Keynote Speech by OPEC Secretary General

Delivered by HE Mohammad Sanusi Barkindo, OPEC Secretary General, at the Fifth Iraq Energy Forum, 14 September 2019, Baghdad, Iraq.

Deputy Prime Minister Thamir Abbas Al-Ghadhban, Professor Sayigh, Excellencies, Ladies and gentlemen, 

It is once again an honour and a privilege for me to return to Baghdad and participate at the Fifth Iraq Energy Forum and share the floor with such an outstanding group of leaders. I listened with rapt attention to HE Al-Ghadhban. 

I would like to commend the Government of the Republic of Iraq, particularly the Ministries of Oil, Electricity and Water Resources; the Iraq Energy Institute ably guided by the IEI Board Chairman, Professor Ali Sayigh; and all members of the organizing team for preparing such an outstanding forum. The Iraq Energy Forum has evolved into one of the most reputable events in the energy calendar; a ‘must-attend’ for industry stakeholders every year. 

I consider myself extremely fortunate to have been a guest in this great nation on several occasions during my professional career. It is always an honour to be here, as Iraq truly is the ‘cradle of civilization.’

This is a nation of firsts: the place where the concept of the wheel first took hold; where the first agriculture appeared; where the first system of irrigation was developed; an area where the oldest surviving form of writing hails from; where the first cities were settled. 

The enormity of these innovations are mind-boggling in that they fundamentally shaped our subsequent human existence but are also the testimony to the enduring genius of the people who lived here, the people of Iraq. For millennia, Iraq has been home to civilizations that have left their mark on the region and the world: the Sumerians, the Akkadians, the Babylonians and the Assyrians, to name but a few.  

Given this litany of extraordinary firsts and the fact Iraq is the source and origin of civilization; you can understand why it is with tremendous pride that OPEC can say that our Organization was also born in this prestigious nation! And today is our birthday! OPEC is 59 years young! 

Between the 10^th and 14^th of September 1960, representatives from five courageous oil producing countries descended on Al-Shaab Hall in the Bab Al-Muaatham district in Baghdad: Fuad Rouhani of Iran; Dr. Tala’at al-Shaibani of Iraq; Ahmed Sayed Omar of Kuwait; Abdullah Al-Tariki of Saudi Arabia; and Dr. Juan Pablo Perez Alfonzo of Venezuela. As a result of the actions of these five founding fathers, visionary leaders of our Member Countries, OPEC came into existence.  

Much has been written about the founding of OPEC and its significance, but in the interests of time this morning, I would highlight two particular legacies which are particularly relevant in our present times. 

With the benefit of hindsight, we might have the impression that the foundation of OPEC was inevitable, however, that was not the case. The Organization’s Founder Members each arrived in Baghdad with different objectives, expectations and priorities. Yet, the founders recognized that common interests outweighed any differences they may have had; that working together will always yield greater results than going alone and unity is a source of strength. 

These ideals are as relevant in 2019 as they were in 1960; they are truly timeless and have served as a stable lynchpin throughout our history. The founding of our Organization is an outcome of cooperation, dialogue and compromise; and this has been clearly apparent in every success we have enjoyed in the subsequent 59 years. 

Secondly, OPEC was founded in strict accordance with the principles and purposes of the UN Charter. The Treaty establishing OPEC was later registered at the UN Secretariat on 6 November 1961. Our Organization has always been proud of its close association with the UN and our role in the multilateral system. 

Aside from being the site of our Organization’s birth, it is no coincidence that Iraq is a Founder Member of OPEC. This spirit of commitment to OPEC’s pursuit of sustainable oil market stability has been exemplified by the current leadership of Iraq. Iraq has strongly supported the ‘Declaration of Cooperation’ process. This unique initiative has seen OPEC join hands with 10 non-OPEC Member Countries to work together in bringing more balance to the market. 

Not only did Iraq play an important role in brokering consensus among the 24 partners, it has also backed words with actions. This year, Iraq, ably represented by HE Al-Ghadhban, became a member of the Joint Ministerial Monitoring Committee and has made a critical contribution to the vital monitoring mission of this body. We just returned from Abu Dhabi together with HE Al-Ghadhban, where we attended the 16^th Meeting of the Joint Ministerial Monitoring Committee under the new chairmanship of  HRH Prince Abdulaziz Bin-Salman of Saudi Arabia. The meeting was very productive, and all participating countries were unequivocal in providing steadfast assurances of their determination to achieve at least full conformity with their voluntary productions adjustments.    

We are delighted that Iraq has continued to demonstrate its commitment through its steadfast support of the ‘Charter of Cooperation,’ which was endorsed at the 6^th OPEC and non-OPEC Ministerial Meeting, held on the second of July 2019. This ‘once in a lifetime’ document provides an institutional framework for the cooperation between OPEC and our non-OPEC partners, facilitating dialogue among stakeholders in the interest of producers, consumers and the global economy. I am delighted, yet unsurprised, to say that Iraq was the first country to ratify the ‘Charter.’

Ladies and gentlemen, 

Returning to the city which birthed OPEC, inevitably leads one to reflect on the history of the oil industry and the factors which connect our past with the present. Re-examining the annals of history, one cannot help but be struck by the perseverance of a belief held by some prominent voices, namely: the notion of an impending collapse of oil. 

These ideas have sometimes been collectively categorized as the ‘concept of peak oil,’ and denote the notion that oil supply was on the verge of a long term decline. 

Most famously it was outlined by M. King Hubbert in 1956 and Matthew Simmons in 2005, but in truth, when one scours sources from even the nineteenth century, from the moment oil was first drilled for commercial purposes in Baku, Azerbaijan in 1846, people were forecasting that as oil was a finite resource, production would eventually stop. The idea was particularly in vogue in the middle of the 2000s, when countless articles, books, studies and media analysis described an impending oil supply shortage.

Significantly, predictions of the end of oil have impacted financial markets, affected investment decisions and caused consternation for policy makers. This reinforces the point that sentiment, speculation and rumours have played important roles as market drivers, often causing a disconnect between prices and market fundamentals. 

Yet, primarily due to technological innovation, the idea of peak supply has not materialized. As Dan Yergin phrased it:

The general history of the oil and gas industry…is of technological advance. New technologies are developed to identify new resources and to produce more from existing fields.

A particularly fascinating development in this current decade is that the concept of what ‘peak oil’ means has shifted. At the beginning of the 2010s, reports of peak supply were almost omnipresent; however, we are about to conclude the decade when this purported ‘worry’ has shifted to concerns about ‘peak demand.’

Pick up a newspaper today or read an article online and one of the most common refrains is that demand for oil is about to plateau or decline. Such thinking has been heavily influenced by advocates of renewable energy and the electric-car lobby, who champion the idea that hydrocarbons are on the verge of being replaced by renewable forms of energy. 

While I would not diminish some of the important arguments and valid points which both proponents of peak supply and peak demand have made, one cannot help but recognize common traits to both views. They both contain a degree of what Blake Clayton described as ‘irrational anxiety.’ Peak demand fears do not necessarily reflect market fundamentals or the overwhelming majority of long-term forecasts of most reporting agencies.   

So to all stakeholders in the oil industry, particularly the investment community and policy makers; I wish to make an appeal: do not let your views on the oil industry be determined by the loudest voices; the overreactions or the excessively bullish or bearish. 

Instead, look at the facts; focus on the fundamentals. And when looking at the fundamentals, in both the short-term and long-term, it is clear that the future of this industry is bright. 

In the long term, as OPEC’s flagship publication the World Oil Outlook has shown, world oil demand is set to grow considerably in the future. Long-term oil demand is expected to rise to almost 112 mb/d by 2040. This will be primarily driven by developing countries: their expanding middle class, high population growth rates and strong economic potential. 

Looking at the road transportation sector and the idea that electric vehicles are about to replace conventional vehicles; it should be noted, that according to our WOO, although the rate for new sales of electric vehicles is very high, the share in total stock in 2017 was just 0.3% and 1.3% of total vehicle sales. 

While the long-term share of electric vehicles in the total fleet is projected to expand and reach a level of around 13% by 2040, conventional vehicles will constitute the majority of growth of the total vehicle fleet. For example, ICE vehicles are expected to maintain their dominant share of new commercial vehicle sales over the forecast period. Although their share declines from 96% in 2017 to 81% by 2040, this still constitutes an overwhelming majority.  

Furthermore, just as technological innovation defied the ‘peak supply’ prognosis, I believe it will play a pivotal role in assuaging ‘peak demand’ concerns. Many link the fate of future of demand with concern regarding the environmental credentials of oil. Technological innovation, particularly energy efficiency improvements, fuel efficiency standards and carbon capture and storage offer promising avenues to reconciling the conflicting components of the energy trilemma. 

Unfortunately, energy poverty remains a scourge of our time. The total number of people with access to electricity is just below one billion. Three billion people still lack access to clean fuels for cooking. An energy transition should not forget these realities and we should strive for a more inclusive world – where every person has access to energy.  

With regard to market prospects in the immediate term, market fundamentals remain solid. While challenges to global economic growth remain, particularly within the sphere of trade-related tensions, the DoC partners have repeatedly demonstrated, through words and deeds, their unwavering commitment to taking whatever action necessary in pursuit of sustainable oil market stability. The figures tell a compelling story: in August conformity with the voluntary production adjustments was 136% and has averaged 121% per month since the ‘Declaration of Cooperation’ was signed.

Ladies and gentlemen, 

Next year, in this great city, we will commemorate one of the most unlikely stories in world history. In the face of the resistance from some of the most powerful stakeholders on earth, a small group of developing nations came together to courageously assert their legitimate sovereignty over their natural resources. Who could have imagined that 59 years later, despite many momentous events in the interim, this group would expand and reach out the hand of friendship to 10 non-OPEC partners, under the umbrella of the ‘Charter of Cooperation.’ 

Committed to the principles of fairness, transparency and equity, this group has evolved from a noble vision to a permanent, transformative force-for-good – one that has had a profoundly positive impact on the global oil industry.  

At OPEC, we respect our origins and our history. For this reason, we are eternally grateful to the people of Iraq, for everything they have done for our Organization. Every OPEC Secretary General is a citizen of Iraq. So I am proud to be one.

We would therefore like to thank the people and Government of Iraq for their gracious invitation to commemorate the 60 year anniversary of OPEC’s founding next year, here in Baghdad. This will allow all Member Countries to return to the Organization’s roots and undertake several important tasks. 

Finally, the 60 year anniversary commemorative celebrations will allow us to take a holistic stock of the tumultuous journey our Organization has been on and travel down memory lane. From the moment of its conception, many did not think OPEC had a chance of survival. Yet over the last six decades, OPEC’s relevance has only increased with each passing year. 

Throughout our history we have faced our share of challenges and we have learned many lessons along the road. We have survived six oil market cycles on this incredible journey. Despite all the highs and lows, peaks and troughs, we have remained dedicated to unity, transparency and equity. It is important that we come together in Baghdad to discuss and analyze these ‘lessons learned.’   

The 60 year anniversary will also serve another critical purpose. Reflecting on our past, we will draw a roadmap for the next 60 years ahead, demonstrating our staying power in a fast changing energy landscape. We will extrapolate how the principles which guided our Founding Fathers can be repurposed for the decades ahead. 

There can be no doubt, in looking at the way ahead; Iraq will continue to be critical in all our endeavours. We will once again look to this great nation, to summon the wisdom, inspired leadership, courage and fortitude which have made Iraq an integral, invaluable and pivotal member of our OPEC family, to guide us on the way ahead. 

Allow me to once again thank our gracious Iraqi hosts and wish us all a successful forum.