Honorary Conference Chairman Address by OPEC Secretary General

Delivered by HE Mohammad Sanusi Barkindo, OPEC Secretary General, at the 19th Nigeria Oil and Gas Conference, 8 December 2020, via videoconference.

Excellencies, distinguished delegates, fellow compatriots, 

I am deeply honoured to have been granted the title of Honorary Conference Chairman for the virtual 19th Nigeria Oil and Gas Conference, a legacy of the great minds of Nigeria’s Dr. Rilwanu Lukman and Venezuela’s Dr. Alirio Parra, of blessed memory.

These two legendary OPEC and oil industry icons, had a vision to inspire the next generation of industry leaders, and the fruits of this vision can be viewed through the conference we are all part of today.

I would like to thank you for convening this conference at such challenging times, when hosting such events has made meeting in person impossible. I am very pleased that despite the unforeseen and difficult circumstances, you have been able to preserve continuity through videoconferencing. I hope we can join together face-to-face again very soon.

This conference has evolved over many years, rising in prestige and prominence. Today, it is a crucial event on the energy calendar, for Nigeria, Africa, OPEC and the world. 

I would like to begin by paying tribute to whom tribute is due President Muhammadu Buhari, the government and my fellow Nigerian compatriots for their heroic efforts in confronting and combating the global health and economic crisis as a result of the devastating COVID-19 pandemic.

The government rose to the challenge with virus containment measures, campaigns to sensitize the population to the devastating impacts of the pandemic, and in promptly providing much needed stimulus to the economy. The government’s proactive response with economic stimulus packages helped protect the economy from a more severe contraction.

The economic contraction in the second and third quarters was not as much as had been originally anticipated, and considering the drop in revenues over this period, the government’s measures have helped minimize the effects of the economic downturn.

Nigerian crude oil export earnings plunged by 77% within three months between January to April 2020, but since then they have gradually improved and rebounded by 116% in November compared to April 2020 levels.

The government should be applauded for its quick and robust actions.

From the perspective of OPEC, I would also wish to express our deep gratitude to President Buhari, who has long been an advocate of OPEC in its overarching commitment to market stability.

All of us in the OPEC family know the enormous debt of gratitude we owe President Buhari for the pivotal role he has played in the Declaration of Cooperation (DoC) process between OPEC and non-OPEC producing countries. Particularly his interventions at the highest level to secure the decisions at the 10th (Extraordinary) OPEC and non-OPEC Ministerial Meeting in April 2020.

These decisions were taken in response to the unprecedented demand slump resulting from the COVID-19 pandemic. OPEC and our non-OPEC DoC partners agreed over two Extraordinary Meetings on April 9 and 12 to new voluntary production adjustments, which are the largest and longest in the history of OPEC and the oil industry.

The President’s inspirational leadership, visionary courage and diplomatic judgement were instrumental in bringing together OPEC and non-OPEC countries and reaching consensus. He has consistently shown his impeccable credentials as a bastion of the principles underpinning international relations: respect for all nations, fulfilling one’s responsibilities, transparency and fairness.

We thank the President most sincerely for his contribution to ensuring that the DoC evolved from a noble vision to a transformative force-for-good, which has had a profoundly positive impact on the global oil industry. 

Nigeria is consistently regarded as one of the most admired and respected Members of the OPEC family, particularly in the realm of consensus-building. For his contribution to making this the case, I would like to pay tribute to His Excellency Timipre Silva, Minister of State for Petroleum Resources. He is a man of timbre and calibre, bringing his wisdom and experience to the process, for which we are all appreciative of. 

Ladies and gentlemen,

The year 2020 will definitely leave a lasting impact on the hearts and minds of people for years and decades to come. The COVID-19 pandemic and its effects came as a shock to us all and is unprecedented in its disruption of the lives of everyone on the planet — and all in such a short space of time.

Today we face a new wave of infections and renewed lockdowns in many regions of the world. The world economy and oil market were on a positive trajectory coming into the year of 2020, but that feels like long ago now.

Let me quote from OPEC’s January 2020 Monthly Oil Market Report published at the beginning of this year. In that report, global economic growth was at a positive 3.1% for 2020. For this year, total world oil demand was projected to rise from 99.77 mb/d in 2019 to 100.98 mb/d.

Only a few weeks later the world plunged into an unparalleled health crisis that has had severe implications on every aspect of our lifes. The economy plunged into a deep recession.

The global economy is now forecast to shrink by 4.3% in 2020; all OECD economies are forecast to see a contraction, and all countries in Africa are anticipated to see a drop in GDP too. China is the only major economy expected to witness growth in 2020.

Millions of jobs were also lost as lockdowns took hold, with the OECD seeing unemployment more than double to 10% in 2020, and the commodity market — including oil — virtually collapsed overnight, with demand dropping up to 30% in the lowest moments in April.

The headwinds we have faced in the oil industry, and as humankind, have at times seemed nearly insurmountable.

We hope to never again experience a day like ‘Black Monday’ – when West Texas Intermediate crashed by $56/b into negative territory in the futures market for the first time ever on April 20, 2020, reaching an incredible -37.6/b. Our latest estimations for the year 2020 see overall oil demand contracting by 9.8 mb/d to average 90 mb/d, an overall loss of about 10%.

Ladies and gentlemen,

There is an African proverb that states: “Smooth seas do not make skillful sailors.” This unparalleled situation required quick and decisive action, and our DoC partners rose to the occasion boldly and proactively in April 2020. This helped reduce volatility and stabilize the oil market, and created a platform for recovery for the coming months and years.

The unprecedented decisions taken at the 9th and 10th (Extraordinary) OPEC and non-OPEC Ministerial meetings provided a rock for the oil market to hold to, helping alleviate the acute imbalance in the market and calming the extreme volatility.

The decisions were historic both in magnitude and duration, with initial adjustments nearly five times more than those made during the last downturn in 2014-2016. The two-year time frame implemented also showed recognition that the situation would not turn around overnight and would require diligence and continuous support. It was also a sign of the sheer dedication of the DoC participating countries.

Just last Thursday on December 3, our Member Countries and participants in the DoC proved once again that we are cohesive, committed and collaborative. The 12th OPEC and non-OPEC Ministerial Meeting decided to reconfirm the existing commitment of the DoC decision from April 12, amended in June and September 2020, and to gradually return 2 mb/d to the market, with effect from 1 January 2021.

Starting in January 2021, participating countries will adjust production by 500,000 tb/d from 7.7 mb/d to 7.2 mb/d.  Additionally, the meeting decided to hold monthly OPEC and non-OPEC Ministerial Meetings starting in January 2021 to assess market conditions and determine further production adjustments on a month-by-month basis. The compensation period for over-production by DoC participating countries was also extended until the end of March 2021 to ensure full compensation.

The oil market responded immediately in a positive manner, with statements made that the actions reinforce the conviction that the DoC is focused on maintaining its steady and stable course through 2021.

These responsible and measured decisions ensure regular consultations and incremental production adjustments so that DoC participants remain vigilant and agile to prevailing uncertainties. In this way, sharp output changes that may destabilize the oil market will be avoided.

Distinguished delegates,

A silver lining to the horrific COVID-19 situation has been witnessed in the engagement, commitment and support throughout the year by other major producers, as well as at the highest policy levels. Solidarity to this degree — international, governmental and from the oil industry — constitutes a marvel in and of itself. We have been witnessing the triumph of multilateralism.

The bold decisions by DoC participating countries also garnered the support of the G20 Extraordinary Energy Ministers Meeting of 10 April 2020, which stressed the importance of working together “in the spirit of solidarity”. It further acknowledged the commitment and sacrifice of the DoC participating countries in stabilizing energy markets and clearly acknowledged the vital importance of international cooperation in ensuring the resilience of energy systems. 

Thus, at the 10th Extraordinary Ministerial Meeting of the DoC, all major oil producers were requested to provide timely contributions to support stabilization of the oil market. This call was taken up by many non-DoC countries, who pledged to help where possible. This included contributions from some countries, as well as production shut-ins in other places such as North America due to bursting storage facilities. The adjustments from Brazil, Canada, Norway, the US, and other countries added up to an additional minimum of 4 mb/d.

At this time, tank-top for inventories had become an urgent concern, with floating storage also filling up. OPEC data now show that without the decisive action by so many countries, led by the DoC, the market collapse would have been far more serious.

In fact, between May and October, participating OPEC and non-OPEC countries contributed to reducing the global supply by approximately 1.6 billion barrels, including voluntary adjustments. This has been key to market rebalancing.

The decisions taken in response to this world-scale calamitous event was a clear manifestation of the open dialogue and multilateral approach, which benefits producers, consumers, and the world economy at large.

Distinguished delegates,

The DoC between OPEC and non-OPEC producers was agreed back on the 10 December 2016, and has now proved decisive in helping the oil market confront two downturns. In fact, the earlier work of the DoC was excellent preparation for the much bigger disaster that befell the world economy and oil industry in the year of COVID-19. DoC members had already worked together and consolidated relationships. Monitoring bodies and architecture were tried and tested.

Another African proverb states: “If you make friends with the boatman in the dry season, you will be the first to cross when the rains come and the tide is high.”

The maturity of this cooperation, with its friendships and trust, gave us the ability to engage quickly and effectively in a way that would not have been possible if the DoC had not already existed.

While this year has been a bleak one, interspersed with positives, such as the role of the DoC, it is also important to take a look at the future.

Despite second waves of the pandemic and spreading lockdowns in several regions, the recent announcements of COVID-19 vaccines has already provided much hope and driven positive sentiment. However, we also realize we cannot get ahead of ourselves. Our recent decisions have been cautious — we have been careful to avoid a supply overrun under fragile market conditions and pandemic-bound risks.

The year 2021 certainly looks brighter, with preparation underway for widespread delivery of COVID-19 vaccines. Once this process is in motion, the global economy and oil demand are expected to progress in leaps and bounds.

Looking even further up the road, this year’s recently released World Oil Outlook (WOO) 2020 provides the OPEC Secretariat’s in-depth look at the unprecedented scale and impact of the COVID-19 pandemic on the global energy and oil markets, and for the first time extends out to 2045

From the WOO,  I draw the following promising figures: after a large drop in 2020, global primary energy demand is forecast to continue growing in the long term, increasing by a significant 25% in the period to 2045.

The key drivers of this demand are the more than doubling of GDP from $121 trillion in 2019 to more than $258 trillion in 2045 and the addition of around 1.7 billion people worldwide by 2045 to a level of close to 9.5 billion. Other demographic factors also figure into this, including urbanization and a growing middle class, particularly in developing countries.

The petroleum sector will remain the secure base in meeting global energy needs. This view is widely shared by other leading agencies. We expect oil to retain the largest share of the energy mix throughout the forecast period, providing nearly 28% of global requirements in 2045, followed by gas at around 25% and coal at around 20%.

Regionally, an evolutionary shift in demand will continue from developed to developing regions, including Africa. Clearly, all forms of energy will be needed to support the post-pandemic recovery on this continent and beyond, along with addressing long-term energy needs, so that no one will be left behind.

However, there will be long-term scars from this most recent downturn, including in investment. Our current assessments show that upstream capital expenditure could fall by more than 30% this year, beyond the 23% losses experienced in both 2015 and 2016. Our WOO shows that $12.6 trillion will be required between now and 2045 in the upstream, midstream and downstream. We are alarmed at the pull back of capital from the industry. We must all be proactive in pushing for policy discussions on energy and ensure that oil remains a key part of energy’s diversified portfolio to avoid a future energy crisis.

Distinguished delegates,

We at OPEC are working continuously to enhance our ties with Africa. This also supports OPEC’s medium- and long-term goals regarding energy poverty eradication and the continued use of conventional oil.

In recent years, more African oil producers have been joining or re-joining OPEC — including most recently Congo, Equatorial Guinea and Gabon, in addition to members Algeria, Angola, Libya and Nigeria. We would like to intensify our focus on the continent. Africa’s potential regarding energy and sustainable development is impressive, and we hope to help unlock it together.

Africa's oil industry holds huge untapped potential. The continent was home to nearly 8.0 mb/d of production in 2019, just below 10% of world output. At the end of last year, Africa was estimated to have proven reserves of oil of around 126 billion barrels, with Nigeria’s proven crude oil reserves at the end of 2019 alone standing at around 36.9 billion barrels, corresponding to more than 29% of the reserves on the African continent.

There are vast possibilities to achieve more in terms of production. Local production could in turn be used in a win-win scenario to alleviate the energy poverty facing millions on the continent.

Many, if not most, African countries face severe energy shortages, which holds back industrial development. With the continent’s tremendous conventional and renewable energy potential, this need not be the case.

According to OPEC data, the world’s deficit in global electrification is concentrated mainly in Sub-Saharan Africa, where 47% of the population have no electricity. Additionally, the number of people without access to clean fuels and technologies for cooking in this region has further increased as a result of fast population growth. About 85% of people lack access to clean fuels and technologies for cooking.

Along with meeting the continent’s own energy demands, which is vital to development and growth, we hope to see the continent diversify within the petroleum sector to stimulate the job market and help protect economies.

We cannot forget the second great scourge facing mankind today: climate change. Along with being harder hit by the fallout of COVID-19 due to starting from a less secure economic base, African countries stand to also disproportionately suffer from the consequences of climate change. The inequalities already in place before stand to be exacerbated.

I wish us all a very fruitful and enlightening conference. Thank you.

HE Mohammad Sanusi Barkindo, OPEC Secretary General

HE Mohammad Sanusi Barkindo, OPEC Secretary General