SHANA – OPEC Secretary General Mohammad Barkindo says the organization wants to want to continue cooperation with non-OPEC countries even after rebalancing of the market.
His office is on the 7th floor of the OPEC secretariat. There is an Iranian carpet on the floor. Flags of all 14 OPEC members are on a desk in the corner of the office. He follows the news through the TV. Mohammad Barkindo, is the Nigerian Secretary General of an organization that produced 32.755 million of crude oil bpd in August, 2017. The organization that after some years decided to decrease its production by 1.2 million bpd and reduce it down to 32.5 million bpd on November 30, 2016. OPEC members committed to their agreement 94 percent. The 14 OPEC members, in cooperation with non-OPEC countries, led by Russia, could curb the drop of oil prices. Brent oil, was traded $55.69 yesterday evening. Oil ministers of Saudi Arabia, Russia, Kwait, Algeria, Oman, Venezuela, besides OPEC Secretary General and the Joint OPEC-Non-OPEC Ministerial Monitoring Committee (JMMC) will meet in Vienna to assess countries’ commitment to their vow about reducing production and oil market’s situation. The market, which has lost some of its reserves due to high demand. Accordingly, experts predict an increasing trend for oil prices. This has encouraged OPEC and non-OPEC members to extend the agreement on reducing production level after March, 2018. Barkindo, who was one of the most important role players in last year’s production cap, is experiencing hectic days now.
Three days before JMMC, and on the day when the Secretariat is really crowded, Barkindo kindly arranged his time to let me conduct an interview with him. All the managers and experts are getting prepared for having JMMC held. Interviewing OPEC Secretary General is rather difficult, since responding each question he tries to take a position which is satisfactory to each of the 14 OPEC members and you should ask question which are well worth an answer. Barkindo is an expert. Since taking office in OPCE, he has been successful to make the members united and also could convince non-OPEC countries to act in coordination with OPEC countries. However, it is vital not to forget the impact of the drop on oil prices besides its pressure on oil producing countries’ budgets on Barkindo’s achievements. Under Barkindo, the management of OPEC secretariat has also been changed. The organization has converted from a rigid one to a flexible on during Barkindo’s tenure. In case of a dinner with member of the management, he invites ex-senior staffs of the organization to the table and calls OPEC a “family”, underscoring that they are still members of OPEC family.
Seven days have passed from the 57th anniversary of OPEC establishment. Before entering Barkindo’s room, an Iranian carpet in the waiting room attracts my attention. There are three pictures of Libya on the wall. When I enter his room, OPEC Secretary General walks towards me with a mug of coffee in his hand. He welcomes me and asks me to sit in an armchair.
“Are you happy that OPEC ministers’ decision has driven oil prices to above $55?” I asked.
”OPEC does not define a specific range for oil prices,” he answered.
During the interview I ask him about the probability of extending OPEC agreement on reducing prices for after March 2018 as well as non-OPEC’ cooperation during production reduction period. Discussing the dispute between Qatar and Saudi Arabia, he underlines the significance of the Middle East region, about which you should read the interview as follow. You can also learn about the latest condition of OPEC, shale oil producers as well as future of renewable energies. Barkindo’s position about the cooperation between OPEC and non-OPEC countries led by Russia is also a point of interest.
- At the moment that I am talking to you oil price stands at above $55 per barrel. OPEC ministers had defined a range from $50 to $55 per barrel for oil price. Are you satisfied that oil has surpassed the predicted level?
– Coming to your question, you know as a matter of policy OPEC does not target specific price levels for oil market, we have been consistent on basing our decisions on fundamentals, and one of those fundamentals has been the issue of stop overhaul. That continued to weigh down on oil markets for the past two to three years. And am glad to inform you we are on course to meeting our objectives on rebalancing the oil market and addressing this one variable of stop overhaul. By stimulating and accelerating the grow-down of stocks in order to bring them down to the five year average.
- Past year’s events, specifically those taken place about oil prices, showed that the relation between OPEC and non-OPEC members, in particular Russia, has been remarkably improved in comparison with the previous year. What is your idea about the future of countries’ relations in OPEC? Do you think that the cooperation will be continued?
– Thank you very much for this very important question. there is no doubt that our relation with the non- OPEC countries, led by the Russian federation, has evolved over time and at the moment we are enjoying a very fruitful, productive relationship especially since the enactment of the declaration of cooperation on the 10th of December last year. And it is our wish and desire of ourselves OPEC and the non OPEC countries lead by the Russian federation to institutionalize this relationship on a sustainable basis for the benefit of all producing countries in the delration of cooperation as well as in the interest of consuming countries.
- Mr. Barkindo, OPEC and non-OPEC ministers have once extended their six-month agreement on reducing 1.8 million bpd for another nine month by March, 2018. Regarding the ongoing discussions, do you think that they are probable to extend the accord for another three month, i.e., by 2018 yearend?
– Already doing our last conference on May 25th here in Vienna, the joint conference of OPEC and none OPEC decided to extend the supply adjustment decision to end of first quarter of 2018. And at the moment discussions and consultations are ongoing on what happens beyond March 25. As I told you consultations and discussions are currently ongoing on the fate of the supply adjustment discussions beyond March 2018. . , so I advise you to be patient, on the 30th of November we will revisit the issue and then a decision will eventually be taken.
- The issue of the increasing trend of Shale production in the U.S. is highly effective on the oil market. As I saw during one of OPEC meetings, some ministers believed that OPEC should not continue reducing its productions, so the prices would continue their decreasing trend and Shale production would become uneconomic. But I see that after reducing production of 300,000 bpd of shale oil in the short-run, production of non-conventional oils has increased for 500,000 bpd and an increasing trend has been predicted for production in the next year. Do you think that Shale production will be increased despite the current prices?
– OPEC is not in the business of deciding for the other producers, be the shale oil or the non-conventional producers on what they should do. We are intergovernmental organization guided by our own status which has one of its core principals the maintenance of stability in oil markets as well as insuring security of supply for consumers. The shale producers are very important for stake holders in the supply chain, they have used efficiently technology and innovating management techniques to midvive the shale revolution in the United States at a time there was an apparent deficit in supply globally because of other factors. As you know, we as OPEC for the first time have also reached out to the shale oil producers and tide oil producers in the United States. We have had exploratory meetings with them in accordance with the decision of our board as well as the ministerial conference to explore areas of dialog with them, and I must admit that it went very well, an inaugural exploratory meeting between the two groups which beforehand had no communication per se and we agreed to continue this dialog in future.
- In general, do you consider shale oil production a potential threat to OPEC?
– We are all suppliers of oil in global market and this market today of about 95 to 97 million barrels daily is a huge market which requires producers across the globe, conventional or non-conventional, none OPEC to continue to invest in this industry in order to meet not only the current demand which is robust, but also future demand in the medium to long term. So, we do not see other producers outside OPEC as competitors per say because the market is huge and everybody has a responsibility to continue to supply this market in order to ensure the security of supply for consumers across the world. What we are promoting is dialog, we want all producers hence the OPEC or none OPEC of the declaration of cooperation that we entered into in December of last year which is still open for other non OPEC producers who may wish to join us. And for the shale producers we have broken the ice by reaching out to them to explore the arias of dialog and received a positive response from this first meeting even the request by them to continue along this lines.
- In your opinion, what would be the stake of renewable naperies in the energy market in the long-run?
– In this global energy transition renewable energy is expected to continue to evolve to meet rising demand. The implementation of Paris climate agreement is heat on this transition going forward. Most of the countries that are in the forefront of this investment are continuing to expect that all other countries in the Paris climate agreement fulfill their obligation. But looking at the medium to long term renewable energy is still music for the future, it is starting at a very low base and it requires huge investments, huge subsidies and preferential treatment of order to survive the turbulence of markets. So while we continue to promote it in a balanced manner the focus will continue to be on conventional oil. How we can improve the environmental integrity environmental credentials of oil by using technology to meet the rising restrictions of fossil fuels in general.
- Last year, during OPEC’s meeting in Algeria, I saw that the ice of relations between Iran and Saudi Arabia was melted. This year, Iranians have gone to Mecca for pilgrimage. Mr. Barkindo, Do you suppose that relations between Qatar and Saudi Arabia would be warm again during OPEC meetings?
– For us, oldest member countries of OPEC, it is not only in the interest of OPEC peace and stability in this region be sustained, but it is also in the interest of the whole world because the strategic importance of this region. And I’m glad that our leaders in this region are doing everything they can to overcome whatever differences and challenges that these countries may have, at the moment in order to maintain peace stability and prosperity of this region not only now but in the medium to long term. It is probably those important region in this world that everybody looks up to for one reason or the other. I’m confident that whatever difficulty we may have will be overcome by the collective efforts of our leaders.
- Mr. Secretary-General, let me ask you about the main reason of cooperation among OPEC members despite their differences? How can we generalize them?
– This is vintage OPEC, OPEC since its establishment 57 years ago has been able to evolve and build an impressive group focusing on core principals of the organization. And over the last 57 years of the existence of the this organization we have faced number of challenges from time to time but the organization has been able to pull together and sometimes put aside whatever differences that one or two countries may have among themselves in the overall interest of the organization and its member states. And this is highly commendable for member countries of this organization. And it is on this basis that we continue to remain hopeful and confident that whatever current differences that may exist between one or two or three countries would be overcome and the organization would be isolated from this differences in order to continue to perform its functions base on its principals.
- OPEC members’ commitment to reducing production has been 94 percent during the past month and the figure stood at 100 percent in the month before the last one. The proved that they can reach their target via cooperation. What is the next plan now? What price they intend to reach?
– We are very pleased with the level of commitment that has been showed by member countries of opec and the participant none OPEC countries in the implementation of the declaration of cooperation. The level of commitment as exhibited by the high level of conformity is unprecedented. This is for the first time in the history of oil you’re getting 24 producing countries, OPEC and none OPEC, not only agree being on a supply arrangement with clear numbers and targets and timelines, but also agreed to form subgroups to monitor the implementation in order to ensure high level of conformity. This has worked extremely well since the beginning of the implementation on the January till now. the joint technical committee of the joint ministerial monitoring committee will conveyed here at the secretariat to look at the current numbers for august in the preparation of the meeting of joint ministerial monitoring committee on the 22nd on Friday. All and all So far so good. The mechanism is working the commitment of member countries and the participant countries is very high. And I think we can commend ourselves.
- And this is my last question, after this one-year cooperation with non-OPEC members, what is your message to them?
– As we decided on December as part of the declaration of cooperation the joint conference mandated the secretariat to work out a mechanism and framework for continues institutionalized cooperation between these two groups of countries beyond the immediate objective of rebalancing the market. In other words we want this cooperation to continue even after the market is rebalanced. This is a work in progress, and we consult all participating countries for the benefit of their thoughts. We are drafting this framework which we will discuss on 30th of November when we convey at ministerial level.
Interview by: Reza Zandi, senior oil and energy analyst, journalist