Precise take a look at Abdullah el-Badri's speech last week on oil market position.
There’s a lot to be said for refusing to back down, and that’s precisely the message that came from OPEC’s General Secretary at the 19th Middle East Oil and Gas Conference in Bahrain last week. Despite the ongoing slump in oil process and growing in-fighting, Abdullah el-Badri remains committed to the path the group began to chart last year and believes it will lead to a better time for the industry in the future.
You’ll remember back in November 2014 all eyes were on the OPEC conference, as oil prices had tumbled from highs of $115 in June to $80. The industry waited with baited breath to see if OPEC was going to curb production to rein in the price freefall. It didn’t, and oil prices sunk further to rest below $50 per barrel. Although they’ve begun to increase since then, there are continued calls for more to be done. A few weeks ago the group’s current president Diezani Alison-Madueke, Nigeria’s oil minister, suggested it should call an early meeting to discuss what to do next.
That seems unlikely. At conference, el-Badri was bullish about the line it took last year, paying no heed to accusations that its stance is behind the current situation. In the only part of the speech which referred to the glut he said, “There have been rising supplies from non-OPEC producers. In fact, since 2008 non-OPEC supply has risen by almost 6 million barrels a day. In contrast, OPEC’s production has been fairly steady at around 30 million barrels a day.”
That’s not exactly true. In fact, according to The Telegraph earlier this year, “Saudi Arabia has secretly increased its oil production to 9.8m barrels per day (bpd), its highest level of output since last October, in a push to win back market share in its oil price war with US shale drillers.”
Nevertheless, el-Badri refused to accept that an abundance of oil was any justification for what happened to returns. He told the conference, “we do not believe that actual market fundamentals warranted the almost 60 per cent drop in prices that the market saw between June 2014 and January 2015. It is clear that speculators also played a role in this fall.”
Far from seeing this as a time when global oil producers develop a band of brothers, el-Badri sees the current state of play as a time that is testing the mettle of those who want to have a stake in this lucrative field, telling the conference, “The current lower price environment is a test for all producers and investors. Lower oil prices mean less revenue. And less revenue means tighter budgets. While prices will no doubt rebound, as they have done lately, it is clear that the industry is currently witnessing a landscape that is shifting the global oil industry.”
We have long been reporting on exactly what those changes mean to our people. Projects being cancelled, rigs wrapped up sooner than planned, investments squeezed and pay packets shrinking. But el-Badri doesn’t see this continuing. In fact the General Secretary is confident things are improving. He said, “The global economy continues to offer up both optimistic and pessimistic indicators, although we do see global economic growth next year at 3.4 per cent, compared to 3.2 per cent in 2014.”
He emphasised the importance of forward planning to get through the difficult times, urging producers to “create incentives to use energy more efficiently and implement sustainable policies that could lay the groundwork for more diversified and less energy-dependent economies.” He backed collaborative schemes between national and international companies, service providers and other industry stakeholders to streamline production. He warned of increasing costs and insisted new technology was needed for “discovering, extracting and producing more hydrocarbon reserves in an ever more cost effective and sustainable manner.”
The future according to el-Badri is healthy. He left conference goers in no doubt that this industry is a cyclical one which throws up challenges that you cannot predict and ones you can. They include “the potential impact of UN climate change negotiations; the role of financial markets and oil market speculation; energy policies in some consuming countries; manpower bottlenecks; advances in technology; and rising costs.” But for those who are capable of riding this current wave, “there are tremendous opportunities”.
That’s a challenge for el-Badri too. The persistent rumours of ferocious infighting and a leadership battle could spell an early end to his reign. He should have been replaced last year but when OPEC couldn’t agree on a successor he was allowed to remain in position. With Nigeria, Iran and Venezuela all experiencing economic havoc as a result of low oil prices, a change in the group’s position would be welcome. However if prices continue to head back up, that will be a fight for another day.