We (Shana) had planned an interview with Mr. Barkindo on the
sidelines of the 175th OPEC Meeting. The interview was initially scheduled for
4:00 p.m. to 5:00 p.m., December 7, in his office at OPEC Secretariat in
Vienna, but due to the fact that the Meeting ended without an agreement on
December 7 and it was extended to December 8, and the resultant time
constraints, the interview did not take place at the Office of the Secretary
General in Vienna. Kindly enough, OPEC Secretary General sent us answers to our
questions through email.
What follows is a verbatim version of the exclusive
interview of the Petro-Energy Information Network (Shana) with the Secretary
General of the Organization of the Petroleum Exporting Countries (OPEC).
SHANA – 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?
OPEC Secretary General – Iran was one of OPEC’s 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. It 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 joined together to help return 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.
SHANA – A drop of about $20 in the price 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?
OPEC Secretary General – 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 its outlooks.
I think we can all appreciate 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.
SHANA – In your opinion, what is the main reason for the
fall in world crude oil prices since June?
OPEC Secretary General – 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 for 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.
SHANA – 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?
OPEC Secretary General – 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.
SHANA – 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?
OPEC Secretary General – 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 haemorrhaging.
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’.
SHANA – What have been the achievements of OPEC-non-OPEC
agreement for OPEC members since 2016?
OPEC Secretary General – 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, honouring
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.
SHANA – What structure or methods do you consider for
continuing OPEC and non-OPEC cooperation?
OPEC Secretary General – 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.
SHANA – 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?
OPEC Secretary General – 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.
SHANA – 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?
OPEC Secretary General – 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.
SHANA – 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?
OPEC Secretary General – 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.
By Roya Khaleghi, Amir Dashti
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