Wole P. Ajayi writes that beyond the promotion of an inclusive and mutually beneficial plan to stabilise crude oil prices, other initiatives by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu are helping to re-establish Nigeria’s position in the global oil industry
“When I started that whole move, I was criticized and told that it would not hold, but I am happy that over the last few weeks we see that everybody has bought into that and we are beginning to see prices inch up very slowly. It is still very challenging but at least we are inching up and for the first time we are beginning to have both the Saudis and the Russians come back on the table” –Emmanuel Ibe Kachikwu, March 2016
For a long time, Nigeria’s influence has not been strongly felt as a member of the Organisation of Petroleum Exporting Countries (OPEC) and the global oil industry. The country has, to a large extent, exercised limited clout, led no high profile initiatives and was perceived as far below the likes of Saudi Arabia, Iran and Kuwait in the pecking order of influence. This is in spite of the fact that it is the 12th largest producer of petroleum in the world and the 8th largest exporter.
However, the picture is changing as Dr. Emmanuel Ibe Kachikwu, the current Minister of State for Petroleum Resources in pursuit of President Buhari’s vision of a Nigeria, which takes its rightful place in the comity of nations works hard to make the country an important player in the global oil industry.
As global oil prices start inching upwards within the context of a gradual but strong improvement in the underlying variables of the global oil industry, it will be useful to recall Nigeria’s contribution under Kachikwu’s watch to this positive development. For the first time in over a year, the price of crude has hit $53 per barrel in the international oil market. This is the first positive significant development in many months.
There are many factors responsible for the current positive outlook in the fortunes of oil. The greater involvement of Russia and the Saudi Arabia-Iran rapprochement are two key factors. Another factor that has also contributed to this process is the combination of Kachikwu’s global network reach, innovative approach and strong personality which has helped to transform Nigeria into a respected rallying point in the global oil industry. This has enabled the country to play an active role in rallying other OPEC members and stakeholders towards solving a common problem. Kachikwu has demonstrated thought leadership, initiative and effective stakeholder communication, engagement and networking that is leading to visible results and concerted action.
This is evident in the intensive diplomatic shuttle which he embarked upon earlier this year to mobilize OPEC members in support of the oil output freeze. His idea – to get the major oil producers to talk and agree to an output cap – has now gained wide acceptance and endorsement as a logical way forward for the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC members including Russia.
Beyond the promotion of an inclusive and mutually beneficial plan to stabilise crude oil prices, Kachikwu’s efforts are helping to re-establish Nigeria’s position in the global oil industry as an influential, well respected and active member.
It will be recalled that Kachikwu’s global rally for a production freeze to stabilize prices marked a turnaround from OPEC’s initial response to falling oil prices. OPEC had in December 2014 taken a decision at its meeting in Vienna to set aside the daily production target. Guided by its biggest producer Saudi Arabia, OPEC increased output in an oversupplied market in a bid to force higher-cost producers to scale back their operations.
While the strategy led to some reduction in supply by non-OPEC members like the US Shale producers, the price of crude fell by 65% to a 12year record low with both major as well as smaller producers suffering a huge squeeze on revenues.
There was therefore an obvious need for a change of strategy to protect the oil industry within OPEC countries as well as the economies of these countries which depend on oil for their survival. Kachikwu made a strong case for a multi-pronged strategy to achieve this multi-dimensional objective.
In his words: “We need to see how we can balance the need to protect our market share with the need for the survival of the business itself, and survival of the countries. I think ultimately for the interest of everybody some policy change will happen. Now will the amount of barrels that you can take out because of that policy change necessarily make that much of a dramatic difference? Probably not, but the symbolism of the action is even more important than the volumes that are taken out of the market.”
In the light of the current gradual shift in the direction of higher prices, after a two year price crash that has been devastating to countries like Nigeria, Kachikwu’s comments were very prescient. The re-alignment and the unity of purpose which he advocated then which at the point seemed ineffectual and academic is turning out to be a key factor in the turn around that is being witnessed.
Back in March, almost all countries who now back the idea had either dismissed it as unworkable or fought publicly against it when he first raised it. For instance, during the Gulf Intelligence UAE Energy Forum in Abu Dhabi in January, where Kachikwu first tabled the idea of an emergency meeting to get Saudi Arabia and Russia to agree on production cuts, the United Arab Emirates (UAE) threw cold water on the idea. Suhail Mohammed Al Mazrouei, the UAE energy minister argued that the OPEC’s strategy is “working.” This was despite the fact that the mere talk of an emergency meeting to discuss production cuts earlier that same led to an instant hike in oil prices, with crude climbing above $32 a barrel. This price rally quickly faded and crude fell 4% after the UAE Minister’s comments.
Kachikwu didn’t give up. Later that same month at the World Economic Forum, Kachikwu while speaking on a panel at the World Economic Forum called on OPEC to meet as soon as possible to discuss the production freeze. Saudi Arabia, Russia, Azerbaijin and other members of the panel opposed the idea.
In spite of this hostility and opposition from the major players, Kachikwu remained optimistic and undaunted and kept pushing on. Determined to make a difference, Kachikwu led concerted efforts along with other countries like Venezuela in a shuttle diplomacy to rally support for the idea with the backing of President Muhammadu Buhari.
These efforts eventually paid off with the agreement by Saudi Arabia and Russia, the two biggest oil producers to freeze oil production. As subsequent events show, this agreement in principle did not lead to an immediate improvement in oil prices which remained tepid. But the recent increase in oil prices has shown that those initial moves were far from useless because they contributed significantly to the latest long anticipated good news for oil producing countries like Nigeria.
As it stands today, there is a general understanding and agreement by both OPEC members and non-OPEC members like Russia to freeze production as canvassed by Kachikwu. His innovative thinking and optimism about the possibility of reaching beyond the initial strategy of protecting individual member market share to a more inclusive and mutually beneficial arrangement has no doubt boosted Nigeria’s influence in the international oil industry and established Nigeria as an active member of the global oil industry.
At a time of crashing oil prices with bookmakers and analysts predicting doom for the oil industry, Kachikwu has been the voice of optimism. He has helped to keep the faith alive that something could be done to get the price back up again.
Speaking at the sixth African Petroleum Congress in Abuja, Kachikwu waxed poetic in expressing his conviction that contrary to the predictions of many pundits, oil will rise again as it has done many times in the past. But his rendition was not just creative, it also included a huge dose of realism, a reflection of the truth that oil must adapt to the realities of a vastly different world in order to survive and thrive:
My name is oil, the very kind people who are kind to me call me black gold.
The ones who hate me call me crude.
I worry for my future; everyone now talks down on me.
Even farmers who trembled at the sight of my name are now strategizing against me.
And all my beneficiaries, me have they abandoned.
All because the producers have lost their tracks.
But I would rise again, and when I do, I will take no prisoners.
I would new technologies control, I will new technologies control. I will my supremacy confirm. I will my respect regain.
And my pricing, not too low, not too high, but I would not allow prices to humiliate me…
The poetic reflection confirms that Kachikwu is one oil minister who has proven locally and internationally that he knows his onions, understands industry politics and possesses sufficient strategic confidence to go out of the script when necessary. While the meetings hold, the agreements are firmed up and oil prices rebound, Kachikwu who is working hard to realize President Muhammadu Buhari’s vision for a re-energized, transparent and profitable oil sector will count among those who have earned deserved gratitude for working with OPEC and non-OPEC oil producers to find a way out of the crisis situation.
– Ajayi is a public analyst based in Lagos.
Email: woleajayip@gmail.com
