13 May 2019 - 11:22
  • News Code: 289132
There Can Never Be another OPEC

TEHRAN (Shana) -- OPEC Secretary General Mohammad Sanusi Barkindo has highlighted the uniqueness of the oil producer organization, dismissing the idea of emergence of any other such organization.

“There can never be another OPEC; our Organization is unique,” Barkindo told Shana, the official news agency of the Iranian Ministry of Petroleum, on the sidelines of the 175th ministerial meeting of the Organization of the Petroleum Exporting Countries.

The full text of the interview is as follows:

During its 58-year-old life, OPEC has gone through many ups and downs; it is now in one of its historic downturns. What steps should the organization take to restore its glorious days?

Iran was one of the OPEC Founding Members back at the historic ‘Baghdad Conference’ in September 1960. The five Founding Members representing their oil-producing nations joined together around the premise of cooperation, with a commitment to safeguard their legitimate national interests and to ensure order and stability in the international oil market.  

When OPEC was set up in 1960, there were some who predicted that the Organization would not last long. Yet, little by little, OPEC began to make its mark. In this light, the formation of OPEC was a pioneering act, an act that demonstrated that even developing countries had rights. 

That initial small group of developing countries has now evolved into a much larger group that is respected far and wide as an established part of the international energy community and has overcome many challenges, and it continues to prosper.

There is widespread recognition that what OPEC, and its non-OPEC partners, put together in December 2016, and which is now known as the ‘Declaration of Cooperation’, has benefitted us all. I think it is important to picture what our Member Countries, and the oil industry, would have to suffer if we had not gathered together to help restore balance and stability to the market.

All our Member Countries agreed to be part of the ‘Declaration of Cooperation’. The ‘Declaration’ has had a transformational impact on the global oil industry. 

Moreover, the unanimous decisions taken at the 175th Meeting of the OPEC Conference and the 5th Meeting of the OPEC and non-OPEC Ministerial Meeting underscore the commitment of all our Member Countries to the Organization.

The last two years have been characterized by successes for the Organization and Iran has been an important part of this. The change we have seen over the last two years or so is like night and day.

I also believe that our best days are still ahead.  We continue to evolve; we continue to listen to the viewpoints of all our Member Countries; and we continue to strive for balance and stability in the market, in the interests of both producers and consumers.

A drop of about $20 in the price  of oil over the past six months makes one suspect that the Secretariat of the organization has miscalculated the supply and demand (market fundamentals) for the oil market. Is this true?

The OPEC Secretariat has management and analysts from all our Member Countries, including Iran. They work together; discuss together; and make decisions together. This is how the OPEC Secretariat comes up with figures in its outlooks. 

I think we can all admit that forecasting is not an exact science. Our forecasts are made on the best available information we have at that time.

We will continue to monitor market fundamentals on a daily basis, and provide all of our Member Countries with impartial, objective and reasoned projections. 

It has been evident over the last six months or so we have seen a number of shifts in market sentiment. Back in October, there was talk in the market of there not being enough supply in the market, while only a month later in November the focus was on there being too much supply.

It should also be noted that the expected surge in non-OPEC supply in 2019 has taken all forecasting agencies by surprise, not only OPEC. This reflects the fact that in the long history of oil, new factors and unexpected developments emerge.

In your opinion, what is the main reason for the fall in world crude oil prices since June?

It is evident that a significant amount of the swing in market sentiment since June has been driven by non-fundamental factors that are beyond the oil industry’s control.  They can have compound effects and are a major source of uncertainty.

On the fundamentals side; however, we also recognize that we have started to face some more headwinds.

The broad consensus on the prospects for 2019 suggests higher supply growth than global requirements, taking into account prevailing uncertainties.

In addition, the global economic growth outlook for 2019 is slightly lower than that of 2018, which combined with the implications of macroeconomic policies and associated uncertainties could potentially have ramifications for global oil demand next year.

These issues were behind the OPEC Conference deciding on December 7 to adjust OPEC overall production by 0.8 mb/d from October 2018 levels, effective as of January 2019, for an initial period of six months. This was then complemented by non-OPEC participants in the ‘Declaration of Cooperation’ agreeing to voluntarily adjust by 0.4 mb/d from October 2018 levels, over the same period.

Has any share of OPEC Members in the oil market been offered to non-OPEC producers and, if so, what has been the role of the OPEC and non-OPEC output production adjustment agreement in creating this situation?

At the OPEC Secretariat, and within the entire Organization, we believe in transparency and fairness. All Member Countries have an equal say, and our decisions are taken by consensus. We fully respect all of our Member Countries.

Many experts believe Russia is the real winner of the 2016 OPEC-non-OPEC output cut deal, because its share in the oil market is on the rise. What is your opinion about this?

I truly believe we were all winners from the decisions taken at the end of 2016, and through the historic ‘Declaration of Cooperation’.

We should never underestimate how severe and potentially ruinous the last downturn was in 2015 and 2016.  It impacted all of our Member Countries, many of them severely.

Back in December 2016, we all agreed that something had to be done to stem the hemorrhaging.

Globally, nearly one trillion dollars in industry investments were frozen or discontinued, many hundreds of thousands of jobs lost and a huge number of companies in filing for bankruptcy.  It was one of the most calamitous downturns in the long history of oil.

We all want a sustainable oil market stability. This has always been the long-term commitment of OPEC, and it has been the focus of the ‘Declaration of Cooperation’. This was evidently on view at the 175th Meeting of the OPEC Ministerial Conference and the 5th OPEC and non-OPEC Ministerial Meeting.

Thus, it is vital we retain OPEC’s cohesiveness; and continue with our cooperation with non-OPEC participants in the ‘Declaration of Cooperation’.

What have been the achievements of OPEC-non-OPEC agreement for OPEC members since 2016?

In terms of OPEC, there is no doubt that it has caused a significant change 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, honoring its commitments and promoting mutual respect among all nations.

Bringing together so many sovereign producing nations is unparalleled in the history of the oil industry.  Moreover, the importance of the ‘Declaration’ has also received backing from other producers, as well as from consumers.

It has also had a positive impact on the global economy, and trade worldwide has increased, helped by the stimulus provided through the Declaration.

It has reintroduced a long-absent element of stability to the market – there is now far more optimism and confidence in our industry, compared to two years ago.  Consequently, it facilitated the upsurge in the global economic recovery seen in 2017-18.

Yes, we do face some headwinds as we look to 2019, but we believe given the decisions taken by OPEC and its non-OPEC partners at the start of December 2018 we can look to maintain balance and stability in the market; and accomplish far more through a constructive, continuous and fully committed approach to helping achieve a sustainable oil market stability.

What structure or methods do you consider for continuing OPEC and non-OPEC cooperation?

How we move forward with the ‘Declaration of Cooperation’ is an issue that continues to be addressed and discussed. In this regard, every country in the ‘Declaration of Cooperation’ has a voice; every country will be able to have a say in how we move forward.

This issue was noted in the press communique of the 175th OPEC Ministerial Conference, with all Member Countries pledging to further strengthen its cooperation with non-OPEC participants within a framework under the draft Charter of Cooperation between Oil Producing Countries, which was endorsed in principle and which is to be finalized and ratified by participating countries.

Although, the non-political nature of OPEC's decisions has been emphasized repeatedly times and again, the behavior of some Members of this Organization regarding Iran's sanctions contradicts this. What have you done for instilling or restoring the non-political management of OPEC since the beginning of your post as OPEC Secretary General, and have you succeeded in this area?

When I assumed the position of OPEC Secretary General back in August 2016, my focus was on being impartial; an arbitrator; a bridge between all of our Member Countries.

I have looked to visit all our Member Countries, including Iran. I listen to the views of all our Member Countries.

I should also reiterate that every Member Country has an equal say in the Organization. All countries have one vote. This is how the Founders correctly set it up back in 1960, and this is how it continues today.

Of course, at times we have differences of opinion. This is natural for any international organization.  But we always look for a consensus; a pathway forward. This was clearly evident at the 175th OPEC Ministerial Conference in early December, when a unanimous decision was reached.

Regarding the current circumstances, serious doubts have been raised about OPEC's survival and effectiveness. To make things worse, there is even talking about creation of a new organization as an alternative to OPEC. What exactly are the threats to the future of this organization?

I firmly believe that OPEC’s best days remain ahead of it. We are at our best when we work together; are strong; and all look to pull in the same direction. Again, we may not always agree, but history has shown that it is in all our mutual interests when we work towards helping achieve balance and stability in the oil market.

Let me also stress that there can never be another OPEC; our Organization is unique. I also firmly believe that Iran will remain at the forefront of OPEC’s future, just as it has been central to its long history.

It is vital that as an Organization, we also look beyond the short-term.  This is in all of our interests. We must work together to ensure that oil remains a fuel of choice for the foreseeable future. 

There are some who believe that oil and gas should be consigned to the past, particularly given the issue of climate change.  But this is not borne out in any reputable energy outlook.

In OPEC’s World Oil Outlook 2018 (WOO), oil and gas still make up over 50% of the global energy mix in 2040. This underscores that we need to continually highlight that all energies are required in the future. 

It is not about a race to renewables alone; it is about a race to lower greenhouse gas emissions.

For oil and gas, we need to recognize that the environmental challenge is not oil and gas themselves.  It is the emissions that come from burning them.

Together, we need to continue to look at ways and means to lighten the environmental footprint of oil. I am a believer that solutions can be found in technologies that reduce and ultimately eliminate these emissions.

Iran, since the 174th OPEC Summit, has written several letters to you regarding the incorrect interpretation of the decisions of the OPEC Conference and that JMMC was not mandated to grant production permission to anyone beyond the 100% commitment endorsed by the OPEC Secretariat. As OPEC Secretary General, what have you done in this regard?

I have worked with and have known HE Bijan Namdar Zanganeh, Iran’s Minister of Petroleum and Hossein Kazempour Ardebili, Iran’s Governor for OPEC for many years. I have a deep and full respect for their professionalism, for defending their country’s interests, and also for their continued support of OPEC.

As I have already said, I look to reach out to all our Member Countries. To be the bridge that all our Member Countries can travel across.

I should also stress that the OPEC Conference remains the highest level of decision making within our Organization.  This is embedded in the OPEC Statute.

This was why it was the OPEC Conference that unanimously decided on December 7 to adjust OPEC overall production by 0.8 mb/d from October 2018 levels, effective as of January 2019, for an initial period of six months.

Courtesy of Iran Petroleum

News Code 289132

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