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Saudi Arabia 2017 | DIPLOMACY | GUEST SPEAKER

TBY talks to Mohammad Sanusi Barkindo, Secretary General of OPEC, on the effects of price fluctuations, Saudi's support for OPEC, and the country's strategies for oil development.

Mohammad Sanusi Barkindo
BIOGRAPHY
Mohammad Sanusi Barkindo was appointed to a three-year term as Secretary General of OPEC in August 2016. He was educated at Ahmadu Bello University in Nigeria and Southeastern University in the US. He has a postgraduate diploma from Oxford University.

What measures and strategies are in place in the event that the oil price drops below USD50?

The voluntary production adjustment decisions taken last year by 24 participating countries in Vienna at the 171st Ministerial Conference and the Declaration of Cooperation between OPEC and non-OPEC producers were specifically focused on bringing forward the market, rebalancing, and accelerating the drawdown of the stock overhang to the five-year average. The collaborative and timely developments were taken to address the prevailing market realities, which should then lead to oil finding its equilibrium. In terms of volatility, all producers—in fact all consumers—would like to minimize price volatility. This is natural. What we need to recognize is that short-term price fluctuations caused by such issues as geopolitics, supply disruptions, economic developments, and weather are natural. While they are unavoidable, they are absolutely normal. It is clear we cannot avoid speculation and volatility altogether. However, it is important that we differentiate between such normal fluctuations and those that can be viewed as 'extreme.' Extreme price fluctuations are clearly not conducive to the effective functioning of the market, particularly given the long-term nature of investments in our industry.

How has Saudi supported OPEC, and what role has it played as a role model for conformity with the landmark decisions taken last year?

Saudi Arabia is another key founding member of OPEC, and over the years it has been vital to OPEC's decision making processes and in helping the organization achieve its central objective of oil market stability. This was true in the consultations that led to the landmark decisions taken by OPEC and non-OPEC members in Vienna, and it has continued to play a leadership role in the implementation of these decisions in 2017. The country's conformity to its production adjustment has far exceeded 100% throughout the first quarter of 2017. I have met Khalid A. Al-Falih, Saudi Arabia's Minister of Energy, Industry and Mineral Resources, and the 2017 OPEC Conference President on many occasions. His wise words, constant encouragement, and firm commitment to the OPEC and non-OPEC decisions taken in 2016 have been extremely welcome. Moreover, as Conference President, he is always looking to find positive solutions to any challenges the organization may face, and to work constructively with all the other member countries.

How has Saudi Arabia's investment strategy in the local petrochemical and refining sectors developed, and how are these contributing to a healthier, value-added domestic energy market?

Given Saudi Arabia has a production capacity of over 12 million bpd and vast crude oil reserves, it is obviously vital to look at ways and means to gain further value from them, beyond just exporting crude oil. On a visit to Saudi Aramco in February 2017, I was shown how the company continues to establish synergies between its upstream and downstream businesses by applying its creativity and cutting-edge science to transform its crude oil and gas resources into a multitude of useful products that benefit people around the world. Moreover, the developments are also creating opportunities for new businesses to spring up in Saudi Arabia to support these petrochemical developments and integration. The expansion of its refining and petrochemical business is also taking place at home and overseas. Alongside the large refinery complexes in Saudi Arabia, Saudi Aramco also has refining and petrochemical joint ventures and interests in countries such as China, Japan, South Korea and the US. In March 2017, the King of Saudi Arabia, HH Salman bin Abdulaziz Al Saud, inked a number of new refining and petrochemical deals during a three-week tour to Malaysia, Indonesia, Japan, and China. There is no doubt that the country, with Saudi Aramco taking the lead, views growth in this sector as vital to its long-term interests. These developments are also supportive of the Saudi Arabia's Vision 2030 that aims to see the country become a major global investment destination, and to stimulate and diversify the country's economy.