A historic decision that reassures markets

A historic decision that reassures markets

Daniele Di Mita and Serena Sabino
Interview with Mohammad Sanusi Barkindo, OPEC's Secretary General. The 24 producing countries' commitment to reducing oil output will bring the market back into balance, re-establishing an appropriate relationship between supply and demand and supporting the industry in the short, medium and long term

OPEC is taking back its destiny. After eight years of more misunderstandings and summits than mutual vetoes and concrete decisions, on November 30, 2016, crude oil exporting countries wiped out skepticism and doubt by reached an agreement to reduce oil production by 1.2 million barrels per day (bpd). Consequently, on December 10, a large group of countries outside of OPEC, led by Russia, joined this decision by cutting their own output by an additional 600,000 bpd. OPEC’s Secretary General, Nigerian Mohammad Sanusi Barkindo, in an exclusive interview with Oil, called this agreemet ''historic'', capable of ''stabilizing the market'' and, at the same time, supporting the oil industry ''in the short, medium and long term''. Barkindo, aged 57, took office at the OPEC summit on August 1, 2016, and will lead it for the next three years. He originally comes from Yola, the capital of the northern state of Adamawa and one of the 36 states comprising the Federal Republic of Nigeria. After graduating from the Ahmadu Bello University, one of the most prestigious universities in West Africa, OPEC’s current Secretary General completed his studies at Southeastern University in Washington, D.C. and at Oxford.

With the agreement on production cuts reached in November, can it be said that OPEC has returned to taking charge of balancing the oil market?

The most important aspect to note is that through a decision made by 24 producing countries, 13 OPEC and 11 non-OPEC (led by Russia), the aim is to work together to balance the oil market. This would have a huge impact on the oil industry and for producing countries, with extended benefits for the entire global economy. We are experiencing a truly historic event because, for the first time, we have OPEC countries and a number of non-OPEC nations united in the signing of an agreement to balance the oil market.

The agreement is paying off: the downward trend has reversed. What do you see happening next? How far up can oil prices go?

The aim of this declaration of cooperation between OPEC and non-OPEC countries is to balance the market. The agreement has completely changed the atmosphere of the oil industry in a positive way: we have already seen the beginning of a restructuring in the market and we now have the power in our hands to make this declaration credible. As for the rest, rather than price targets, we prefer to think of a stability target: our current goal is to bring the market back into balance, building a fair relationship between demand and supply in order to ensure stability.

The agreement comes after eight years of misunderstandings between OPEC countries. How important is this agreement in terms of your internal balances and OPEC's ability to effectively impact the crude oil market?

Along with the other 11 non-OPEC countries, OPEC has written a truly historic page for the global oil industry that outlines the challenges we have ahead of us. Now we have to work together to stabilize the oil market and support it in the short, medium and long term. Do you think there will be issues when implementing the agreement? Several analysts are concerned that not all OPEC countries will comply with the cuts. This declaration of cooperation has only been effective since January. Over the past weeks, we have had discussions with the countries that signed the agreement, and we are working with all participating nations to do our best to begin to implement this historic decision.

Mohammad Sanusi Barkindo

Mohammad Sanusi Barkindo

Mr. Barkindo was officially appointed Secretary General of OPEC for a three-year term at the organization's 169th Meeting of the Conference on June 2, 2016 in Vienna. He replaced Abdalla Salem El-Badri who had led the Organization since January 1, 2007. Mr. Barkindo brings with him a wealth of experience in the oil and gas industry, both in Nigeria and internationally. From 2009 to 2010, he was Group Managing Director of the Nigerian National Petroleum Corporation (NNPC). Previous to that, he served as Deputy Managing Director of Nigerian Liquefied Natural Gas.

Will non-OPEC countries keep their promise to work together to reduce global output?

At present, all I can say is that I do not know the level to which each of the 24 countries - OPEC and non-OPEC - have expressed their views based on a voluntary commitment at the time of signing the agreement.

Will Nigeria and Libya's increased output, which has been faster than expected, and America's increased shale oil production, curb prices?

In the short, medium and long term, oil demand remains positive and robust. Therefore, we ask all producers, including Nigeria and Libya, to continue to play their role to meet demand and to supply the market with their production. All countries have an important role to play to continue to ensure that the market is supplied continuously to meet the demand: our goal is to maintain stability on a sustainable basis.

President Donald Trump has recently taken office at the White House: what impact do you think he will have on the energy industry and, specifically, on the oil sector?

Firstly, we are waiting to see what policies President Trump will implement. We certainly support continued investment in the energy industry and specifically in the oil sector, in order to ensure that the global economy is continuously replenished with oil to maintain and assist its growth.

Before we finish up, given your origins, can you tell us how you see Nigeria's geopolitical situation?

As Secretary General of OPEC, I prefer never to comment on the internal affairs of individual member countries. But here I will make an exception, only to say that now the situation is better. For now.