UAE Minister of Energy and Industry addresses International Petroleum Week (IP Week) in London
Thursday, February 22, 2018
His Excellency Suhail Mohamed Al Mazrouei, UAE Minister of Energy & Industry and President of the OPEC Conference for 2018, addressed more than one thousand industry specialists during engagements at this week’s International Petroleum Week (IP Week), London.
Delivering a keynote conference address, Al Mazourei provided an update on the ‘Declaration of Cooperation’, the historic agreement signed by 24 OPEC and non OPEC countries to reduce oil inventories and support the rebalancing of the oil market. The agreement, which runs until the end of 2018, has led to a reduction in OECD stock overhang against the five-year average by around 260 mb since the start of 2017. The level of inventory overhang in January 2018 stood at 74 mb above the five-year average.
His Excellency noted that: “The ‘Declaration of Cooperation’and the historic levels of compliance that have been observedhave evidently provided more optimism and confidence to the industry and the market. However, we recognize that our work is not yet done. We (OPEC and our non OPEC partners)remain focused on our goal of bringing stocks down to normal levels. There is no doubt that we will stay the course.”
While reiterating OPEC’s focus on delivering balance to the market, Al Mazourei also highlighted the critical importance of making new investments to maintain future market stability. He highlighted that: “oil prices fell by an extraordinary 80% between June 2014 and January 2016.From an investment perspective, this led to exploration and production spending falling by a massive 27% in both 2015 and 2016. Overall, we have seen nearly one trillion dollars in investments frozen or discontinued, and many hundreds ofthousands of jobs were lost.”
“However, with the global economic recovery now gathering momentum, market fundamentals remain strong. In OPEC’sDecember 2016 Month Oil Market Report, global oil demand growth for 2017 was at 1.15 mb/d. This has been revised up considerably to now stand at 1.6 mb/d. For 2018, this encouraging dynamic is set to continue with a similar forecast of above 1.6 mb/d.”
His Excellency highlighted the importance of stability and balance across all timeframes to ensure that future demand growth is met. Central to this is investment. In OPEC’s World Oil Outlook 2017, oil demand is set to pass 100 mb/d in 2020and to reach over 111 mb/d by 2040. This is an increase of around 15 mb/d from current levels. Oil producers and companies must also invest heavily simply to offset the impact of natural decline rates.
“OPEC’s World Oil Outlook 2017 estimates that the required global oil sector investment to 2040 is $10.5 trillion. Global investments did pick up slightly in 2017, and the same is expected in 2018, but this is not close to past levels. This needs to be rectified to ensure future market shocks are avoided.”
As part of OPEC’s ongoing efforts to engage more frequently with the media, Al Mazourei hosted a number of engagement sessions throughout the week. A reoccurring question was the future of the OPEC and non OPEC alliance, what it might look like and when more details will be shared. Al Mazoureistressed that it is too early to know what shape any future agreement may take, but highlighted that there is most certainly an aspiration to institutionalise, in some way, shape or form, this historic cooperation between OPEC and its non-OPEC partners on a longer term basis. This will be explored further over the course of the year ahead.
International Petroleum (IP) Week, hosted by the Energy Institute (EI) is a renowned and highly respected event where leaders from the global oil and gas industry share their wealth of knowledge and experience with fellow experts over three days of conferences, seminars, roundtables and social events.