The Business Year

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SAUDI ARABIA - Diplomacy

Key Partners

Secretary General, OPEC

Bio

HE Abdalla Salem El-Badri was appointed OPEC Secretary General on January 1, 2007. He began his oil industry career with Esso Standard in 1965 and became Chairman of the Libyan National Oil Company in 1983, before being made Minister of Petroleum in 1990. His ministerial career continued with his appointment as Libya’s Minister of Energy, Oil, and Electricity in 1993 and Deputy Prime Minister in 2004, before he returned to the chairmanship of the Libyan NOC until 2006. In 1994, he was both President and Secretary General of OPEC, and again served as its President in 1996 and 1997.

"For OPEC, the main focus will continue to be on trying to ensure the market is stable and balanced."

Saudi Arabia is a founding member OPEC and its largest producer. What role does Saudi Arabia play in OPEC’s current policy objectives?

Saudi Arabia is OPEC’s largest producer, with major reserves and potential, and an experienced and highly skilled workforce educated both at home and internationally. But there is far more to Saudi Arabia’s role than just its size; it is vital to OPEC’s decision-making process and in helping achieve the central objective of oil market stability. In this regard, it is always looking to find positive solutions to any challenges the Organization may face, and to work constructively with all the other Members. In terms of the history of the Organization, Saudi Arabia is a founding Member, has hosted a number of OPEC Ministerial Conferences, has held the OPEC Conference Presidency on several occasions, and afforded the Organization a Secretary General in the 1960s. In addition it also hosted the Third Summit of OPEC Heads of State and Government in 2007, which concluded with a Solemn Declaration in which principles were set out to guide the future work of the Organization. Saudi Arabia has contributed much to the Organization. We respect and appreciate its support and input. And this goes for all Member Countries: each of them has a voice and their views are important to the Organization’s present and future.

Throughout the history of OPEC, how has cooperation between member states encouraged greater trade between them? What about in the Middle East specifically?

For OPEC, in terms of overall trade between Member Countries over the past 50 plus years, this is obviously difficult to quantify. But I think I can safely say that the relationships that have evolved between countries, through their involvement with OPEC, have helped advance bilateral relations and trade ties. From the perspective of the oil sector and OPEC, over the years the Organization has brought together its Member Countries to discuss and share knowledge on various issues, such as technology, R&D, investment, capacity expansion, and the environment. I certainly hope that in a small way these activities have advanced dialogue, cooperation, and trade among Members.

“For OPEC, the main focus will continue to be on trying to ensure the market is stable and balanced.”

OPEC has predicted an increase in oil demand in 2014 by over 1 million barrels per day. At the same time, it also suggests that non-OPEC countries will meet this demand increase. What does this mean for expanding OPEC production in the years ahead?

Yes, we expect that supplies from non-OPEC producers will meet the expected global oil demand increase this year. We have recently seen an expansion in non-OPEC production, particularly in the US with tight oil. These developments are welcome—we need diversity in production. There is room for all sources of energy, and oil, in particular. However, we also need to keep our eyes on the long term and where supplies will come from. When we talk about our future, we are not just talking about the next few years. What is clear is that significant OPEC capacity expansion will be required. We expect to see the call on OPEC liquids increase by over 10 million barrels a day—to over 47 million barrels a day (bbl/d) by 2035. This is greater than the expected increase in non-OPEC liquids supply over the same period, at just under 9 million bbl/d. Of course, OPEC continues to invest—to maintain existing capacity and add new production—to meet these future expectations. And as it has done for many decades, OPEC and its Member Countries will continue to monitor the market on a daily basis, and make sure that production and future investments are in line with how we see the market in the coming months and years.

The majority of OPEC’s members are from the high-growth Middle East region, and many Gulf nations, like Saudi Arabia, are beginning to consume significantly more oil than in the past. What is OPEC’s approach, from a policy perspective, to this trend of domestic consumption?

We have seen a number of OPEC Member Countries make statements about trying to reduce their domestic oil consumption. For example, through the utilization of natural gas and renewables for power generation, as well as the advancement of energy efficiency measures. It is clearly an important issue, one that OPEC Member Countries are looking at closely, and one in which the OPEC Secretariat has worked with its Members to analyze some of the issues through a study and workshop. Let me stress, however, that OPEC is not involved in its Member Country policy choices. How they utilize their crude oil resources is a decision for them to make.

As the world’s energy demand increase in the medium term, what are your goals for OPEC as an organization? Where can we expect to see OPEC in 2020 in terms of membership, production, and influence?

For OPEC, the main focus will continue to be on trying to ensure the market is stable and balanced in terms of supply and demand. This means better understanding and helping overcome any future industry challenges, such as excessive market speculation and volatility, potential human resource shortages and rising costs, as well as those that today could be termed as “unknowns.” This also means working, where appropriate, with other industry stakeholders. In an increasingly energy interdependent context, dialogue and cooperation can be expected to play an expanding role in the years ahead. By 2020, we should also be heading into a period where OPEC’s production needs to expand significantly. It has the capacity to do this, with proven reserves in OPEC Member Countries currently totaling more than 80% of the world’s total, and as I have already mentioned, it is committed to making sure investments take place to meet future demand increases. In terms of membership, I cannot predict whether we will see new Members in the future, but any oil producer that is a net exporter can apply to join the Organization. We do not actively seek new Members, but we are always ready to talk.

© The Business Year – July 2014

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