TBY talks to Mohammad Sanusi Barkindo, Secretary General of OPEC, on surviving amidst low crude prices, OPEC's historic Declaration of Cooperation, and how Nigeria and OPEC thrive on a symbiotic exchange of knowledge.

Mohammad Sanusi Barkindo
Mohammed Sanusi Barkindo was appointed to a three-year term as Secretary General of OPEC on August 1, 2016. He previously served as Acting Secretary General and represented Nigeria on OPEC’s Economic Commission Board from 1993-2008. He led the Nigerian National Petroleum Corporation from 2009-2010 and has headed Nigeria’s technical delegation to UN climate negotiations since 1991. Barkindo has academic degrees from Ahmadu Bello University (Zaria, Nigeria) and Southeastern University (Washington, D.C.). He earned a postgraduate diploma from Oxford University, and was awarded an honorary doctorate from Yola Federal University of Technology.

How can low oil prices boost the industry and the petroleum sector value chain?

After enduring what has now become the longest downturn in the history of the international oil and gas sector, it is in fact quite difficult to find the positives attached to a sustained period of low crude oil prices that have served to damage the entire fabric of the industry and are clearly detrimental to the needs of the various stakeholders, producers, and consumers alike. If prices remain low and investment in new capacity is not made in time, then the supply that these consumers will need in the future—and in growing quantities, I might add—will be in question. Then, there is the problem of deflation, a direct consequence of sustained low crude prices. Perhaps the only area that has benefited from lower prices is that of oil companies and service firms that have had to find ways and means to continue their operations with much reduced capital at hand.

How do you expect investment by oil companies in exploration and production to evolve in the next five to 10 years?

Today, the picture is unfortunately shrouded in uncertainty. OPEC forecasts show that to meet the expected rise in global demand over the next quarter of a century, oil investments totaling around USD10 trillion will be required, in addition to a further USD6 trillion for gas. Since oil prices fell in the summer of 2014, huge pressure has been exerted on the industry as a whole, leading to widespread retrenchment by the oil majors, who have had to drastically reduce costs, bringing with it massive manpower layoffs and, of course, cutbacks in investment. In 2015, global oil upstream spending fell by 26% from the previous year, while in 2016 the figure stood at 22%. This combined represents an investment loss of more than USD300 billion. Nonetheless, OPEC is hopeful that our recent historic Declaration of Cooperation, signed with a group of non-OPEC producers, will help stabilize the market by reducing supplies and shrinking the stock overhang.

How would you describe the importance of the petroleum industry in terms of job generation in Nigeria?

Nigeria is the most populous country in Africa—and within OPEC—with over 183 million inhabitants. Its petroleum exports account for over 90% of the nation's total export revenues. Therefore, the importance of the oil and gas industry in terms of job generation is understandably huge—and will remain so. Looking at official figures from 2015, out of a total value of exports of USD45.4 billion, almost USD42 billion came from petroleum. And even though the government is committed to diversifying its economy in the years ahead, especially toward agriculture and the mining of other natural resources, President Buhari has publicly stated that oil and gas will continue to provide the source of funds necessary for laying a strong foundation for a new and more diversified economy.

How does Nigeria benefit from being part of OPEC and how does the organization benefit from having Nigeria among its members?

Over its more than 56 years of existence, OPEC has established great links with its member states, and Nigeria has proven to be no exception. The country has been active in all OPEC proceedings and policy actions since it joined in 1971 and is considered a valued and trusted member of the OPEC family. And just as OPEC profits from such loyal and committed members as Nigeria, then so does Nigeria benefit from being a member of one of the most important and relevant inter-governmental organizations on the world stage. Nigeria, and especially its oil sector, also benefits hugely from being able to send its personnel in varying disciplines to the OPEC Secretariat, where they can spend several years enriching their knowledge. This is another example of how OPEC and its member countries work together to improve ties and ultimately conditions in the global oil sector.