It is both a pleasure and privilege to be in the great nation of Angola this morning. Angolan hospitality is world-renowned, and my team and I have really been reminded why this is the case during our time here. I would like to sincerely thank our gracious hosts and, in particular, my good friend His Excellency, Dr. Diamantino Pedro Azevedo, Minister of Mineral Resources and Petroleum. Also thank you Excellency, for your kind words of introduction.
Since assuming his position, the Minister has been a tremendous asset to the OPEC family, diligently applying his broad experience and knowledge to our ongoing efforts at OPEC. I thank and commend him most heartily for this. Thank you to Mr. Carlos Saturnino, CEO of the Sonangol Group and all other colleagues in the Ministry who have made this visit possible.
I also extend a warm welcome to esteemed members of Parliament, all Ministers, dignitaries, officials, and other government ministries, captains of industry, colleagues in the private sector and other interested parties in attendance for this lecture. I am very glad to see you all.
I must confess to having a very personal affinity to this country which extends beyond the bonds of African fraternity. Angola’s membership of OPEC began on 1 January 2007, but of course, the negotiations that led to this milestone event took place throughout 2006, at a time when Nigeria held the Presidency of the OPEC Conference. During that year, I had the tremendous honour of serving as Acting Secretary General of the Organization.
Indeed, Angola was formally admitted to the OPEC family in Abuja at the 143rd (Extraordinary) Meeting of the OPEC Conference!
Needless to say, Angola becoming a Member Country was a tremendous boon for OPEC. A new source of positive energy and dynamism was injected into the Organization, as we benefitted from the experience of an extremely important regional player from central and southern Africa.
Angola’s accession in 2006 was the first new addition to OPEC since my own country, Nigeria joined in 1971. This had enormous repercussions, the ramifications of which are still being felt today. Regional neighbours saw Angola make a success of its membership and in due course, Gabon and Equatorial Guinea, would enter the OPEC fold.
Furthermore, Angola’s membership after a 36 year hiatus on expanding the Organization, proved that reaching out and embracing new partners yields results. This spirit of collegiality among nations, willingness to try things differently, innovation and honoring one’s commitments has also been at the core of OPEC’s recent cooperation with its non-OPEC partners under the umbrella of the “Declaration of Cooperation.”
Therefore, history will conclude that Angola joining the OPEC family was a precursor to membership of our Organization increasing, a strengthening of the African voice in our decision-making structures and this new era of cooperation among oil producing countries through the ‘Declaration of Cooperation.’ So, given this context you can understand my absolute joy at our being with you today.
The timing of this Mission is also extremely exciting. At OPEC, we follow with great interest and admiration the very commendable reform agenda of President João Manuel Gonçalves Lourenço, particularly as he seeks to modernise the oil industry, improve transparency and good governance.
Undoubtedly, President Lourenço has achieved a series of notable successes, which have improved the industry’s efficiency and effectiveness. We commend the President’s decision to create a new Agency and separation of conflicting roles of policy, regulation, and commercial operation, in line with the best international practices.
OPEC also welcomes Angola’s efforts to upgrade, and expand its refinery sector and we stand ready to provide whatever technical advice and expertise that we can, in this regard.
Another area of intense activism on the part of the President which strongly resonates with the ethos and philosophy of OPEC is his commitment to international cooperation and the multilateral process.
It gladdened my heart when President Lourenço told the UN General Assembly in September of this year that Angola supports:
“All efforts to promote cooperation among the nations of the whole world, consolidate peace and defense for cooperation, trade and investment relations at the bilateral and multilateral levels.”
This fits ‘hand-in-glove’ with OPEC’s raison d’être. As an intergovernmental organization, we strongly share the view that cooperation among nations remains the most effective problem-solving mechanism at our disposal.
When you listen to any OPEC official speak; if you read any of our publications, statements, or press releases; if you examine our statute; you will see our core objective repeated over and over again: oil market stability on a sustainable basis. This goal drives all of our activities, all our actions and almost all our research.
It is very important that we step back and ask the deceptively simple question: why? Why does oil market stability matter? Why does it motivate OPEC in everything it does? Why does it generate the attention of decision makers and world leaders across the political spectrum?
Having invested a lot of time reflecting on this, I think the most concise formulation of why oil stability matters hails from the great historian of our industry, Professor Dan Yergin, when he said in his book “The Quest”:
The industrial civilisation that has evolved over the last two and a half centuries rests on a hydrocarbon foundation.
Such is the importance of oil that it plays an indispensable role in lubricating economic growth, sustainable development and improving the livelihoods of billions of people around the globe. Oil market stability begets prosperity; it is an essential component in fighting poverty. The multiplier effects of oil market stability are immense for other industries and the global economy.
For example, consider the hard-earned savings of millions of retirees whose fortunes are tied to pension funds that invest in our industry. Think of the sheer number of families dependent on bread-winners employed in our sector and the job opportunities which result from oil market stability.
OPEC does not seek stability for stability’s sake: rather we are acutely conscious of the broader social and economic benefits for all which come as a result of sustainable oil market stability.
And when we cast our minds back to the depths of the last downturn in 2015-16, one can only shutter at how close the world came to a catastrophe of epoch defining proportions.
If you don’t take my word for it, I’d like to quote David Kreisman, Senior Vice President at the credit rating agency Moody’s from September 2016:
“When all the data is in, including 2016 bankruptcies, it may very well turn out that this oil and gas industry crisis has created a segment-wide bust of historic proportions.”
This situation came about as a result of the fact that from 2014 to 2016, world oil supply growth outpaced that of oil demand, with world oil supply growing by 5.8 mb/d, while world oil demand increased by 4.3 mb/d.
By July 2016, OECD commercial stock overhang reached a record high of about 403 mb over the five-year industry average. The OPEC Reference Basket price fell by an extraordinary 80% between June 2014 and January 2016.
Nearly one trillion dollars in investments were either frozen or discontinued, and a record number of companies in our industry filed for bankruptcy. According to the consulting firm Graves & Co., almost half a million jobs were lost in the global oil and gas industry.
Several emerging economies were in the midst of a recession, being battered by the collapse in commodity prices. As the economic historian Adam Tooze said,
“In 2015-16 the world dodged a third instalment of the global crisis.”
OPEC knew it had to act in the face of this potential calamity. Throughout 2016, extensive consultations were undertaken with our non-OPEC partners, aimed at building consensus about the strategic urgency of rebalancing the global oil market in a collective manner.
Twenty-four (now twenty–five) oil producing nations agreed at the first OPEC and non-OPEC Ministerial Meeting held on the 10th of December 2016 in Vienna, on a concerted effort to accelerate the stabilization of the global oil market through voluntary adjustments in total production of around 1.8 million barrels per day.
What would become clearer in time is that one of the greatest inherent strengths of the ‘Declaration of Cooperation’ was its flexibility, grounded on the core principles of equity, fairness and transparency. Over the last two years, the partners have been able to modify course depending on conditions in the market. When the market appeared skewed to oversupply, we have reacted accordingly, and equally, when consumers expressed concerns regarding demand outpacing supply, the partners in the DoC have taken appropriate action.
This was best exemplified by the decisions of the 174th OPEC Conference, 22 June 2018, and the 4th OPEC and Non-OPEC Ministerial Meeting, 23 June, where participating countries decided to strive to adhere to the overall conformity level, voluntarily adjusted to 100%.
Therefore the DoC should be viewed as an adaptable toolkit to address imbalances in the market.
The most recent iteration of this ongoing undertaking occurred on 6th and 7th December at the 175th Meeting of the OPEC conference and the 5th Ministerial Meeting of OPEC and non-OPEC.
Following extensive analysis and deliberations on the immediate oil market prospects and, in view of a growing imbalance between global oil supply and demand in 2019, the partners decided to adjust the overall production by a combined 1.2 mb/d, effective as of January 2019 for an initial period of six months.
If I was to use a single word to describe the impact of this cooperation on the oil market, it would be: transformative. A long-absent element of stability has been reintroduced. There have been significant changes in industry-wide and public perceptions of OPEC. The Organization has ably demonstrated its credentials as a body committed to international cooperation, working with other producers, honouring its commitments and promoting mutual respect among all nations.
Bringing together 25 sovereign producing nations is unparalleled in the history of the oil industry. The enhanced relations between participating countries now constitute a fundamental and essential feature of the ‘new world of energy.’
However, most importantly of all, the multiplier benefits of the ‘Declaration of Cooperation’ have been immensely significant. This was apparent in the conclusions of the IMF in a publication entitled “The Global Economic Recovery 10 years after the Financial Meltdown”:
“After faltering at time over the past 10 years, the global economic recovery experienced a long awaited synchronized growth upswing 2017-18.”
This global economic upsurge has occurred at exactly the same time as the ‘Declaration of Cooperation’ has been operational. Oil market balance begets prosperity.
Consider the fact that over the last two years, the global economy has had the assurance from the ‘Declaration of Cooperation’ strategic partners that they will take the necessary measures to contribute to a balance between supply and demand. Can one quantify how important this guarantee of responsible leadership, this proactive dependability, has been?
Throughout this entire process, the partners have solicited and responded to the views and concerns of producers and consumers. We have championed consumer and producer dialogue, benefiting from the tremendous partnership with the IEF. OPEC’s energy dialogues with the EU, Russia, China, India and independent suppliers have further harnessed information exchange and fed into our joint strategies.
The partners have been responsible and responsive; proactive and professional; adroit and adaptive.
The OPEC family wants to transmit a very important message to Angola: we deeply respect and value Angola’s regional leadership, defense of multilateralism, and support for the ‘Declaration of Cooperation’ process.
Working together, there can be no doubt that we can navigate any stormy waters to calmer seas. Committed to the principles of equity, transparency, fairness and respect among nations, we can close a long, dark chapter for the oil industry and write a new one, fulfilling the words of the poet Lord Tennyson when he wrote,
“The long day wanes: the slow moon climbs: the deep moans round with many voices.
Come my friends, Tis not too late to seek a newer world.”
Barkindo, who is the OPEC Secretary General, delivered the lecture in Angola