Cooperation: the tried and tested approach

OPEC Bulletin Commentary October 2018

The nature of the oil industry means that it is often subject to forces beyond any one individual stakeholder’s capacity to control. Geopolitical events, natural catastrophes, technological breakthroughs, to name a few; the history of the oil industry is laden with examples where unexpected events have had huge ramifications. In recent years, this trend has appeared particularly acute.

OPEC Secretary General, Mohammad Sanusi Barkindo, acknowledged this in his keynote address at the ‘Africa Oil and Power Conference’, held in South Africa in early September. He alluded to the fact that unexpected forces can often appear to have a trajectory of their own.

This can pose challenges for all stakeholders in the international oil industry. OPEC often must navigate a path through these complex challenges. Nevertheless, the Organization remains unwavering in its commitment to its core aim: oil market stability, which is integral to the interests of both producers and consumers.

The fact remains that our world is highly interconnected and globalized. This means that no one stakeholder can overcome obstacles acting alone. Previous experience has shown that international cooperation and dialogue between stakeholders, including consumers and producers, remains the most effective problem-solving mechanism, as well as the key conduit for knowledge exchange.

This is evidently the bedrock of the ‘Declaration of Cooperation’ process. OPEC Member Countries, working hand-in-glove with their non-OPEC partners, have taken action that has helped nurse the global oil industry back to a healthy state following the worst downturn in its history.

The Joint Ministerial Monitoring Committee (JMMC) attested to this progress when it convened in Algiers, Algeria for its tenth meeting, on September 23, 2018. In its Press Release, the Committee noted that, “despite growing uncertainties surrounding market fundamentals, including the economy, demand and supply, the participating producing countries of the ‘Declaration of Cooperation’ continue to seek a balanced and sustainably stable global oil market, serving the interests of consumers, producers, the industry and the global economy at large. The Committee also expressed its satisfaction regarding the current oil market outlook, with an overall healthy balance between supply and demand.”

The ‘Declaration of Cooperation’ process may appear to be novel; however, it should be borne in mind that it is in fact the modern manifestation of a faith in international cooperation that is intrinsic to OPEC. As an intergovernmental organization, the Organization is a strong supporter of the multilateral system. OPEC was registered with the UN Secretariat as an inter-governmental organization on November 6, 1962, following UN Resolution No 6363.

Throughout the following decades, OPEC has enjoyed an expanding and productive relationship with the UN. This has been a priority for Barkindo since his appointment as Secretary General in August 2016.

In March 2017, the OPEC Secretary General met with the newly appointed Deputy Secretary General of the UN, Amina Mohammed. This was an opportunity to discuss the broad spectrum of issues on which the two entities collaborate. The Secretary General has also been involved in extensive, ongoing dialogue with Patricia Espinosa, Executive Secretary of the UN Framework Convention on Climate Change (UNFCCC), who spoke recently at the 7th OPEC International Seminar. These talks have opened up further possibilities for enhancing collaboration between OPEC and the UNFCCC on matters such as climate change, sustainable development and economic diversification.

OPEC is also committed to engaging in bilateral dialogue with consumers. Energy dialogues regularly take place with China, the European Union (EU) and India. The Secretary General will travel to New Delhi to participate in a range of engagements later in October, which also includes the OPEC-India Energy Dialogue. Throughout the entire ‘Declaration of Cooperation’ process, OPEC has solicited and sought to respond to the views of consumers. It will continue to do so going forward.

So while critical uncertainties may constitute an important force in our industry, as the Secretary General said in South Africa, “there is another force alive and well in our industry. This force exists in the desire of producers, consumers and investors, ordinary women and men throughout the world, to have sustainable stability in the oil market.

“This force thrives in the hearts and minds of decision makers who know that cooperation, collaboration and team-work remain the most effective problem-solving techniques this industry or indeed any industry knows. This force underpins the ‘Declaration of Cooperation’ and encourages other stakeholders, many of whom are in this room, to lend their support to this noble cause.”

OPEC Bulletin October 2018

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