Criminal Court.

My friends, these facts, Alirio and Lukman’s legacies, and Nigeria hosting two major international petroleum events this year means we can truly say that we are living through a golden era of Nigerian statesmanship. This is testimony to the way in which President Buhari has elevated the international profile of our country.

Nigeria has historically assumed, a strong, proactive leadership role in OPEC. I am delighted to be able to inform you that following a decision at the 174th OPEC Conference on 22 June 2018, the African continent gained an additional voice in our Organization: the Republic of the Congo became the fifteenth Member Country of OPEC. This is a tremendous boon for our entire Organization and continues the positive trajectory which saw Gabon rejoin OPEC in 2016 and Equatorial Guinea join in 2017.

Excellencies, Ladies and gentlemen,

At this very moment, as I speak, schoolchildren are boarding the bus to make their way to morning lessons. Mothers and fathers are returning home after working nightshifts. An elderly grandparent is being transported to see their doctor. Farmers are fertilizing their fields. Families are being reunited; communities are being brought together.  And these are scenes being repeated millions of times here and across the globe.

What links these seemingly disparate scenes of everyday life? Petroleum. Indeed oil is so intrinsic in daily life that we sometimes overlook the fact that our industry has an impact on the individual experiences of billions of people.

And while I would not for a minute, suggest that our industry is perfect, I believe we can take pride in oil’s role in fueling modern civilization, lifting millions out of poverty and contributing to sustainable development.

Extreme volatility in the oil market has very negative consequences for such consumers and producers. Low oil prices are bad for producers today and create situations that are bad for consumers tomorrow.  And high oil prices are bad for consumers today and lead to situations that are bad for producers tomorrow. Volatility is a devastating disincentive for investment, which is the lifeblood of our industry and essential for ensuring adequate supply in the future.

[Slide 5]
We saw this during the last industry downturn. From 2014 to 2016, world oil supply growth outpaced that of oil demand, with world oil supply growing by 5.8 mb/d, while world oil demand increased by 4.3 mb/d.

[Slide 6]
By July 2016, OECD commercial stock overhang reached a record high of about 403 mb over the five-year average. The OPEC Reference Basket price fell by an extraordinary 80% between June 2014 and January 2016.

[Slide 7]
What was particularly ominous for consumers was the fact that investments were choked-off, with exploration and production spending falling by an enormous 25% in both 2015 and 2016. Additionally, nearly one trillion dollars in investments were frozen or discontinued, and many thousands of high quality jobs were lost. A record number of companies in our industry filed for bankruptcy.

[Slide 8]
Lack of investment on this scale has very serious repercussions for future consumers, especially given the increase in world oil demand which is expected in the long term. According to OPEC’s World Oil Outlook, long-term oil demand is expected to increase by 15 mb/d, rising from 94.5 mb/d in 2016 to 111.1 mb/d in 2040.

To meet the projected increase in global oil demand, investments worth an estimated $10.5 trillion will be required. Investment is also necessary to offset the impact of natural decline rates, which can be as high as 5% per year. To maintain current production levels, the industry might need to add upwards of 4 mb/d each year.

[Slide 9]
This background gives a sense of the gravity of the situation as OPEC and its non-OPEC partners held intensive discussions throughout 2016 to build consensus about the strategic urgency of rebalancing the global oil market in a collective manner. The situation was bleak, but as the saying goes, the darkest hour is the one just before the dawn.

So began the most intensive negotiations in the history of the Organization. Meetings lasted hours, days and nights.  I witnessed displays of stamina in those sessions that I’ve never seen before in my life: including from our own Minister Kachikwu.

Thankfully, all these labours were not in vain. With the landmark “Declaration of Cooperation,” twenty-four (now twenty-five) oil producing nations agreed at the first OPEC non-OPEC Ministerial Meeting held on the 10th of December 2016 in Vienna, on a concerted effort to accelerate the stabilization of the global oil market through voluntary production adjustments of around 1.8 mb/d. The second OPEC non-OPEC Ministerial Meeting, held on the 25th of May 2017, extended the voluntary production adjustments for another nine months commencing on the 1st of July 2017.

Following the third OPEC and non-OPEC Ministerial Meeting on the 30th of November 2017, the Declaration of Cooperation was amended to take effect for the whole year of 2018.

The 174th Meeting of the OPEC Conference and the 4th OPEC and non-OPEC Ministerial Meeting, held on 22 and 23 June 2018, reaffirmed the partners’ unshakeable resolve to act in the interests of producers and consumers. Participating Countries agreed to strive to adhere to the overall conformity level of 100%, for the remainder of 2018.

[Slide 10]
The adjective which most appropriately describes the impact the “Declaration of Cooperation” has had on the global oil market is “transformational.”

  • It has caused a significant change in industry-wide and public perceptions of OPEC. The Organization has repeatedly demonstrated its credentials as a body committed to international cooperation, working with other producers, honouring its commitments and promoting mutual respect among all nations.
  • Bringing together 25 sovereign producing nations is unparalleled in the history of the oil industry. The “Declaration of Cooperation” strategic partnership constitutes a fundamental and essential feature of the ‘new world of energy.’
  • A long-absent element of stability has been reintroduced to the market – industry optimism and confidence abounds.
  • It is a transparent and fully accessible platform; open to all producers. It has evolved into a broader continuity partnership that can work for everyone, across all timeframes, to help deliver the sustainable market stability we all desire.
  • The importance of the Declaration has also received backing from other producers, as well as from consumers.

[Slide 11]
Conformity with the voluntary adjustments in production has been extremely high: 147% in May 2018. The OECD commercial stock overhang above the five-year-average has been reduced by more than 370 mb since the Declaration of Cooperation came into force, and switched to a deficit of 35 mb in May 2018.

[Slide 12]
Contemporaneous with this improvement in oil market sentiment has been the synchronous economic growth the global economy is experiencing. Global economic growth is forecast at 3.8% for 2018. Correspondingly, global oil demand has also been on the rise increasing by 1.7 mb/d in 2018, with 4Q18 surpassing the mark of 100 mb/d.

Excellencies, Ladies and Gentlemen,

As I mentioned earlier, OPEC has had a particularly intensive schedule over the last fortnight. I would like to provide a brief overview of outcomes from the 7th OPEC International Seminar.

The Seminar was attended by over 900 delegates from 51 countries, representing the global community. Indeed, the Seminar was a multipurpose forum for dialogue among all stakeholders in the energy community, including both producers and consumers.

In preparing our Seminar, we were very much inspired by Nigeria’s great track record in organizing high level events, such as this conference and NIPS in February.

What was the watchword from these seminal events? Cooperation. The last year has demonstrated the enduring capacity of collaboration among nations to surmount obstacles.

As an intergovernmental organization, faith in multilateralism and international cooperation is integral to OPEC’s DNA. This faith manifests its modern expression in our strategic partnership with our non-OPEC partners, who honoured us through their active participation and engagement during the OPEC International Seminar.

Given this success, I once again extend an open invitation to all producing countries to consider joining us in our common mission to work towards sustainable market stability.

Ladies and gentlemen,

The ever-evolving nature of the petroleum sector means that industry leaders always face difficult decisions, must make hard choices and respond to events, both expected and unexpected. Success breeds success; where we find it, we must build on it, to make it sustainable.

The times we live in often appear turbulent and challenges daunting. Such is the pace of change that sometimes it can be difficult just to catch our breath. And yet, experience has repeatedly shown that the enduring principles of cooperation; collaboration and transparency can lead us out of any darkness and into the light.

May we always have the courage of our convictions and work together. With this in mind, I truly believe that the times we live in and how we respond to them can be encapsulated by the immortal words of Shakespeare in the play “Julius Caesar”:

There is a tide in the affairs of men.
Which, taken at the flood, leads on to fortune;
Omitted, all the voyage of their life
Is bound in shallows and in miseries.
On such a full sea are we now afloat,
And we must take the current when it serves,
Or lose our ventures.

God bless you all and may He always bless the Federal Republic of Nigeria.

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HE Mohammad Sanusi Barkindo, OPEC Secretary General, delivers his address in Abuja, Nigeria

HE Mohammad Sanusi Barkindo, OPEC Secretary General, delivers his address in Abuja, Nigeria

HE Dr. Emmanuel Ibe Kachikwu, Nigeria's Minister of State for Petroleum Resources (l); and HE Mohammad Sanusi Barkindo, OPEC Secretary General

HE Dr. Emmanuel Ibe Kachikwu, Nigeria's Minister of State for Petroleum Resources (l); and HE Mohammad Sanusi Barkindo, OPEC Secretary General

HE Mohammad Sanusi Barkindo, OPEC Secretary General (first r); pictured with officials at the Nigeria Oil and Gas Conference and Exhibition

HE Mohammad Sanusi Barkindo, OPEC Secretary General (first r); pictured with officials at the Nigeria Oil and Gas Conference and Exhibition

HE Barkindo, OPEC Secretary General (second r); visits OPEC's stand at the exhibition

HE Barkindo, OPEC Secretary General (second r); visits OPEC's stand at the exhibition