In fact, at the 2016 World Economic Forum in Davos, Switzerland, His Excellency President Ilham Aliyev initially proposed the idea of advancing oil market coordination between OPEC and non-OPEC oil producing countries to help address the severe downturn in the oil market from 2014-2016, OPEC’s Secretary General Mohammad Sanusi Barkindo said in an exclusive interview with Trend.
“He was the first head of state to give his backing to such an innovative and forward-looking proposal,” said Barkindo.
OPEC's secretary general pointed out that Azerbaijan has played a leading role in the DoC since its inception at the end of 2016.
“President Aliyev was ahead of the curve, and we returned to his wisdom when 24 oil producing nations, including Azerbaijan, agreed at the first OPEC non-OPEC Ministerial Meeting on 10 December 2016 in Vienna, on a concerted effort to accelerate the stabilization of the global oil market through voluntary production adjustments. Since then, Azerbaijan has been at the forefront of our endeavours, including graciously hosted a meeting of the Joint Ministerial Monitoring Committee in March 2019. This was a pilgrimage for all of us that attended given Azerbaijan’s unique role in the history of the oil industry. Baku is the site of the first oil well for exploration that was drilled in 1846: a 21 metre well drilled in Bibi-Heybat.
I have personally had the great honour of meeting President Aliyev on many occasions, as well HE Parviz Shahbazov, Azerbaijan’s Minister of Industry and Energy. I would also like to take the opportunity to remember the late Energy Minister HE Natiq Aliyev who was instrumental in the discussions that led to the DoC at the end of 2016.
At OPEC, we are extremely grateful for the robust support and excellent contributions of Azerbaijan, and we look forward to continuing to work very closely with the country, as we move forward to enhance this historic framework of cooperation,” noted Barkindo.
OPEC+ journey in ensuring oil market balance
OPEC’s secretary general pointed out that following the unprecedented turmoil of 2020, the year 2021 was characterized by global economic recovery and relative oil market stability, despite new COVID variants, such as Delta and most recently Omicron, and continuing lockdowns and restrictions in some parts of the world.
“The recovery evolved on the back of the massive vaccine rollout across the year, and the oil market evidently benefitted from the actions of participants in the Declaration of Cooperation (DoC) in 2021. One key component of the DoC in 2021 was the strengthening of the monitoring aspect of the implementation of the DoC decisions at the beginning of the year with the initiation of monthly OPEC and non-OPEC Ministerial Meetings (ONOMM), alongside the other regular meetings. The monthly high-level appraisal process has proven judicious. It has allowed DoC participants to review the outlook and take decisions on a regular basis to proactively accommodate market developments,” noted Barkindo.
He went on to add that the DoC decisions taken in 2021 have had a stabilizing influence on the market.
‘This has included the return of monthly production volumes from May onwards, as decided at the 15th ONOMM on 1 April 2021, which was then reaffirmed and extended at subsequent meetings. Moreover, high conformity levels with the production adjustments in 2021 have been testimony to the depth of the commitments undertaken by DoC participants and have been key to bringing down inventory levels and accelerating the market balancing process,” said Barkindo.
OPEC’s secretary general pointed out that the DoC turned five on 10 December 2021.
“It is important to remember just how far this cooperation has come over the past five years, as exhibited by the decisions taken as a result of the pandemic. The DoC is an unprecedented collaborative and transparent framework of leading oil producers that has helped rescue the global oil industry at critical junctures over the past five years. If it was not for this group of countries and the courageous acts that have been undertaken, the oil sector would, without a doubt, be in a very different situation.
As we move through 2022, we remain as vigilant and agile as ever, to help ensure a balanced market, and deliver a sustainable stability, that is in the interests of both producers and consumers,” he said.
New normal in oil market after COVID-19
“In a number of ways, the pandemic has changed the nature of the way we monitor, analyze and take decisions. The often unpredictable aspects of COVID-19, not only its spread, but also the sporadic impact of lockdowns and restrictions, locally, regionally and globally, have underscored the increasing need to be attentive and proactive, which has been exhibited through our monthly meetings. In general, however, the overall oil market dynamics have changed little and the focus of OPEC and the DoC has remained on the need for market balance and stability, albeit in the face of a devastating pandemic,” said Barkindo.
Additionally, OPEC’s secretary general noted that the implications of the pandemic have also reinforced the importance of cooperation, and the magnitude of the investment challenges before us.
“The value of cooperation was clear during the early stages of the pandemic, when both producers and consumers at the very highest levels, including through the G20, came together to support the actions of the DoC. Looking back on this time, we showed that we could stare down the horrific situation we faced through the enduring timelessness of the principles and key tenets of international cooperation.
From the perspective of investment, this great challenge for our industry was exacerbated by the pandemic. In the oil sector alone, upstream oil capital expenditure fell by more than 30% in 2020, a shrill wake-up call, exceeding the annual dramatic declines witnessed in the severe industry downturn in 2015 and 2016,” he said.
Barkindo noted that additionally, there has been an ever-evolving narrative that oil and gas are part of the past.
“This is wrong-headed given that oil demand continues to grow. In OPEC’s World Oil Outlook 2021, we see the global oil sector alone needing cumulative investment of $11.8 trillion in the upstream, midstream and downstream through to 2045 to meet future demand. These investments are essential for both producers and consumers, as we could see demand exceed supply if investments are not made. In fact, all these issues of market balance and stability, cooperation, and investments are interlinked, which was underscored clearly at the end of 2021 when energy markets witnessed the strains and conflicts related to affordability, security and reducing emissions,” he said.
OPEC’s secretary general noted that it is vital that all stakeholders focus on all these issues.
“We need to remember that focusing on only one of them, while ignoring the others, can lead to unintended consequences. This needs to be central to our thinking as we chart a path out of the pandemic, and view the future energy transition. It is important to stress that OPEC and participants in the DoC do not focus on prices. We are committed to ensuring a balanced market, with a sustainable stability that provides a platform for necessary investments. Our decisions taken throughout the pandemic have focused on this, as exhibited through our data, analysis, and the full transparency related to the decisions taken. Looking ahead, we remain measured and attentive to evolving market dynamics,” he said.
Oil industry as one of the driving forces in building a low-carbon future
“We need to be clear that building a low carbon future has many paths. It is not just one path for all, whether that be a country or an industry. There is no-one size fits all pathway. We need to take an all-options approach, an all-solutions approach, and an all-technologies approach. The oil and gas industries are part of the solution; they possess vital resources and expertise that can help unlock a low carbon future. OPEC supports innovation and technological advancement, and the need to look for clean and more efficient technological solutions everywhere, across all available energies.
We agree with the science and are believers that solutions can be found in technologies, such as Carbon Capture Utilization and Storage (CCUS), hydrogen and others, as well in energy efficiency measures and the promotion of the Circular Carbon Economy (CCE),” he said.
Barkindo pointed out that it is also vital to understand that the future energy transition has many moving parts and needs to be driven by the science, facts and hard data.
“It is about fairness, inclusivity and mutual benefit. We need to ensure energy is affordable for all; we need to transition to a more inclusive, fair and equitable world in which every person has access to energy as referenced in UN Sustainable Development Goal 7; and we need to reduce emissions. Oil has a role to play in each part,” OPEC’s secretary general concluded.