Says cartel has restored market confidence with output pact
By Chineme Okafor in Abuja
The Secretary General of the Organisation of Petroleum Exporting Countries (OPEC), Dr. Mohammed Barkindo, monday said the cyclical downturn in crude oil prices which lasted from 2014 to 2016 meant that member countries of the cartel could not earn about $1 trillion of oil revenue.
Barkindo also stated that globally the oil industry lost up to $1trillion in terms of deferred projects and outright cancelations of projects across its entire value chain.
He made this disclosure even as the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, stated that his election as OPEC Secretary General has restored the credibility of the cartel.
Speaking during his visit to Kachikwu in Abuja, Barkindo stated that in the long run, member countries of OPEC had difficulties managing their domestic economies because of the price dip and thus needed to reach an agreement on how to overcome the recession.
He explained that the agreements reached by the cartel and non-OPEC members in Algiers and Vienna during their meetings in November and December 2016, were lifesaving measures, adding that from these, they have been able to overcome the market challenges and now looking forward to better days.
According to him, the economics of the oil market were looking good for OPEC members while its reputation as a significant market player had been restored.
He said the cartel and non-members would now go ahead to solidify the partnership they reached in December so as to maintain a comfortable balance in the market.
“This industry globally has lost nearly $1 trillion in terms of deferred projects and outright cancelations of projects across the supply chain and this is the greatest threat that is facing future security of supplies.
“We need consistent investments in order to maintain current production and take care of reserves and secure future supplies,” said Barkindo.
He further stated: “In terms of national revenues, since all our countries are dependent on this commodity, within OPEC alone, we have lost cumulatively about $1trillion. Therefore, we together with our non-OPEC friends, we remain determined to solidify this platform and maintain a stable environment and restore confidence for investors.”
Speaking further on the impact of the December production freeze agreement on the market, as well as claims of OPEC’s renewed confidence, Barkindo stated that: “When we met in Vienna, we agreed that we needed the non-OPEC members to come on board, we are a marginal supplier and supply about 40 per cent to the world market and the real balancing that would restore stability to the market would require the non-OPEC to join hands with us.
“And for the first time in history we were able to build a platform of 24 producing countries to agree on a joint supply agreement seeking to adjust about 1.8 million barrels a day within six months in order to address the stock overhang which has been the variable to the supply equation that had sent this market off balance since 2014.
“Today, I can confidently report that those three historic events have altogether changed the energy landscape and turned a historic page in oil for good. We are on the course of pulling this industry out of the worst recession that we have entered to restore stability to the market on a sustainable basis that will allow investments to come back on a continuous basis.”
Barkindo also commended Kachikwu for taking steps to solve Nigeria’s longstanding challenges with joint venture cash-call obligations. He said the approach adopted by the minister was innovative.
“In the seven big wins initiatives that you have rolled out, I must single out the lingering funding challenge of exploration and production – the joint venture cash calls.
“Many of my colleagues that we served together will testify that government after government, regime after regime, we had battled with this issue continuously without solutions and the day that I got information that you have been able to overcome this issue, you made my day and all participants in this industry who know what previous governments have battled to stay afloat cash calls.
He noted that while Nigeria’s exemption from the production freeze would last for only six months, the cartel was confident that the market would absorb the extra volumes of oil that would come from her increased output.
“This decision is for six months and as the countries continues to be exempted for these months, we will continue to pray that they will recover production and return to the market fully because the market needs every barrel that Nigeria can produce or Libya or Iran.
“The demand figures continue to show a robust growth of over one million barrels per day going forward,” he stated.
Similarly, Kachikwu in his remarks explained that OPEC was in a messy situation with its credibility greatly impaired and thus needed someone like Barkindo to restore its posture.
He said the coming of Barkindo has helped restored the integrity of OPEC, as well as salvage the economies of its members.