Welcoming Remarks by OPEC Secretary General

Delivered by HE Mohammad Sanusi Barkindo, OPEC Secretary General, at the 3rd High-Level Meeting of the OPEC-China Energy Dialogue, 21 October 2019, Vienna, Austria.

HE Zhang Jianhua, Administrator of the National Energy Administration of the People’s Republic of China and his esteemed delegation, Dr. Sun Xiansheng, Secretary General of IEF, distinguished guests, colleagues, ladies and gentlemen,

It is an honour and a pleasure to host the Chinese delegation here in Vienna for the 3rd High-Level Meeting of the OPEC-China Energy Dialogue. Last time you gracefully hosted us in December 2017 in Beijing, a trip to your beautiful and historical capital.

This followed on the heels of the First High-Level Meeting of the OPEC-China Energy Dialogue which took place a very long time ago, in December 2005. It seems our dialogues are coming closer together, a trend which I hope to see sustained. This underwrites the enthusiasm on both sides to deepen our relations and look for future possibilities for knowledge exchange.

We have attended various other official meetings together in the meantime and our exchange of information is rich and ongoing, which we all very much appreciate.

This includes a very successful meeting between OPEC and the Chinese Academy of Social Sciences, which took place recently at the OPEC Secretariat on 11 October this year. I hope today’s discussions will take this collaboration another step further.

The core of OPEC’s mission is open and transparent dialogue with all stakeholders in the energy industry. We believe that only through constructive dialogue can we effectively find sustainable solutions to energy industry problems. Deepening our relationship and understanding the challenges we each face builds friendships and ensures mutually beneficial outcomes.

China is a very important trade partner for OPEC and our Member States, one whose significance has grown over time. Additionally, China’s leadership and critical role in the global economy and the energy industry cannot be understated.

The trade numbers, for example, tell the story. OPEC exports to China have risen from over $5.5 billion in 2000 to over $104 billion in 2018. Meanwhile, OPEC imports from China have also drastically jumped from $8.3 billion in 2000 to nearly $176 billion in 2018. This represents massive growth in overall trade between China and our Member Countries.

The global economy is expected to more than double from 2017 to 2040, according to our latest World Oil Outlook. China’s role in this picture is significant. While China accounted for 18 per cent of global GDP in 2017, this amount is projected to rise a whopping six percentage points to reach 24 per cent by 2040!

World oil demand is to rise from 97.2 mb/d in 2017 to 111.7 mb/d in 2040, with China accounting for nearly 30 per cent of that growth! Accordingly, China’s demand for oil is set to rise from 12.3 mb/d in 2017 to 17.4 mb/d in 2040, or by 5.1 mb/d.

This great country became the world’s biggest importer of crude oil in 2017, overtaking the US. In 2018, over 62 per cent of OPEC crude exports went to the Asia Pacific region, with the majority headed for China. So as you can see, there are crucial ties between OPEC Member Countries and China which are critical for both of us.

The percentage of oil in China’s fuel share is also expected to rise, going from 18 per cent in 2015 to 19.5 per cent in 2040, according to our WOO 2018. This means that although China has been making great leaps and bounds in the field of renewables, the need for oil will continue to grow significantly.

The share of renewables and nuclear energy in China’s energy pie will also rise dramatically in that time, with nuclear energy going from 1.5 per cent in 2015 to 7.4 per cent in 2040, and ‘other renewables’, including solar and wind, up from 1.6 to 6.4 per cent. Natural gas use will also more than double to 11.3 per cent. What is clear is that all sources of energy are going to be required to meet China’s growing future needs, as you clearly elaborated during our joint meeting.

This is confirmed by figures on China’s expected increase in per capita energy consumption over this time frame, which is expected to rise significantly from 16 barrels of oil equivalent to over 21 barrels of oil equivalent.

In the medium term, structural changes in the Chinese economy will affect oil demand, specifically slowing it in some sectors, such as industry and energy. However, strong oil demand is set to continue in the road transportation and aviation sectors, as the country’s expanding middle class gives rise to mobility needs, despite growth in the sale of alternative vehicles.

China’s vehicle stock levels are expected to rise more than twice as fast as the rest of the world from 2017-2040 at 4.3 per cent per annum. Although the share of electrical vehicles in overall vehicle stocks will rise significantly, it comes from a low base, and internal combustion engines will by far continue to dominate.

The petrochemical sector will also see strong growth, with totals behind only the United States. World refining capacity additions between 2018 and 2023 are projected at around 7.8 mb/d. Of this amount, China will add 1.7 mb/d, or over 20 per cent, which will also require greater amounts of crude oil feedstock.

Our message at this important gathering is that even with the country’s great advances in renewables, oil is going to continue to remain a major and growing provider within China’s energy mix for the foreseeable future. Thus it is essential for us to grow our exchange and expand close and transparent collaboration over the coming decades.

I want to emphasize here that although according to our WOO 2018, oil’s share in the world energy mix is anticipated to decline from nearly 32 per cent in 2015 to 28 per cent in 2040, it will still remain higher than any other fuel in the forecast period.

Excellency, distinguished delegates,

I want to congratulate China on moving quickly to achieve what many countries are striving to do — introducing and managing a very diverse and balanced energy portfolio. This provides not only energy security for the country’s future but positively affects CO₂ emissions, as is also intended in the country’s ‘blue skies’ project.

China has made leaps and bounds in the last decade in reducing energy consumption and CO₂ emissions per unit of GDP. Following the 2016 Paris Agreement, China made a commitment to use non-fossil fuel energy for 20 per cent of its energy supply by 2030.

Meanwhile, China has become the world’s largest producer of renewable energy — it is the largest producer of hydroelectricity, solar power and wind power worldwide. This includes becoming the world’s largest producer, exporter and installer of solar panels, wind turbines, batteries and electric vehicles, according to a recent report.

China has made a huge shift, heading south-south energy climate discussions, as well as deploying clean energy policy and working as a leader in this area.

This great country has been carefully planning its energy strategy and strongly pursuing policies and actions to ensure that its energy access across a range of fields is more secure, affordable and reliable. This shows great foresight and is a stellar example to other countries struggling with energy security. You have indeed become a leader and an example of starting to successfully move into the ‘energy transition’.

The words of famous Chinese philosopher Lao Tzu from way back around 500 BC, still ring true today: “A journey of 1000 miles begins with a small step.”

As your great leader President Xi Jinping stated: “China will always remain the builder of world peace, a contributor to global development, and upholder of international order.” We are counting on the President’s wisdom, commitment and engagement to help us overcome these current challenges.

I just want to add here that OPEC Member Countries have contributed immensely to the United Nations Framework Convention on Climate Change process from its inception. OPEC’s efforts to confront climate change include constructive participation in UN negotiation sessions and a deepening and expanding relationship with the UNFCCC Secretariat over the past few years. I have often stated that the oil and gas industry must be part of the solution to climate change. I am glad that you also share the same view.

OPEC had partnered with China under the umbrella of the G77 and China (coalition of 134 developing countries in the United Nations), which I had the honour to chair, in producing the UNFCCC, its sister the Kyoto Protocol, the Paris Agreement and the current Talanoa Dialogue.

One difficulty in being one of the largest and fastest-growing energy consumers over the last decade is sustaining rapid economic growth, which has in part led to China becoming the world’s largest importer of oil. OPEC has been very pleased to have been a strong partner with China, helping to fuel its rapid development and looks forward to long and fruitful future collaboration.

You have been working extensively on increasing your strategic petroleum reserves in recent years. This shows a great deal of foresight and wisdom; China is once again setting an example for the rest of the world.

As we have seen with the recent attacks in September on key oil facilities in the Kingdom of Saudi Arabia, such reserves are essential to stabilizing the oil market in the case of any unforeseen circumstances. OPEC has consistently said that we need more investment in the industry, not only to provide for current demand, but in order to maintain future energy security.

Ladies and gentlemen,

The need for a sustainable oil market in light of the serious downturn that was jeopardizing producers, consumers and the world economy in 2016 was behind the decision of OPEC and non-OPEC countries to come together in this room on December 10, 2016 to sign the historic Declaration of Cooperation.  This turned a glorious page in the history of oil.  And a new glorious chapter is currently being authored by the 24 courageous nations in the overall interest of producing and consuming nations, including China.

We have learned so much since then. Not only have we overcome all market challenges thrown our way since that time, we have done so quickly, effectively and always considering our underlying principles of equity, transparency and collaboration.

It was with great pride that I saw these countries take our cooperation one step further to sign the Charter of Cooperation at our 6^th OPEC and non-OPEC Ministerial Meeting in July in this room. This confirms at the highest level, their deep commitment and fortitude.  China as a major consumer of energy deserves a seat at the Charter of Cooperation.

The power of cooperation is clear. Our collaboration has led to a new era of responsible oil market management, which has proven to be a necessary tool in a global environment that seems to only grow in complexity. The international community and energy industry have come to count on OPEC to sustain this balance to enable them to write their own economic plans. We hope too, that sustainable stability will continue to encourage investment into the industry to avoid any future crisis.

An initially unexpected benefit of our cooperation with other countries has been the deepening of relationships and understanding. This has enabled more opportunities to work and learn together through workshops and sharing of experiences. We believe exactly these elements will enable all of us in the industry to plan for the future. I hope to see our relationship with China deepen and prosper under your able leadership, including pooling our collective expertise to better face tomorrow’s challenges.

I am looking forward to fruitful discussions and exchange, and hope this is another important stone on what I hope to see become a well-worn path between OPEC and People’s Republic of China.

Thank-you.