Don't Miss


Home   >   Business   >   Industries   >   Energy   >   OPEC’s next challenge is to solidify gains from production cut – Barkindo

OPEC’s next challenge is to solidify gains from production cut – Barkindo

By on March 6, 2017

Nigeria was exempted from a deal between 13 OPEC  member and 11 non-OPEC countries to cut their oil production in order to boost price. What was the consideration for exempting Nigeria? How long would it last and how would the market absorb the extra volume of oil that would come from the country’s increased output.

The consideration was that member countries particularly Nigeria, Libya and Iran that have been facing severe challenges in their domestic industries should not be expected to participate in this new supply arrangement. Nigeria had lost 900,000 barrels per day, Libya nearly 1.5 million and Iran saw its exports shrinking by nearly 1 million barrels a day. Therefore, the council of ministers decided that these three countries should be given special considerations in the implementation of the Algiers Accord. When we met in Vienna on 30 November to begin the process of implementation we reaffirmed the position of these countries.

This decision is for six months. Therefore, these countries will continue to be exempted for these six months and 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.

We look forward to the expiration of this regime where we will sit down and look at the numbers again and move forward.

OPEC member countries have achieved more than 90 per cent compliance in the first month of the agreed production cut deal reached in November 30, 2016. What is the level of cooperation from non-OPEC members?

The declaration of cooperation that we entered into on 10 December 2016 with 11 non-OPEC member countries led by Russia is that it was the first time OPEC reached such an agreement with producing countries outside of OPEC.

So, you can expect some teething challenges in some of the non-OPEC countries because this is the first time that they are being subjected to such a joint monitoring exercise. But in numbers, for the month of January, that is the first month, in the regime of six months it has shown very commendable high level of conformity of about 90 to 94 percent. The non-OPEC group is lagging behind for reasons I have explained but commitment from all the participating countries is very strong.

The level of confidence has returned to OPEC and the face of the organization is gradually changing.

How badly has the collapse in the price of oil impacted global economies?

Those three historic agreements (Algiers, September 30; Vienna November 30 and December 10) have together changed the energy landscape and have turned a historic page in the oil industry. 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.

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.

Our industry is capital intensive; we need consistent investments in order to maintain current production and take care of reserves and secure future supplies.

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.

What is OPEC’s prediction about the price of oil in the years ahead?

Our lawyers have advised us against having price objectives. These historic decisions that I enumerated earlier (Algiers (30th September, Vienna 30th November and December 10) has helped to restore balance in the market. With the joint decisions that we took on the 10th of December cumulatively we from OPEC have withdrawn about 1.2 million barrels per day. The 11 non-OPEC members have withdrawn nearly 600,000 barrels a day that is 1.8 million barrels per day. For the first month which is January, our compliance level is over 90 per cent. Even within OPEC, we have never had 90 per cent compliance, never! This is the first time. We remain optimistic that the worst is over for this cycle. The challenge now is how to solidify this platform of 24 and I must report from you that the signals we are getting are very positive.

Our neighbour Equatorial Guinea, a very important producer in the gulf of Guinea, has applied formally to join OPEC because they have seen practically efforts we have made together to pull the industry out from this cycle.

 

 

[DailyTrust]