OPEC and sustainabilityMarch 1, 2019
H.E. Mohammad Sanusi Barkindo, secretary-general of OPEC, talks to TOGY about the role of member countries in reducing greenhouse gas emissions, projections for future demand growth and how the UAE has contributed to achieving the OPEC agenda. OPEC was formed in 1960 to co-ordinate policy among oil producing countries.
What is the role of OPEC member countries in reducing greenhouse gas emissions?
OPEC remains fully engaged and supportive of the UNFCCC and the Paris Agreement, which remains the only viable global framework to address climate change. OPEC member countries were present at the recent COP24 meeting in Katowice, Poland, in December 2018, and I delivered a statement at the meeting on behalf of the organisation.
Given that the World Oil Outlook 2018 underscores that oil and gas are expected to still make up more than 50% of the energy mix by 2040, with many other reputable outlooks showing similar numbers, it is important to state unequivocally that the oil industry must be part of the solution to the climate change challenge.
The scale of the challenge means that no single energy source is a panacea, nor can the contribution of an entire industry be overlooked. This is not a race to renewables alone; it is a race to lower greenhouse gas emissions.
The oil industry possesses know-how and experience for reducing our environmental footprint: Working practices and fuel efficiency standards have improved exponentially over the decades.
The industry’s capacity for technological innovation must be harnessed. In this regard, we need to continually look to develop, evolve and adopt cleaner energy technologies, such as carbon capture utilisation and storage (CCUS). The UAE has taken the lead in applying this technology, in conjunction with enhanced oil recovery.
Moreover, it is also vital to have all-inclusive and non-discriminatory energy policies that enable us to meet expected future energy demand, in a sustainable and ever more efficient manner.
Let me stress that the UAE’s Energy Strategy 2050, which aims to increase the contribution of clean energy in the total energy mix from 25% to 50% and reduce the carbon footprint of power generation by 70%, should be held up as a beacon for a cleaner, more sustainable energy future.
What are OPEC’s projections for future demand growth?
Over the past two years or so, the effective implementation of the historic Declaration of Cooperation literally rescued the oil industry from its worst-ever downturn. It helped bring more balance to the supply and demand equation and reintroduced a long-absent element of stability to the market. There is now far more optimism in our industry.
It is important to recognise that the production adjustments through the Declaration of Cooperation are not only focused on the short term; we need to appreciate that the short, medium and long terms are all interlinked. Stability today begets stability tomorrow. We fully believe that the evolving co-operation with participating non-OPEC countries can be a cornerstone of the global oil market in the years ahead, injecting confidence into it and providing a platform to enable the sustainable stability we all desire.
This stability will be vital for the huge investments required to meet future oil demand growth. In OPEC’s World Oil Outlook 2018, published in November last year, long-term oil demand was revised upward for the second consecutive year, with total demand now expected at almost 112 million barrels per day in 2040. It is also important to stress that there is no expectation for peak oil demand over the forecast period to 2040.
In terms of investments, in the period to 2040 the required global oil sector investment is estimated at USD 11 trillion.
Thus, it is vital and welcome that the UAE, and all OPEC member countries, continue to invest in their industries and in expanding capacity for the longer term.
How is the UAE becoming a key player in OPEC in terms of refocusing on downstream and petrochemicals?
The UAE has made huge strides in evolving its downstream business, including the Abu Dhabi National Oil Company (ADNOC) under the stewardship of Dr. Sultan Al Jaber. In May 2018, ADNOC announced an unprecedented expansion of its downstream portfolio to significantly enhance its assets, capabilities and product ranges, underpinned by a USD 45-billion investment programme.
This will help diversify its operations, establishing synergies and creating an integrated model between the upstream and downstream. These creative strategies and flexible business models will clearly aid the UAE in the years and decades ahead.
Many other OPEC member countries are looking to evolve and expand their downstream portfolios. There is evidently much we can all learn from the UAE’s developments in this regard.
How has the UAE aided in the realisation of the OPEC agenda?
The UAE has always played an important role within OPEC since Abu Dhabi, as it was then known, joined the organisation in 1967. In the subsequent years, the UAE has earned a stellar reputation as a conciliator, a bridge builder and a consensus broker in helping the organisation evolve its role and in realising its objectives.
This was also clearly evident in 2018, when H.E. Suhail Mohamed Al Mazrouei, minister of energy and industry of the UAE, assumed the role of president of the OPEC Conference for the year. His Excellency helped guide the organisation with immense skill, diplomatic tact and statesmanship. He steered OPEC and its non-OPEC partners through the second year of the Declaration of Cooperation and oversaw a further flowering of the relations.
The overwhelming consensus of all observers and his peers is that His Excellency was an extremely successful president of the OPEC Conference. All who work closely with him have been impressed by his professionalism, dedication and fundamental decency. His humility has made him an extremely pleasant colleague and a magnificent ambassador for his country, OPEC and indeed the oil industry.