Keynote Address by OPEC Secretary General at the APPO CAPE VII Congress and Exhibition

Delivered by HE Mohammad Sanusi Barkindo, OPEC Secretary General, at the APPO CAPE VII Congress and Exhibition, Sipopo International Conference Hall, 3 April 2019, Malabo, Equatorial Guinea.

Excellencies, ladies and gentlemen,

It gives me great pleasure to return home to mother Africa and to participate at such an important oil industry event, the APPO CAPE VII Congress and Exhibition, and one that is taking place in an OPEC Member Country, Equatorial Guinea.

Since it became an OPEC Member in May 2017, Equatorial Guinea has played an ever more proactive and expansive role in helping deliver the Organization’s mission and objectives.  This has been particularly evident through the historic ‘Declaration of Cooperation’ between OPEC nations and 10 non-OPEC producers, which was put together to stimulate and accelerate the drawdown of the stock overhang, expedite the rebalancing of the oil market, restore a sustainable stability to the oil industry and enable investments to return.

The success and the future evolution of the historic ‘Declaration of Cooperation’ is something I will return to later in my remarks.

The year 2019 is what Equatorial Guinea has labelled its ‘Year of Energy’ campaign, with the country promoting intra-African cooperation and pan-African alliance building, championing its oil and gas projects and hosting other flagship energy events, such as the forthcoming 5^th Gas Exporting Countries Forum Summit in November this year.

The ‘Year of Energy’ actually sits between two landmark milestones, the 50^th anniversary of Equatorial Guinea’s Independence Day on 12 October, 2018, and the 60^th Anniversary of OPEC and the historic Baghdad Conference that will take place from September 10–14, 2020: two significant events for developing nations asserting their sovereign and legitimate independence over their natural resources.

In terms of the ‘Year of Energy’ campaign I can already sense the benefits and possibilities at this Congress.  The commitment of Equatorial Guinea, and the courage of its able leaders is clear for all to see.

All this has been made possible by a statesman who has shown great fortitude, bravery and vision over the past 38 years in leading his country, His Excellency Teodoro Obiang Nguema Mbasogo, President of Equatorial Guinea.  He is a symbol of peace, stability and prosperity on the African continent.

On the energy side, the President is ably and skillfully supported by HE Gabriel Mbaga Obiang Lima, the country’s Minister of Mines and Hydrocarbons and his very able team.

In preparing for this event, I was actually reading an interview that HE Mbaga Obiang Lima conducted with the OPEC Bulletin in December last year.  In this, he stated that the ‘Declaration’ had been something extremely positive for Equatorial Guinea, the best thing for oil producers, and important for consumers too.

These are wise words.

In less than two years, Equatorial Guinea has become a key advocate for OPEC and an important influencer for the Organization.  It has found a welcome home in the OPEC family.

It is clear that the country’s leadership recognizes the value in working through organizations like OPEC, which can empower African countries with a voice on the international stage.

Under the exemplary and visionary leadership of President Obiang Nguema Mbasogo, and the stewardship of HE Obiang Lima, the country’s oil and gas sector is continuing to evolve and expand, and help further energize its economy.

This includes attracting new investment, plans to launch new licensing rounds for both oil and natural gas, with many overseas operators interested in new blocks, as well as continuing work on improving the regulatory environment.

The advancement in Equatorial Guinea’s business environment was recently commended by the African Energy Chamber, which highlighted the country’s establishment of an all-inclusive model for setting up businesses in the country.  It said that the new one-stop shop allows companies to set up a business in the country in only one week, putting the country at par with global standards.

These developments should all be lauded.  Equatorial Guinea is becoming a beacon of light for oil industry investment – the vital cog in our industry’s future – one of the key doorways to the Gulf of Guinea, and a driving force for cooperation across the region.

I have no doubt the future is bright for the country, not only due to its oil and gas sector, but also given some of its other resources, such as its rich expanses of water and deepwater ports, as well as its efforts to diversify the economy by encouraging agriculture and financial services.

I would also like to take this opportunity to thank the organizers of this event, the African Petroleum Producers Organization, its President HE Emmanuel Ibe Kachikwu from Nigeria, and its Secretary General, HE Mahaman Laouan Gaya.  Not only for putting on such a great conference, but also for the continued backing of the ‘Declaration of Cooperation’.

HE Gaya has been a regular attendee at OPEC and non-OPEC Ministerial Meetings in Vienna, offering encouragement and support for the ‘Declaration’ and its objectives.  I also know that he is a keen advocate of African regional cooperation and the advancement of synergies in all sectors of the continent’s economies in order to boost growth.

This is clearly evident here in Equatorial Guinea, and at this APPO Congress and Exhibition.

It is much easier to collaborate when we are united; when we find common cause and goals.  As the famous English poet John Donne once said:

“No man is an island, entire of itself; every man is a piece of the continent.”

Excellencies, ladies and gentlemen,

This line leads me elegantly back to the ‘Declaration of Cooperation’ itself and how this reinforced the mantra that ‘together we can do so much’.

Allow me turn your minds back to the period 2014-2016; it is not a time that conjures up happy thoughts for the industry.  The severe three-year downturn brought the industry to its knees.

Throughout 2016 there was a recognition that it would take a monumental effort to turn this situation around.  However, this herculean task was one that needed to be undertaken.

Through numerous and extensive bilateral and multilateral consultations with many OPEC Ministers, non-OPEC Ministers, as well as some Heads of State and Governments, 24 OPEC and non-OPEC producing nations, eventually to draft and agree on the landmark ‘Declaration of Cooperation’ in December 2016.

It was a first in many ways:

It brought together 24 sovereign producing nations, which is unparalleled in the history of the oil industry.

It also focused on a key industry metric, the five-year average for OECD commercial oil stocks, which was both definable and measurable.

And from the beginning, it was a transparent and fully accessible platform, through its key functioning bodies, the Joint Ministerial Monitoring Committee (JMMC) and the Joint Technical Committee (JTC), all supported by the OPEC Secretariat.

Of course, it took some time to reverse the pathway the industry had been on, but there is no doubt that the ‘Declaration’ has had a transformational impact on the global oil industry and has received the backing of other producers, as well as consumers. It has broken long standing barriers and turned a new glorious page in the history of oil.

The change we have seen over the past two years or so is like night and day.

It took us around 18 months to assist the oil market in returning OECD inventory levels to the five-year average, which helped return balance to the market and reintroduced a long-absent element of stability.  There is now far more optimism and confidence in our industry.

Moreover, when we saw conformity levels to the voluntary production adjustments overshoot in the middle of 2018, we were agile and flexible enough to modify course and stay ahead of the curve.  When the market has appeared skewed to oversupply, we reacted accordingly, and equally, when concerns were expressed regarding demand outpacing supply, the partners in the ‘Declaration’ took the appropriate action.

It has had a positive impact on the global economy, and trade worldwide responded positively, helped by the stimulus provided through the ‘Declaration’.

The financial markets, in general, and the financial oil market, in particular, have welcomed the forward guidance provided by the ‘Declaration’.  It has given them a sense of understanding and security, and to avoid any crisis like that seen in 2008.

It has also caused a significant change in industry-wide and public perceptions of OPEC.  The Organization has ably demonstrated its credentials as a body committed to international cooperation, working with other producers, honouring its commitments and promoting mutual respect among all nations.

Let me stress that we also recognize our mission is never accomplished; the challenge of balancing the market and maintaining stability is a continuous process.

This was in evidence at the most recent meeting of the JMMC in Baku, Azerbaijan, on March 18.

The Committee recognized the current, critical uncertainties surrounding the global oil market throughout 2019, and stressed on the shared responsibility of all participating countries in the ‘Declaration of Cooperation’ to sustain market stability and prevent the recurrence of any market imbalance.

Every country understands the importance of achieving full and timely conformity with their voluntary production adjustments under the decisions of the 175^th Meeting of the OPEC Conference and the 5^th OPEC and non-OPEC Ministerial Meeting, on the 6 and 7 December 2018.

Overall conformity levels to the new voluntary production adjustments, reached almost 90% for the month of February 2019, which is up from 83% in the month of January.  We expect them to improve further in the coming months.

While we have seen a marked improvement in market conditions in the 1Q19, compared to the turbulence and volatility of the 4Q18, with the market steadily moving towards a more balanced state, we still believe we need to see inventory levels drop further.

We also recognize the fact that underlying risks remain, such as ongoing trade negotiations, monetary policy developments, as well as increasingly complex geopolitical challenges and climate change-related concerns.

Additionally, we need to see a further pick-up in industry investments, particularly for long cycle projects.  We need to remind ourselves that exploration and production spending fell by an enormous 27% in both 2015 and 2016, and only increased by 8% in both 2017 and 2018.

It is why we continue to take a very measured approach through the ‘Declaration of Cooperation’ – we look at the economic and market outlook, and we listen to consumers and other stakeholders.

The ‘Declaration’ is not about short-termism.  We are focused on continuity; we are steadfast and completely unwavering; we have long-term objectives and goals.

This was exemplified in Baku through further statements of support by participating countries for a permanent intergovernmental platform, under the Charter of Cooperation between Oil Producing Countries.

Excellencies, ladies and gentlemen,

When looking at the ‘Declaration of Cooperation’ it gives me great pleasure to say that over one-third of the 24 participants are from Africa:  Algeria; Angola; the Republic of the Congo; Equatorial Guinea; Gabon; Libya; Nigeria; Sudan; and South Sudan.

Moreover, half of OPEC’s Membership comes from this continent of Africa.

This underscores the vital role this great continent plays within OPEC, within the ‘Declaration of Cooperation’, and within the global oil industry.

As we all know, it is also a great continent with enormous resources; ever-expanding financial, industrial and business sectors; a growing and dynamic population; and a place that still has huge untapped potential.

In terms of oil, Africa has around 130 billion barrels of proven crude oil reserves, an increase of around 50% since the end of last century.  And in terms of proven natural gas reserves, the figure is over 15 trillion standard cubic metres, a number that has more than doubled since the mid-1980s.

It is irrefutable evidence of the petroleum potential of Africa, the exciting and abundant opportunities, and the role that this industry can play in unleashing tremendous economic development and prosperity across the continent.

Additionally, according to the United Nations, more than half of global population growth between now and 2050 is expected to occur in Africa.  It underscores the fact that the continent will continue to have a young and vibrant population; a wealth of human capital needed to develop the available resources, and ensure that the continent takes its leading position on the global stage.

We need to harness what we have – in terms of resources and our people – to ensure that everyone benefits, and that no one is left behind.

Moreover, it also requires collaboration, the promotion of intra-African cooperation and pan-African alliance building, which is evidently apparent here today.

All this can only be achieved under great leadership, such as that exhibited here in Equatorial Guinea. To prosper we need peace, far-sightedness and stability.

Allow me to conclude with an African proverb:

“Keep your head and heart going in the right direction and you will not have to worry about your feet.”

At times the challenges before us can appear daunting, but experience has repeatedly shown us that visionary leadership, teamwork, the enduring principle of cooperation and the bravery to try something new, can bring about great success.

Thank you.