Vienna, Austria

Petroleum – cooperation for a sustainable future

20–21 June 2018

Hofburg Palace

www.opec.org
On the right track

Commentar y
After several months of historical decisions and unwavering Cooperation’ is unparalleled in the history of the oil industry.
dedication by OPEC Ministers and their non-OPEC counter- However, given the nature and severity of the downturn of
parts to the ‘Declaration of Cooperation’, participants once the last several years, such a concerted, collective effort was
again showed the world their mettle at their recent ministe- required. No one could have acted alone — and the continu-
rial meetings in Vienna, continuing to lead global efforts to ation of such a broad commitment has been necessary to en-
stabilize the world’s oil market. sure that the desired objectives are kept in focus and finally
The main outcome of the 172nd Meeting of the Conference reached.
and the 2nd OPEC and non-OPEC Producing Countries’ Although the rebalancing of the market has taken longer
Ministerial Meeting, which took place at the OPEC headquar- than originally envisaged at the end of 2016, the expecta-
ters on May 25, 2017, was an extension of production adjust- tions are that we are well on our way to a return to more de-
ments for a further period of nine months, with effect from sirable market conditions. Still, all participating countries
July 1, 2017. The decision once again underscored OPEC’s must ensure that they continue to carry on as they have
importance as a positive force in the market, alongside par- been and maintain their commitments and conformity to
ticipating non-OPEC countries, to the benefit of all produc- the adjustments.
ers, consumers, the industry and the global economy. It has been evident that the slower than expected rebal-
The conclusion was reached after considering various in- ancing process in the first half of this year has been due to
ternal reports, as well as the recommendations made by the the regular early year seasonal changes that can soften the
Joint Ministerial Monitoring Committee (JMMC), supported market, as well as to a sudden pick-up in US tight oil pro-
by the Joint Technical Committee (JTC). duction. But despite this and other sources of uncertainty
These two bodies had been set up last year to monitor in recent months, we believe the groundwork has been laid
conformity to the original production adjustments made by for stronger stabilization and a more consolidated recovery
13 OPEC and 11 non-OPEC producing nations, which result- during the second half of the year.
ed from the 171st OPEC Ministerial Conference on November In short, we are still in the midst of a broad rebalancing
30, 2016, and the unprecedented OPEC and non-OPEC process and, consequently, there are still important issues
‘Declaration of Cooperation’ on December 10, 2016. which need to be addressed. We are not entirely out of the
The very high level of commitment on behalf of OPEC woods, and the market environment remains a challenging
Members and participating non-OPEC nations has been re- one for producers and investors.
flected in the unprecedented conformity levels to last year’s In addition, the discussions and consultations undertaken
adjustment decision, which has increased month-on-month over the past year have opened up an exciting new chapter
during 2017. In May 2017, the combined conformity level in our Organization’s interactions and relations with other
reached 106 per cent, an increase of four percentage points market stakeholders — non-OPEC nations, shale oil produc-
over the previous month. ers, financial actors, consumers and the broader international
What could be a clearer demonstration of the power and community.
efficacy of dialogue and cooperation? Such a spirit of dialogue among energy stakeholders may
There have evidently been many sceptics throughout this have important, long-lasting reverberations. It may even
process of consultations and negotiations, many from observ- serve to help protect the market from severe price cycles in
ers who did not believe that OPEC Members could find unity the future.
among themselves. There were also many who were doubt- Another outcome of this entire process has been an up-
ful that any kind of unanimity could be found with non-OPEC surge in optimism among oil majors and national oil compa-
producers. And there were also many who believed that the nies, despite the lingering short-term market challenges. This
‘Declaration of Cooperation’ would not be fulfilled. The devel- has been demonstrated by an increase in recent E&P agree-
opments of the past six months have surely proven them wrong. ments and deals and a rise in investments following two years
In fact, the actions of the Organization and its Member of decline. Ingenuity, innovation and investments are vital to
Countries constitute what could be called ‘vintage OPEC’. They the long-term future of this vital global industry.
have shown the courage, diligence and spirit of compromise All things said, we believe we remain on the right path.
that have always been hallmarks of the Organization — and The enthusiasm and commitment shown by OPEC and par-
the world today continues to look to OPEC to carry on with ticipating non-OPEC oil producing countries in the rebalanc-
its good work. ing process is a good omen for the future of the market and
It is worth underscoring the fact that the ‘Declaration of global economic stability.
 Contents
Co n ference Notes 4 The 172nd Meeting of the OPEC Conference
14 OPEC oil ministers discuss market, ambitions at home
18 2nd OPEC and non-OPEC Producing Countries’ Ministerial Meeting
22 OPEC and non-OPEC countries attend gala dinner
25 Honouring a legend

Appointments 26 OPEC Secretary General welcomes new Crown Prince of the

Kingdom of Saudi Arabia, congratulates new Minister of State for
4 Energy Affairs

ddp images/abaca press Elec tions 28 President Rouhani re-elected in landslide election

OPEC Fund News 30 OFID Director-General receives Lifetime Achievement Award

Forum 34 International Oil Summit 2017

38 Sixth High-level Meeting of the OPEC-Russia Energy Dialogue
42 The 3rd GCC Petroleum Media Forum

Iraq M ission 44 OPEC Secretary General addresses 3rd Iraq Energy Forum, meets
with senior Iraqi officials

28 Oil Sh ow 46 Iran Oil Show 2017 attracts record numbers of exhibitors

55 Association supports oil and gas businesses in IR Iran
Gulf Intelligence

56 Iran’s oil, gas, refining and petrochemical industry on the

upswing

En erg y Dialogue 62 OPEC-India Energy Dialogue: Evolving Indian relations

Technical Meeting 66 OPEC and non-OPEC extend dialogue with discussions on

OPEC bulletin

US tight oil

Market Insigh t 68 Mark Papa’s vision

Inter view 74 BP’s Chief Economist shares his views on the oil industry

Statistical Meeting 78 OPEC Member Countries discuss improving

statistical input at annual meeting
30
Publishers OPEC Membership and aims
OPEC OPEC is a permanent, intergovernmental Organization,
Organization of the Petroleum Exporting Countries established in Baghdad, on September 10–14, 1960,
Helferstorferstraße 17 by IR Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Its
1010 Vienna objective — to coordinate and unify petroleum policies
Austria among its Member Countries, in order to secure a steady
income to the producing countries; an efficient, economic
Telephone: +43 1 211 12/0
and regular supply of petroleum to consuming nations; and
Telefax: +43 1 216 4320
a fair return on capital to those investing in the petroleum
Contact: The Editor-in-Chief, OPEC Bulletin
industry. Today, the Organization comprises 14 Members:
Fax: +43 1 211 12/5081
Qatar joined in 1961; Libya (1962); United Arab Emirates
E-mail: prid@opec.org
Cover (Abu Dhabi, 1967); Algeria (1969); Nigeria (1971); Angola
Website: www.opec.org (2007); Equatorial Guinea (2017). Ecuador joined OPEC in
This month’s cover reflects the 172nd Meeting of
the OPEC Conference, and the 2nd OPEC and non- 1973, suspended its Membership in 1992, and rejoined in
OPEC Producing Countries’ Ministerial Meeting Website: www.opec.org 2007. Indonesia joined in 1962, suspended its Membership
which was held at the OPEC Secretariat in Vienna, Visit the OPEC website for the latest news and infor- on December 31, 2008, reactivated it on January 1, 2016,
Austria, on May 25 (see feature starting on p4). mation about the Organization and back issues of the but suspended its Membership again on December 31,
OPEC Bulletin which are also available free of charge 2016. Gabon joined in 1975 and left in 1995; it reactivated
Vol XLVIII, No 3, May/July 2017, ISSN 0474–6279 in PDF format. its Membership on July 1, 2016.
 Featu re 80 Sticky wicket: The conservation and risks of
used lubricating oils

Awards 86 Call for nominations for OPEC Journalism and

Research Awards

Newslin e 88 Saudi Arabia and Russia: A new era of

cooperation
90 Equatorial Guinea’s Fortuna FLNG a step
46

Shutterstock
closer to becoming Africa’s first deepwater
liquefaction facility
91 New refinery to contribute to IR Iran becoming
self-sufficient in gasoline
92 Nigerian Senate clears bill to reform oil
governance
93 Advances in sulphide separation techniques
spur sour gas development in UAE

S e cretar iat Visit 94 A Royal Visit: The Lamido of the Adamawa

Emirate

Secretary General’s Diary 96 Visitors of the OPEC Secretary General

Focus on Member Countries 98 OPEC Cities in Focus 90

100 Luanda: Angola’s pearl and cultural icon

Shutterstock
104 Saudi Arabia: Born to fly!

Ar ts & Life 108 Vienna: Bringing music to the masses …

114 Top composers … at a glance

B r ief ings 116 Visits to the Secretariat

Obitu ar y 119 Natiq Aliyev, Minister of Industry and Energy,

Azerbaijan
Noticeboard 120
Market Review 121
OPEC Publications 129
100
Secretariat officials Contributions Editorial staff
Secretary General The OPEC Bulletin welcomes original contributions on Editor-in-Chief
Mohammad Sanusi Barkindo the technical, financial and environmental aspects Hasan Hafidh
Editors
Head, Energy Studies Department of all stages of the energy industry, research reports
Mario Fantini, Maureen MacNeill
In Charge of the Research Division and project descriptions with supporting illustrations Associate Editors
Oswaldo Tapia and photographs. James Griffin, Scott Laury, Mathew Quinn
Head, Petroleum Studies Department Contributors
Dr Hojatollah Ghanimi Fard Editorial policy Siham Alawami, Saadallah Al-Fathi,
General Legal Counsel The OPEC Bulletin is published by the OPEC Ayman Almusallam
Asma Muttawa Secretariat (Public Relations and Information Production
Diana Lavnick
Head, Data Services Department Department). The contents do not necessarily reflect
Design & layout
Dr Adedapo Odulaja the official views of OPEC nor its Member Countries. Carola Bayer and Tara Starnegg
Head, PR & Information Department Names and boundaries on any maps should not be Photographs (unless otherwise credited)
Hasan Hafidh regarded as authoritative. The OPEC Secretariat shall Herwig Steiner and Wolfgang Hammer
Head, Finance & Human Resources Department not be held liable for any losses or damages as a re- Distribution
Jose Luis Mora sult of reliance on and/or use of the information con- Mahid Al-Saigh
Head, Administration & IT Services Department tained in the OPEC Bulletin. Editorial material may
Abdullah Alakhawand be freely reproduced (unless copyrighted), crediting
Head, Office of the Secretary General the OPEC Bulletin as the source. A copy to the Editor Indexed and abstracted in PAIS International
Shakir Mahmoud A Alrifaiey would be appreciated. Printed in Austria by Ueberreuter Print GmbH
 1 7 2 nd M e e t i n g o f t h e C o n f e r e n c e

The 172nd Meeting of the OPEC Conference

Conference Notes

Khalid A Al-Falih (c), Conference President and Minister of Energy, Industry and Mineral Resources, Saudi Arabia; Estévâo Pedro (l), Governor for OPEC, Chairman
of the Board of Governors; and Mohammad Sanusi Barkindo (r), OPEC Secretary General.
OPEC bulletin 5–7/17

4
 Conference Notes

The 172nd Meeting of the OPEC Conference was held in Vienna

on Thursday, May 25, 2017. Attended by delegations from all

13 of the Organization’s Member Countries, the meeting was

held under the Chairmanship of Conference President, Khalid

A Al-Falih, Minister of Energy, Industry and Mineral Resources

of Saudi Arabia, who also served as Head of the country’s

Delegation. The OPEC Bulletin provides the following overview of

the meeting.

Noureddine Boutarfa, Minister of Energy, Algeria. Eng José Maria Botelho de Vasconcelos, Minister of
Petroleum, Angola.

5
 1 7 2 nd M e e t i n g o f t h e C o n f e r e n c e

Conference Notes

Eng Carlos E Pérez, Minister of Hydrocarbons, Ecuador. Gabriel Mbaga Obiang Lima, Minister of Industry, Mines and Energy,
Equatorial Guinea.

A
t a time of continuing challenges for the world’s various reports, including those from both the Secretary
oil producers, the OPEC Conference held its 172nd General, as well as the Organization’s Economic
Meeting at the OPEC Secretariat in Vienna. With Commission Board. Overall, the oil market situation
more than 100 participants representing each of the showed marked improvement since the 171st Meeting
Organization’s 13 Member Countries, the semi-annual of the Conference held on November 30, 2016.
gathering was an occasion for the Conference to con- The Conference President noted: “We started with a
sider oil market developments since it last met at the bearish sentiment, but the market is now well on its way
end of November. toward rebalancing. We have more work to do in lower-
In an opening address, the President of the OPEC ing inventories toward the last five-year average, but we
Conference, Khalid A Al-Falih, Saudi Arabia’s Minister of are on the right track.”
Energy, Industry and Mineral Resources, stated that “the In the meantime, the Conference President said he
main focus for today remains on consolidating, strength- expected global conditions to continue improving —
ening and accelerating the process of rebalancing, along- “assisted by a more robust global economy and higher
side the important task of drawing down global oil inven- GDP growth in 2017, as well as fairly healthy oil demand
tories.” His comments underscored the importance for growth this year, particularly in Asia.”
open discussions on the ongoing challenges facing the He also reminded delegates of the main task before
oil market. them, emphasizing that “nurturing a constructive and sta-
OPEC bulletin 5–7/17

Delegates to the Conference then reviewed the oil ble market environment is our highest priority.” Ensuring
market outlook for the remainder of 2017 and considered a sustainable future for oil supply and demand — and

6
 Conference Notes

Pascal Houangni Ambouroue, Minister of Petroleum and Hydrocarbons, Gabon. Eng Bijan Namdar Zanganeh, Minister of Petroleum, IR Iran.

in order to avoid price spikes and other risks to global Through this decision, Member Countries not only
energy security — is critical. displayed unity once again, but also confirmed their
The other key objectives for the OPEC Conference commitment to strive for a stable and balanced oil mar-
“include strengthening cooperation between OPEC and ket. The objective of achieving price levels that are suit-
non-OPEC producers, and fostering excellent relations able for both producers and consumers, and for the
with international energy institutions to promote greater sake of the industry and the global economy, continues
understanding of vital issues.” to be the overarching goal of OPEC Member Countries.
At various times during the meeting, OPEC delegates
expressed thanks to other Member Countries for their
An extension of the decision
shared commitment and cooperative spirit, particularly
In line with the decision taken at the 171 Meeting of
st
as it was reflected in the most recent conformity lev-
the OPEC Conference, as well as with the ‘Declaration els to the decision taken at the 171st OPEC Ministerial
of Cooperation’ between OPEC and non-OPEC produc- Conference. These conformity levels, which approached
ers on December 10, 2016, and based on analytical 100 per cent, were seen as unprecedented and were
reports presented by the OPEC Secretariat, OPEC dele- interpreted as robust, thus providing encouragement to
gates from all 13 Member Countries decided to extend continue efforts.
the original production adjustment of 1.2m b/d for a Delegates also acknowledged the crucial role
OPEC bulletin 5–7/17

further period of nine months. This was to take effect played by participating non-OPEC producers through
on July 1, 2017. the ‘Declaration of Cooperation’. They welcomed the

7
 1 7 2 nd M e e t i n g o f t h e C o n f e r e n c e

Conference Notes

Jabbar Ali Hussein Al-Luiebi, Minister of Oil, Iraq. Issam A. Almarzooq, Minister of Oil, Minister of Electricity and Water, Kuwait.

constructive and positive dialogue that had emerged, Joint Ministerial Monitoring Committee (JMMC), which
and praised the technical interactions that have evolved was set up last year to monitor conformity to the volun-
among experts from all participating countries. In fact, tary production adjustments decided upon by OPEC and
at the conclusion of the 172nd Conference, the request participating non-OPEC oil producers at the meeting on
of one formerly non-OPEC producing country to join the December 10. The work of the JMMC, which is supported
Organization was formally accepted, with immediate by a Joint Technical Committee (JTC), remains ongoing,
effect — thus making Equatorial Guinea OPEC’s 14 th
and will be particularly important to the work of the
Member Country. Organization — and other non-OPEC producers — espe-
The Conference President also praised OPEC’s “firm cially in the coming months.
and unwavering resolve”, along with that of participat- Given the need to continue studying market condi-
ing non-OPEC producing countries, extolling the virtues tions and the evolution of supply and demand factors
of “the extensive process of consultations and discus- worldwide, delegates to the Conference asked the JMMC
sions involving all … OPEC Member Countries and the — and more specifically, the JTC — to continue its impor-
participating non-OPEC producing countries.” tant work during the period of the nine-month extension.
During their first period of the production adjustment, the
JMMC and JTC had made valuable contributions which
The work of the JMMC
had provided the technical input and the transparency
OPEC bulletin 5–7/17

Attendees at the OPEC Conference also considered a needed to implement the adjustment decisions in a
report and numerous recommendations made by the timely manner.

8
 Conference Notes

Dr Ibrahm Albesbas, Libya’s Ambassador to Austria and Permanent Dr Emmanuel Ibe Kachikwu, Minister of State for Petroleum Resources,
Representative to the International Organizations in Vienna. Nigeria.

The mandate of the JMMC was also a subject of some recognized the achievements and previous contribu-
discussion, with OPEC delegates expressing a desire to tions of outgoing officials. Minister José Icaza Romero,
see it extended. This would be necessary in order to con- from Ecuador, Minister Etienne Dieudonné Ngoubou,
tinue to monitor conformity with the voluntary production from Gabon, Acting Minister Anas Khaled Al-Saleh,
adjustments, as well as to engage in ongoing evaluation from Kuwait, and Minister Eng Eulogio Del Pino, from
of market developments and to follow through with any Venezuela, have all left their ministerial posts. These
necessary recommendations. With the support and input four men played an important role in helping OPEC and
of the OPEC Secretariat, the JTC will continue to provide non-OPEC producers reach the historic and landmark
monthly technical input to the JMMC throughout the decisions of last year, and the Conference extended its
agreed-upon extension period. appreciation for their commitment to the work of the
The Conference also gave special attention to improv- Organization.
ing the ‘environmental footprint’ of oil, and it would, Separately, the Conference congratulated their incom-
according to the President, engage in an appropriate ing replacements: Ing Carlos Pérez, the new Minister of
manner with the United Nations Framework Convention Hydrocarbons of Ecuador; Pascal Houangni Ambouroue,
on Climate Change. the new Minister of Petroleum and Hydrocarbons of
Gabon; Issam A Almarzooq, Kuwait’s Minister of Oil and
Minister of Electricity and Water; and, finally, Dr Nelson
Ministerial acknowledgments
OPEC bulletin 5–7/17

P Martínez, the new People’s Minister of Petroleum of

As usual, the delegates of the OPEC Conference Venezuela.

9
 1 7 2 nd M e e t i n g o f t h e C o n f e r e n c e

Conference Notes

Dr Mohammed Bin Saleh Al-Sada, Minister of Energy and Industry, Qatar. Khalid A Al-Falih, Minister of Energy, Industry and Mineral Resources, Saudi
Arabia, and President of the OPEC Conference.

While the new Ministers and their respective teams address to all delegates, the Conference President said,
will continue the work of their predecessors, joining OPEC “has a fundamental interest in the health of the
other Member Countries in the hard work ahead, they global economy and the worldwide energy industry.” It
continue to display optimism for the future. During his must necessarily be so in order for appropriate levels of
OPEC bulletin 5–7/17

Members of OPEC Management (l–r): Dr Hojatollah Ghanimi Fard, Head, Petroleum Studies Department; Asma Muttawa, General Legal Counsel; Hasan
Hafidh, Head, Public Relations and Information Department; Shakir Mahmoud A Al Rifaiey, Head, Office of the Secretary General; ...

10
 Conference Notes

Suhail Mohamed Al Mazrouei, Minister of Energy, United Arab Emirates. Dr Nelson Martínez, People’s Minister of Petroleum, Venezuela.

investment to be maintained and for technological pro- and will accomplish our goals for the mutual benefit of
gress to continue to be encouraged and nurtured. “The all,” he said.
task in front of us is admittedly challenging and com- The next meeting of the OPEC Conference will con-
plex, but I’m confident that by working together we can vene in Vienna on November 30, 2017.

OPEC bulletin 5–7/17

... (l–r) Abdullah Alakhawand, Head, Administration and IT Services Department; Jose Luis Mora, Head, Finance and Human Resources Department;
Dr Adedapo Odulaja, Head, Data Services Department; and Oswaldo Tapia, Head, Energy Studies Department.

11
 1 7 2 nd M e e t i n g o f t h e C o n f e r e n c e

Conference Notes

d for the Conference.

0 me mb ers of the press were accredite
About 25

graph.
thered for a group photo
nisterial Meeting ga
nd OPEC and non-OPEC Pro
ducing Countries’ Mi
ates to the 2
Ministers and deleg
OPEC bulletin 5–7/17

12

lobby of OPEC.
Press waiting in the
 Conference Notes

etings.
ce held after the me
The press conferen

O P EC Co n fe re n ce and the
172 nd
Impressions of the ies ’ M in iste ria l Meeting ...
nd OPEC and non-OPEC P
roducing Countr
2

OPEC bulletin 5–7/17

ergy, Industry
ce and Minister of En
ntre l), Pre siden t of the OPEC Conferen r), Minister of Energy, Russian
Khalid A Al-Falih (ce der Novak (centre
of the event. i Ara bia ; an d Ale xan nis terial Meeting. 13
or conducting coverage and Mineral Resource
s, Saud nd OPEC and non-OPEC Mi
OPEC’s Eithne Trean the press after co- cha iring the 2
Federation; speak to
 1 7 2 nd M e e t i n g o f t h e C o n f e r e n c e

OPEC oil ministers discuss

Conference Notes

market, ambitions at home

The following brief interviews were conducted by the OPEC
Secretariat’s OPEC Bulletin team with high-level OPEC officials, who
attended the 172nd Meeting of the OPEC Conference on May 25.

Eng Carlos E Pérez

Minister of Hydrocarbons, Ecuador

E ng Carlos E Pérez was appointed as Ecuador’s

Minister of Hydrocarbons just before the last OPEC
Conference, held on May 25 in Vienna. The change had
taken place one day before the Conference and Pérez was
attending for the first time. “I am enjoying it,” he told the
OPEC Bulletin, smiling.
Pérez added that he finds the OPEC and non-OPEC
dialogues very positive. “It’s very good that we have
opened up and non-OPEC countries are participating with
these meetings and agreements,” he said. “It makes it
much more interesting — and we have a larger producer
volume in talks so I think it brings a lot of benefit to the
Organization and to the industry as a whole.”
He said that after the market has stabilized more,
Ecuador hopes to see its production increase, adding
that Ecuador has a lot of potential to do so. It’s a matter
of having the right type of contracts in place and making
them attractive for investors, he said. The country cur-
rently produces 525,000 b/d of crude, with the agreed-
upon production adjustments in place, and has pipe-
lines that are capable of moving 800,000 b/d. “We have
the capacity to grow in four or five years, but it depends
of course on the interest for investment [by] foreign and reserves are there, so companies looking for additional
non-governmental companies that will be looking at addi- production may be interested in making investments.
tional reserves and production later on,” stated Pérez. Regarding the downstream, the previous government
“I think the investors are interested. I think it’s just a had intended to set up a new refinery capable of produc-
matter of having the right tools in place to make it attrac- ing about 300,000 b/d of products but had not found the
tive — and, in the case of the country, to make sure they right investors. “So the task for the new government is
OPEC bulletin 5–7/17

understand there is a stable environment for them to to try and get that interest from companies that are will-
invest and clear rules. From then on things will take care ing to invest in that refinery,” he said. “Hopefully we can
of themselves.” Pérez also noted that the reservoirs and achieve that during the next four years.”

14
 Conference Notes

Gabriel Mbaga Obiang Lima

Equatorial Guinea’s Minister of Industry, Mines and Energy

important to join an organization like OPEC that is able

to provide information which helps in taking future deci-
sions related to projects. The government decided it
was “clearly the best moment”, but Obiang Lima added
the country also joined because there are a lot of OPEC
Members with a lot of experience and, “we can exchange
that experience and allow us to go on to the next phase
(of development).”
He stated that OPEC has fared well over the years and
added that it has become an extremely relevant global
organization. “Usually you know the relevance of an
organization not in the good times, but in the bad times,
and this has clearly been a good example because OPEC
has stepped in at a very important moment. We believe
it has stabilized very volatile pricing and we believe that
by continuing to work together, we can continue to see
benefits for a long time for everybody.”

Cooperation important
Obiang Lima said he has learned a lot through the OPEC
and non-OPEC talks. He added that he thinks such coop-
eration is very important and points out that all produc-
ers have equal interest in the situation. “We are export-
ers and as exporters we need to make sure we have an
equitable supply and price, because that will allow us to
continue with our projects and continue with our invest-
ment. Not having the right price will impact us and in the
future it will impact consumers too.” He added that it is
very important that non-OPEC producers continue to work
with OPEC Members.

E quatorial Guinea’s Minister of Industry, Mines and

Energy, Gabriel Mbaga Obiang Lima, stated he
was very pleased that OPEC had accepted his country’s
Equatorial Guinea is currently producing 348,000
barrels of oil equivalent/day, which includes crude oil,
condensate, LPG and LNG. Crude oil alone accounts for
request to join the Organization. The decision was taken around 200,000 b/d, said the Minister. As a very small
during the 172 Meeting of the Conference on May 25
nd
country, it is focusing more on exploration, refining and
and was announced when all Ministers briefly exited their exporting. Much of the product from refineries is for
closed talk session for a photo opportunity with the new- export, he added.
est OPEC Member. “We are focusing more on exploration and one of the
Obiang Lima said the country decided to join OPEC key focus areas is gas, but still we are producing oil. We
after enduring the struggles that all producers had believe the refining sector is a very important stage for
been through following the oil price drop that started a country like Equatorial Guinea, so we can have added
OPEC bulletin 5–7/17

in mid-2014. “We believe that it is better that oil pro- value for our products rather than just exporting the
ducers work together” he said, and stated that it is very crude.”

15
 1 7 2 nd M e e t i n g o f t h e C o n f e r e n c e

Jabbar Ali Hussein Al-Luiebi

Conference Notes

Iraq’s Minister of Oil

five months since last November’s Conference, non-OPEC

countries have collaborated greatly with OPEC countries,
and conformity is high,” he said. “There are a lot of ideas
being exchanged, and I hope that this will continue to be
strengthened even more.”
Meanwhile, he stated that Iraq is in full agreement
with OPEC and strongly supports its resolutions, adding
it will play any role necessary with the other countries in
the extension [of the ‘Declaration of Cooperation’]. “Iraq
is committed to conformity and complying with OPEC res-
olutions,” he said. “We have control over our exports and
we are in line with OPEC.”

Future plans
Looking to the future, he explained that planned projects
are going ahead as scheduled and that the country is wit-
nessing prosperity in all energy sectors, including oil and
gas. “We are focusing more on upstream for the coming
years, but now we are paying more attention to gas utili-
zation because we have about 3,000 standard cubic feet
of associated gas, about 45 per cent of it being utilized,
whereas 55 per cent is being burned. Thus, we are on a
fast track to use gas because gas is clean energy, and
there is a lot of revenue from gas because it has conden-
sate and associated liquids, which will have a significant
impact on our revenues.”
Some sections of Iraq’s refineries have been hit by
militants, he said, adding that the country’s largest refin-
ery in Baiji was completely wrecked. Now there is a fast-
track plan to rehabilitate it, while four other refineries
have been tendered on an investment basis this year.

J abbar Ali Hussein Al-Luiebi, Iraq’s Minister of Oil, finds

the OPEC and non-OPEC talks very exciting, useful and
successful. “On top of everything, they are very success-
“We are moving very fast on the refinery sector, as well
as on the upstream and gas sectors.”
The country continues to face numerous challenges,
ful. There are very fruitful discussions with mutual under- he noted, including political instability and security
standing,” he proclaimed. “We have exchanged ideas issues. Nevertheless, he expressed hope that stability
between us and reached good resolutions, the main one would soon return. Additionally, he noted that Iraq was
being the extension of the [voluntary production adjust- recently able to avoid the danger of a complete financial
ments] for a period of another nine months.” collapse during 2016. Fortunately the country passed this
He predicts that OPEC and non-OPEC talks will wit- phase successfully, he said, “and now we are in the pro-
ness increasing levels of understanding, and that even cess of rebuilding our country — economically, socially
OPEC bulletin 5–7/17

deeper discussions may ensue. “I think during the last and in other aspects.”

16
 Conference Notes

Dr Emmanuel Ibe Kachikwu

Nigeria’s Minister of State for Petroleum Resources

D r Emmanuel Ibe Kachikwu, Nigeria’s Minister of State

for Petroleum Resources, said he feels extremely
positive about the OPEC and non-OPEC talks which have
aren’t working well and
are only producing about
10–15 per cent of the
been taking place over the past months. “I think the country’s requirements,
whole idea of getting both OPEC and non-OPEC countries with most products being
together was a fantastic idea,” he said. “We all pushed imported. Facing this
for it, and the sheer momentum that has gathered and problem, the Petroleum
what it has done for the industry has been unbelieva- Ministry has decided that
ble,” he said. rather than have middle
“More importantly, it’s helped forge unity, even [among] men sell the country’s
OPEC Members,” he said. “All in all, it’s been good.” products and [import fin-
“I think the Secretariat has done an excellent job, ished products], it has
while taking on an additional workload,” Kachikwu said. tried “to achieve synergy
A year ago, he could not have foreseen the level of suc- by giving the crude to an
cess that the talks have reached today. “I didn’t think established refinery to
we would get this sort of momentum and unity between process it and bring it
OPEC and non-OPEC countries that easily. But I always back to us.” Doing this,
felt cooperation was a solution. I always advocated for it has saved billions of
it …. The more universality we can bring to this relation- dollars in his first year as
ship, the more stability we bring to the market — so I am Minister. “It’s worth the
happy with what we have achieved so far.” effort,” he said.
Regarding his country’s oil industry, Kachikwu
stated that investment is needed to maintain essential
Refining investment
work. Nigeria’s normal production level is about 2.2m
b/d and the government would like to raise it to 3m However, this is not a sustainable, long-term solution.
b/d. “Just to get fields online and cap them will require “The refineries need to be repaired […] which we are
an average of about $10 billion per year in investments hoping to do by 2019–20. But over and above that, we
over the next three to four years,” he noted. want those involved in this trading to begin to invest in
“There are also some dedicated projects in the Bonga refineries,” he said. “I think it’s a shame that we are still
oil field,” he said, adding that Italy’s Agip plans to spend importing so much product. When the government came
about $10bn, while Royal Dutch Shell is hoping to spend in two years ago, that was a major concern for us.”
$10–11bn on the field. In the meantime, the sector has been stabilized and
“We are fairly close to identifying dedicated invest- fuel queues removed. He added that supplies are better,
ments upstream,” he said. “Downstream is a chal- but there is still a fundamental need to focus on local
lenge. We need to [invest in our] refineries. [We] need demand.
to do pipelines. We’ve estimated the infrastructure During the Meeting of the Conference, back in his
gap in the midstream and downstream to be about country, the first part of the Petroleum Industry Bill was
$30–40bn and that is one of the things we are going passed by the Nigerian Senate. This was welcome news,
to be looking at.” He further stated that some of the though Kachikwu added that there are several compo-
required investment could come from Nigerians with nents to the bill. “[The Senate] just passed the first one
investment capabilities, rather than being restricted today, so it’s a landmark achievement,” he said. It still
to investors abroad. requires approval from the House of Representatives
OPEC bulletin 5–7/17

Kachikwu commented on direct purchase agree- and the President. “But it’s a long process [and] we have
ments, which were introduced last year, as well as associ- worked collaboratively with the Senate. I am happy to
ated crude-for-product exchanges, stating that refineries hear that it got passed today.”

17
 1 7 2 nd M e e t i n g o f t h e C o n f e r e n c e

2nd OPEC and non-OPEC Producing

Conference Notes

Countries’ Ministerial Meeting

Co-chairs Khalid A Al-Falih (c), President of the OPEC Conference, and Minister of Energy, Industry and Mineral Resources of the Kingdom of Saudi Arabia, and
Alexander Novak (l), Minister of Energy of the Russian Federation; with Mohammad Sanusi Barkindo (r), OPEC Secretary General.

The 2nd Ministerial Meeting of OPEC and non-OPEC signatories to the

‘Declaration of Cooperation’ took place in Vienna in the afternoon
of Thursday, May 25, 2017. Attended by delegations from ten
participating non-OPEC oil-producing countries and all 14 of the
Organization’s Member Countries, the meeting was co-chaired by
Khalid A Al-Falih, President of the OPEC Conference, and Minister
of Energy, Industry and Mineral Resources of the Kingdom of Saudi
Arabia. He was joined by Alexander Novak, Minister of Energy of the
Russian Federation, who also co-chaired the 1st OPEC and non-OPEC
OPEC bulletin 5–7/17

Ministerial Meeting in December. The OPEC Bulletin provides the

following overview of the meeting.

18
 Conference Notes

The late Natiq Aliyev,

former Minister of
Industry and Energy,
Azerbaijan (see
obituary on p117).

T
he oil market has seen some interesting devel- Shaikh Mohamed
opments in the approximately six months since Al-Khalifa, Minister
of Oil, Bahrain.
historic and landmark decisions were reached by
OPEC’s 13 Member Countries and ten participating non-
OPEC oil-producing countries. All 24 countries were sig-
natories of the joint ‘Declaration of Cooperation’, which
resulted from the 1st Ministerial Meeting of OPEC and non-
OPEC producers on December 10, 2016, and all of them
met once again on May 25, 2017, at the OPEC Secretariat
headquarters, after the conclusion of the 172nd Meeting
of the OPEC Conference, to consider recent market devel-
opments and discuss the possibility of extending the
original decision.
At the plenary session, delegates to this 2nd OPEC
and non-OPEC Producing Countries’ Ministerial Meeting
first recalled the November 30, 2016, decision by OPEC
Member Countries to implement a 1.2m b/d production
adjustment effective January 1, 2017, for a six-month
period, and then reviewed the subsequent decision of
participating non-OPEC producers, who joined OPEC in
Pehin Datu
the ‘Declaration of Cooperation’ to implement a produc- Singamanteri
tion adjustment of nearly 600,000 b/d on December 10, Colonel (B) Dato Seri
2016, for the same period. Setia (Dr) Awang Haji
Mohammad Yasmin
Bin Haji Umar,
Important for stability Minister of Energy
and Industry at the
Prime Minister’s
In his opening address to the plenary, Conference
Office, EIDPMO,
President Al-Falih said the joint ‘Declaration of Brunei Darussalam.
Cooperation’ had “played an important role in mov-
ing the market toward stability.” He added that “in
the absence of the [decision], the markets would have
OPEC bulletin 5–7/17

remained aimless.”
The plenary noted that the 14 OPEC Member
Countries — the Organization’s 13 Member Countries in

19
 1 7 2 nd M e e t i n g o f t h e C o n f e r e n c e

Kanat
Conference Notes
Bozumbayev,
Minister
of Energy,
Kazakhstan.

addition to new member Equatorial Guinea, one of the

original non-OPEC signatories of the Declaration — had
met earlier in the day, before the start of the 2nd OPEC
and non-OPEC Producing Countries’ Ministerial Meeting,
at the 172nd Meeting of the OPEC Conference. There del-
egates had taken into account current oil market condi-
tions, analysed oil market developments since the last
OPEC Conference in November, reviewed the oil market
outlook for the remainder of 2017, and considered the
reasons for an extension of the production adjustment.
Datuk Seri Abdul The participating non-OPEC Parties were Azerbaijan,
Rahman Dahlan, the Kingdom of Bahrain, Brunei Darussalam, Kazakhstan,
Minister in the
Malaysia, Mexico, the Sultanate of Oman, the Russian
Prime Minister’s
Department, Minister Federation, the Republic of Sudan and the Republic of
in charge of Oil & South Sudan.
Gas, Malaysia.

Exceptional opportunity
At the opening, the Conference President said the meet-
ing was “an exceptional opportunity to further strengthen
the foundation of cooperation between both OPEC and
non-OPEC [countries].” It was a chance “to build more
robust mechanisms to collaborate for the benefit of all.”
The cooperative spirit that characterized delibera-
tions at the meeting seemed to bear this out. And after
some discussion, all Parties attending the 2nd OPEC and
non-OPEC Producing Countries’ Ministerial Meeting rec-
ognized the need for continuing cooperation among oil
exporting countries in order to achieve lasting stability in
the oil market — and decided to extend the production
Dr Aldo Flores-
Quiroga, Deputy adjustment, which originally started January 1, 2017, for
Secretary of Energy a further period of nine months, beginning July 1, 2017.
for Hydrocarbons, In announcing their decision, the 14 OPEC Member
Mexico.
Countries and ten participating non-OPEC producing
countries underscored the importance of continuing
efforts to help stabilize the oil market in the interest of all
oil producers and consumers, and reaffirmed their com-
mitment, individually and collectively, to the decision.
It was noted that the commitment of all 24 countries
to the voluntary adjustment decision was clearly evi-
dent from the unprecedented conformity levels reached
OPEC bulletin 5–7/17

by the date of the meeting. These had been monitored

by the Joint Ministerial Monitoring Committee (JMMC)
and the Joint Technical Committee (JTC), both of which

20
 Conference Notes

Salim Al Aufi,
Undersecretary at
the Ministry of Oil
and Gas, Oman.

had been created as a result of the December meeting.

The JMMC and JTC continuously examined oil market
data and production levels, and in so doing, “informed,
guided and enhanced the work” of the signatories, said
the Conference President.
A day earlier, on May 24, the JMMC had convened
in Vienna for its third meeting. Basing its deliberations
on the Report of the Joint OPEC/non-OPEC Technical
Committee (JTC) for the month of April 2017, JMMC dele-
gates stated that participating producing countries had
shown “steady and convincing progress” towards full Alexander Novak,
conformity with their respective adjustments in produc- Minister of Energy,
Russian Federation.
tion, and recommended the nine-month extension.
In the course of the meeting, delegates also
expressed gratitude for the contributions of Issam A
Almarzooq of Kuwait, Chair of the JMMC, and Alexander
Novak of the Russian Federation, who served as its
co-chair. The two Ministers will continue to serve in their
respective roles following the decision to extend the man-
date of the JMMC and the JTC. Over the months since the
December decision, both bodies have provided valuable
support and input, and have ensured the transparency
required for the timely implementation of the decisions
taken last year.

Monitoring bodies continue their work

The JMMC stated that it would continue monitoring con-
formity levels, as well as market conditions, and would
leave the possibility open to recommend, if necessary,
further adjustment actions. Its next meeting will be held overall aim of ensuring a sustainable oil market for the
in the Russian Federation in July. benefit of producers, consumers, the industry and the
The JTC, with ongoing support from the OPEC global economy.
Secretariat, will continue to provide monthly tech- As the President of the Conference said at the start
nical assistance to the bodies of the ‘Declaration of of the 2nd OPEC and non-OPEC Producing Countries’
Cooperation’ — reaffirming the overall commitment of Ministerial Meeting, all Parties are “determined to
OPEC and participating non-OPEC countries to the pro- deepen the institutionalization of the framework for coop-
cess of cooperation. eration between OPEC and non-OPEC countries.” This can
At the conclusion of the 2 Ministerial Meeting, the
nd
help to improve the future adaptation of producing coun-
Parties agreed to continue regularly reviewing the sta- tries to market cycles, he said.
tus of their cooperation at the technical and ministerial “The oil industry is cyclical by nature,” he added. “But
OPEC bulletin 5–7/17

levels. They also further agreed to continue strength- with regular interactions at both the policy and technical
ening their cooperation by, for example, facilitating the levels, and by working together toward common goals,
exchange of joint analyses and outlooks — with the we can help promote healthy markets.”

21
 1 7 2 nd M e e t i n g o f t h e C o n f e r e n c e

OPEC and non-OPEC countries

Conference Notes

attend gala dinner

Mohammad Sanusi Barkindo, OPEC Secretary General, speaks at the first gala dinner for OPEC and non-OPEC countries.

T
he ministers and representatives of the OPEC and December 10 when the ‘Declaration of Cooperation’ was
non-OPEC countries that were signatories to the signed — the Gala Dinner marked the first formal evening
‘Declaration of Cooperation’ participated in their event. It also represented an opportunity to deepen per-
first Gala Dinner on May 24, 2017, on the eve of the sonal relationships — and the hope was expressed that
172 Meeting of the OPEC Conference, and the 2 OPEC
nd nd
it may be the start of a wonderful tradition.
and non-OPEC Ministerial Meeting. The event was held “It is great to see so many enthusiastic and com-
at the spectacular and unique Palais Ferstel in Vienna’s mitted people here — gathered together not just for the
OPEC bulletin 5–7/17

famous first district. sake of the oil industry but for the well-being of the global
Although the group of dignitaries had met informally economy and the prosperity of the world at large,” said
once before — for a breakfast on the historical date of Khalid A Al-Falih, Minister of Energy, Industry and Mineral

22
 Conference Notes

Resources of Saudi Arabia, and President of the OPEC B a r k i n d o sa i d

Conference in his opening remarks. that Minister Al-Falih
“The consultations and diplomacy efforts that led to assumed the OPEC
this began during 2016. They were unparalleled in the Presidency at the
history of OPEC.” commencement
Al-Falih discussed the process behind the talks lead- of these landmark
ing to the successful OPEC and non-OPEC decisions. He decisions and with
also described the feeling of urgency that had spurred a new framework
all participants on, noting that the talks represented a that had yet to be
new chapter in OPEC and non-OPEC relations. Since the tested. He lauded
‘Declaration of Cooperation’ was signed some positive Al-Falih’s previ-
indicators had returned to the market but important ous work as Saudi
issues remain.

The Secretary General of OPEC, Mohammad Sanusi Aramco’s President and

Barkindo, also saw the gala dinner as a good opportunity CEO prior to taking up
for all in attendance. It is a chance to “sit back, take stock his post as Energy
and acknowledge the collective will and heroic efforts of Minister. “In his five-
all 24 countries in the ‘Declaration of Cooperation’,” he and-a-half year tenure
said. as the head of the
He highly praised both the previous President of largest energy com-
the Conference, Mohammed Bin Saleh Al-Sada, Qatar’s pany in the world,”
Minister of Energy and Industry, and Al-Falih, the cur- said Barkindo,
rent President. Al-Sada’s unwavering focus on the mis- “[Al-Falih] led the compa-
sion and destination of the group “despite often stormy ny’s transformation from an oil and gas company
waters” was a cornerstone in the historical achieve- to a fully integrated energy and chemicals enterprise.”
OPEC bulletin 5–7/17

ments, Barkindo said. “Mohammad Al-Sada never gave Barkindo added that Al-Falih has been a major con-
up. He remained optimistic, even given the prospect of tributor and actor in the OPEC and non-OPEC decisions
despair.” that had been taken. “As Conference President, he has

23
 1 7 2 nd M e e t i n g o f t h e C o n f e r e n c e

Conference Notes

Alexander Novak, Russian Minister of Energy. Khalid A Al-Falih, Saudi Arabian Minister of Energy, Industry and
Mineral Resources, and President of the OPEC Conference (r), gave the
recitation in honour of Dr Alirio Parra (l).

been similarly instrumental in pushing these for-

ward with commitment and dedication,” he said.
The Secretary General also praised the role of
Russian Energy Minister, Alexander Novak, who
he described as “the most reliable and depend-
able bridge in this flourishing dialogue between
OPEC and non-OPEC.”
Although some doubted a united position
with regards to the market rebalancing pro-
cess could be found among OPEC Member
Countries, let alone in combination with non-
OPEC producers, the recent decisions have
proved that the extensive deliberations and
consultations paid off. Even after the joint
decision of 10 December was announced,
some naysayers refused to believe that any
reasonable conformity with the produc-
tion adjustments could be reached. But
they were all mistaken, said Barkindo.
He called the ‘Declaration of
Cooperation’ “unparalleled” in history,
adding that given the nature of the mar-
ket downturn, a collective effort was
required. “No one could have done it alone.”

24
 Conference Notes

Honouring a
legend
Later in the evening, participants honoured Dr Alirio Parra of
Venezuela, a pioneer of the oil industry and witness to history,
including the founding of OPEC. In fact, he is the last surviv-
ing witness of the Baghdad meeting which established OPEC
in 1960, said Khalid A Al-Falih, Saudi Arabian Minister of
Energy, Industry and Mineral Resources, and President of the
OPEC Conference, who gave the recitation in Parra’s honour.
At that time of OPEC’s founding, Parra was an assistant to
Venezuela’s legendary Minister of Mines and Hydrocarbons,
Juan Pablo Pérez Alfonzo. The objective and vision of the
Founder Members back in 1960 — to protect the long-term
interests of the Organization’s Member Countries and to move
forward together — is essentially the same one that is still
adhered to today, noted Al-Falih.
Al-Falih listed Parra’s many impressive accomplish-
ments spanning the decades of his career in the oil
industry. These included Parra’s time as a member of the
Presidential Commission on Oil Nationalization in 1975 in
Venezuela, when he participated in the creation of Petroleos
de Venezuela SA (PDVSA). Then, as a board member of the
company, he spent 15 years helping to shape the com-
pany into an efficient, global commercial enterprise, said
Al-Falih, including initiating and facilitating development
of Orinoco extra-heavy crude. Parra also served as the
country’s Minister of Energy and Mines (1992–94) and as
President of the OPEC Conference.
After Al-Falih’s comments, Parra stood at the podium to
thank his audience and share his humble delight at receiv-
ing the honour given to him. He extended his deep gratitude
to the OPEC Secretary General for its extraordinary gesture,
adding that Barkindo may already be viewed as one of the
most successful Secretaries General since the founding of
the Organization.
“What has been accomplished thus far by those here this
evening has made a difference to so many people’s lives,”
said Parra, “but everyone must still roll up their sleeves and
continue with the journey.”
Parra noted that back in 1960 there were many people
who believed that OPEC would not last long; but it is still here
today — and its best days are yet to come. “I believe that OPEC
is currently the most cohesive group of Member Countries in
living memory,” said Parra to thunderous applause. He is a
man who should know.
Dr Alirio Parra of Venezuela, a pioneer of the oil industry and witness to history, including the
founding of OPEC.

25
 OPEC Secretary General welcomes
Appointments

new Crown Prince of the Kingdom

of Saudi Arabia, congratulates new
Minister of State for Energy Affairs

O PEC Secretary General, Mohammad

Sanusi Barkindo, has congratulated
HRH Prince Mohammed bin Salman Al Saud
on his appointment as the new Crown
Prince of the Kingdom of Saudi Arabia fol-
lowing the announcement of the decision
in a Royal Decree by King Salman Bin Abdul
Aziz Al-Saud, the Custodian of the Two Holy
Mosques.
The OPEC Secretary General offered his
sincere congratulations, along with those of
the staff of the OPEC Secretariat in Vienna, on
the auspicious appointment. He said that he
had no doubt that the new Crown Prince, in
supporting King Salman, would continue the
development and renaissance of the Kingdom
through Saudi Vision 2030 and achieve great
success in serving his country.
He added: “May Allah grant you wisdom,
courage and strength to carry out the heavy
obligations and duties of this high position,
and guide you always on the most propitious
path.”
Barkindo also thanked HRH Prince
Mohammed for his continued engagement
with, and support of OPEC. He said that
Alamy
OPEC bulletin 5–7/17

HRH Prince Mohammed bin Salman Al Saud, the newly appointed Crown Prince of the
Kingdom of Saudi Arabia.

26
working with Khalid A Al-Falih of Saudi Arabia, the
Kingdom’s Minister of Energy, Industry & Mineral
Resources and the current OPEC President, had
underlined to him the important role that the
Crown Prince played in the decisions taken by
OPEC and non-OPEC at the end of last year, and
most recently in May 2017 through the extension
of the ‘Declaration of Cooperation’.
The Secretary General also conveyed his sin-
cere best wishes on the joyful occasion of Eid
Al-Fitr Al-Mubarak, and his hopes that this spe-
cial day brings peace, happiness and prosperity
to everyone.

I n a separate message, the OPEC Secretary

General also congratulated HRH Prince Abdul
Aziz Bin Salman on his appointment as the new
Minister of State for Energy Affairs of the Kingdom
of Saudi Arabia by Royal Decree by King Salman
Bin Abdul Aziz Al-Saud, the Custodian of the Two
Holy Mosques.
The OPEC Secretary General conveyed his
sincere congratulations, along with those of the
staff of the OPEC Secretariat in Vienna, on the
appointment, and expressed his sincere wishes
for a successful “period of tenure”.

HRH Prince Abdul Aziz Bin Salman, the newly appointed Minister of State for Energy Affairs of the
Kingdom of Saudi Arabia.
OPEC bulletin 5–7/17

27
Election

President Rouhani
re-elected in
landslide election
OPEC bulletin 5–7/17

ddp images/abaca press

28

Iranian President, Hassan Rouhani.

After an intense presidential
campaign, Dr Hassan
Rouhani, President of the
Islamic Republic of Iran, was
overwhelmingly re-elected
during polling on May 19. The
OPEC Bulletin provides the
following global round-up of
his electoral victory.

T
Reuters

hese were the first presidential elections in

the Islamic Republic of Iran since the coun-
try’s nuclear agreement of 2015. Turnout was President Rouhani casts his
impressive, with 73 per cent of the country’s 55 million of Iran would continue to support OPEC’s important vote during the presidential
election in May 2017.
eligible voters participating. In fact, given the long lines efforts to restore market stability for the benefit of
at many polling stations, voting had to be extended producers, consumers, the industry and the global
by five hours on Friday evening, according to several economy.
Iranian news reports. During their September meeting, the Secretary
In the end, out of a total 41 million votes cast, General thanked President Rouhani for his kind and
Presidential incumbent Hassan Rouhani won 23.5 million encouraging words, and offered his gratitude for IR Iran’s
(about 57 per cent), while the second closest candidate, support of both his candidacy for Secretary General and
Ebrahim Raisi, received 15.7 million votes (about 38.5 the work of the OPEC Secretariat in general.
per cent). The Secretary General also underlined the key role
When he was first elected in 2013, Rouhani had IR Iran has played over the years within OPEC to achieve
received a clear mandate based on a solid electoral vic- market stability and fair prices — and said that with
tory with a turnout of more than 51 per cent. Rouhani’s Rouhani’s guidance IR Iran had achieved “prosperity,
mandate has now been extended. He plans to continue stability and progress.”
with efforts to help the economy grow, and to stimulate Rouhani, who is 69 years old, is a senior cleric who
investments to the oil and gas industry. also served as an adviser to the country’s Supreme
Rouhani has, at various occasions, discussed the Leader, Ayatollah Ali Khamenei. Under the former presi-
challenges and opportunities facing the oil market. In a dent, Mohammad Khatami, Rouhani served as the chief
meeting with OPEC Secretary General, Mohammad Sanusi negotiator for IR Iran’s nuclear energy programme. He
Barkindo, in Tehran on September 6, 2016, accompanied also served as Secretary of Iran’s Supreme National
by Eng Bijan Namdar Zanganeh, Minister of Petroleum, Security Council for 16 years, having been appointed
Rouhani noted that IR Iran had suffered greatly under in 1989.
sanctions. After the electoral results were announced on May
One of the President’s key objectives during his ten- 20, tens of thousands of Rouhani supporters poured onto
ure is thus to see the end of all sanctions against the the streets of Tehran and other Iranian cities to celebrate.
Islamic Republic of Iran — and to make efforts to ensure Fireworks also went off in Vali-e-Asr Square.
OPEC bulletin 5–7/17

that this translates into economic benefits for the coun- In a post to Instagram after his victory, Rouhani wrote:
try and its many important industries. “Great people of Iran, you are the true winners of this
In the meantime, Rouhani said the Islamic Republic election.”

29
 OFID Director-General
receives Lifetime
Achievement
Award
Suleiman Jasir Al-Herbish has

been presented with the

2017 Abdullah Bin Hamad

Al-Attiyah International

Energy Award for Lifetime

Achievement for the

Advancement of the

Organization of the

Petroleum Exporting

Countries (OPEC).
OPEC bulletin 5–7/17

By Steve Hughes
OFID

Suleiman Jasir Al-Herbish, Director-General of the OPEC Fund for International Development (OFID).
30
 OPEC Fund for International Development (OFID)

Praising Al-Herbish’s efforts toward universal energy pov-

erty alleviation, Abdullah Bin Hamad Al-Attiyah, Chairman
of the Al-Attiyah Foundation and former Deputy Prime
Minister and Minister of Energy and Industry of Qatar,
said Al-Herbish had “championed [the cause] tirelessly
at the highest level.”
Al-Attiyah told Al-Herbish: “Since assuming office,
you have led numerous initiatives to make the OPEC
Fund For International Devepment’s (OFlD’s) work more
relevant and efficient, which has led to milestone part-
nership agreements with a large number of bilateral and
multilateral partners.”
Accepting the award, Al-Herbish thanked the selection
committee, Al-Attiyah and the foundation. He praised the
Member Countries of OFID and OPEC, including his own
country, the Kingdom of Saudi Arabia: “It is only through
their unwavering support that I have been able to dedi-
cate my career to OPEC, spending 13 years as a member
of the Board of Governors. I have also been able to com-
mit fully to international development — specifically to
our Energy for the Poor advocacy at OFID. I am truly thank-
ful,” he said.
Al-Herbish dedicated the award to his family and made
special mention of friends “who have stood by me over
the years.” He further dedicated the award to the staff of
OFID: “These people have supported our noble mission
to eradicate energy poverty. They are the ones that have
ensured access to energy was recognized the world over
Gulf Intelligence

as the seventh Sustainable Development Goal after it was

ignored under the Millennium Development Goals.”
Al-Herbish was among seven distinguished winners
to receive awards from the Abdullah Bin Hamad Al-Attiyah
Suleiman J Al-Herbish (r), Director-
International Foundation for Energy and Sustainable General of the OPEC Fund for
Development at a ceremony and gala dinner held at the committee included: Dr Majid A Al-Moneef, Advisor to International Development,
Sheraton Hotel, Doha. the Royal Court of the Kingdom of Saudi Arabia; Adnan Z receiving the Lifetime Achievement
Award from Abdullah Bin Hamad
The foundation established the annual awards in Amin, Director-General, International Renewable Energy
Al-Attiyah, Chairman of the
2013. They recognize outstanding accomplishment in Agency; Hamad Rashid Al-Mohannadi, Senior Advisor, Al-Attiyah Foundation and former
the advancement of the global energy industry. Winners Qatar Petroleum; Claude Mandil, former Executive Deputy Prime Minister and
Minister of Energy and Industry
must show distinct personal achievement in their sector Director, International Energy Agency; Dr Bassam Fattouh,
of Qatar.
OPEC bulletin 5–7/17

over a consistent career spanning at least 30 years. Director, Oxford Institute for Energy Studies; and Margaret
An independent international selection committee McQuaile, former Senior Correspondent, S&P Global
invited by the foundation selects the winners. This year’s Platts.

31
 Suleiman J Al-Herbish has been OFID Director-General since
2003. He has made OFID’s work more relevant and visible,
and strengthened cooperation with other development
organizations. His second book entitled Uniting against
poverty: OFID’s Suleiman Jasir Al-Herbish and the fight for
sustainable development, was recently published. Here are a
few edited extracts from interviews with Mr Al-Herbish.
OPEC bulletin 5–7/17

Gulf Intelligence

Suleiman J Al-Herbish.
32
“
My family was not poor, but my whole city — Ar Rass in
Saudi Arabia — was poor in terms of electricity, facili-
ties and infrastructure. When I was a child, we didn’t
even hear about electricity. I would study until mid-
We were the ones who took the idea to our Member
Countries. They took it on board and made it a decision
of the Summit. Their call — on all OPEC aid institutions
including OFID — was the springboard that launched
night under the light of the kerosene lantern with my OFID on a new path and marked a major watershed in
mother at my side (I was the only boy and she spoiled terms of OFID’s position in the international develop-
me). When I was done with my homework, she would ment community.
blow out the flame with a “Pfffeww”. Later, I moved But I think I speak for everyone at OFID when I say
to Riyadh. Not even then did I have electricity. In the that our most momentous achievement is the inclusion
evenings I would go to the mosques — where there of energy poverty eradication as a stand-alone goal in
was electricity — to study. This problem has always the 2030 Development Agenda. It represents the out-
remained in the back of my mind. It is something, I come of seven or eight years of hard advocacy. We were
think, that has driven me on. the ones — working with our partners — who brought
Some 1.2 billion people still live without electricity this issue to the attention of the world. There is still
and 2.7bn people are without clean
cooking facilities. This has been my
focus for most of my career. So for me,
becoming Director-General of OFID was
like having the best job in the world.
One very special high point of my
career was the $1 billion resource
replenishment we received from our
Member Countries in 2012. This was
the first resource boost in 30 years and
a resounding endorsement of our work.
I was in the OFID headquarters shortly
after, preparing for a follow-up meeting.
One of my colleagues said: “We need
you in the conference room. Please, just
one minute.” I went and found every-
body was there. They applauded me.
And I have to admit that I cried. And my
colleagues applauded me again. There
are many of us in OFID that are not just
OFID

with the organization. We are of the

organization.
Suleiman J Al-Herbish.
Another highlight was the inclu-
sion of energy poverty eradication in the outcome doc- a distance to go to deliver on the agenda, but energy
OPEC bulletin 5–7/17

ument of the Third OPEC Summit in Riyadh in 2007. access is finally on the agenda. It is also now recog-

”
Not many people know that the relevant article of the nized as central to the achievement of all Sustainable
Riyadh Declaration was actually drafted here in OFID. Development Goals.

33
 Forum

International Oil Summit 2017

Light at the end of the tunnel

As delegates gathered in Paris for the
18th edition of the annual International
Oil Summit in April 2017, it was clear
that events of the past year or so were
at the centre of discussions. There
was much talk of OPEC’s decision to
adjust production in November 2016,
and of its ‘Declaration of Cooperation’
Mohammad with non-OPEC producers in December
Sanusi
Barkindo, 2016, which had focused on bringing
OPEC
Secretary balance back to the market and
General.
returning to sustainable stability.
The OPEC Bulletin reports on the
participation of the OPEC Secretary
General, Mohammad Sanusi Barkindo,
who delivered a speech looking at
how the rebalancing of the market was
progressing.
OPEC bulletin 5–7/17

34
It was evident from OPEC Secretary General, Mohammad Sanusi February 2016, between Qatar, Saudi Arabia, Venezuela and Russia,
Barkindo, and his fellow session panelists Dr Sun Xiansheng, the and the Doha-2 meeting in April 2016, with around 20 OPEC and
Secretary General of the International Energy Forum (IEF), and non-OPEC producers present, as to how the industry might over-
Keisuke Sadamori, the Director of the Energy Markets and Security come the downturn that had begun in mid-2014, and, in turn, rebal-
Division at the International Energy Agency (IEA), that since last ance supply and demand. Producers, both OPEC and non-OPEC,
year’s International Oil Summit in April 2016, much had changed had lost their compass and direction!”
in terms of market sentiment and outlooks.
In a session moderated by Claude Mandil, a former Executive
OPEC and non-OPEC decisions
Director of the IEA, Barkindo recalled the atmosphere at last year’s
Summit. He said that “in conversations with colleagues that were In this regard, the Secretary General noted the importance of the
in attendance I heard expressions of bearish sentiment, a sense extensive consultations embarked on by OPEC Member Countries,
of foreboding about the industry’s near-term future, and little talk and between OPEC and non-OPEC producing nations in the second
of industry expansion and investment. The prevalent feeling was half of last year. He said that “these consultations, both formal and
gloomy and downbeat.” He compared this with the more positive informal, across various global capitals, were unparalleled in the
impression he had gotten from participants at this year’s event. history of OPEC.” There was a consensus, Barkindo added, “that
In terms of numbers, Barkindo noted that total OECD commer- stability on a sustainable basis had eluded the industry since the
cial oil stocks in April 2016 were around 350m b above the five-year summer of 2014, to the detriment of all industry stakeholders.”
average, and expectations were for them to continue to rise. They The extensive consultations, he said, “were undertaken with
reached 380m b in July 2016. He said that WTI and Brent combined commitment, great diligence and rare courage that facilitated flexi-
net-long positions were at 620,000 contracts in mid-April, with a bility, accommodation and compromise among the respective par-
pessimistic market outlook among traders for the coming months. ties.” These eventually led to the landmark decisions taken at the
Combined WTI and Brent net-long positions fell to below 400,000 170th (Extraordinary) Meeting of the OPEC Conference in Algiers, on
contracts by mid-August. “And the average ICE Brent price in the September 28, 2016, the 171st Ministerial Conference in Vienna on
first four months of 2016 was around $30/b,” he added. November 30, 2016, and the ‘Declaration of Cooperation’ between
He also highlighted that “there was also no clear direction [back OPEC and non-OPEC producers in Vienna on December 10, 2016.
in April 2016], despite the efforts made at the Doha-1 meeting in He added that “for the first time in the history of the industry,
OPEC bulletin 5–7/17

35
Forum

13 OPEC nations and 11 non-OPEC participating countries came of significantly rising supplies that were working their way through
together as strategic stakeholders, to help rescue and stabilize the the market in the early part of 2017.”
global oil industry — one that has been vital to the development of
modern civilization.”
Positivity returns
Barkindo stressed that “in recent weeks we have seen positive
Market sentiment improves
sentiment return, driven by expectations for further improvement
Following these landmark decisions, Barkindo said that it was evi- in OPEC and non-OPEC conformity, which ended up at 98 per cent
dent that market optimism began to improve. The decision in Algiers in March, and signs that market rebalancing is taking place.”
saw a “rise in net long-positions and a narrowing of the contango, He referenced the fact that total OECD commercial oil stocks
as well as extending “the hand of unity to non-OPEC producers to in March fell by 23m b, the second consecutive monthly drop. The
broaden the global platform of voluntary production adjustments.” total level at the time of the Summit was 275m b above the five-
Market optimism advanced again following OPEC’s decision year average, compared with 314m b in February, and 356m b in
on November 30, stated Barkindo, with WTI and Brent combined the same month in 2016.
net-long positions increasing from close to 500,000 contracts He stressed that “outside of the US, we believe the global trend
on November 29, 2016, to 763,000 on January 3, 2017. It then of destocking is broadly on track. Moreover, we are also seeing num-
improved further in the early part of 2017, particularly following bers from industry stating that crude in floating storage has fallen
the high level of conformity to the production adjustments seen in by over 40m b since the beginning of the year.”
January. The US has evidently not been reflective of the rest of the world,
For the month of January, he said, “OPEC and non-OPEC nations he said, given rising production there in the first quarter of 2017,
achieved a conformity level of 86 per cent, which certainly seemed but even here the market has now witnessed consecutive weekly
to surprise the market to the upside.” WTI and Brent combined net- crude stock draws.
long positions reach 921,000 contracts on February 21, an addi- He also underscored that there was confidence that all 24 par-
tional rise of 21 per cent from January 3. ticipating countries will remain steadfast in honouring their com-
“It was a period of lower volatility, and more stability in oil mitments to individually achieve the 100 per cent conformity level
prices,” he said. to the production adjustments. “These are all signs of a renewed
sense of positive momentum and improving stability in the global
oil market,” he stated.
Bumps along the rebalancing path
He emphasized that it is important to appreciate that “the mar-
However, despite the expectation of improved levels of OPEC and ket rebalancing was never going to occur in a linear fashion.” There
non-OPEC conformity in February, which proved to be true, with are too many factors at play. “Nonetheless, we are heading in the
overall conformity at 94 per cent, Barkindo stated that “we saw a right direction. Steadily, but surely we are seeing light at the end
turn in market sentiment in early March, with financial players sig- of the tunnel.”
nificantly reducing their net-long positions.”
It is important to stress, he added, “that this development was
Longer-term perspective
not totally unexpected. The first quarter of every year has a number
of seasonal trends that can soften the market.” Barkindo emphasized that the importance of fast-tracking the rebal-
He said that “the first quarter is a period when significant lev- ancing process and returning to market stability is also vital for the
els or refinery throughput in the US is often shut-in. In January medium- to long-term oil outlook, specifically with regard to the
and February this year, 1m b/d of throughput was shut down for investments required for the world’s growing oil and energy future.
maintenance. For these two months, this equates to approximately In the tenth edition of OPEC’s World Oil Outlook launched last
60m b.” November, he noted that “oil demand is expected to reach over
On top of this, he also noted rising production from a number 109m b/d by 2040, an increase of over 16m b/d from 2015 levels.”
of non-OPEC nations, particularly in the US from tight oil, reflecting Moreover, he added, both OPEC and the IEA agree that “there
OPEC bulletin 5–7/17

expectations for much greater quantities to come from non-OPEC in are no expectations for an oil demand peak in the foreseeable
2017, as well as recalling “the fourth quarter of 2016 was a period future.” Oil will clearly remain a fuel of choice in the coming decades.

36
 “This expansion in demand will obviously require significant revenue losses of more than $1 trillion [and that] the industry has
investments in new barrels and to accommodate for decline rates seen a sharp two-year contraction in upstream investments of more
from existing fields.” Overall, he added, OPEC sees oil-related than $450 billion.” In many consuming countries, this has led to
investment requirements of around $10 trillion over the period to deflationary pressures and as the IMF has highlighted, the global
2040. In order to achieve this, he told the audience that “the indus- economy overall has seen no net positive benefit, he said.
try needs timely, adequate and sustainable investment to guaran- “The magnitude of these effects has seen growing calls from
tee security of supply to the global community.” both producers and consumers to bring forward the market rebal-
ancing, return stability to the market, and ensure the necessary
industry investments take place, in a timely fashion.”
Lessons learned from the 2014–16 price collapse?
Additionally, “the broad global platform of 24 producing nations
To conclude, Barkindo said he felt it was pertinent to respond from OPEC and non-OPEC initiated through the ‘Declaration of
directly to one of the questions posed by the Summit’s organizers: Cooperation’ is unparalleled in the history of the oil industry. Given
What lessons have we learned from the 2014–16 price collapse? the nature of the downturn, a collective and concerted effort was
Although “the jury is still out,” he said he felt able to offer required.” No one could have acted alone, he said.
some pointers. “The consequences of the decision of oil-produce- “Looking ahead, as the ‘Declaration of Cooperation’ underlines,
ing countries to abdicate their traditional responsibilities — related it is vital that we evolve a framework of permanent and sustained
to stability and balance — to the vagaries of the market back in cooperation between all participating nations, given the industry’s
November 2014 have been evident for all to see,” he said. “There growing complexity and its inter-connected nature,” he said.
is once again widespread recognition that on occasions the market While it is evident that a market rebalancing is now moving
needs to be complemented, in the interests of all stakeholders.” forward and that some investments — especially those consid-
And, he noted, this is not only confined to oil. ered short-cycle — are returning, he said it is essential to remain
“The market saw the largest percentage price fall in the six epi- focused on three specific goals: “We need to see the global stock
sodes of sharp price declines we have observed over the past four overhang move closer to its five-year average. We need to see the
decades. The depth and duration of the supply-side led downturn return of more long-cycle investments, the industry’s baseload.
was alarming, and so were the impacts for all stakeholders.” And we need to ensure sustainable stability in the years and dec-
He further noted that “OPEC producers are anticipated to forego ades ahead.”

Mohammad Sanusi Barkindo (r), OPEC Secretary

General, with his fellow session panelists (from l–r):
Keisuke Sadamori, the Director of the Energy Markets
and Security Division at the International Energy Agency
(IEA); Dr Sun Xiansheng, the Secretary General of the
International Energy Forum (IEF); and moderator, Claude
Mandil.
OPEC bulletin 5–7/17

37
 Sixth High-level Meeting of the OPEC-Russia Energy Dialogue
Forum

Secretary General meets with

Russian Energy Minister, attends
economic forum in Russia

Seen at the St Petersburg International Economic Forum are (l–r): Patrick Pouyanné, Total’s Chairman of the Board and Chief Executive Officer; Robert Dudley,
BP’s Chief Executive; Mohammad Sanusi Barkindo, OPEC Secretary General; Alexander Novak, Russian Federation’s Minister of Energy; moderator Elena Cherney,
The Wall Street Journal’s Canada Bureau Chief and Global Resources Editor; and Khalid A Al-Falih, President of the OPEC Conference, and Saudi Arabian Minister
of Energy, Industry and Mineral Resources.

In its ongoing efforts to engage in bilateral dialogue with other

energy stakeholders around the world, and building on the
successful meetings OPEC regularly has with those non-OPEC
producers with whom it has established a formal dialogue process,
OPEC Secretary General, Mohammad Sanusi Barkindo, and an
accompanying delegation of OPEC officials, participated in the Sixth
OPEC bulletin 5–7/17

High-level Meeting of the OPEC-Russia Energy Dialogue on May 31,

2017, in Moscow.

38
T
he Sixth High-level Meeting of the OPEC-Russia
Energy Dialogue was co-chaired by Alexander
Novak, the Minister of Energy of the Russian
Federation; Khalid A Al-Falih, Minister of Energy,
Industry and Mineral Resources of the Kingdom of
Saudi Arabia, who also serves as President of the
OPEC Conference; and Mohammad Sanusi Barkindo,
Secretary General of OPEC. It was also attended by a
delegation of OPEC officials and senior executives of
Russia’s various national oil companies, as well as rep-
resentatives of the academic community of the Russian
Federation.
During the meeting, officials considered the short-
term oil market outlook, and discussed the prospects
for the market’s medium- and long-term outlook. Some
consideration was also given to various projections for
non-OPEC supply in 2017 and 2018. Additionally, the
Parties recognized a common understanding to expand
research and analysis activities.
In a joint communiqué published on the day of the
meeting, the Parties noted that “the OPEC-Russia Energy
Dialogue continues to represent a valuable contribution
among producing countries towards collective efforts in
support of sustainable market stability.”

Meeting with the Prime Minister

Following the conclusion of the Sixth High-level At the Sixth High-level Meeting of the OPEC-Russia Energy
Meeting of the OPEC-Russia Energy Dialogue, the OPEC Dialogue, OPEC officials, headed by OPEC Secretary
Secretary General and accompanying OPEC officials General, Mohammad Sanusi Barkindo, and Khalid A
Al-Falih, President of the OPEC Conference, and Saudi
met with the Prime Minister of the Russian Federation, Arabian Minister of Energy, Industry and Mineral Resources,
Dmitry Medvedev, at the Prime Minister’s residence. met with Alexander Novak, the Russian Federation’s
The Prime Minister was joined by the Russian Energy Minister of Energy and other officials from the Russian
government. The Dialogue preceded the St Petersburg
Minister.
Economic Forum.
The Prime Minister welcomed the OPEC delegation to
OPEC bulletin 5–7/17

Moscow and emphasized the importance of the energy

dialogue with OPEC, which has grown and evolved in
recent years. He specifically highlighted the recent

39
Forum

consultations that took place during the second half of

2016, in which Russia played a key role, which led to
the historic ‘Declaration of Cooperation’ between OPEC
and non-OPEC producers. “The good relations between
OPEC and Russia have helped the oil market to recover,”
Medvedev said. “Our coordinated efforts have resulted
in a better economic situation for all.”
The Secretary General underscored the signifi-
cance of the understanding that has evolved between
OPEC and the Russian federation, particularly through
the Energy Ministry. A “constructive, collaborative and
intensive dialogue” has achieved “positive results”, he
said. Without the support of the Russian Federation,
the Secretary General said “we could not have reached
the consensus needed to sign the ‘Declaration of
Cooperation’.”
Following the meeting with the Prime Minister,
Minister Novak and the Secretary General held a joint
press conference to respond to questions about the cur-
rent state of the oil market and the future of the OPEC-
Russia Energy Dialogue. The next High-level Meeting of
the OPEC-Russia Energy Dialogue will take place in Vienna
during the second half of 2018.

St Petersburg International Economic Forum

The next day, the OPEC Secretary General and his dele-
gation travelled to Russia’s second-largest city to attend
the St Petersburg International Economic Forum (SPIEF),
which was held in the historic city from June 1–3, 2017.
While there, he participated in a panel session entitled,
‘Hydrocarbon energy: a vestige of the past or the basis
for development?’
The session also included the participation of the
President of the OPEC Conference, and Saudi Arabian
Minister of Energy, Industry and Mineral Resources,
Khalid A Al-Falih; the Russian Federation’s Minister of
Energy, Alexander Novak; BP’s Chief Executive, Robert
Dudley; Total’s Chairman of the Board and Chief Executive
Khalid A Al-Falih, President of the OPEC Conference, and Saudi Arabian Minister of Energy, Officer, Patrick Pouyanné; and Vice Chairman of IHS
Industry and Mineral Resources, being interviewed by the media. Markit, Daniel Yergin.
OPEC bulletin 5–7/17

The session was moderated by Elena Cherney, The

Wall Street Journal’s Canada Bureau Chief and Global
Resources Editor.

40
Paris Agreement

The first question posed to the panellists by the moder-

ator focused on US President Donald Trump’s decision
to withdraw from the Paris Climate Change Agreement.
Barkindo stated: “In OPEC, we have been playing our
part. All of our Member Countries have signed the Paris
Agreement and five of our Member Countries — including
Saudi Arabia — have ratified it. To achieve our common
goal of (keeping a global temperature rise this century
well below) 2°C (above pre-industrial levels) through
the application of Intended Nationally Determined
Contributions (INDCs) without the US, it looks to me very
challenging and almost like a task that the world will
have to revisit. The issue though goes beyond oil”, said
Barkindo. “It also has to do with OPEC Members being
developing countries.”
“All of our Member Countries will be heavily impacted
by climate change,” he said, “and [will be] doubly
impacted by the response measures of rich industrial-
ized countries, which made commitments either under
Mohammad Sanusi
the convention of Kyoto or subsequent resolutions of the Al-Falih, meanwhile, expressed his commitment to Barkindo (r), OPEC
process. long-term cooperation between OPEC and participating Secretary General,
non-OPEC producing nations. “We want to institutionalize speaks to the press
during his visit to the
the goal of maintaining and strengthening critical coop-
Responsibilities Russian Federation.
eration between OPEC and non-OPEC [producing coun-
He added: “OPEC Countries are determined to proceed tries],” he said. “I believe we also have good opportuni-
with our obligations based on the principles of common ties to expand our cooperation to other areas of mutual
but differentiated responsibilities.” interest,” he added.
Responding to a question on how he views the oil OPEC’s Secretary General said the decision was wel-
market in the future, following the decision on May 25 comed by many parties, including major oil companies
by OPEC and participating non-OPEC producing nations such as BP and Total. The CEOs of both these oil majors
to extend the voluntary adjustment of oil production by also welcomed the decision.
an additional nine months, the Secretary General briefed
the audience on the historic ‘Declaration of Cooperation’
OPEC/non-OPEC agreement
which was signed on December 10 by 24 OPEC and non-
OPEC oil-producing countries. “I am supportive of what has been done [by OPEC and
He spoke about how the decision taken in December non-OPEC participating oil-producing nations],” Total’s
to adjust oil production by a combined amount of around CEO Patrick Pouyanné told the audience. “It is a good
1.8 million barrels/day has led to the drawdown of the deal for everyone,” he said.
build-up in oil stocks. Barkindo also lauded the level of “I do support the OPEC/non-OPEC agreement,” said
OPEC bulletin 5–7/17

conformity by participating countries, saying, in January, BP’s CEO Robert Dudley. “It brings credibility to the oil
it was around 80 per cent, while in April it exceeded 100 market. It brings prices to a level which is healthy for the
per cent. whole world,” he said.

41
 The 3rd GCC Petroleum Media Forum
Forum

Managing the OPEC message

OPEC’s Secretary General, Mohammad
Sanusi Barkindo (pictured left), and an
accompanying delegation participated in
the 3rd Gulf Cooperation Council Petroleum
Media Forum held on April 19–20 in Abu
Dhabi, United Arab Emirates (UAE).
The international gathering was held
under the auspices of His Highness,
UAE President, Sheikh Khalifa Bin Zayed
Al-Nahyan. The following is a summary of
the event provided to the OPEC Bulletin.

J
ournalism and the impact of the media are as the part of OPEC’s 13 Member Countries and 11 partici-
important today as ever, especially in an age of pating non-OPEC producer nations.
lightning-fast communication. This is part of the “For the month of February, conformity to the adjust-
reason the Gulf Cooperation Council (GCC) organized ment stood at 94 per cent, which was eight percentage
the third Petroleum Media Forum, bringing together points above the January figure — already in itself impres-
practitioners from the worlds of both petroleum and sive,” the Secretary General said. He also said that con-
the media. formity for the month of March was expected to be greater
OPEC’s Secretary General, Mohammad Sanusi than February’s figures.
Barkindo, delivered a keynote speech at this year’s The Secretary General also publicly thanked Suhail
Forum, to the delight of attendees. In addition to speak- Mohamed Al Mazrouei, the UAE’s Minister of Energy, “for
ing to the international media about OPEC’s work, he his skillful, persuasive and constructive engagement dur-
reviewed the achievements of the production adjustment ing the intensive negotiations” which paved the way for
decisions taken in Vienna at the 171st Ordinary Meeting of last year’s landmark decisions. “I am indeed very confi-
the OPEC Conference on November 30, 2016, and at the dent our collective action will continue to prove effective
OPEC/non-OPEC meeting held on December 10, 2016. and bring us the results we are seeking.”
The result of these meetings was the historic ‘Declaration The Secretary General’s speech was followed by a
OPEC bulletin 5–7/17

of Cooperation’, which, at the 172nd Meeting of the OPEC video showcasing the first phase of the ‘Oil and Gas Big
Conference held on May 25, 2017, was extended to Data Project’, an initiative jointly developed by the OPEC
March 2018, thanks to collective voluntary decisions on Secretariat and the UAE Ministry of Energy.

42
 According to the video, the project will have the can continue to have access to OPEC information and
capacity to display raw figures and compare time series decisions.
between countries, as well as flows and products. It is Demonstrating his readiness and willingness to
aimed at developing a comprehensive, multi-dimensional engage with the media, the Secretary General gave inter-
and easy-to-use tool for analyzing publicly available oil views on the sidelines of the event to Bloomberg, Reuters,
and gas data. The results of the project’s first phase are Sky News Arabia, CNBC International, Associated Press,
expected to be presented later this year, during the Abu Platts, Energy Intelligence, the Arabic-language London-
Dhabi International Petroleum Exhibition and Conference based Al-Hayat newspaper and several other media
on November 13–16, 2017. outlets.
During the first day of the Petroleum Media Forum,
the Secretary General also took part in a session entitled
Rebalancing of the oil market
‘Managing the OPEC message in the digital age of dis-
ruption’. He was joined by John Defterios, CNN Money’s He also briefed members of the press on recent develop-
Emerging Markets Editor. ments in the oil market and discussed how recent pro-
In his comments, the Secretary General emphasized duction adjustment decisions have contributed to the
the need to establish and maintain positive working rela- rebalancing of the oil market to the benefit of consum-
tions between OPEC and the media — in a manner that ers and producers.
can be mutually beneficial. The two-day event was attended by energy and oil min-
He also asked members of the media, particularly isters from Bahrain, Kuwait, Oman, Qatar, Saudi Arabia
those covering OPEC, to work harder to report “accu- and the UAE. Along with ministers, the Secretary General
rately, fairly and responsibly on the Organization and attended a Gala Dinner on the first day of the meeting,
its Member Countries”. He added that OPEC, in turn, which was organized to honour some of the distinguished
would remain transparent in its day-to-day opera- journalists and media personalities who have contributed Mohammad Sanusi Barkindo (r),
OPEC’s Secretary General; with
tions and in its policy initiatives — so that the media to the excellence of GCC petroleum coverage.
John Defterios (l), CNN Money’s
Emerging Markets Editor.

OPEC bulletin 5–7/17

43
 OPEC Secretary General addresses
Iraq Mission

3rd Iraq Energy Forum,

meets with senior Iraqi officials
OPEC’s Secretary General, Venezuela, Abdullah al-Tariki of
Mohammad Sanusi Barkindo Saudi Arabia, Dr Tala’at al-Shai-
(pictured right), visited Iraq in bani of Iraq, Dr Fuad Rouhani of
early April to speak at a high- Iran and Ahmed Sayed Omar of
level plenary session at the 3rd Kuwait — gathered together in
Iraq Energy Forum and to par- the Al-Shaab Hall, to midwife
ticipate in a series of meetings this Organization on September
with top officials from the Iraqi 10–14, 1960.”
government. In addition, the Secretary
The Iraq Energy Forum, General provided a brief account
which took place at the of the landmark achievements
Al-Rasheed Hotel in Baghdad of late 2016, as well as of the
from April 2–4, was held under implementation of those deci-
the motto, ‘Iraq: towards an sions, highlighting Iraq’s his-
effective energy sector and eco- toric leadership, as well as its
nomic diversity.’ It counted with role in the consultation pro-
the participation of various officials from the Iraqi government and cess of recent months. “As a Founding Member, Iraq has played a
international organizations, as well as foreign and domestic energy pivotal role in OPEC’s evolution to what the Organization represents
companies. today. And it continues to show the leadership and commitment to
The Forum began with opening remarks delivered by Iraqi Prime the Organization that ensures OPEC remains engaged and relevant
Minister, Dr Haider Al-Abadi, who expressed his appreciation for the today.”
Forum and asked participants to share, in the course of the Forum, He lauded Iraq’s “significant progress in raising its production
their ideas for facilitating and improving investment planning in the capacity, despite the many above-ground challenges it has faced,
country. He also affirmed his commitment to building a robust econ- and extended his deep appreciation for the constructive, flexible, and
omy and diversifying the country’s revenue sources, so that it may accommodating role that Iraqi leadership has played in the challeng-
eventually move away from sole reliance on oil revenues. ing process of consultations and negotiations that eventually paved
The Prime Minister’s remarks were followed by remarks by the way for the OPEC and non-OPEC decisions, and the ‘Declaration
Parliament Speaker, Dr Salim Al-Jubouri and the Forum’s Guest of of Cooperation’.
Honour, Mohammad Sanusi Barkindo, OPEC’s Secretary General. The Secretary General also noted the ongoing efforts of Member
In his speech, the Secretary General thanked the government Countries to meet their obligations as secure and reliable suppliers
of Iraq for its hospitality and for hosting the Forum. He also praised of oil to world markets. “I have no doubt that OPEC Member Countries
the role of Iraqi Oil Minister, Jabbar Ali Hussein Al-Luiebi, and his remain committed to investing in new capacity and necessary infra-
work through OPEC to restore Iraq’s leadership position within the structure, despite the downturn we have witnessed in the last couple
Organization. He also reminded the audience of the historic role of years. This is certainly true here in Iraq.”
played by the country in the founding of OPEC. “I cannot pass up the Additionally, he praised Iraq’s “significant progress in raising
opportunity to recognize Iraq’s central role, almost 57 years ago, in its production capacity, despite the many above-ground challenges
the setting up of the then-fledgling group, the Organization of the it has faced”, including the enormous potential the country has for
OPEC bulletin 5–7/17

Petroleum Exporting Countries.” its future development. “Iraq,” he said, “is also ideally positioned
He added: “Here in this city on the banks of the rivers Euphrates for the large oil demand growth expected from the Asia-region in the
and Tigris in the land of Mesopotamia near the historic Babylon, the five coming decades.”
Founding Fathers of OPEC — Venezuela’s Juan Pablo Pérez Alfonzo of After his speech at the Forum, the Secretary General held a series

44
 Left: Dr Fuad Masum (r), President
of Iraq, met with Mohammad Sanusi
Barkindo (l), OPEC’s Secretary
General.

Dr Haider Al-Abadi (r), Iraqi Prime

Minister; Mohammad Sanusi Barkindo
(c), OPEC’s Secretary General; and
Jabbar Ali Hussein Al-Luiebi (l), Iraqi
Minister of Oil.
Dr Haider Al-Abadi (r), Iraqi Prime Mohammad Sanusi Barkindo, also met Mohammad Sanusi Barkindo (r)
Minister, and Mohammad Sanusi with Sayyid Ammar Al-Hakim (r), Head receiving a gift from Dr Luay Al
Barkindo, OPEC’s Secretary of the Iraqi National Alliance, the largest Khatteeb (l), the Executive Director of
General. parliamentary bloc, and Head of the the Iraq Energy Institute and organizer
Islamic Supreme Council of Iraq. of the 3rd Iraq Energy Forum.

of individual high-level meetings with top Iraqi government offi- the continuing support to OPEC. The two officials discussed various
cials. Under the auspices of Iraq’s Minister of Oil, Jabbar Ali Hussein topics, including the current market situation and ways to continu-
Al-Luiebi, OPEC’s Secretary General and an accompanying delega- ing to support efforts to rebalance the market within the framework
tion from the OPEC Secretariat first met with the President of Iraq, of the recent landmark decisions reached between OPEC and partici-
Dr Fuad Masum. pating non-OPEC countries.
The Secretary General expressed gratitude to President Masum The Prime Minister, in turn, expressed his appreciation of the
for Iraq’s unwavering support during the recent period of extensive impartial role pursued by the Secretary General and stressed that
consultations between OPEC and non-OPEC nations that led to the his- Iraq will continue to support the Organization’s decisions and their
toric decisions at the end of 2016 and the ‘Declaration of Cooperation’ implementation, despite whatever challenges the country may have.
with non-OPEC countries. “By your guidance, great encouragement Finally, the Secretary General met with the Head of the Iraqi
and the support of your offices, we were able to reach these decisions National Alliance, the largest parliamentary bloc, and Head of the
that were beyond expectations,” he told the President. The Secretary Islamic Supreme Council of Iraq, Sayyid Ammar Al-Hakim, who under-
General also reiterated the important leadership role played by Iraq scored Iraq’s commitment to the decisions taken by OPEC and par-
and once again praised the key role of the country’s Oil Minister, who ticipating non-OPEC countries last year.
OPEC bulletin 5–7/17

was instrumental in the process. Before departing, the Secretary General thanked Muatasim Akram,
The Secretary General also met with Iraq’s Prime Minister, Dr Haider Iraq’s Deputy Oil Minister and Dr Falah Alamri, the Governor of Iraq,
Al-Abadi, later in the day. This represented the second such meeting and other Iraqi officials for their warm welcome and generous hos-
in less than six months, he noted, and he thanked him once more for pitality — and said he looked forward to his next visit.

45
 Iran Oil Show 2017 attracts
Oil Show

record numbers of exhibitors

Already an institution in its own right, the IR Iran International

Oil, Gas, Refining and Petrochemical Exhibition (Iran Oil Show
2017) broke new records this year for the number of exhibitors
trying to participate. Organizers had to turn away 800 national and
OPEC bulletin 5–7/17

international applicants, stated show director Mohammad Naseri.

“We have a lot of fans.”
By Maureen MacNeill, reporting from Tehran

46
The already frantic traffic in IR Iran’s capital of Tehran far-flung countries such as Australia, Austria, Canada,
thickened to a near halt and the Tehran permanent fair- China, France, Germany, Italy, Japan, Russia, South Korea,
ground became a veritable beehive of activity for the four Spain, Turkey and the US. The exhibition site stretched
days of the biggest energy exhibition in the Middle East over 80,000 square metres of land, 55,000 sq m of which
in terms of the number of participants and size, which was occupied by stalls.
started on May 6. The date of the event is specified by the International

Naseri said that the Iran Oil Show started as a fledg- Federation for Exhibitions and Events Services, thus it
ling event 22 years ago with less than 200 companies has found its own footing over time among international
and only two halls. This year 4,000 local and interna- exhibitions. “This exhibition is big because it covers all
tional exhibitors were spread out over 25 main halls. The four big sectors of the oil industry: gas, oil, petrochemi-
OPEC bulletin 5–7/17

2,500 Iranian and 1,500 foreign firms from 37 countries cals and refining,” said Naseri.
present added to the air of buzz and excitement which Additionally, 15 specialized forums were held on the
could be felt throughout the city. Exhibitors hailed from sidelines of the exhibition this year, where experts from

47
 different areas of the industry exchanged in history of our company. We came to IR Iran a year ago,
Oil Show

views and discussed issues with foreign and thanks to business opportunities which your beautiful
local businesses. country can offer us.
“The exhibition is aimed at cementing “We had the opportunity to discuss with officials …
new contractual frameworks in the industry … and we sharpened our interest in really pursuing these
projects that should be developed by domes- projects in IR Iran. We are glad that NIOC gave us this
tic and international partners in a parallel opportunity to sign this MOU, which we feel will start the
mode,” said Naseri. “We hope these partners relationship between our two nations.”
find each other, interact and see each other. He stated later the MOU provides the opportunity
The main goal is the transfer of technology to develop oil and gas fields and establishes a first in
and investment.” the area of LNG as well, adding the country is hoping to
This year is special because it is the sec- become a main partner.
ond exhibition held after the implementation “All the companies attending the exhibition, both
of the Joint Comprehensive Plan of Action local and foreign, have felt the difference in this exhibi-
(JCPOA), an international agreement regard- tion,” said Nouri. “They see it as a much more efficient
ing the nuclear programme of IR Iran, reached and practical exhibition than in previous years.
in Vienna on July 14, 2015, between IR Iran, “So far 30 exploration and production [E&P] com-
the P5+1 (the five permanent members of panies have indicated their readiness for involvement
the United Nations Security Council — China, in IR Iran, he continued. Investment in the downstream
France, Russia, United Kingdom, United is much easier and on a smaller scale, which is why the
States — plus Germany) and the European main focus is put on the upstream,” stated Nouri.
Union, stated Kasra Nouri, General Director “Our main message would be that IR Iran has under-
of Public Relations at the country’s Ministry gone serious changes in its business environment,”
of Petroleum. The JCPOA entered into force said Naseri. “We want to show that IR Iran is a safe and
in January 2016. favourable place for the serious and effective presence
He added companies are still careful in of international companies for investment. We believe
their actions and wary of conditions. that IR Iran is a sustainable and reliable source of energy
Still, there have so far been 27 supply to the world.”
Memorandums of Understanding (MOUs) He added a big barrier continues to be misbeliefs
sealed over the past months since the about IR Iran. “We are determined and serious in this
JCPOA has been implemented, including path and will do whatever it takes to reach success.”
several signed during the exhibition, stated Additionally, exhibition organizers have been inter-
Nouri. acting with and visiting other international exhibitions
These primarily focus on oil field develop- in a mutually cooperative effort to continuously improve
ment, with some gas targets as well, he said. the event.
Both greenfields and brownfields, as well as
newly discovered fields are included, as well
Opening ceremony
as enhanced oil recovery (EOR) and improved oil recovery
(IOR). At the opening of the event, Iranian Parliamentary
“There is great potential (in EOR and IOR technolo- Speaker, Ali Larijani, said the Ministry of Petroleum is
gies) and many companies active in the field are inter- seeking new investments in the oil industry in a push to
ested in coming over and joining us.” enhance the recovery of oil from reserves.
One of the MOUs announced during the Iran Oil Larijani underscored the importance of the oil sec-
Show 2017 was with the Philippine energy company tor to the country’s economy and added that any indus-
PNOC Exploration Corporation. Company President and try development has a knock-on effect on other indus-
Executive Officer, Pedro A Aquino Jr, said at the sign- tries in the country. He emphasized the importance of
OPEC bulletin 5–7/17

ing ceremony, “We are honoured today with this excit- efficient use of energy and added, “Parliament passed
ing ceremony we are going to have with NIOC (National legislation about Clean Air a few days ago.” He said that
Iranian Oil Company). This marks a significant milestone the administration has kept a strong focus on developing

48
joint oilfields, which is a national interest of IR Iran, and
added that the petrochemical sector also has great poten-
tial which still needs to be tapped.
Minister of Petroleum, Bijan Namdar Zanganeh,
stated at the opening ceremonies that IR Iran’s return to
the oil market was an immediate outcome of the entry
into force of the JCPOA (in January 2016).
“IR Iran’s oil production and exports increased by
more than 1 million barrels/day and we have managed
to regain a share that had been lost and feared never to
return.”
The development of joint oil fields with neighbour-
ing countries has also accelerated under President
Hassan Rouhani’s administration. For example, pro-
duction from the West Karoun fields in western IR Iran
soared from 70,000 b/d in 2013 to 280,000 b/d in
Ali Larijani, Iranian Parliamentary Speaker.
March. The oil layer of the South Pars gas field started
producing 25,000 b/d of oil, while the jointly owned
Azar oil field was supplying 15,000 b/d. The country’s
petrochemical output increased by more than 5 million
tonnes and will hit 9m t with new projects planned to
come online before August, stated Zanganeh. A total
of 10.5m t of output will have been added from the
country’s petrochemical sector at the end of a four-year
period.
Additionally, 11 development phases of the South
Pars gas field, which the country shares with Qatar, came
on-stream in the past three-and-a-half years. Output has
doubled in recent years, with production from the huge
reservoir jumping from 285m cubic metres/day in 2012
to 575m cu m/d in March, resulting in an increase in gas
supply to power plants from 36 billion cu m in 2013 to
62bn cu m in 2016.
Bijan Namdar Zanganeh, IR Iran’s Minister of Petroleum.
IR Iran also moved from being a gasoil importer to
being a gasoil exporter, and the country was able to German companies in attendance. “The Germans have
export 50m litres of fuel oil in 2016. had good relations with the Iranians for a very long time,”
“I announce firmly that IR Iran’s petroleum industry said Rüdiger, adding, they like the “made in Germany”
is ready for a jump ahead. As we can see today, domestic symbol. German and China are probably the top repre-
manufacturers and contractors enjoy high potential with sented countries at the event, he added.
regard to the petroleum industry,” he said. The valve manufacturer has been doing business
with IR Iran for more than 30 years and has never left
the market. “We never disappeared, even in very hard
German presence
times, like in 2011, 2012, 2013. For sure we always
Matthias Rüdiger’s German company Samson has respect the rules, and had to follow the regulations, but
attended the exhibition for maybe ten years, though we never left and whatever business was legal, we tried
sometimes under another name. “There is a history,” to do it.”
OPEC bulletin 5–7/17

he said. Rüdiger said he has personally been travelling to IR

As is the case with other countries, the German gov- Iran with the company for nearly ten years and has seen
ernment provides some support for a pavilion featuring a lot of different developments. A few years ago, in 2012

49
Oil Show

Kasra Nouri, General Director of

Public Relations at IR Iran’s Ministry
of Petroleum.

France. “The Chinese for sure as well,

they were here before.”
He said it is his feeling and the
feeling of his management, as well
as the Iranians, that all the good news
about removal of sanctions made
everyone think they could easily con-
duct business, but it’s not so easy.
However, in the last six to nine
months it has been getting better,
he added. “We won some projects.
Finance … is still a headache. We find
solutions but it’s very hard.”
As a private, German company, it
is more flexible in finding solutions
on all fronts, he stated. Not being
financed by third parties is a benefit
and the company has more freedom
regarding financing options.
Samson has established a sub-
sidiary in IR Iran, which was officially
registered two weeks earlier. “We
Above: Supported by the would have done it earlier, but with
government, the German sanctions it was not possible … Now
pavilion features many German
companies. Pictured at the top is when he was there, “I had the feeling I was the one and we can start to act. Find an office, hire people. I guess in
Matthias Rüdiger from Samson, only European guy. It was good at breakfast, everything the next three to six months it will be under operation,”
Germany, who has attended the was empty,” he laughed. said Rüdiger.
Iran Oil Show for nearly ten years.
Also four or five years ago, the company used to get The company’s general philosophy, which it applies
a lot more hate mail back home for doing business with to all 50 of its subsidiaries, is to bring service near the
OPEC bulletin 5–7/17

IR Iran, which has lessened in recent times. customer. The Iranian national oil company is also look-
Over the past year, the event has become very ing for suppliers which produce in IR Iran, he said. “It is
crowded with foreigners from Germany, Italy, Spain and our own philosophy to come here, but they want it too

50
Mohammad Naseri, Director of the
Iran Oil Show 2017.

… we want quickly to have production,

local assembly, and so on.”
Iranians are very interested in the
acquisition of know-how, he added.
“But we are proud to bring our know-how
here and it is also an advantage when
we are really here … But we can learn
from them because they are the end-
user and they know the application.”
He said that the knowledge level
has definitely increased in the country
over the years. “They are clever people
and also they are people who want to
manage by themselves … independent
… When they don’t get products they
have to do something. For example, a
German company making cables faces
a problem now because there is a lot
of local manufacturing of cables in IR
Iran.
“Whenever there is a project in the Above: IR Iran is China’s
oil industry and there is a local manu- second-biggest trading
partner. Pictured at the
facturer, he has a first … We still have an advantage from The company has about 30 projects in IR Iran to date, top is Yang Wang, Project
the technology and quality perspectives, but maybe in but Wang said business was better for Chinese com- Manager at Hangzhou
five years it’s different.” panies before last year. Since then, many German and Steam Turbine Co Ltd,
one of China’s companies
Japanese companies have come and they are increasing
present at the show.
competition.
China’s position
“The Chinese government has issued directives to
Yang Wang, the young Project Manager at the Hangzhou Chinese companies to go overseas to do business,” he
OPEC bulletin 5–7/17

Steam Turbine Co Ltd booth, said his company makes added. IR Iran is China’s second-biggest trading partner
steam turbines and has been attending the exhibition after India.
since 2003. He stated that most Chinese businesses are simple

51
 manufacturing firms, producing packaging or flanges, small, so it’s more important to produce high-quality
Oil Show

“but we have a steam turbine and that is our advantage. products, because it’s necessary if we would like to
It’s very complicated and that’s why we can get almost survive.”
30 projects here. We try high-quality manufacturing.” The Austrian businesses present offer products such
He said his company does a as oil and gas equipment, spare parts, control systems
lot of work in the petrochemical compressors, software, industrial organization, scientific
business, which is currently devel- and analytical instruments and engineering.
oping very fast in IR Iran, and is in The financial situation is not satisfying for Austrian
need of equipment. “So it meets companies, he said, but the market is very important.
our requirements.” “I think that is one of Austria’s main strengths. When
A lot of Chinese companies the market is not high we try to stay in contact with com-
have a presence in the country panies and people here because that’s what a long-
and Wang thinks that China and term relationship is about … staying also when times are
IR Iran have a very good relation- poor,” said Gumplmayr.
ship which will continue. “There is Success depends on including local technology and
a long history of joint cooperation. strong local relationships, thus IR Iran’s strict policies
We will keep the cooperation, and about local involvement are not a problem.
will keep in touch.” Gumplmayr stated that the quality of education in IR
Iran is very high, which can also be observed from the
amount of Iranian doctors in Austrian hospitals. “They
Austrian pavilion
know it is important to be well educated and the pop-
Project Manager of the Austrian ulation is very young … They are very open-minded and
pavilion, Markus Gumplmayr, hope the situation will improve here.”
explained that the Austrian pavil-
ion made a return appearance last
OPEC in Iran Oil Show
year after disappearing during the
time of sanctions. The Organization of the Petroleum Exporting Countries
Hamid Reza Araghi, Deputy Oil Minister and Managing “The last time we were here (OPEC) took part for the fifth time in the Iran Oil Show.
Director of the National Iranian Gas Company (NIGC). was 2009 (before sanctions were During the exhibition, the OPEC booth was visited by
removed). We are proud to have many people. While introducing some OPEC activi-
more companies than last year. ties in the field of oil international policies, the OPEC
Last year we had 10 and this year Public Relations staff directly interacted with inter-
14 … The feedback from Austrian ested visitors, providing them with relevant informa-
companies is very positive; all of tion. Accordingly, visitors were attracted by the OPEC
them are thinking of joining again booth, which was designed based on Iranian-Islamic
next time.” architectural elements, as well as elements highlighting
Gumplmayr said that before the Organization’s mission, and the unique status and
2009, the Austrians came many role of OPEC in oil market stability and world oil balance
times, thus there is a strong rela- and security.
tionship between Austria and IR The OPEC booth, which was placed in the National
Iran, and people in IR Iran appre- Iranian Oil Company (NIOC) VIP hall and decorated by
ciate the high-quality products pro- flags from Member Countries and OPEC, was a centre of
duced in Austria. attention for many Iranian and foreign visitors at the Iran
“There has been very good Oil Show. Due to the large number of visitors coming to
news during the exhibition,” he the OPEC booth, experts from the General Directorate of
added, clarifying that two Austrian OPEC and International Energy Fora of Iran’s Petroleum
OPEC bulletin 5–7/17

companies have signed MOUs for Ministry, Ehsan Jenabi and Mohammad Khoddam, were
Ali Kardor (r), Deputy Minister of Petroleum and
Managing Director of the National Iranian Oil Company some millions of euros. present at the booth to answer visitors’ questions and
(NIOC), with the OPEC Bulletin’s Maureen MacNeill. “As you know Austria is very provide them with required information.

52
A view of the OPEC stand at the Iran Oil Show 2017.

During the exhibition, the OPEC booth was visited by

some senior officials from IR Iran’s Ministry of Petroleum,
including the Deputy Minister of Petroleum and Managing
Director of the NIOC, Ali Kardor, and IR Iran’s National
Representative to OPEC, Behrooz Baikalizadeh. Moreover,
a number of Members of Parliament and other govern-
ment officials, as well as university officials visited the
OPEC booth and spent time discussing global oil issues
and the role of OPEC in oil market developments. In addi-
tion, the booth was welcomed by professionals, academ-
ics and students. While appreciating the presence of the
OPEC Secretariat at the fair, many visitors raised ques-
tions about OPEC issues, especially its recent decisions A model of
and their impact on the oil market. an offshore
platform with
OPEC bulletin 5–7/17

It is worth noting that during the 22nd Tehran Oil

a helipad on
Exhibition, in addition to oral information provided display at the
to visitors, Secretariat publications and reports were show.

53
Oil Show

A group of Iranian students paid a visit to the OPEC stand. They were welcomed by Ehsan Jenabi (r) and Mohammad Khoddam (l) from the the General
Directorate of OPEC and International Energy Fora of Iran’s Petroleum Ministry.

distributed and were highly welcomed by both profes- The participation of OPEC in such events, especially
sionals and academics familiar with their valuable con- in OPEC Member Countries, aids OPEC in becoming more
tent. These included OPEC’s Monthly Oil Market Report, known to the global community and further highlights the
the OPEC Bulletin, the World Oil Outlook 2016 and the pivotal role of OPEC in the oil market.
Annual Statistical Bulletin.

One of the MOUs that was announced during a press conference at the Show was with the Philippine energy company PNOC Exploration Corporation.
OPEC bulletin 5–7/17

54
 Association
supports
oil and gas
businesses
in IR Iran
The Association of Petroleum Industry Engineering and Construction Iranian companies use basic engineering, technology, know-
Companies (APEC) was formed in 2000 with a membership of only 40 how and equipment from high-level foreign companies that have
private Iranian firms — but has since grown to 240 members today. a good relationship with IR Iran. But foreign companies may also
In an interview with the OPEC Bulletin on the sidelines of the 2017 have joint ventures with Iranian companies and/or their own office
Iran Oil Show, APEC Board Member, Gholamhossein Moeindarbari (pic- in IR Iran.
tures above right), explained that APEC was formed in order to support
companies and facilitate arrangements between companies, as well as
to bring various companies in different fields of activities to work on
suitable projects.
According to Iranian law, companies are
joint ventures with
graded from one to five based on the level of foreign companies
their technology, size, machinery, infrastructure,
and a number of other factors. Companies need to 100 projects
achieve a certain grade to be accepted as members of APEC — though
different areas of a large company can be graded differently.
240 members
graded 1–5
Moeindarbari said that companies are able to move from a lower
checked every two years
grade to a higher grade, according to how much the level of their tech-
nology and investment is enhanced. They are checked every two years
by the government. Those companies who achieve membership get spe- “The important thing is finance,” he emphasized. “The Iranian gov-
cial credits for projects, he added. “They get advantages, more offers.” ernment invites companies to come to IR Iran with finance.” He then
Having connections to foreign companies is essential. “Knowledge added that the country needs a lot of investment, particularly in the
and technology are not limited within the country,” Moeindarbari said. upstream but also in the midstream and downstream.
“So we have to have connections … with other suppliers [and] joint There are, however, certain rules about how much project financ-
ventures, as well as cooperation among our companies,” he said. “Just ing from foreign as opposed to local or domestic firms is allowed. But,
now we have, for example, an agreement with Spanish and Italian asso- to this end, he says “[It] the government has provided some facility for
ciations. Different associations can transfer knowledge and there are the changing of money.” This can expedite the system for people who
similar associations in many countries.” want to invest in IR Iran. “There are less financial barriers.”
“The [foreign and local] associations find companies that match. Thus, today, any company that wants to participate in a project in IR
It’s also about training, workshops and maybe some cooperation,” he Iran must establish a joint venture with an Iranian company that belongs
added. to APEC. The newly adopted contracting system is also favourable for
“One hundred projects in IR Iran have been carried out by compa- APEC, he said. “Our association participated with the government to
nies that are members of APEC,” said Moeindarbari. He added that all issue this contract.”
OPEC bulletin 5–7/17

potential sectors of the Iranian oil and gas industry are represented by As for the future, Moeindarbari said he hopes to see APEC continue
these companies, with approximately 60–70 per cent by Iranian firms to expand and develop, both to the benefit of Iranian companies, and,
and 30–40 per cent by foreign companies. in the end, to the country’s economy as a whole.

55
 Iran’s oil, gas, refining and
Oil Show

petrochemical industry on the

upswing
From various government ministry posts held over an impressive span
of 32 years, Minister of Petroleum for IR Iran, Bijan Namdar Zanganeh,
has witnessed first-hand the difficult times that have been endured by
the country’s hydrocarbons industry, which is a vital component of the
country’s economy.
By Maureen MacNeill

The energy superpower receives about ten per cent of annual value of both exports and foreign currency
its gross domestic product (GDP) from the industry, but earnings.
the importance of the hydrocarbons sector to IR Iran’s During his opening remarks at the Iran Oil Show
economy is far greater. The oil and gas industry has been 2017, Zanganeh reminisced about past difficult times,
the engine of economic growth, directly affecting public but stated that over the last three years good success
development projects, the government’s annual budget, has been achieved. This is apparent in the doubling
and most foreign exchange of output from the South Pars field in this period, the
sources. amount of Iranian villages which now are now supplied
In the 2017 fis- by gas, developments in the petrochemical industry
cal year, and other markers. Still, he recognized there remains
the sector quite some way to go before the country can reach its
accounted full potential.
10 per cent of GDP from for 35 per Zanganeh believes that petrochemical output needs
the oil and gas industry cent of to increase, domestic refining capacity should rise and
total gov- there should be more foreign and domestic investment,
ernment particularly in the upstream. But in general, he is of the
revenues view that the report card is positive and there is an over-
35 per cent of total and 80 per all hopeful feeling for the future of the country.
government revenues cent of This was reflected in statements from Iranian
t h e President, Hassan Rouhani, some weeks before the exhi-
total bition at an inauguration for petrochemical projects. “For
the first time in IR Iran’s history, non-oil exports outdid
imports in (March 2016 to March 2017),” he said.
Ali Kardor, Managing Director of the National Iranian
Oil Company (NIOC), stated in an OPEC interview at the
Iran Oil Show 2017 that the country’s oil production
80 per cent of total annual value capacity will quickly reach up to 4 million barrels/day
OPEC bulletin 5–7/17

of exports and foreign (m b/d), though its production would remain lower.
currency earnings “We adopted the production rules and regulations of
the ministries, the Minister of Petroleum. NIOC can only

56
provide the capacity for the production and the govern- to rank first to third among main energy players in the
ment orders how much we can produce.” world. We have to reach a point where we would be the
He stated that there have been new upstream agree- owners of oil and gas technologies and we should not be
ments concluded for some fields, especially common content with being only a vendor.”
fields along the border of Iraq. “By 2018, the latest and Managing Director of the National Iranian Drilling
last phases of South Pars should be finished. Some may Company (NIDC), Mohammad Reza Takayei, stated at the
remain for 2019. exhibition that the company has successfully spudded
“For the next Iranian year (which began on March 22), 725 oil and gas wells since 2013.
the country is focusing on completing new upstream con-
tracts for big fields such as South Pars, Western Karoun
(including Yadavaran, Yaran, Azadegan and Changuleh)
as well as medium-sized fields Jofayr, Sohrab and Aban,”
said Kardor.
He discussed the importance of enhanced oil recov-
ery (EOR) and improved oil recovery (IOR), stating that
although the country is very capable regarding normal
production, and has very good performance and tech-
nology in the areas of drilling, transfer and production
units, “for injection and hydro fracturing or acid fracturing
or use of some polymer, water injection or gas injection
we need more input, particularly for some fields where
recovery is low, below ten per cent. We hope to increase
to 20 per cent.
“For this reason we are inviting some international oil
companies (IOCs) which have some technology to come
to IR Iran for EOR/IOR.”
During a press conference at the Iran Oil Show 2017,
Kardor discussed the second development phase of the
massive South Pars gas field, which will primarily focus on
planning and technology transfer to maintain production Mohammad Meshkinfam,
levels of the field through enhanced recovery methods. Managing Director and Chairman
Gas development of the Board of Pars Oil and Gas
He stated that all phases of the development pro-
Company, a subsidiary of NIOC.
jects of the gas field, which is shared with Qatar (except Mohammad Meshkinfam, Managing Director and
for South Pars 11), will be complete within a year. Chairman of the Board of Pars Oil and Gas Company, a
“Fortunately, IR Iran’s gas output from the field has subsidiary of NIOC, is in charge of
Iraq
reached that of Qatar,” said Kardor. the development of South Pars oil
He added that seven proposals have so far been and gas fields.
IR Iran
submitted by international companies to NIOC for the Meshkinfam made some pub-
development of oil projects in the country, including from lic announcements regarding
Kuwait
Pertamina, Lukoil, CNPC, Total and Inpex. development and completion of
IR Iran plans to strike $80 billion worth of oil contracts the South Pars project during the
over the coming two years as the country looks to imple- exhibition.
South Pars
ment its newly developed contracts, stated Gholam-Reza “We referred to some invest- Qatar
Manouchehri at the exhibition. The Deputy Head of NIOC ment regarding our project.
added that plans are under way to “stabilize and boost Our CAPEX is about $90bn and Saudi Arabia UAE
IR Iran’s standing within OPEC and the world. we spent about $70bn, so the
OPEC bulletin 5–7/17

“Every one per cent increase in the recovery rate remaining balance is about $20bn. We will arrange for
would mean an increase of 7.5 billion barrels of oil to the the remaining balance of this $20bn over the next two
existing known reserves,” he added. “IR Iran will continue years.”

57
 700m cu m/d The most intensive development has taken place over
Oil Show

the past four years, during which 11 phases and five pro-

570m cu m/d
 jects were developed and concluded, all of which are in
operation right now. “We increased production from 280
million standard cu m/d (m cu m/d) to about 570m cu

280m cu m/d  m/d. It has doubled in four years.”

In the next four years, the target is to reach about
700m cu m/d, according to Meshkinfam.
The operation processes of development phases
for South Pars gas field started with the inauguration of
2014 2017 target Phase 12 under the administration of President Rouhani.
This continued as phases 15 and 16 came online. The
For this, he thinks $10bn will be used, which will developments were completed as phases 17 and 18, 19
leave only phase 11 uncompleted, though its develop- and 20 and 21 came on-stream.
ment is already under discussion with France’s Total. The development of South Pars is considered to be
Local contractors were primarily used for all of this of high importance to the country, as the gas recovered
development due to sanctions, stated Meshkinfam. from each phase would add one per cent to IR Iran’s GDP,
Although some equipment and materials were procured Kardor said in a recent Iran Petroleum interview.
from foreign companies, the management, construction “South Pars supplies gas in the country and pro-
and engineering were undertaken by local contractors, vides welfare for people in the winter. Furthermore,
he said. enhanced production from this field will help natural
“Mostly basic and conceptual designs come from the gas replace petroleum products, which will in turn lead
outside, but we perform this job once and apply it to the to more export of oil products and directly impact job
other projects. After one time we absorb this technology creation, economy, etc.”
from outside and then it is done by local consultants. We He added that phases had to be prioritized under
perform the job by ourselves.” President Rouhani’s administration because of the sanc-
He stated that 80–90 per cent of the gas produced by tions that were in place, leading to a sharp decline in
the country comes from the South Pars area. There is also NIOC’s financial resources.
a very small independent layer of oil on top of the reser- Due to the financial difficulties, the Ministry of
voir and “fortunately we have production of about 20,000 Petroleum and NIOC guaranteed that contractors oper-
b/d. We hope we can develop this field and expect about ating joint oil and gas fields, including South Pars, could
140,000 b/d. benefit from the National Development Fund of Iran (NDFI).
“The gas itself is a mixture of gas and condensate,” Thus, progress in South Pars was able to pick up speed.
he says, “and the condensate is produced along with the The implementation of the Joint Comprehensive Plan
gas. For this reason the gas is rich gas.” of Action (JCPOA), IR Iran’s nuclear deal with six world
powers, facilitated financial transactions and the pos-
sibility of opening credit, which significantly helped in
South Pars history
completing the development of the South Pars phases,
The South Pars gas field has been a great success story for according to Kardor. The lifting of the ban on buying
IR Iran. “First developed about 15 years ago, the country compressors, valves and other equipment used in pro-
started to develop phases two to five with international jects, which had been stuck abroad, accelerated project
companies and learned how to manage the project, how implementation.
to run the engineering, procurement and construction “Development of jointly owned fields remains a pri-
(EPC) contracts for the mega-projects, and fortunately ority for NIOC and that is why all activities in South Pars
this technology is now localized and we can perform the are concentrated on maximum recovery from this field,”
job here in IR Iran,” stated Meshkinfam. said Kardor.
OPEC bulletin 5–7/17

“We hope that this trend will remain as it is and that Also in the Iran Petroleum publication, Mohammad
these companies will grow and perform even better in Reza Chelipa, project manager of Phases 17 and 18
the future.” development stated that: “Today Iranian contractors have

58
 become so powerful in South Pars that the Ministry of
Petroleum has endorsed their qualifications for activity
in the exploration and production (E&P) sector and they
can easily operate offshore and treatment facility con-
struction projects … ”

Gas to replace fuels

Currently, 70 per cent of the energy used in IR Iran comes
from gas, said Hamid Reza Araghi, Deputy Oil Minister
and Managing Director of the National Iranian Gas
Company (NIGC).

A replica of an oil installation at

Europe. Currently, the country exports gas to Turkey, Iraq, South Pars which was on display
Azerbeijan and Armenia by pipeline and it is in negotia- at the Iran Oil Show 2017.

70% of energy used six computer service tions with Oman, Kuwait and Afghanistan.
in IR Iran is gas stations have been built
Refining
“It’s used for everything, for heating, for refineries,
for industrial production. Last year, we had the best year The National Iranian Oil Refining and
in the 15 years (since NIGC was established). We could Distribution Company (NIORDC), also
build six computer service stations, more than 800 km under the Ministry of Petroleum, and
>800 km of pipeline >3,000 villages supplied
of pipeline
builtand more than 3,000
withvillages
gas in were
2016supplied headed by Managing Director Abbas
70%gas,
with of only
energy
last used
year.” six computer service Kazemi, is responsible for ten refin-
in IR Iran is gas stations have been built
eries in IR Iran, nine of which are oil
refineries and one of which is a con-
densate refinery.
The oldest refinery in the coun-
try — Abadan Refinery in the south of
>800 km of pipeline >3,000 villages supplied IR Iran — is about 110 years old. “It
built with gas in 2016 is still functioning very well, with a
capacity of about 450,000 b/d,” said
“There are 1,000 towns and 23,000 villages currently Kazemi.
supplied with natural gas,” he stated. “It was the best “Refineries are in the process of
year for NIGC for activity, for performance, without any being privatized,” said Kazemi, “and
problem.” two refineries in the private realm
There is also a total of 230,000 km of pipelines, have completed their basic design,
Abbas Kazemi, Deputy Minister of Petroleum and
including gathering lines and small lines. The power but construction has not yet started. Managing Director of the National Iranian Oil Refining and
plants in IR Iran use gas, especially in summer. “For pol- “Generally NIORDC works with Distribution Company (NIORDC).
lution it’s very good.” local companies in IR Iran,” he added,
Additionally, a lot of refineries run on the gas pro- “though it plans to start some cooperation with compa-
duced by South Pars. nies abroad.
In the future, the country hopes first to export more “We encourage them to come here and invest and
OPEC bulletin 5–7/17

gas to its neighbours, said Araghi, and then to estab- build.”

lish LNG and negotiate with neighbouring countries to Contracts have been made for consultation and
send these products by pipeline, including eventually to the intermediate study of some refineries to plan their

59
 upgrading/expansion, he added. For example, both the Bandar petrochemical projects operational up to March of next year.
Oil Show

Abbas and Tehran refineries will be upgraded with the cooperation Shahedaie added the year after that there should be ten more
of Japanese companies, while Tabriz Refinery upgrades are being projects, and that petrochemical production capacity should
discussed with another company, and Isfahan Refinery is currently increase by about 20m t by March 2019.
being upgraded. Shahedaie is quoted in Iran Petroleum’s April issue stating that
Kardor said at the event in Tehran that phases II and III of Bandar four memorandum of understandings (MOUs) were signed with top
Abbas Gas Condensate Refinery will most probably come online by petrochemical companies after the JPCOA with the P5+1 was agreed
next year. “Once Siraf Condensate Refinery Project comes online, upon in January 2016.
IR Iran will have no gas condensate left for export.” “Currently these companies are conducting economic and tech-
“We want to decrease fuel oil from 30 per cent to nical feasibility studies on the projects. They will be concluded this
below ten per cent by 2025,” he said, when asked which year and agreements will be signed,” she said.
products will be produced. The focus will fall mainly on Shahedaie said that 13 petrochemical projects came online
30% gasoline and gasoil, said Kazemi. over the past four years, adding 5.2m t of output capacity.
10% And more than 40 per cent of the gasoline currently Some weeks before the Iran Oil Show 2017, President Rouhani

decrease fuel oil produced and 35 per cent of the gasoil is of Euro 4 inaugurated four petrochemical projects that will add some 2m t to
standard. This will be increased in the very near future, the country’s petrochemical production capacity, according to Iran
so that 70 per cent of gasoil and gas production inside IR Iran will Petroleum (April).
meet the Euro 4 specification, with the eventual goal to export to The President stated that international sanctions had blocked
Europe, he added. petrochemical exports. “We had the problem of supplying feedstock
Since last year, the country has been exporting gasoil and fuel and exporting projects. Therefore the lifting of sanctions on the pet-
oil, as well as LPG and it will continue, he added. The natural gas rochemical industry was one of the primary agreements reached
network in IR Iran is extensive, and more fuel is becoming availa- in Geneva (in the Joint Plan of Action signed between IR Iran and
ble for export. the P5+1 countries) … we have to get ready for a big jump after the
As for the more distant future, the plan is to increase the total removal of obstacles.”
capacity of refineries to 3m b/d by 2021.

Research and technology

Petrochemicals
The country decided to change its
The up-and-coming petrochemical industry in IR Iran is full of poten- approach to research and technology
tial, according to the Managing Director of the National Iranian after 100 years of producing oil from
Petrochemical Company (NIPC), Marziyeh Shahedaie. She told the different fields, according to Head of
official Petroleum Ministry news service Shana that the Iran Oil the NIOC Research and Technology
fields have been dedicated
Show 2017 was instrumental in the realization of the second giant to Iranian universities Directorate, Ebrahim Taleghani, in an
leap of the country’s petrochemical industry. She stated that NPC interview with the OPEC Bulletin.
had initiated serious talks with leading chemical and international “Various huge fields have now been
companies during the event, primarily aimed at technology transfer dedicated to different Iranian universities and institutes to research
and the financing of petrochemical projects in IR Iran. various field issues,” he said. Prior to this, consultants were hired
Shahedaie, also Deputy Petroleum Minister for Petrochemical to address technology and research issues.
Affairs, stated that NPC held talks with Spanish energy and petro- Currently nine fields are part of the programme, and eventually
chemical companies to finance projects in IR Iran. 12 or more will take part.
Ali-Mohammad Bosaqzadeh, director of production control at “Lots of projects were done in the past by professors, labs, doc-
NPC, told Shana that IR Iran produced more than 50 million tonne torate and masters students, but they didn’t have a place to con-
(m t) of petrochemicals in the last calendar year to March 2017. centrate activities. Now we have given one field to each and they
“We expect to see a 7m t increase in petrochemicals this year,” can focus on that,” said Taleghani.
he added. “Based on our projections, 50 to 60 per cent of this For example, one gas condensate field may have more of an
year’s output hike would come from operating units which would acid problem and another dense rock. “Each field has its own par-
OPEC bulletin 5–7/17

have capacity for more production and 30 to 40 per cent would be ticular issues and now these can be intensely investigated,” he
provided by new projects.” said, “thus after some years universities may become specialized
Bosaqzadeh said that IR Iran plans to make seven in some subjects.

60
 “The starting length of the contracts is ten years,” he said. “They
are long-term contracts, they can be sure they will be continued.”
The universities also have some obligations. They are asked to
try and develop technical, research and laboratory networks with
Iranian and foreign companies, universities and consultants, and
to learn about best practices.
“There are now more European collaborators than before,” he
said, adding that he hopes that the US and Canada will also join
in projects. As IR Iran has exported knowledge to so many of these
countries in the form of experts abroad, “we already have ambas-
sadors there. There are many Iranian professors in those countries,
and this will also help cooperation.”
He provided an example, such as “in a heavy oil or gas conden-
sate field, solutions to problems can be found via the best prac-
tices of others. One of the obligations is that at least one foreign
university join in the cooperative venture.”
“The universities are technical consultants for that field and
they are supported totally by NIOC,” said Taleghani, adding that the
universities are also involved in field development negotiations.
“We have committees for negotiations. The university has a seat.”
He has not heard of such a one-field-one-university programme
in any other country, and believes that the Iranian Ministry of
Petroleum and the NIOC is a leader in this.
All industry aspects are included, he said, such as computer
issues, mathematics and engineering. All faculties are involved
in finding a way to solve issues. These, in turn, provide reports to Ebrahim Taleghani, Head of the NIOC Research and Technology Directorate.
NIOC.
The other area the directorate is working on is technical knowl- necessarily depend on the age of a field, but rather on character-
edge and product development. “Not just buying and assembling, istics. From the first day it
they are given a roadmap to improve.” may produce ten per cent
Companies are rated by technical readiness level (for exam- or 40 per cent. “Geology is


ple, manufacturing readiness level [MRL], commercial and techni- most important,” he said.

cal readiness levels [CRL, TRL]. “If a company doesn’t understand During times of strife
subjects or concepts, it can’t be in the market,” said Taleghani. (the IR Iran-Iraq conflict
Through this system, the directorate is hoping to encourage com-
panies to improve their capabilities and produce commodities/tools.
This involves a great deal of flexibility, added Taleghani, because, for
of 1980–88), then sanc-
tions, he said, “we under-
stood we have to empha-

technical, research and
example, different oil compositions require different tools. size our own capabilities laboratory network
He added the clock did not stop when sanctions were imposed. and facilities.”
“We had to stand on our own feet.” The effect of sanctions,
A big topic of research is EOR/IOR, he said. “It’s very impor- price, geopolitical tensions and war has increased the expertise of
tant to get more and more from a field. One field changes during private Iranian companies. “Mostly in the last three years we have
its lifetime. It needs to be checked, monitored, proper software is seen this phenomenon. We are very near to the point where we can
needed to model and understand it. We need to understand what’s export … believe me, we have the best engineers. You can see it in
happening a few kilometres beneath our feet … there is a big need the fields.
for that.” “Companies that come to IR Iran see lots of knowledge. They
OPEC bulletin 5–7/17

He said it is important to monitor both greenfields and brown- come for collaboration, consultation. If a company comes here
fields. “You always have to pay attention, from the beginning.” thinking we know nothing, they won’t be successful, because we
He continued by saying that the percentage extracted does not already have deep knowledge.”

61
 OPEC-India Energy Dialogue
Energy Dialogue

Evolving Indian relations

The second High-level Meeting of the OPEC-India Energy Dialogue was
held on May 22, 2017, in Vienna. The event built on the first High-level
Meeting that took place in New Delhi, India, in December 2015. The OPEC
Bulletin reports on the ministerial event, as well as a technical meeting
that followed, in which viewpoints were exchanged on various global oil
and energy issues.

Mohammad Sanusi Barkindo

(c), OPEC Secretary General; with

A
Dharmendra Pradhan (l), India’s s part of its global energy dialogue outreach, the discussed the short-term oil market situation, including
Minister of Petroleum and Natural
OPEC Secretariat hosted the second High-level developments since the landmark decisions taken by
Gas; and Hasan Hafidh (r), Head,
PR and Information Department; Meeting of the OPEC-India Energy Dialogue in late May. OPEC Member Countries and 11 non-OPEC nations at the
during the press conference. The Meeting was co-chaired by the OPEC Secretary end of 2016. The Secretary General told the Minister that
General, Mohammad Sanusi Barkindo, and Dharmendra OPEC and participating non-OPEC nations remain stead-
OPEC bulletin 5–7/17

Pradhan, India’s Minister of Petroleum and Natural Gas. fast and resolute in seeing through this market rebal-
Minister Pradhan initially paid a courtesy visit to the ancing process, in the interests of both producers and
Secretary General before the Meeting convened. The two consumers, and the global economy as a whole.

62
 The two Heads of Delegation also shared their substantially. “India’s overall imports from OPEC Member
thoughts on the benefits of the producer-consumer dia- Countries increased from just over $4 billion to a high of
logue, with specific reference to the International Energy above $170bn in 2012, before dropping slightly in recent
Forum (IEF). The next IEF Ministerial Meeting (IEF16) will years. And in the other direction, OPEC’s total imports
be held in New Delhi in April 2018. from India increased from just under $4bn in 2000 to
over $60bn in 2014,” stated Barkindo.
“In terms of crude oil, India’s total imports have risen
Ministerial remarks
from around 1.5 million b/d in 2000 to close to 4.3m
In his opening comments to the Meeting, the OPEC b/d in 2016,” he added. “In fact, in 2016 India was the
Secretary General recalled the extremely warm welcome fastest-growing oil demand nation globally, with an
he received from Minister Pradhan when he spoke at the increase of close to 340,000 b/d, or 8.3 per cent.”
‘Petrotech’ conference in New Delhi in December 2016, Looking ahead, said Barkindo, India will continue
as well as his valued support for OPEC’s oil market sta- its tremendous economic growth. In OPEC’s World Oil
bilization measures. He also noted the bold economic Outlook, it is estimated that India’s economy will grow
reforms undertaken by Indian Prime Minister Narendra at an average annual rate of 6.9 per cent for the period
Modi. He applauded the demonetization and the General 2015–2040. Real GDP is expected to surpass OECD

Dharmendra Pradhan
(second r), India’s Minister
Service Tax initiatives, and the way India had managed Europe by 2034 and by 2040 it is anticipated to be about of Petroleum and Natural
Gas, with his team.
to overcome the global economic slowdown. the same size as OECD America.
In terms of the dialogue, Barkindo said it was easy to “From the perspective of oil, demand growth will
appreciate the value and substance of the ongoing coop- increasingly shift to India,” the Secretary General said.
eration, particularly when looking at the ever expand- “By 2040, India’s oil demand is anticipated to increase
OPEC bulletin 5–7/17

ing relationship between India and OPEC’s Member by over 150 per cent, from around 4m b/d presently to
Countries. 10.1m b/d by then. Its total share of global oil demand
Since 2000, trade between India and OPEC has grown will rise from four per cent, to over nine per cent by 2040.”

63
 He stated that he saw enormous value and substance In terms of energy access, he stated that the Indian
Energy Dialogue

in the Energy Dialogue, particularly when looking at the government is committed to providing clean and afforda-
ever-expanding cooperation between India and OPEC’s ble fuel to all of its citizens. Today, Minister Pradhan said,
Member Countries. “With OPEC home to over 80 per cent “lots of people still do not have ready access to quality
of the world’s proven crude oil reserves, and with many of energy” and it is vital to expand energy access to every-
its Member Countries well-positioned for exports to India, one in the country.
it is clear that this cooperation will expand further,” he He also highlighted the growing role of renewables
said. in India but stressed that hydrocarbons would remain
In his opening remarks, Minister Pradhan under- central to the country’s energy future. In this regard, he
lined the importance of the Energy Dialogue, as well as underscored the importance of India’s expanding refining
the cooperation between OPEC Member Countries and and petrochemicals sector, and its dynamic companies.
India, with 86 per cent of the country’s crude oil imports In fact, his delegation to the OPEC Secretariat included
coming from OPEC nations. seven Chief Executives, from both the public and private
From the perspective of the Indian Government, he sectors in India, who head all of the country’s 23 refiner-
said there were four key priorities in the energy sector: ies. Together they process around 4.7m b/d.
Minister Pradhan concluded by saying that “we are
• Energy access confident that the India-OPEC engagement will prove to be

Mohammad Sanusi
• Energy efficiency a very productive dialogue mechanism to grow together,”
Barkindo (c), OPEC • Energy sustainability and he said he looked forward to welcoming an OPEC del-
Secretary General, with • Energy security egation to India for the third High-level Meeting in 2018.
his team during the
deliberations.
OPEC bulletin 5–7/17

64
Outlooks and technical exchanges sectors with a special focus on the road transportation
and petrochemical sectors. India, in turn, considered the
The High-level Meeting also saw presentations from OPEC country’s long-term energy demand, as well as its energy
on short-term oil market developments, as well as the mix, in light of emerging energy and climate change
long-term energy outlook. This included some analysis policies.
on the ongoing forecast for oil market rebalancing, the
outlook for the global economy, oil supply and demand
Advancing dialogue
for the remainder of 2017, as well as medium- and long-
term challenges and opportunities. The Indian delega- There was clearly much for both Parties to discuss and
tion presented information on the potential for long-term digest, especially in terms of better understanding some
crude and gas supply cooperation between India and of the challenges, as well as the opportunities, faced by
OPEC Member Countries. both OPEC and India today. However, such considera-
A technical meeting of experts from OPEC and India tions should not only be between the Secretariat and
was also held following the High-level Meeting to ana- India, both Parties noted.
lyze various issues, as well as look at ways and means It is equally important to further expand direct
to enhance cooperation in the coming years. dialogue between Indian companies and their coun-
In the technical meeting, OPEC focused on the long- terparts in OPEC Member Countries — particularly
term oil demand outlook in the Asia Pacific, with particu- in the downstream — to help meet the ever-growing
lar emphasis on India. This included an analysis of trends demand for oil in India. This remains something to Delegates attending the
and drivers for future oil demand in various consumption look forward to. 2nd High-level Meeting of the
OPEC-India Energy Dialogue
gather for a group photo.

OPEC bulletin 5–7/17

65
 OPEC and non-OPEC extend dialogue with
Te c h n i c a l M e e t i n g

discussions on US tight oil

The 1st Technical Meeting of OPEC and non-OPEC producing countries, all
signatories of last year’s ‘Declaration of Cooperation’, took place at the OPEC
Secretariat in Vienna on May 19. Featured at the Technical Meeting were a
number of tight oil experts from the United States who shared with participants
their views on various aspects of tight oil developments in North America.
By Maureen MacNeill

At the start, OPEC’s Secretary General, Mohammad Sanusi was seen as being of “intermediate status” in terms of maturity and
Barkindo, warmly welcomed all delegates to the Meeting, who rep- though it is anticipated to still be a powerful shale play by 2020, it
resented the 24 countries that had participated in the ‘Declaration will not, as one speaker noted, “be super-powerful”.
of Cooperation’ of last December. He stated: “this collaboration is It was the Delaware Basin of the Permian that speakers under-
ripe for expansion ever further.” He also noted that the Technical scored as being the foremost growth driver in the coming years. One
Meeting was part of an ongoing process of structured and sustained speaker talked about the rate of well completions in the Delaware
dialogue and cooperation that OPEC hopes will pave the way to a Basin as being “astounding” and this is expected to continue.
healthy and growing oil market. Overall production in the Permian Basin, noted another speaker,
The Secretary General praised the exemplary leadership roles is expected to be up by 1.7m b/d between 2016 and 2020.
played during the lead-up to the ‘Declaration of Cooperation’ by With tight oil, sweet spot exhaustion is an important factor,
Mohammad Bin Saleh Al-Sada, last year’s President of the OPEC and this was highlighted at the meeting. One speaker stated that
Conference and Qatari Minister of Energy and Industry, and his the Bakken is already 72 per cent developed, while the figure for
non-OPEC Russian counterpart, Energy Minister, Alexander Novak, the Permian is only ten per cent.
before proceeding with the agenda. Another key issue relates to well productivity, which has been
The meeting began with a closed session, during which dele- rising. One speaker stressed that average peak production per
gates addressed the latest short- and long-term market develop- well in 2011 was 392 b/d, but this has now grown to 750 b/d.
ments. Then, after hearing from invited US experts in the morning, Additionally, the number of days it takes to drill has fallen over time
they held discussions on various other topics related to recent and wells are now being drilled increasingly deeper.
developments in the oil market. Cost efficiencies have also been important, particularly over
Central to the evolution of the oil market in recent years has the past couple of years. For example, it was noted that the typi-
been the development and expansion of US tight oil. In 2010, US cal horizontal well in the Bakken in 2014 cost $8.2–8.3 million to
tight crude production was around 500,000 barrels/day, but by drill when oil was at around $100/b. Today, it is about $5.2m. In
2015 it had risen to over 4.5 million b/d. It fell in 2016, on the the Eagle Ford it is less than $5m and in the Permian it is down to
back of the lower oil price environment, but in 2017 it has started $4.5–4.6m.
rising again. This raises a question posed to the speakers at the One of the major reasons behind this drop in costs has been
meeting: what does the future look like for US tight oil? the fact that the service sector has had to cut costs significantly.
However, it was underlined that service costs are expected to rise
this year, as more rigs have been added in 2017 and demand
The shale plays
for services increases again. Moreover, it was noted that service
In terms of the major US tight oil plays — the Bakken, the Eagle sector companies have been living unsustainably for a number
OPEC bulletin 5–7/17

Ford and the Permian — it was evident that the main focus today is of years.
on the latter. It was noted that the Bakken can be expected to see In addition, it was stated that given the fact that tight oil pro-
zero growth by 2020, irrespective of the oil price. The Eagle Ford duction fell last year, it will be easier to grow in 2017 as the base

66
 ‘Declaration of Cooperation’:
1 Technical Meeting of the OPEC and non-OPEC Producing Countries
st

decline will be relatively low. A larger base decline is expected in calculated on a one-year basis and the concern is how much cash
2018. is immediately available.
Besides tight oil, speakers also spoke about other US pro- Different pockets of capital finance are available for different
duction, particularly the US Gulf of Mexico (GoM). It was empha- segments of E&P, dependent on a number of variables, particularly
sized that the region has suffered greatly from the lower oil price price. And these different pockets react differently, which in turn,
environment. determines the speed of growth.
Although new projects are currently coming onstream because In the downturn, high yield bond markets were the most
of investments taken three to six years ago, there is currently very affected form of financing and this choked off small private and
little sign of greenfield exploration projects. It was stated that the independent players. However, one speaker said that high-yield
situation in the GoM will not improve unless WTI prices reach at least bonds have been flowing back in at a “neck-snapping” rate.
$70/b, and production is expected start to fall at current prices by It was also noted that the US tight oil bankruptcies that took
2020, as there will be no new investment in exploration. place during the downturn did not cut deeply into production,
though many companies still have elevated debt levels.
Developments in the overall energy sector were also put into
Small players and financing the machine
the context of the US economy, with one speaker saying that is
Almost the entire shale revolution has been built by small oil com- responsible for 30–35 per cent of the US’s overall GDP.
panies, according to the speakers, with about 90 per cent of the
shale revolution propelled by independent producers. It was noted
Looking ahead
that independent companies are very different from international
oil companies on many fronts, including their mind-set, which is Looking ahead, one speaker stated that the price curve is the key
focused on growth. They pay almost zero attention to profitability to understanding market behaviour. When prices increased in early
and the rate of return on investment. 2017 a lot of companies hedged. The question is how financing will
Additionally, independent firms have often appeared to have look in 2018 and how much will be hedged in the coming months.
an almost unlimited access to money, both public and private. And In terms of the three main basins, it was emphasized by one
they can change their financing portfolio “on a dime”, sometimes of the speakers that having all three developing and producing at
within months or even weeks. around the same time has put a strain on the oil market.
Financing is at the core of understanding how much the ‘shale However, it was noted that this should be viewed as a short- to
Delegates attending
machine’ can go faster or slower, said one speaker. There is no other medium-term phenomenon, with the Bakken and the Eagle Ford the ‘Declaration of
place in the world, they added, where there are such amounts of expected to see a plateau in the coming years. Additionally, it was Cooperation’: 1st
Technical Meeting of
money that could be accessed and deployed into these types of said that it is unlikely that any new shale plays on the scale of these
the OPEC and non-
developments, and with such speed. This is vital, as budgets are three will be found in the US. OPEC Producing
Countries.

67
 OPEC bulletin 5–7/17

68
Market Insight
 M A R KET IN SIG HT

Mark Papa’s vision

Mark Papa (pictured left) is a leader and pioneer behind the shale
revolution in the United States. Formerly CEO of EOG Resources
from 1999 to 2013, he retired after turning that company into
the largest oil producer in the lower 48 US states. Now a partner
at private equity firm Riverstone Holdings LLC, Papa continues to
invest in shale plays and remains a strong voice in the US shale
industry. He was at the OPEC Secretariat, along with other tight oil
experts, to speak to attendees of the 1st Technical Meeting of OPEC
and non-OPEC producing countries, held on May 19. While there,
he found time to share some of his views with the OPEC Bulletin’s
Maureen MacNeill in an exclusive interview.

You founded EOG Resources, where you had a lot of months surprised you — anything about the price struc-
‘firsts’. The company is still a top performer today. Now ture or the speed of recovery?
you are advising Riverstone. Do you think there are any-
more ‘firsts’ to be had in shale oil? I believe what happened is that when OPEC announced
that they were going to curtail production for six months
I am not sure there are any more firsts in the shale indus- and then revisit it, I think that stimulated a wave of opti-
try to be had. I think all the major North American shale mism among US shale oil producers. The corner had been
fields have already been found. I would be surprised if turned regarding prices and, yes, production had been
hear of any new significant oil field discoveries. declining up to that point. For the full calendar year of
When I ran the company [EOG], it was the established 2016, US production declined by about 550,000 b/d and
leader in shale oil exploitation technology, which really then as we rode into 2017 you saw a bit of optimism from
involves hydraulic fracturing technology and things like US producers and you saw an almost instant resurgence
that. And it continues to be the best in the industry even in drilling activity among the producers.
after my retirement. There may be some new enhance- You have to remember, the shale oil industry in the
ments to technology that will come about, but I will be US is about 90 per cent comprised of independent pro-
surprised if there are any absolute breakthroughs. I think ducers. It’s not the Shells or the BPs or the Exxon Mobils;
we will see some evolutionary breakthroughs but not any it’s much smaller companies and they are very nim-
‘revolutionary’ breakthroughs as we go forward. I think ble, so they can retool their capital budgets or change
you’ve seen the revolutionary things happen already — their investment strategy literally within a week or two.
and now it’s just going to be the incremental changes That is what they did; you saw a burst and an increase
OPEC bulletin 5–7/17

that will happen in the world of shale oil technology. in the number of drilling rigs being put to work — and
so it appears that you’re going to see a change from a
Has anything about the oil market recovery over recent decrease in total US production in 2016 to an increase

69
Market Insight

Mark Papa.
in US production in 2017. I would estimate the increase 100 per cent conformity with the agreed-upon produc-
in 2017 will be in the range of 400,000–450,000 b/d tion adjustments?
y-o-y. That’s what we discussed with the OPEC Secretariat:
what could be the impact of that change. As kind of a neutral observer, no, I did not expect the
On a go-forward basis, is that sustainable in 2018? Declaration of Cooperation to take place and I expected
The year 2017 is a done deal already, [conformity] to be somewhere perhaps around 60–70
… the momentum is there and the per cent and it has been, as you say, approaching 100
“... the shale oil industry in year is already half done. The ques- per cent. Getting some of the other countries like Russia,

the US is about 90 per cent tion is going to be: what will happen Oman and Mexico to cooperate has been, in my mind,
in 2018? And that’s going to be a pretty well unprecedented. My view on the oil market is
comprised of independent function of what the May 25th OPEC that to get this oil market back into some sort of stabilized
producers. It’s not the Shells decision is and what happens to oil condition we really need to clear this excess inventory —
prices in the second half of the year. and I think the participating OPEC Members would agree.
or the BPs or the Exxon There is a range of possibilities of [T]hat will probably take another minimum six to nine
Mobils; it’s much smaller what could happen. One thing that is months to get done, so we probably have another six to

companies and they are certain at this time is that producers’ nine months of tepid oil prices. And it will take until that
reaction will be a very nimble reaction global surplus inventory is cleared before we can really
very nimble ...” — either scaling up or down the level figure out what is the equilibrium price of oil on a go-for-
of drilling activity in the US. ward basis. So we will probably be in a bit of a surplus
OPEC bulletin 5–7/17

condition with inventory until the first quarter of 2018.

Did you expect the Declaration of Cooperation, first of
all, to take place and then to achieve the level of nearly Do you have any concerns that a few years down the road

70
 M A R KET IN SIG HT

there is not going to be enough oil produced worldwide to flood the market with oil and perpetually depress oil
because of a lack of investment? prices. I would just reverse that statement and say that
for us to meet the world’s demand for oil in 2020 of
Yes. In one of the discussions we had at today’s meeting, slightly over 101m b/d we are going to need the US oil
what we really focused on is what are the motivations shale machine to be turned on as well as OPEC. Combined
and likely outcomes with US shale producers. But I pur- OPEC production plus US oil shale production will, if we
posely focused a bit of my time and presentation on what are lucky, barely satisfy global oil demand in 2020. So I
is going on in the US Gulf of Mexico (GoM), specifically look at it from an optimistic point of view. We are going to
deepwater (oil production) and what’s been the impact have a reasonably tight global supply/demand situation
of chronically low oil prices on that. by 2020 and we are going to need a pretty good partner-
Two things strike me about the global oil market. ship between OPEC and US shale producers to meet the
First, there’s been a significant lack of investment in world’s oil demand by then.
deepwater oil projects — not only in the US GoM but
other places that are typical deepwater oil areas, such as OPEC’s Secretary General has “Two things strike me about
Angola and Nigeria. Because of the lead times to bring been initiating a dialogue
the global oil market. First,
deepwater to market, where that impact will be felt is with American producers.
really in 2019 and it will be felt for probably at least five What potential do you see for there’s been a significant
years starting in 2019. That’s going to be a significant this to develop in the future? lack of investment in
issue to meet global oil demand.
The second point is a very salient point relating to I think dialogue doesn’t hurt.
deepwater oil projects
global oil markets: most forecasters have consistently Communication doesn’t hurt. and most forecasters have
underestimated global oil demand growth for at least the I find that having a mutual consistently underestimated
last three years. Typically, most forecasters have included understanding of what some
forecasts of annual demand growth of between 1.0 and of the parameters are is prob- global oil demand growth for
1.2m b/d per year for the last three years. Actual demand ably a good thing. I think at least the last three years.”
growth during the last three years has turned out to be there are certainly some lim-
between 1.3 and 1.5m b/d each of those years. People itations in the US about having a dialogue — to make
have said the economy of China is slowing down and that, sure it doesn’t include anything relating to pricing or pro-
therefore, we should be conservative with our demand duction limits or anything like that — but to give OPEC
forecast. I am not an expert on the Chinese economy, but an understanding of what the mechanisms are of shale
the numbers I see year after year indicate that demand production is good, and to have communication and
for oil in Asia overall has been remarkably robust. All you have that sort of discussion is good. They are more along
have to do is check the sales of vehicles in the US and the lines of technical discussions because this whole oil
what you see is that American consumers are buying shale situation is really an unusual beast. It’s an unusual
pickup trucks with very big gasoline-consuming engines type of reservoir. It’s like a manufacturing process. So to
and they are shunning small gasoline engine vehicles have a discussion on how that manufacturing process
that get great miles per gallon. So people are voting with works is probably a good enterprise to have.
their pocketbooks to not particularly go for the most gas-
oline-efficient vehicles even in the US. Consequently, Do you see American oil production peaking at some
total global oil demand is going to reach 100m b/d in point?
2019 and by 2020 my estimate is it’s going to be about
OPEC bulletin 5–7/17

101.5m b/d. The most the US has ever produced in its history occurred
That brings me to another conclusion, which is that a in 1970 when the Alaskan North Slope production
lot of people say the US oil shales are likely to continue peaked and that was at 10.0m b/d. It looks likely that

71
Market Insight

in 2018 or early 2019 we will surpass 10.0m b/d in the $47 in the US — there is a lot of capital available for the
US, almost exclusively driven by US shale production upstream side of the business. For the industry to have
growth, so I would say it’s almost certain that we are gone through a downturn where oil prices got as low as
going to ‘whiz’ right by that production record, which $28/b, and with a price that used to be $95/b, and is
was set 47–48 years ago, and that we will be achieving now hovering at roughly $47/b, it is surprising that there
a new production record in the US. So I wasn’t more significant damage to the industry than actu-
don’t see it peaking anytime soon. I fore- ally occurred. In other words, the industry got through this
cast out to 2020 and see it continuing with much less damage than what I would have expected
to grow through 2020 — unless we have if you would have told me that this is what’s going to hap-
“It looks likely that in 2018 another massive, terrible price decline pen to the industry, and that prices are going to go to this
or early 2019 we will surpass where oil prices fall back to $28/b. But level. The structure of the industry is still pretty solid and
absent some terrible price decline, I see capital is not currently a limitation to companies who
10.0m b/d in the US, almost
it growing. The amount of growth will be want to find the capital to drill oil. It’s just amazing.
exclusively driven by US shale a function of what exactly the oil price is
production growth ...” between now and 2020. In an interview with the OPEC Bulletin just over a year
and a half ago you predicted that investors might be
Has the type of financing for shale oil more cautious to step in.
been affected by recent market condi-
tions? Were there more of a certain type They perhaps are slightly more cautious, but not in a
of investor before the oil price crash and has it changed? major way … which is really a bit surprising, considering
all that has happened.
If you’re sitting over here in Vienna, you would have heard
of bankruptcies of oil and gas companies in the US and Has technology played a role in the speed of the come-
related service companies. But what back or in increasing efficiency?
I would say is that there were a num-
“For the industry to have gone ber of oil and gas companies that went Certainly the downturn has forced oil companies to get
bankrupt — or as we call it in the US, more efficient. Every company has asked itself: “How
through a downturn where oil
[filed for] Chapter 11 — but the amount do I become at least cost breakeven? How do I lower
prices got as low as $28/b, and of production that was associated with my breakeven costs so that I can at least be cash flow
with a price that used to be those companies was rather miniscule neutral at say a $45/b oil price?” So there have been
$95/b, and is now hovering at on a national scale and the impact on all kinds of efficiencies that have been forced into the

roughly $47/b, it is surprising the overall industry was very, very small. system by economics. And with regards to technol-
They got a lot of headlines [that] read: ogy improvements, you’ve seen some improvements
that there wasn’t more “oil companies going bankrupt.” But in the last 24 months. But I’d say the rate of technol-
significant damage ...” the fact is that no consequential-size oil ogy improvement has slowed down, mainly because
companies went bankrupt, only … some most companies are just trying to stay alive at this time
very small oil companies. Even of those and their focus is not on pushing for vast technology
very small companies that went bankrupt, many of them enhancements. It’s really just about trying to keep their
got restructured in bankruptcy and in a matter of a month doors open for business during this particular time. So
were back in business. we haven’t seen any massive improvements in technol-
OPEC bulletin 5–7/17

There were obviously a lot of layoffs and so on, but if ogy. It really was a kind of cost-cutting and, depending
you look at the amount of capital available to the indus- which part of the business you were in, some of it was
try today — even in a world where oil prices are currently … massive.

72
 M A R KET IN SIG HT

Mark Papa.

Although the US oil export ban was repealed a while We were producing ever-increasing amounts of oil but
ago, it has probably not had that much of an effect found ourselves in a position — if you project it out a
yet. Do you think it will be something that will play a year or two — of [how] can we refine all this oil being
role later? produced in the US if we were banned from exporting
it? We [thought] we might have to shut it in, in the US,
Yes, I think the [repealing of the] export ban will turn out because we [were] not allowed to export it. That was
to be significant. What prompted the push to remove the the situation we were in. The solution was: let’s repeal
export ban was that US oil production was rising pretty the ban … if our own refineries can’t solve the problem.
fast — and the problem was that US refineries were all And then, about the time the [repeal] came in is when oil
designed to handle a certain mix of sweet versus sour prices fell — and so US production fell simultaneously
crudes, and all the crude produced from shale oil pro- [but] it [didn’t] really matter because we [were] produc-
duced is sweet. So the refineries in the US were having ing less US oil. Everybody said: “That’s typical legisla-
difficulty digesting an ever-higher percentage of sweet tion. About the time we got the legislation in, we don’t
crude because they weren’t really designed to handle a need it.” But now you turn it around and we are talking
whole lot of sweet crude. A lot of them, particularly on about US shale oil increasing over the next several years
the Gulf coast, were designed to handle ever-increasing and this issue will again come up. So the fact that the
OPEC bulletin 5–7/17

imports of sour Venezuelan crude, for example. export ban [has been] removed could become very criti-
So what was happening was that the capacity of US cal over the [next] two or three years. It’s a very positive
refineries to handle all this sweet US crude was in doubt. thing that the export ban is now not in existence.

73
 BP’s Chief Economist shares his
Interview

views on the oil industry

By Maureen MacNeill

Spencer Dale, BP’s Chief Economist, jokes that wherever he goes,

bad luck follows. When he became chief economist at the Bank of
England in 2008, it was two months before the Lehman Brothers
crash, which sent reverberations through the entire world economy
and he struggled, along with his colleagues, to try and restabilize
Britain.

When he joined BP in October Dale expects the world’s economic future to be char-
of 2014, the oil price had acterized by a drop in population growth, and an increase
been over $100/barrel for in productivity. Two billion people will move from low to
a number of years, but his middle income in the next 20 years, supported by plen-
arrival coincided with a sud- tiful energy. Due to this advancing middle-income pros-
den price collapse, creating perity, there will be a sharp increase in energy demand,
another challenging environ- but for upper-income people energy consumption flat-
ment for him to work in. tens out. Global energy demand is projected to grow
One could argue that it by 30 per cent over the next 20 years, primarily coming
has been exactly these chal- from emerging markets. Energy intensity is expected to
lenges which have shaped decline more rapidly over time as countries become more
him into one of the world’s efficient. Even though renewables are fast growing, they
most respected economists are expected to move from supplying three per cent of
today. energy needs today to only ten per cent by 2035. Natural
And, as an economist he gas looks set to grow faster than oil and coal because of
asks, “do you think you can abundance of supply and environmental policies; LNG
forecast 20 years ahead? No, will grow strongly. There will be steady growth in oil,
Spencer Dale, BP’s Chief Economist. you are certain to be wrong. though its share of the energy pie will be smaller. Peak
But that is not the value of a forecast, to see if it is right oil demand is not likely over the next 20 years. Coal is
or wrong. It is to help better understand the uncertainties expected to have the sharpest break with the past and
one faces and their nature. peak around 2020.
“You can not say you know what will happen, but OECD oil demand has been down for the past ten
you can seek the most likely path and explore how it will years and is expected to continue to fall, he added,
change with different factors.” though world oil demand will grow by 15 million barrels/
He says developing an outlook every year has value day over the next 20 years, two-thirds of which will be
because even if the main contours do not change, the driven by transportation. Vehicle efficiency will cause the
future questions can. Publishing it is essential, he adds, growth rate to slow over the next 20 years, down to half,
because: “I know of no better discipline than exposure or 0.5m b/d of growth by the end of the outlook period
to public scrutiny. The greatest danger is ‘group think’, in 2035.
OPEC bulletin 5–7/17

where you don’t consider others’ opinions.” However, accompanying the period of slowing
People love to tell you what is wrong and as a result demand for transportation, the importance of using oil
you get smarter, he adds with a laugh. for feedstock will grow. Currently, there are one billion

74
 cars on the planet, a figure expected to double over the next 20 tight oil can turn on and off rapidly, states Dale. It is a matter of
years, he said, with nearly all the growth in developing countries. months from drilling to producing oil and likewise because decline
The dominant demand sector for oil as far as can be seen into rates are so sharp, once investment stops, supply comes off very
the future will come from transport, says Dale, not just cars, but quickly, he says.
also trucks, planes, trains and ships. “Tight oil has introduced a flatter bit into the oil curve and what
“Transportation is likely to account for the majority of oil that means is that prices will be less volatile than they otherwise
demand for as far as we can see in the future, and it is also likely would have been. More of the impact of any shock can be taken in
to account for the lion’s share of growth we will see in oil demand terms of tight oil moving up or down, less in terms of prices.”
over the next 20 years. If we look further enough into the future, by Nonetheless, tight oil cannot adjust production on and off like
the end of our outlook in 20 years’ time or so, as the growth of oil OPEC can, he adds. OPEC can decide in a meeting in December to

BP Statistical Review
in transport starts to fade, you may start to see the non-combusted adjust its supply of oil by 1 or 2m b/d by January or February and it
use of oil, particularly as a feedstock for petrochemicals, become can deliver that. For tight oil, turnaround times are not measured
a key source of growth in oil demand.” in one or two months, but can be measured in 6–12 months, he
As for the short term, the world economy seems to be doing says.
better than in recent years and looks set to pick up this year com- “So if I look at the pace of which tight oil responded to the price

of World Energy
pared with rather weak growth last year. This growth is likely to be fall in 2014–15 it took 6–12 months, but then we saw a dramatic
synchronized across the world in both the OECD and developing
world, states Dale, though risks are to the downside, with uncer-
tainty over US interest rates, as well as great uncertainty about
geopolitical issues, with more instability in this area than seen in
a very long time, he adds.

une 2008
Demand has grown exceptionally strongly in the past few years,
stimulated by the fall in the oil price, says Dale, particularly in the
OECD. If prices remain around current levels, it is likely to provide
a continuing boost to oil demand, but the impact of that boost will
gradually fade over time.
“I expect relatively solid growth in oil demand, with a backdrop
of the economy picking up in the next year or so. If prices remain
relatively low, this should support relatively healthy growth in oil
demand. Not perhaps the same rates seen in 2015–16 but still rel-
atively healthy relative to the ten-year average.” Spencer Dale (r), BP’s Chief Economist, with the OPEC Bulletin’s Maureen MacNeill.

shift in supply. It can respond far more quickly than conventional

New economics of oil
oil projects, but not as quickly as OPEC can.”
Textbooks have always said that oil is an exhaustible resource The third point, says Dale, is that textbooks thought OPEC would
that will eventually run out, says Dale. “One aspect of the new always smooth the oil price. His argument is that the textbooks were
economics of oil is recognizing that we are highly unlikely to ever wrong.
run out of oil. It is very likely that some recoverable barrels of oil “I always think that the power of an Organization like OPEC
will never be used.” is to shift supply from one period to another, as a result it is very
Because oil was expected to eventually run out, this implied good at responding to temporary shocks. So if demand is weak for
that prices would rise over time, and that underpins a lot of exist- a period, it can adjust supply temporarily to stabilize (the market)
ing thinking and strategies, he adds. and as demand picks up it can then increase supply again.
The second aspect of the new economics of oil is the effect of “Likewise if some countries suffer supply disruption it can
tight oil on the supply-demand curve, says Dale. It was always said increase supply to stabilize (the market) and when the disruption
that the supply and demand curves are very steep and they didn’t eases then take supply back off … but it cannot smooth out struc-
respond much to price, he says. tural shocks.
OPEC bulletin 5–7/17

Very steep demand and supply curves tend to generate signif- Saudi Arabian Minister of Energy, Industry and Mineral
icant price volatility, since if there is a shock to either demand or Resources, Khalid A Al-Falih said at CERAWeek (held in Houston,
supply, prices need to move a lot to stabilize the market. However, Texas, March 6–10, 2017) ‘that history had shown that OPEC could

75
Interview

Spencer Dale, presenting BP’s

Energy Outlook 2017 at the respond strongly to short-run aberrations but not long-run 100 million by then, growth of over 20 per cent/year. He
OPEC Secretariat. structural factors,’ states Dale. The reason I use this in the adds, though: “I am not at all confident in this forecast,
context of the new economics of oil is because the emer- there are huge uncertainties, such as technology, policy
gence of tight oil was not a short-run cyclical shock it was and social preferences.”
a structural shock, a new source of supply and so faced And while this sounds like a large amount, it is “not
with that development, it seemed to me the way OPEC a game changer” regarding oil demand, says Dale. The
behaved was entirely consistent with the economics of main messages are that: “even if electric cars grow far
OPEC in the sense it couldn’t smooth through the impact more quickly than we expect, their effect on oil demand
of this structural change. Lots of economists seemed sur- over the next 20 years is likely to be small. Moreover, we
prised with that behaviour but to me it seemed consistent should talk more about vehicle efficiency. This is orders
with this theory.” of magnitude more important.”
He adds that BP’s data shows that in 2015 the US He states that electrical vehicles and fuel efficiency
was the largest oil producer when measured in terms of are two ways to achieve the same outcome in terms of
barrels of oil produced. He says in their 20 years oil out- vehicle emissions.
look, US production grows by another 4–5m b/d of oil An autonomous, self-driving vehicle is estimated
supply. to be 25 per cent more efficient. Moreover, car-sharing
“That is stronger growth than we expect to see in any is likely to increase, meaning cars will be used more
other single country, so I expect that the US will reestab- intensely, maybe three to five times as much as a nor-
lish itself as the world’s largest oil producer and will likely mal car today. If cars used for car sharing have the latest
remain so in the foreseeable future because of growth in technology, then more miles will be driven by new tech-
US tight oil. We think US tight oil will at some point stop nology cars, squeezing out internal-combustion engine
growing, but we do not see it falling back very sharply, cars and leading to a drop in oil demand. In addition,
just plateauing.” subsidies may make up for the higher cost of these cars.
If electric cars really grow, and they are used for shar-
ing/pooling, it will have a bigger impact. Car sharing is
Mobility revolution
a potential game changer, claims Dale, and it is likely to
The mobility revolution is already happening, accord- happen rather quickly given the internet/digital possibil-
ing to Dale. ities that already exist.
He says: “You can see it on the streets today. I think
this will completely revolutionize the car market over
Global energy transition
the next 40–50 years. It will grow very rapidly. The rela-
tionship many of us have to our cars is likely to change Dale thinks there is a significant energy transition already
significantly.” underway and that it has many different dimensions. One
But the impact on oil demand over the next 20 years is that the growth of energy demand is shifting from the
will not be huge. In 40–60 years it will be much bigger, developed world to developing world, he states.
OPEC bulletin 5–7/17

he states. “All the growth in energy demand in the next 20 years

Dale predicts very rapid growth in electric cars by is likely to come from fast-growing emerging economies
2035, with numbers jumping from one million today to driven by increasing prosperity and the growing middle

76
 class … and two countries which absolutely lead that big, but India could nearly catch up in terms of energy
charge are China and India.” growth,” he says.
However, the growth rate for overall energy demand
is slowing due to greater improvements in the pace of
Recoverable oil
energy efficiency. In addition, there is likely to be a con-
tinuing shift in the fuel mix away from carbon fuels, par- There are estimated to be 2.5 trillion barrels of recovera-
ticularly coal, towards cleaner, lower carbon fuels like ble oil with today’s technology, said Dale, which is more
natural gas and renewables, he says. than double the oil which is needed meet the world’s
“We see renewable energy — wind and solar — grow- oil demand out to 2050, and much more oil could be
ing very rapidly over the next 20 years, being the fastest recovered. “It is increasingly likely that some technically

BP Statistical Review
growing energy in history in terms of the pace at which it recoverable oil will not be recovered … we are unlikely
penetrates the energy system. But even so, there is still to run out of oil.”
likely to be a significant role for oil and gas in powering Both low- and high-cost producers coexist
the global energy system over the next 20–30 years, and in today’s market, he continued. That may well
I think that is important.” change in the future.

of World Energy
BP’s investment plans in the near term focus
on capital discipline, says Dale, making sure the
China and India
business can be rebased to adapt to lower oil
As the world continues to electrify, around two-thirds of prices, which are likely to remain relatively low
the energy increase over the next 20 years is projected for some time.
to be absorbed by the power sector, says Dale. He adds “But we see the demand for oil continuing to

une 2008
governments who are serious about the ‘energy transi- grow for next 20 years, so we need to invest in oil
tion’ should look at the power sector. China’s energy tran- as well as natural gas. For oil, our main focus is
sition has been faster than expected, Dale says, with the low-cost oil, often where we have already have
reduction in coal-fired power generation occurring much relationships and infrastructure.”
more quickly than expected and new energy sources com- Dale adds that BP already has very good
ing mostly from renewables. relationships with many OPEC Countries. It just
China’s GDP growth is slowing and over the next 20 renewed a large contract with Abu Dhabi, co-runs Spencer Dale (r), with Oswaldo Tapia, Head of
years is expected to average around half of the ten per one of the biggest oilfields in Iraq and has close OPEC’s Energy Studies Department.
cent it that it averaged in the past, says Dale, adding relationships in Kuwait, “just to name a few. We
growth in energy consumption will slow sharply from pride ourselves on having close relationships with many
the extraordinary growth experienced in the 1990s and OPEC Countries.”
2000s.
The pattern of growth is shifting away from industry to
OPEC/non-OPEC cooperation
consumer services. Additionally, China has an extraordi-
nary nuclear programme, claims Dale. “Their programme The OPEC/non-OPEC cooperation has been a significant
is roughly equivalent to building a new reactor every three event for the oil market, states Dale. Initially there was
months for the next 20 years.” a big question about the level of conformity to the pro-
Although China is committed to shift progressively duction adjustments, but relative to expectation it has
away from coal, 62 per cent of the country still gets its been stronger, he stated.
energy from this commodity. It is on course to reduce this “The cooperation is likely to speed the adjustment of
share to 45 per cent by 2035, “but to achieve this they oil stocks to more normal levels and so help to stabilize
need to grow other energy very quickly.” the market.
India is different, he adds. Its growth rate is not likely “I think this has reminded people that in response
to slow sharply (it is now at 6.75 per cent), moreover its to certain situations, OPEC and wider groupings of
industrial structure is already closer to that of Western countries can have an influence on market dynamics
OPEC bulletin 5–7/17

economies, with less scope to deindustrialize. for a period of time and that OPEC remains a very sig-
“Do not expect a sharp slowing in India’s energy nificant force in the oil market now and likely into the
consumption like in China. In volume terms, China is so future.”

77
 OPEC Member Countries discuss improving
Statistical Meeting

statistical input at annual meeting

Adedapo Odulaja, Head of OPEC’s Data Oswaldo Tapia, Head of the OPEC’s Energy Dr Hossein Hassani, OPEC’s Statistical
Services Department. Studies Department, In charge of the Systems Coordinator.
Research Division.

This year, 33 attendees from eight OPEC Member Countries participated in

OPEC’s 16th Annual Statistical Meeting. The annual event once again provided
delegates with the opportunity to meet with fellow statisticians from other
Member Countries and discuss statistical data with the OPEC Secretariat’s own
specialists. The OPEC Bulletin’s Maureen MacNeill filed the following report.

Participants at this year’s Annual Statistical Meeting (ASM) once OPEC Secretariat, specifically the studies considered by the OPEC
again examined the figures and data-gathering process that under- Ministerial Conference when making its collective decisions. These
lie much of the work of the OPEC Secretariat. The 33 participants, statistics aid OPEC Members in making decisions with regard to
joined by the Secretariat’s own statistical experts, engaged in the their oil industries, including deciding production levels and how
ongoing process of considering ways to improve the flow of oil and much to invest. The data is also used to inform the deliberations
energy statistics regularly submitted to the Secretariat by Member that determine how the Organization can best fulfil its Mission.
Countries (MCs). They exchanged technical knowledge and field In his opening remarks, Oswaldo Tapia, the Head of the
experience with their counterparts in other MCs, discussed how Secretariat’s Energy Studies Department and Officer-in-Charge of
best to use the Secretariat’s statistical database, and explored the Research Division said the heart and soul of OPEC’s work is
the different energy databank management practices that are based on statistics and analysis. Thus, he said, comprehensive,
OPEC bulletin 5–7/17

employed. timely and reliable data is indispensable.

Held on April 26–27, the various sessions of the ASM “OPEC produces about 40 per cent of the world’s oil, and
explored the support that statistics provide to the work of the our production data is essential for experts around the globe to

78
calculate the world’s oil balance, and how supply and demand
can be matched,” he said. “One thinks of rigs, drilling, refining and
infrastructure when talking about the oil industry, but behind the
scenes the figures we collect determines the flow of events.”
Many of OPEC’s publications rely on high-quality data, contin-
ued Tapia, including the Annual Statistical Bulletin, the Monthly Oil
Market Report and the Crude Oil Production Monitoring Report, as
well as the annual World Oil Outlook, the Organization’s flagship
publications. Most of these publications are distributed to the pub-
lic. “They are frequently quoted around the world, affecting the
decisions of other countries and institutions,” he said.
Members of the
Tapia also noted that the main goal of the ASM is to improve during the ASM included interactive one-to-one discussions with OPEC Statistics
the statistical data available for OPEC’s MCs — by finding ways to MC delegations. These discussions focused on the data they sub- Team (l–r): Pantelis
strengthen the technical communications between individuals MCs mitted for the 2016 Annual Questionnaire. The content — and the Christodoulides,
Klaus Stöger,
and the OPEC Secretariat with a view to ensuring the smooth flow timeliness — of tables submitted to JODI Oil and Gas was also a
Mohammad
of data. topic, as was online supply data submissions. Sattar, Mouhamad
Adedapo Odulaja, Head of the Data Services Department, The planned revisions and redesign of the Annual Questionnaire Moudassir and
Ryszard Pospiech.
informed delegates that this year’s ASM would devote more time was also preliminarily discussed by attendants at the ASM. It was
to one-to-one discussions between MC representatives and OPEC then agreed to have a subsequent follow-up meeting on the topic
Secretariat statisticians. Such discussions and exchanges, he said, during the second half of 2017. Additionally, MCs agreed to sub-
have proven to be most beneficial in enhancing the data quality mit 2017 data for the Annual Questionnaire no later than April 7,
from each MC. 2018.
During the course of the ASM, several technical presentations Much of the material gathered through the Annual Questionnaire
were given by OPEC statisticians. Some of these included overviews also feeds in to the preparation and production of the Annual
of the questionnaires used for the gathering of MC data. Statistical Bulletin. Dr Hossein Hassani, the Secretariat’s Statistical
The use and importance of a statistical ‘report card’ that the Systems Coordinator, reported that due to recent improvements in
OPEC Secretariat uses was also discussed for the benefit of the MC the process, this year the ASB was launched on June 13, 2017, the
delegations. It was explained that each report card shows a coun- earliest launch time ever.
try’s latest performance in data provision. Each MC delegation was At the end of the meeting, attendees at the ASM thanked the
Delegates of the
then issued their respective country’s draft report card showing how OPEC Secretariat for its ongoing efforts regarding data submissions Annual Statistical
the country performed. — and in providing ongoing support and improvements to the qual- Meeting take time
Besides the plenary sessions, deliberations and discussions ity and timeliness of MC data. out for a group
photograph.

OPEC bulletin 5–7/17

79
 Sticky wicket:
Feature

The conservation and risks of

used lubricating oils
The volume of lubricating oils used by transportation, industries
and processes worldwide is already quite large. It may increase
even further given the economic changes, population growth,
and urbanization that is taking place in many countries. The
use of lubricating oils not only facilitates the functioning
of engines and machines, it also generates numerous
challenges and creates potential environmental problems
and waste. However, the industry is increasingly finding
ways to respond. Saadallah Al-Fathi files this report on the
reduction of environmental risks associated with the use
of such oils — and the efforts underway to enhance their
conservation.

Used lubricating oils derived from for the emerging automobile industry. The processing
petroleum affect the environment of petroleum-based lubricants then progressed gradu-
adversely because of the pollut- ally as technology advanced and engine requirements
ants they accumulate from deterio- evolved, especially when hydrotreating, and the use of
ration caused by heat and friction additives to prolong the performance and service life of
throughout their service life. At the automotive engine oils and other equipment became
same time, used lubricating oils are more widespread.
still a resource that should be con- Naturally, the increased use of lubricating oils gen-
served as much as possible in order erated the problem of what to do with the used oil and
to lessen the need for — and reli- how to get rid of it, especially given that drain intervals
ance on — additional crude oil and were relatively short. In addition, it is worth remembering
its products. that dumping used oil into the environment was the norm
Before the dawn of the modern age before regulations were tightened and the reclamation
of petroleum, which started in 1859, of used oils (using them for fuel or re-refining them back
lubricants were made either from ani- into base oil) became more popular.
mal fat or vegetable oil. Petroleum- The tightening of environmental regulations and the
based lubricants emerged later, as increase of oil prices in the 1970s and 1980s were two of
by-products of the refining of crude the most powerful stimulants for the growth in the recy-
oil for the generation of kerosene cling and re-refining of used oils. To a large extent, these
OPEC bulletin 5–7/17

(for lighting purposes) and, later, activities continue today, though at a different pace.
gasoline Looking ahead, the future of re-refining
used oils will depend largely on

80
the price of crude oil and competition with the process- However, recent research studies have been divided
ing or direct use of used oils for fuels. In other words, on the economic viability of re-refining. While a general
low oil prices may discourage re-refining projects, unless rule cannot be made, re-refining projects remain coun-
enforced environmental regulations and the support of try and site specific. This does not, however, rule out the
governments serve as drivers. possibility of its economic attractiveness in certain situ-
ations if the choice of a suitable process, plant location
and plant size are made correctly.
Conservation of used oils
Overall, the feasibility of re-refining is impacted by
As everyone knows, crude oil is a precious resource that the price of oil, as higher prices mean higher base oils
is very expensive to find and develop. Its conservation and, therefore, more profitable re-refining. This is well
is therefore a priority for many oil consuming societies. demonstrated by the increase in re-refining projects dur-
Furthermore, efforts have also been made to conserve ing periods of high oil prices. Generally speaking, there
and re-use the used oils left over from the industrial use is large surplus capacity in virgin lube oil production
of lubricating oils. In this regard, increasing the rate of shown by different supply and demand forecasts, which
collection is a key to conservation. puts pressure on base oil prices and impacts re-refin-
It takes one barrel of crude oil to produce the same ing negatively. Therefore, only large projects with viable
amount of lubricating oil that can be obtained from re-refin- modern processes allowing for higher grades of base oil
ing one gallon (1/42 barrel) of used oil. And the costs, both production may be considered in any future re-refining
financial and in terms of energy requirements, of re-refining project.
are much less. Additionally, the process of re-refining can One cannot to rule out that certain countries may
be repeated many times. have a unique position with respect to favourable plant
Burning used oils is also a form of conservation locations and a willingness to support the industry for the
because the used oil is substituted for fuel oil, gasoil, protection of the environment. In more than one study,
natural gas or coal. Also, burning used oils at high tem- government support in the form of subsidising collection
peratures through the use of applications such as cement and re-refining used oil was found to be necessary and
kilns gets rid of contaminants such as chlorinated com- much cheaper than having to deal with the environmen-
pounds, halogens and others, which is advantageous. tal and human health problems of disposing used oil and
In general, many studies suggest that re-refining is that used oil is a resource that should not be wasted by
better for resource conservation efforts and for the pro- dumping it in landfills. Besides subsidies, many countries
tection of the environment. A life cycle analysis con- charge the consumers for the collection and treatment of
ducted by Groupment European de l’Industrie de la used oil in accordance with the ‘polluter-pays’ principle.
Regeneration (GEIR) demonstrates this for almost every These considerations are also recognized by the
count of nitrification, acidification, fine particulates (PM International Environmental Technology Centre of
10) and carcinogenic risk. However, not everybody agrees the United Nations Environmental Program (IETC/
with this assessment and there is no denying the fact that UNEP) which was developed to test the Sustainability
the world burns five times the amount of used oil that it Assessment of Technologies (SAT) in the selection of
re-refines. re-refining processes. In licensing new projects or even
assessing existing ones, governments are advised to con-
sult the SAT, especially since used oil recovery methods
The economics of re-refining
may differ from country to country, and there is no single
For a long time, the prevailing view was that the re- model of implementation.
refining of used oils was uneconomic due to the multitude The problem of stigma, as well as hesitation by con-
of factors that work against the industry — such as the sumers, will not go away easily. A recycled product
relatively high investment required compared with burn- is in their mind inferior and thus it suffers
ing applications, the costly collection system that has to a price reduction in the market. In
be financed by the industry, consumers or governments, well-developed markets, this
OPEC bulletin 5–7/17

the lower prices in the market for re-refined base oil com- can be avoided by obtain-
pared with virgin base oil and the cost of getting rid of ing relevant certi-
environmentally damaging waste in some processes. fication from

81
 authorised bodies Environmental impact
Feature

such as the American

Petroleum Institute (API). There is no doubt that the production, storage, trans-
The re-refining industry must content portation, processing and distribution of hydrocarbons
itself with the availability of surplus base stock capacity imply a degree of risk and environmental impact. While
in the world. Therefore, its expansion should be directed governments and industry do try to reduce such impacts
at solving environmental problems and the needs of to the lowest level possible through the use of technolog-
individual countries or regional groups if cross-border ical solutions and improvements in processes, neverthe-
trade in used oil is allowed. However, in the majority of less, some activities have more of an impact than others.
cases, a re-refining project needs the support of govern- The use of lubricants, however, and the disposal of
ments through regulations and subsidy. Such subsidies used lubricants and used oil currently represents the larg-
can either be direct or through taxation on consumed est amount of liquid, non-aqueous hazardous waste in
lubricants — with the tax returns going to collectors and the world. Currently, the majority of used oil comes from
re-refiners. the use of lubricants in the transportation sector, where
56 per cent of lubricants are used. This is followed by the
industrial sector where 31 per cent of lubricants are used.
Burning used oil
Only ten per cent of lubricants are used in processing.
In many countries, using used oil for fuel is a competitor Although they are slightly biodegradable, their dis-
to re-refining. While the European Union (EU), the United posal and their release into the environment is very dan-
States and a few other countries have given priority to gerous to the natural world. As they deteriorate, they carry
re-refining, most of the used oil that is generated and great risks to the environment and to the health of peo-
collected is still recycled into fuel in high temperature ple, especially with a spike in the level of pollutants com-
industrial combustion systems (this ensures complete ing from the deterioration of increasing levels of additives
combustion and avoids the release of harmful sub- used in automotive gasoline and diesel engine oils. The
stances into the environment). These systems include deterioration is compounded by the fact that dirt, metal
cement kilns, blast furnaces, power plants, industrial scrapings from machines or engine parts, water, polyar-
plant boilers and space heating on its own or blended omatic hydrocarbons and chemicals all can get into lubri-
with fresh fuels. These applications perhaps involve no cating oils, thereby not just reducing performance, but
more than allowing feedstock to settle in a heated tank rendering them more toxic and carcinogenic.
and decanting it to drain water, followed by filtration to Therefore, if used oils are disposed of into landfills,
remove sludge and suspended matter. they can slowly leach into the land and underground
At the moment, industry consultants and even coun- water resources, which can then cause additional exten-
try experts are divided on the advantages, disadvan- sive damage by getting into rivers, lakes or coastal
tages and suitability of re-refining or burning used oils. regions. They could also impair sewage treatment plants.
In Europe, where re-refining flourishes, the total amount Scientific sources confirm that one litre of oil can con-
of collected used oil in 2008 was 2.0 million tons, 1.1m taminate one million litres of water, which is why many
t of which was burned for fuel against 0.7m t which was suggest that the use of landfills for the disposal of used
re-refined. In the US, about 2.6m t are burned against oil must be avoided at all costs.
0.53m t re-refined — though in later years re-refining has
been picking up but not to the extent of eclipsing burning
Collection and management
for fuel.
The famous Kline Report of 2009 estimated that One way to respond to such challenges is through the col-
collected used oil, burned for fuel and re-refined fuels lection and management of used lubricating oil, which
constitute 16.5, 12.9 and 2.6m t, respectively, as the implies an effective collection system that ensures low
world burned almost five times more than it re-refined. costs while also being environmentally sound. However,
Regardless, the burning of used oil for energy recovery this is probably the most difficult step in the entire process
OPEC bulletin 5–7/17

is to be treated seriously and must be given consid- of salvaging resources (whether for energy recovery, re-
eration in any future study on re-refining. refining or disposal). Additionally, because of the
many points of generation, both large and small,

82
 Lu b r i ca nt q ua lit y an d drain perio ds
Lubricating oils must meet certain standards and certified specifications, In the early days of lubricating oils, mineral oils were simple and
especially for engine oils. The US Society of Automotive Engineers was the contained no additives. Therefore, they required frequent changing as
first to classify lubricating oils according to viscosity. However, the more contamination and deterioration were faster. Engine oils were changed
famous specifications now are those of the American Petroleum Institute after only 800 kilometres travelled. However, with advancements in pro-
(API) and their counterpart the European Automobile Manufacturers duction processes and the availability of chemical additives to improve
Association (ACEA), in addition to the original equipment manufacturers performance, drain intervals became longer in developed countries in
(OEM) in some cases. Europe and North America. Developing regions are now catching up as
In the API system, base oils are divided into five categories (Group I outdated motor vehicles and machinery are replaced by products that
to V) according to constituents, performance level, and viscosity: require smaller amounts of better-performing lubricants.
• Group I are traditional lubricants (lubes) prepared by solvent extrac- In the heavy duty diesel engine category, oil drain intervals remain
tion processes. around 40,000 km though it is possible to double this mileage for nor-
• Group II base oils have a higher viscosity index and are manufactured mally running vehicles. However, for the same vehicles running in more
by hydrotreating and hydrocracking, and either solvent or catalytic severe and harsher conditions, an oil change every 24,000 km is in order.
de-waxing. In the passenger car field, the majority of automakers today call for
• Group III base oils have a higher viscosity index. They are more refined oil changes at either 12,000 or 16,000 km. This is in contrast to the US
through more severe hydrotreatment in order to yield purer base oils. where the general practice is changing oil at an outdated 4,800-km tar-
• Group IV are synthetic base oils which are suitable for more severe get. When synthetic oils are used, the change interval can extend from
temperature applications and extreme cold conditions. They are syn- 12,000 km to 40,000 km, depending on the type of synthetic oil used.
thesised from the products of naphtha or condensate steam cracking It is clear from the evolution of lubricating oil specifications and con-
in petrochemical plants. sumption trends that the used oil re-refining industry has to follow suit
• Group V includes base oils produced from silicone polymers, phosphate in order to be viable and able to compete. Technological advances in the
ester, polyalkylene glycol, polyolester, and oils made from biomass last 15 years have shown that the re-refining industry has reached a stage
sources. They are more applicable to higher temperatures and will pro- where it can produce re-refined base stocks on par with virgin base stocks
vide superior detergency compared with Group IV synthetic base oils. by following the hydrotreating route.
While Group I lubricating oils are still produced to a large extent While consumer awareness of the quality of re-refined lubricants is
around the world, it is clear that this is changing. Group II are now much spreading slowly, the industry still suffers from the stigma that its prod-
more favoured in automotive oils and many producers have plans to ucts are recycled and may be sub-standard and thus have to be sold at a
phase Group I out. However, higher synthetic oils are not increasing discount.
their share as fast. In spite of their advantages in protecting engines The trend to extend oil drain periods will force the re-refining industry
and improving fuel efficiency, they are judged by consumers to be very to produce base stocks that are compatible with higher specifications,
expensive. though the trend will reduce the availability of used oil in the long run.

Group I Group II Group III Group IV Group V

oil from biomass sources

higher viscosity index higher viscosity index applicable to more applicable to
base oils (higher viscosity)
traditional lubricants

severe temperatures higher temperatures

synthetic base oils

suitable for extreme superior detergency

base oils and

cold conditions
base oils

produced from
synthesised from silicone polymers,
products of naphta or phosphate ester ...
hydro-treating and more refined by more condensate steam and oils from biomass
solvent extraction hydrocracking severe hydro-treatment cracking sources

25,000 miles (synthetic oil)

7,500–10,000 miles (standard)
oil change
in the passenger car field 3,000 miles (US)
83
 Pro cessing l u brican ts ,
Feature

re - refining o il that may impact the

method of utilization, it is
Re-refining is defined as the chemical and physical process that extracts the also a logistical problem that requires careful study
lubricating base stock from used lubricants, and in which water, fuels, additive and consideration.
remnants and sludge are separated from the base stock. One simple approach is to first provide convenient
Base oil is the name given to lubricant-grade oils which are produced in the collection points for large volumes of used oil generated
modern industry through a complex sequence of steps in a refinery where vacuum by activities at airports, and by the military, truck fleets,
distillation, solvent deasphalting, solvent extraction, dewaxing and hydrotreating garages, taxi company service stations, etc. Collection
are all employed to obtain base oils ready for blending into finished lubricants. points are then needed at smaller locations such as
Thus, since base oils are not actually destroyed by use but get contaminated, the local automobile service stations, small lube change
question of re-refining them may be considered more of a ‘cleaning’ process. shops and so on.
One of the most important initial steps in the re-refining process is testing Additionally, all this should be regulated by the
collected used oils to ensure quality. Since used lubricating oils come from a wide government and local municipalities, in coordination
variety of sources, they may contain chemical or physical contaminants that are with the industry. Associations can be formed to decide
quite hazardous, so initial testing of gathered oils is essential. The quality of the on collection costs or whether subsidies are needed to
used oils gathered may also depend on different regulations around the world. ensure sound operations.
Generally, the re-refining process involves other steps such as: filtration and However, when there is no government involvement,
the settling of collected oils, removal of water and light hydrocarbons, removal it becomes the used oil collector’s business to agree
of gasoil via feeding through a vacuum column, rejection of heavy materials and with the used oil generator’s on costs and logistics. In
contaminants through vacuum distillation or wiped film evaporation (or both), the United Arab Emirates, for example, used oil collec-
and, finally, treating remaining oil with solvent or hydrogen to get base stocks tors pay generators of used oils for the right to dispose
close to virgin oils. of their used oils. This was also the case in the US before
There are three major categories of processes to treat used lubricating oils: the collapse of oil prices in 2014. Today collectors there
treatment with sulphuric acid and clay; a distillation process followed by activated charge the generators of used oils.
clay treatment and treatment by solvent extraction to reject heavy residues, met- For any approach to the collection, management
als and other contaminants. The second and the third options can be followed and conservation of resources, information and data are
by the hydrotreatment of the product to improve quality even further. needed. Specifically, data regarding the overall sale and
The first two options are not currently in favour because of the environmental distribution of lubricants in a country or a region should
problems associated with acid and clay sludge. They are, in any case, used for be made available to those directly involved in dispos-
small capacity only. Therefore, the application of solvent extraction and hydro- ing of used oils, as well as to environmental authorities,
treatment are the preferred options. Some examples of solvent extraction are the before a given re-refining facility or fuel processing plant
Avista process used in the US, Saudi Arabia and Denmark, and the Dollbergen location is chosen. Otherwise, disposal of used oils will
process in Germany. Examples of hydrotreatment include the Revivoil process become a haphazard and potentially environmentally
used in Italy, Spain, Poland and Indonesia, and the KTI process used in the US, damaging activity.
Greece, Germany and Tunisia.
It should be mentioned here that industrial oils, such as those used in power
Conclusions
stations, compressor stations and marine installations, may be treated on site
by fixed or mobile treating units which rely on a centrifuge to separate water and The problem of used oils is now an international issue
sludge, which then circulates the clean oil back to the system. and governments must do their best to contend with it.
The selection of environmentally sound technology for the re-refining of Even the United Nations Environmental Program (UNEP)
used oil is not a straightforward task. As far back as 1995, the Basel Convention and the Basel Convention on waste disposal are active
set technical guidelines for such activities, determining or setting parameters in developing programmes to utilize and dispose of
for feedstock quality, as well as for identification of the nature of any contam- used oil.
OPEC bulletin 5–7/17

inants it may contain, stipulating the desired quality and yield of base As the world continues to develop eco-
oil, as well as the disposal methods to be considered for any nomically, with associated population
hazardous waste. growth and urbanization, it is

84
 Th e Arab lu brican t industr y
more likely that environ-
mental laws and regulations The base oil refining industry in Arab countries may have started in Egypt in the late 1930s
will need to be tightened further, especially or early 1940s followed by Iraq in 1957. Expansion to date has been very significant not
in countries where these are still lax. The question of only because it added capacity but because of the quality shift from Group I base oils to
waste disposal in general, and used oil in particular, will Groups II and III. With the passage of time, this will improve the quality of finished lubri-
thus get more and more attention, as the objective of con- cants. It is necessary to make consumers aware of the new upgraded quality through edu-
serving natural resources and preventing the dumping of cation and a pricing policy aimed at avoiding early oil changes to reduce used oil quanti-
used oil becomes more critical. ties and hazards at source. This is especially important because the region is in a low oil
There is no doubt about the environmental impact drain interval category of only around 2,000 to 3,000 km, though this behaviour is slowly
of disposing used oil into the environment even in well- changing as a result of following car manufacturers’ instructions.
designed landfills. Small quantities of used oils in water By the end of 2016, the base oil production capacity in Arab countries was around
supplies, rivers, lakes and the sea can cause tremendous 3.128 million tons with almost two-thirds of this in Saudi Arabia, the United Arab Emirates
damage. Carcinogenic pollutants in used oil are, beyond (UAE) and Bahrain. Furthermore, those countries have better quality base oils.
a doubt, a risk to human health. Consumption of lubricants is, however, estimated to be at about 1.7m t a year,
The debate around re-refining used oil or burning it which is almost half of the production capacity. This will open opportunities for
in specialized industries is not going to be settled soon. trade among Arab countries and export to international markets, especially for high-
Countries have special circumstances that must be taken quality products. It is much more difficult to estimate re-refining capacity in Arab coun-
into consideration. The most important thing is to ensure tries because of a lack of information in a non-regulated industry and the reluctance of re-
high collection rates of used oils and the burning of them refiners to provide information.
for energy recovery until there is sufficient volume to sup- However, there are reports suggesting that re-refined used oil is gaining ground in
port a re-refining plant. Utmost effort should be made to the Middle East, although it still suffers from image and quality issues. There are opera-
ensure the optimization of drain periods and to follow tors which strictly undergo filtration to remove insolubles and export the products to less
instructions from manufacturers. demanding markets. Uncontrolled burning is also reported, which may produce hazard-
While the economics of re-refining and even burning ous emissions in the hot Middle East climate.
for energy recovery are very important, they should not Some sources report the existence of five plants in Saudi Arabia which have a total capacity
be the only solutions to used oil disposal. Governments of 100,000 t/yr, but it could be higher. The same source reported that UAE’s re-refining capac-
should support the industry through the imposition of ity is 200,000 to 250,000 t/yr, which is much higher than domestically generated used oil.
surcharges on lubricant use (polluter pays principle) or According to the best available information, total re-refining capacity is estimated to
by providing direct subsidies to collectors, re-refiners or be over 400,000 t/yr. In any case, the potential new re-refining capacity from collectable
fuel processors. used oil could be close to 900,000 t/yr. As the quality of virgin base oils in Arab producing
In Arab countries, there is a need for more gov- countries moves forward to groups II and III, new re-refining projects must be top quality
ernment intervention and regulations to ensure the as well.
proper collection and disposal of used oil and to hold Major lubricant manufacturers in Arab countries complain about the state of the re-re-
licensed companies to well-established practises that fining industry, especially because of the growing issue of counterfeiting. The writer met
take into consideration the rights and interests of all with some major manufacturers who refuse to have anything to do with re-refining because
stakeholders. of the risk that its image may affect their own products. This is in contrast to what is hap-
It is important to form a trade body of lubricant pro- pening in some developed countries, where governments give priority to re-refined oil in
ducers, blenders, marketers, collectors, re-refiners and their facilities and where all lubricant manufacturers share in supporting the collection
used oil fuel consumers to hold discussions with gov- and proper utilization of used oil.
ernments and their respective ministries. Such associa- There is a long way to go for the re-refining industry in Arab countries, both horizon-
tions in developed countries have been instrumental in tally and vertically. With regard to horizontal growth, many countries have neither plans
improving the overall management of used oil. to regenerate used oil nor possess information on its use or abuse.
Some Arab countries’ consumption is low and does not support viable modern re-
refining plants. Collected oil could be exported to a plant nearby, in a country where re-
OPEC bulletin 5–7/17

refining capacity is established or it could be delivered to a legitimate fuel user. In this

way, investment would be optimized, resource conservation maintained and, above all,
the environment protected.

85
 Call for nominations for
Awards

OPEC Journalism and

Research Awards

OPEC has issued a call for nominations for each of its two industry
awards: the OPEC Award for Journalism and the OPEC Award for
Research.

The two Awards honour distinguished individuals who The winner of the OPEC Award for Research will receive
have made outstanding contributions to the petroleum a commemorative plaque and ¤27,000 in prize money.
industry and oil-related issues, particularly in enhanc-
ing cooperation between oil producers and consumers. Both Awards will be presented by the President of
the OPEC Conference on the occasion of the 7th OPEC
The OPEC Award for Journalism, which is open to both International Seminar, scheduled to take place at the
print and broadcast journalists, is given to an experi- Imperial Hofburg Palace in Vienna, Austria, on June
enced journalist or media organization that has delivered 20–21, 2018.
objective and balanced reporting/analysis of the oil mar-
ket and related issues for more than ten years.
Previous Award recipients
The OPEC Award for Journalism is commemorated with a
plaque and an official certificate. In addition, OPEC will The inaugural OPEC Award for Journalism was presented
make a donation of ¤6,000 on behalf of the winner to a at the 4th OPEC International Seminar in 2009. It was given
charity or institution of his/her choice. to respected journalist, eminent scholar and academic,
Dr Walid Khadduri, a former Executive Editor and Editor-
The OPEC Award for Research is given to researchers in-Chief of the Middle East Economic Survey (MEES). At
who have shown dedication to research and analysis of the time the Award was presented, he was Economics
important oil related issues, contributed to improving Editor of the London-based Dar Al-Hayat news service.
the understanding of the key determinants that support
oil market stability, and have exhibited a consistently The 2 nd OPEC Award for Journalism was presented
critical, yet impartial, view on oil-related issues in public to Bloomberg’s OPEC news team at the 5 th OPEC
debates and discourse. International Seminar in 2012.

The recipient will also have demonstrated a high level The most recent winner of the OPEC Award for Journalism
of objectivity, integrity and innovative thinking through- was Margaret McQuaile, a long-time reporter for Platts.
out his/her career, and will have furthered knowledge She received her Award at the 6th OPEC International
of the oil industry by encouraging and promoting young Seminar in Vienna in June 2015, in recognition of the
OPEC bulletin 5–7/17

researchers within OPEC Member Countries and across detailed reporting, economic understanding and political
the developing world. acumen that has long characterized her work.

86
The inaugural OPEC Award for Research was first pre- The most recent recipient of the OPEC Award for
sented in 2004 at the 2 nd
OPEC International Seminar Research was global energy expert, Dr Vaclav Smil,
held in Vienna in September of that year. It was given to Distinguished Professor Emeritus at the University
the late Professor Robert Mabro, Emeritus Fellow of St of Manitoba in Canada. He received his Award at the
Anthony’s College and a Fellow of St Catherine’s College, 6th OPEC International Seminar in Vienna, Austria, in
both at Oxford University, United Kingdom. Professor June 2015.
Mabro was a former Director of the Oxford Institute for
Energy Studies and became Honorary President of the
Institute in 2006. He passed away in 2016 at the age Criteria for excellence
of 81.
OPEC established the two Awards to acknowledge and
The second OPEC Award for Research was presented at celebrate the past efforts of researchers and journalists
the 3rd OPEC International Seminar in Vienna in September working in the oil industry, and to encourage objective
2006. It was given to the economist, the late Professor reporting and future research projects.
Peter Odell, then Professor Emeritus of International
Energy Studies at Erasmus University in Rotterdam, the The selection process for the Awards is entrusted to two
Netherlands. He passed away in 2016 at the age of 85. separate panels of experts, whose knowledge and expe-
rience enable them to make an insightful judgment on
The third winner of the OPEC Award for Research, who was the achievements of the nominees.
honoured at the 4th OPEC International Seminar in Vienna
in March 2009, was Professor Paul Stevens, Emeritus The deadline for nominations for both the 2018 OPEC
Professor at the Centre for Energy, Petroleum and Mineral Award for Journalism and the 2018 OPEC Award for
Law and Policy of the University of Dundee in Scotland. Research is September 5, 2017.

Professor Oystein Noreng of the BI Norwegian Business Additional information about the two Awards, as well as
School was the fourth recipient of the OPEC Award application forms and instructions for submitting nomi-
for Research. It was presented to him at the 5th OPEC nations, are available on the OPEC Website at:
International Seminar in Vienna in June 2012 in recogni-
OPEC bulletin 5–7/17

tion of his life-long academic work in the field of energy

economics and petroleum. www.opec.org

87
 Saudi Arabia and Russia:
Newsline Spotlight

A new era of cooperation

Russian President, Vladimir

Putin, shakes hands with Saudi
Arabia’s HRH (then) Deputy
Crown Prince and Minister
of Defence, Mohammed bin

Reuters
Salman, during a meeting at
the Kremlin in Moscow, Russia.

2017 may well be characterized by posterity

as the ‘great blossoming’ of cooperation
between the Kingdom of Saudi Arabia and the Russian
adjustment was extended by an additional nine months
in May of this year. However cooperation between Saudi
Arabia and Russia has intensified on a multitude of other
Federation, heralding a golden age for the bilateral rela- fronts.
tions of the world’s two leading oil-producing countries. Attesting to the positive relations between the
Central to this new dawn for their relationship is a two countries, His Royal Highness (HRH) then Deputy
shared commitment to re-introduce stability into the Crown Prince and Minister of Defence of Saudi Arabia,
oil market which has resulted in historic levels of coop- Mohammed bin Salman, told Russian President, Vladimir
eration between OPEC and non-OPEC countries. This Putin, in a visit to Moscow at the end of May, that, “rela-
endeavour culminated in the momentous ‘Declaration tions between Saudi Arabia and Russia are going though
of Cooperation,’ in December 2016 which committed one of their best moments ever.”
OPEC bulletin 5–7/17

OPEC Member Countries and 11 non-OPEC oil producing Subsequent to his visit to Moscow, HRH was
countries to a sizeable adjustment in crude oil produc- appointed Crown Prince to the Kingdom of Saudi Arabia.
tion in support of much needed market stability. This The impetus for the further improvement of relations

88
was generated on the margins of the G20 summit in signing of a memorandum of understanding between the
Hangzhou, China, in September 2016. Following a meet- Public Investment Fund of Saudi Arabia and the Russian
ing between HRH and President Putin, the seeds for a Direct Investment Fund. This will explore the potential of
strategic partnership in the field of energy were sown, joining a consortium of investors in a Moscow real estate
with significant ramifications for OPEC. project. The Russian Fund stated that both parties were
Reuters

Russian President, Vladimir Putin,

meets with Saudi Arabia’s (then)
Since then, the relationship has gone from strength considering the potential of further projects, including Deputy Crown Prince and Minister
to strength, the apex being the visit by HRH to Moscow in in retail, real estate, alternative projects, transportation of Defence, Mohammed bin
May. Closer ties are seen as having the potential to spur and logistics infrastructure. Salman, at the Kremlin in Moscow,
Russia.
increased investment and promote cooperation between Russian oil service companies have also shown a
the two on a host of potential energy projects in Russia, growing interest in Saudi Arabia. The Executive Chairman
Saudi Arabia and throughout the globe. of Rosneft, Russia’s largest oil producer met with Minister
The Kingdom’s Minister of Energy, Industry and Al-Falih as part of the visit. In a statement, the Russian
Mineral Resources, Khalid A Al-Falih was also part of major said discussions included exploring possible
the delegation to Russia and he used the opportu- “cooperation between Rosneft and Saudi Aramco in vari-
nity to speak with his Russian counterpart, Minister ous spheres of activities.”
of Energy, Alexander Novak, about technological Further manifestations of the good relations were
cooperation. seen during the St Petersburg International Economic
However discussions on future cooperation were Forum, which Minister Al-Falih attended (see story on
not solely confined to the realm of energy. “We support pp38). The Russian Minister organized a visit for
political contacts, contacts between the defence minis- Al-Falih to Yamal, a district in north-western Siberia.
tries. We work together on sorting out difficult situations, Saudi Arabia is considering the possibility of participat-
including in Syria,” President Putin said after the meeting. ing in Russia’s Arctic LNG project.
This was corroborated by HRH, “we have a lot of common The trip to the Russian Arctic field was a reciproca-
ground. As far as our disagreements are concerned, we tion of a visit by Minister Novak to Aramco’s facilities in
OPEC bulletin 5–7/17

have a clear mechanism to overcome them. We are mov- the Empty Quarter desert last October. Novak had joked,
ing forward quickly in a positive way.” “last year, Minister Al-Falih took us to a desert; we want
One outcome of the meeting in Moscow was the to show him an ice desert.”

89
 Equatorial Guinea’s Fortuna FLNG a step
Newsline

closer to becoming Africa’s first deep-

water liquefaction facility
A significant milestone will be passed in August, lead- In November 2016, the British oil and gas explorer,
ing to the anticipated start-up of the Fortuna floating liq- Ophir Energy, signed a Shareholders Agreement with
uefied natural gas (FLNG) export terminal in Equatorial OneLNG, a joint venture between Golar LNG Limited and
Guinea by 2020. This follows an announcement by the Schlumberger, to establish a Joint Operating Company
Minister of Mines, Industry and Energy, Gabriel Mbaga which will develop, finance and operate the Fortuna pro-
ject, utilizing Golar’s FLNG technology.
In May, Ophir Energy signed an umbrella agreement
with three other parties, namely, the Government of
Equatorial Guinea, state-owned GEPetrol and OneLNG,
outlining the legal and fiscal parameters for Fortuna
LNG, thereby paving the way for the Equatorial Guinean
offshore production project to be on course for a final
investment decision (FID) this summer.
GEPetrol’s participation rights as partners in 20 per
cent of the upstream project were reconfirmed by the
agreement, as well as the right of the Government of
Equatorial Guinea or a state-owned company to own up
to 30 per cent of the FLNG vessel.

Additional FLNG terminals

Minister Obiang Lima indicated at an African oil and gas
conference that there was interest in seeing another
two FLNG terminals added by the end of the year. LNG
demand has accelerated in recent years in Africa.
Shutterstock

OPEC’s newest member has also become party to

binding agreements with OneLNG SA to explore the lique-
faction and commercialization of natural gas in offshore
LNG demand has accelerated Blocks O and I.
in Afria in recent years.
Obiang Lima, that Royal Dutch Shell and oil traders Equatorial Guinea, which is Sub-Sharan Africa’s third-
Gunvor and Vitol had been shortlisted for an off-take largest oil producing nation, has seen a lot of recent activ-
agreement for the Fortuna FLNG. ity with regard to the granting of licenses for onshore and
Fortuna FLNG is on course to become Africa’s first offshore blocks. The country recently signed a produc-
deep-water liquefaction facility. The location is advanta- tion-sharing contract for offshore block EG-11 with US
geous as it combines the presence of world-class reser- oil major ExxonMobil.
voirs, dry pure-methane gas and benign metocean con- ExxonMobil is already active in Equatorial Guinea,
ditions. Production capacity is expected to be 2.2 million operating the Zafiro field, which is the country’s largest
tonnes per year. oil producing field.
OPEC bulletin 5–7/17

Fortuna sits within the Block R licence, offshore Equatorial Minister Obiang Lima indicated that the country has the
Guinea, which is located in the south-eastern part of the ambitious target of increasing oil output to 300,000 b/d
prolific Niger Delta complex. by 2020.

90
New refinery to contribute to IR Iran
becoming self-sufficient in gasoline
President, Hassan Rouhani, officially inaugurated the the contribution of the 2015 landmark nuclear deal with
first phase of IR Iran’s Bandar Abbas Gas Condensate world powers for allowing the project to reach its opera-
Refinery in May, which is intended to help the country tion stage. The deal capped IR Iran’s nuclear activities
become self-sufficient in the production of gasoline. in return for lifting sanctions. Were it not for the agree-
The first phase of the refinery will see the production ment, Rouhani said, “this giant refining unit would never
of 120,000 b/d. go online.”
Currently, it is estimated that Iranians consume IR Iran plans to boost production of condensate
about 60 million litres (15.85m gallons) of gasoline from its current level of 700,000 daily to 1m b daily over
daily on average. The OPEC Member Country already the next two years. The Bandar Abbas Gas Condensate
produces approximately 50m l (13.2m gal) and imports Refinery is one of two projects that will process the
about 11m l (3m gal). increased output. The second is the $2.8bn Siraf con-
densate refinery park, which will consist of eight con-
densate refineries, each with a daily capacity of 60,000
Phase 1
b. Construction is at a nascent stage.
In Phase 1, the facility will add 12m l/d, or 75,000 b/d, of IR Iran has grand ambitions for its downstream oil
Euro-4 gasoline along with 28,000 b/d of gas oil, 6,300 industry. Media reports from earlier in the year asserted
b/d of kerosene and 8,200 b/d of liquefied petroleum that there were 12 refineries in the works, to be added to
gas production, according to the country’s official Shana nine existing ones in the country which produce 1.73m b
news website. of oil equivalent.
The refinery is located in the port IR Iran’s President, Hassan Rouhani.
city of Bandar Abbas, which is 750
miles (1,205 km) south of Tehran.
At full operation, the refinery
will then be capable of producing
36m l (9.5m gal) of gasoline per day
after completion in 2018. Shana
has reported that the remaining two
phases of the facility are scheduled
to come on stream in six-month inter-
vals over the next year.
IR Iran has imported between
50,000 and 75,000 b/d of gasoline
in recent years and as the remain-
ing phases of the refinery in Bandar
Abbas come on stream, the country
is expected to become self-sufficient.
Condensate feedstock will primarily
come from the offshore South Pars
gas field, which IR Iran shares with
OPEC bulletin 5–7/17

fellow OPEC Member Qatar, where it

Reuters

is known as North Field.

President Rouhani referred to

91
 Nigerian Senate clears bill to
Newsline

reform oil governance

Nigeria has taken a significant step towards a major over- have responsibility for regulating the sector; the National
haul of the oil sector, as the Senate approved the first Petroleum Company (NPC); and the Nigerian Petroleum
of four bills which aim at unlocking millions of dollars Assets Management Company (NPAMC).
of investment. The Petroleum Industry Governance Bill
(PIGB) is one part of a series of planned reforms which
Crude oil marketing and refining
constitute the Petroleum Industry Bill (PIB).
The NPAMC will inherit the NNPC’s upstream assets and
the NPC is likely to take control of crude oil marketing
and refining. Furthermore, the bill creates opportunities
for private investment by stipulating that no less than ten
per cent of shares of the NPC will be divested within five
years of its creation, rising to 30 per cent within a decade.
The NPRC will oversee compliance with laws pertain-
ing to the petroleum industry, which includes the main-
tenance of environmental standards and the evaluation
of national reserves. In addition, the regulatory body will
be empowered to grant, amend, renew, extend or revoke
any license or lease required for petroleum exploration.
In a previous version of the bill, such powers lay with the
Petroleum Minister, however transferring responsibility
to the Commission was justified as ensuring the separa-
tion of duties and providing for checks and balances.
Procedurally, if the governance bill secures pas-
sage through parliament’s lower chamber, the House of
Representatives, it would require presidential approval
to become law. Parliament has still to consider the three
Reuters

other components of the main energy bill, namely,

the Fiscal Regime Bill, the Upstream and Midstream
Nigerian Minister of State Administration Bill and the Petroleum Revenue Bill. These
for Petroleum Resources,
The objective of the 191-page long PIB is to “create bills will address critical issues such as the fiscal terms of
Dr Emmanuel Ibe
Kachikwu. efficient and effective governing institutions with clear the NNPC. Senate President Bukola Saraki said lawmak-
and separate roles for the petroleum industry,” thereby ers were committed to ensuring all of the bills are passed
increasing transparency and accountability. The oil indus- before the end of 2017.
try is extremely important for Africa’s largest economy, The passage of the Petroleum Governance Bill
providing 70 per cent of government revenue and nearly by the Senate was welcomed by industry analysts.
all of its export earnings. Wunmi Iledare, Director of the Emerald Energy Institute,
The specific provisions of the PIGB seek to reform University of Port Harcourt, said “the passage of the gov-
how Nigeria’s oil and gas industry is regulated and ernance bill on its own is a welcome development.”
funded. Under the Bill, the state oil company, the Nigerian Minister of State for Petroleum Resources, Dr
OPEC bulletin 5–7/17

Nigerian National Petroleum Corporation (NNPC), will Emmanuel Ibe Kachikwu, was upbeat about the prospects
be divided into three main companies: the Nigerian of the PIB, saying that it should pass both the Assembly
Petroleum Regulatory Commission (NPRC), which will and the Senate this summer.

92
Advances in sulphide separation techniques
spur sour gas development in UAE
These are interesting times for sour gas expansion in UAE. The for separating sulphur. The gas of the Shah field, as is the case
state oil company, Abu Dhabi National Oil Company (ADNOC), is in the fields in the North-West Area proposed for development,
weighing up another large gas project in the North West Area, which has extreme “sourness.” This means it contains very high levels
would consist of developing the Hail and Ghasha, Delma, Nasr and of hydrogen sulphide and carbon dioxide. It is only with the recent
Shuwaihat “ultra-sour” gas fields. evolution of techniques that partners have been able to safely and
Lying in relatively shallow water, south-west of Abu Dhabi city, profitably separate the sulphide. Consequently, Shah’s production
analysts have estimated that the sour gas prospect contains about of 10,000 t/d of pure sulphur has propelled Abu Dhabi to near the
5 trillion cubic feet of gas and predict it could produce 1 billion cu top of the world’s league table of sulphur producers.
ft/d. This would be sufficient to meet 18 per cent of UAE’s current Suhail Mohamed Al-Mazrouei, UAE’s Minister of Energy, told
demand, thereby providing gas and water to 400,000 homes. the 25th Gas Processors Associaition GCC Chapter conference, that
Genesis Oil and Gas, a division of France’s Technip, delivered gas would continue to be critical for the country as a source of feed-
the North-West Area design concept and it recommends the con- stock of power generation and industrial use.
struction of a number of artificial islands, mirroring those pioneered Gas field in the UAE.
for Abu Dhabi’s offshore Zadaco oil project.
Alamy

Undeveloped gas reservoirs

Abdul Munim Saif Al Kindy, ADNOC’s Director of Upstream,
explained the rationale behind considering the project, “tapping
into undeveloped gas reservoirs is part of ADNOC’s focused strategy
to drive a more sustainable and economic gas supply.”
The previous success of Abu Dhabi’s giant Shah Gas
Development may well have a positive influence on the chances
of the North-West Area getting the go ahead. ADNOC jointly owns 60
per cent of Al Hosn Gas, with its US partner, Occidental Petroleum,
(Oxy), owning the rest and this entity successfully delivered the
Shah project last year on time and on budget.
Progress has already been made on Phase 2 of the Shah sour
gas development, which is intended to boost processing capacity
by 50 per cent in the coming years. Currently, Shah produces a total
of 1bn cu ft/d, 500 million cu ft/d of which is delivered to UAE’s
gas grid. In addition, the field produces 33,000 b/d of petroleum
condensate and 4.4 million tonnes per day of natural gas liquids.
Front-end engineering design (Feed) work on the expansion of
the project is due to be completed this year and will be followed
by the launch of the engineering, procurement and construction
tender in 2018.
Abu Dhabi, the largest emirate in the UAE, has seen demand for
natural gas surge in recent years, largely as a result of power plant
and industrial expansions. Gas demand has steadily risen at around
OPEC bulletin 5–7/17

six per cent per year, requiring increasing amounts of imports.

To match this growing demand, Abu Dhabi is prioritizing gas
development, a situation facilitated by advances in techniques

93
 A Royal Visit:
Secretariat Visit

The Lamido of the

Adamawa Emirate
His Royal Highness, Dr Muhammadu Barkindo Aliyu Musdafa, of the
Adamawa Emirate in Nigeria, and an accompanying delegate visited
the Secretary General of OPEC and some staff members of the OPEC
Secretariat. Hind Zaher provides this summary account of the royal visit.

May of this year, the Secretary General received an espe-

cially august visitor: the traditional ruler (or ‘Lamido’) of
Nigeria’s Adamawa Emirate, Dr Muhammadu Barkindo
Aliyu Musdafa. The Lamido not only hails from the
Secretary General’s own native Nigeria but also from the
very same birthplace.
The Secretariat was privileged to receive the Lamido
of Adamawa. After a warm welcome by the Secretary
General, the OPEC Secretariat’s Public Relations and
Information Department delivered a presentation to him
about OPEC and its work, followed by a screening of a
short video about OPEC titled, ‘Instrument of Change’. A
Q-&-A session was held afterwards, which was then fol-
lowed by a guided tour of some of the OPEC Secretariat’s
facilities, including the main conference room.
During his visit, the Lamido of Adamawa shared sto-
ries about his impressive life as a traditional leader in
Nigeria. He also described the history of the Adamawa
Emirate and recounted some of the rich history of the
State of Adamawa.
Formed in 1991 from part of Gongola State, one of
the 36 states which constitute the Federal Republic of
Nigeria, Adamawa State, located in north-eastern Nigeria,
has four administrative divisions: Adamawa, Ganye, Mubi
and Numan. Its capital city is Yola.
The name ‘Adamawa’ is derived from the founder
Dr Muhammadu Barkindo Aliyu Musdafa (r), of the Adamawa Emirate in Nigeria, during his of the Emirate, Modibbo Adama bin Ardo Hassana,
visit at the OPEC Secretariat, with Mohammad Sanusi Barkindo, OPEC’s Secretary General. a regional leader of the Fulani Jihad organized by
Usumaanu dan Fodio of Sokoto in 1804. In 1806, he

I
n office for less than a year, Mohammad Sanusi founded the Adamawa Emirate and, in 1841, the city of
OPEC bulletin 5–7/17

Barkindo, OPEC’s Secretary General, has received Yola, where he died in 1848.
numerous dignitaries and leaders, each offering Adamawa is one of the largest states of Nigeria, occu-
their words of welcome and expressions of support. In pying about 36,917 square kilometres. It is bordered by

94
the states of Borno to the north-west, Gombe to the west the Emirate has meant achieving harmony, respect and
and Taraba to the south-west. Its eastern border forms prosperity, he explained. According to him, ruling is not
the national eastern border with Cameroon. about power; it is about being responsible for your peo-
There are over 80 ethnic groups in Adamawa State, ple and achieving what is in their best interest.
with 21 local government areas. It is well known for its
rich cultural heritage as reflected in its history, traditional
Worthy candidates
dances and craftsmanship, as well as music and dress
patterns. “Traditional titles are not for sale,” he explained. “They
The majority of the people in Adamawa State are are given only to worthy candidates based on recommen-
farmers. Many of them are also engaged in cattle ranch- dations of the Emirate’s king makers,” he said, quoting
ing. In addition, the communities living on the banks of an official document. He also reiterated his wish to see
the Rivers Gongola and Benue and their tributaries in the the State of Adamawa become the most successful state
state subsist by fishing and farming. in the whole country. “My hope is to support the Governor
The state is also well-known for its strong agricultural and anyone who wants to see Adamawa [become] the
tradition, with crops such as maize, rice millet, sugar best State in Nigeria.”
cane, cotton, groundnuts, tea and kola nuts all growing Dr Muhammadu Barkindo
abundantly in the area. Aliya Mustafa is well-known
The Lamido currently resides in the old quarters of for his wisdom, charisma and
the city of Yola. In recent years, the new city of Jimeta — leadership. The prosperity of
located about five kilometres to the north-west — became the Adamawa Emirate is a
the administrative and commercial centre of the state. result of his continuous efforts
The Lamido had his own interesting history to share. to support the development of
Born in Yola State, Nigeria, in February 1944, he was the the Emirate and achieve excel-
eldest son of Lamido Aliyu Musdafa, a leader who left lence. But such a unique and
a cherished legacy and ruled the Adamawa Emirate for responsible approach to ruling
nearly six decades. Under his tenure, the Emirate grew the Emirate is not a surprise:
in prosperity. His son, Dr Muhammadu Barkindo Aliyu His own late father, Lamido
Musdafa, was then ‘turbaned’ on March 18, 2010, as the Dr Aliyu Mustada, was also a
next ruler of the Emirate. man of equity and justice. He
The visiting Lamido explained that he attended ruled the Emirate with fairness
Barewa College, Zaria, in Kaduna State, and then Ahmadu and achieved harmony despite
Bello University, also in Zaria, where he obtained a its heterogeneous ethnic, reli-
Diploma in Law in 1969. Later, he attended North London gious, educational and social
Dr Muhammadu Barkindo Aliyu Musdafa (r), with Mohammad
Polytechnic (1973–75) and St Clements University in the composition.
Sanusi Barkindo, visiting the OPEC press room.
Turks and Caicos Islands (2000–02). It is clear that the son has
Dr Muhammad Barkindo Aliyu Musdafa’s professional successfully followed his father’s footsteps and suc-
experience has also been extensive. He worked with the ceeded in creating very strong bonds with his commu-
Nigerian Customs Service, the Nigerian Ports Authority nity. He has taken admirable initiatives and has made
and the National Freight Company. He then became a the Emirate more prosperous. He is clearly proud of his
Commissioner for Works and later a Commissioner for region and its people, and his contributions as the ruler
Animal Health after joining the Gongola State civil ser- of the Emirate have been widely admired.
vice. He was also a director of the National Engineering And when he talks about his home, as he did dur-
and Technical Company (1991–93), Chairman of Stirling ing his visit to the OPEC Secretariat and the Secretary
Civil Engineering Nigeria Limited (1991–2003) and then General’s office, he does not talk merely as a leader but
Chairman of the Federal Radio Corporation of Nigeria as a passionate citizen who admires and cherishes the
(2003–05). history of Adamawa and the beauty of his birthplace. The
OPEC bulletin 5–7/17

Under his leadership, which has been described as Lamido’s descriptions of Adamawa State are so vivid and
modern, the Adamawa Emirate has enjoyed new innova- colourful that they leave those who have the privilege of
tive conveniences and approaches to governance. Ruling meeting him with the desire to know more.

95
Secretary General’s Diary
Visitors of the OPEC Secretary General
In the course of his official duties, OPEC Secretary General, Mohammad Sanusi Barkindo, visits,
receives and holds talks with numerous dignitaries.

May 1 May 2

Martínez meets with OPEC Secretary General

Mohammad Sanusi Barkindo (r), OPEC Secretary
General, met with Dr Nelson P Martínez, People’s
Minister of Petroleum, Venezuela.
Angola’s Ambassador visits OPEC Secretary General
Mohammad Sanusi Barkindo (l), OPEC Secretary General,
received Maria de Jesus dos Reis Ferreira, Ambassador of
the Republic of Angola in Austria, Croatia, Slovenia and
May 2 Slovakia.

WPC visit to OPEC Secretariat

Mohammad Sanusi Barkindo
(second l), OPEC Secretary
General, received Dr Pierce
Riemer (l), Director General,
World Petroleum Council (WPC).
Pictured here with Ulrike von
OPEC bulletin 5–7/17

Lonski (second r), Director of

Communications, WPC, and
Estévâo Pedro (r), Angola’s
Governor for OPEC, Chairman of
the OPEC Board of Governors.

96
May 3 May 22

Hess visits OPEC Secretary General Flores-Quiroga visits OPEC Secretary General
Mohammad Sanusi Barkindo (l), OPEC Secretary General, Mohammad Sanusi Barkindo (l), OPEC Secretary General,
received John Barnett Hess, CEO of Hess Corporation. received Dr Aldo Flores-Quiroga, Deputy Secretary of Energy
for Hydrocarbons, Mexico.

May 25
Ms Khazagaeva visits OPEC Secretary General
Mohammad Sanusi Barkindo (l), OPEC Secretary General,
received Iuliia Khazagaeva, correspondent at Tass News Agency.

May 26

OPEC bulletin 5–7/17

Visit of Nigerian media representatives

Mohammad Sanusi Barkindo (fourth r),
OPEC Secretary General, received a group
of journalists from Nigeria.

97
 OPEC CITIES IN
F O C U S
OPEC bulletin 5–7/17

Pictured above is
Angola’s capital
city, Luanda.

98
 OPEC CITIES IN
F O C U S

I
n the previous edition of the OPEC Bulletin, we introduced a new
series — OPEC Cities In Focus — which would endeavour to
provide an overview of the major cities in OPEC’s Member Countries and
highlight their many attributes.
Though each OPEC Member Country has played a prominent role in
the oil and gas sector over the years, and has maintained a steadfast
commitment to the Organization’s broader objectives in regards to
market stability, they all have much more to offer than just energy
resources. Through this series, we hope to spotlight the history and
development of their principal cities.
Our motivation is to highlight some of the other features of our
Member Countries apart from oil and gas. And our desire is to offer
readers a window into the rich urban life in our Member Countries and
OPEC bulletin 5–7/17

their cultural diversity.

99
 OPEC bulletin 5–7/17

100
Focus on Member Countries

Angola’s modern Luanda bay front walk.

Shutterstock
 OPEC CITIES IN
F O C U S

Luanda:
Angola’s pearl and
cultural icon
São Paulo da Assunção de Loanda, more commonly known as
Luanda, is the capital city of the Republic of Angola. The OPEC
Bulletin’s Ayman Almusallam takes a closer look at the city, its
history and key developments in this second instalment of our
‘OPEC Cities in Focus’ series.

L
uanda, lying on the Atlantic Coast, is one of Angola’s most Loanda. Back then, just a handful of settlers resided in the area.
strategic ports, endowing the country with economic and But the city took on the Portuguese explorer’s name and eventu-
logistical significance. It is also a primary cultural, urban ally, in time, was referred to only as Luanda.
and industrial hub, and thus plays a notable role in the OPEC In 1576, much of the area in which Luanda is located had been
Member Country. discovered by Portuguese explorer Paulo Dias de Novais, who was
The population of Luanda is estimated to be more than six greatly fascinated by the area’s notable wealth of minerals, par-
million, while its geographical size is around 113 square kilo- ticularly silver. Dias de Novais was the grandson of the well-known
metres. Interestingly, it is deemed the world’s third-most popu- 15th century explorer and mariner, Bartolomeu Dias, who belonged
lated Portuguese-speaking city and ranks first among Portuguese- to a Portuguese royal household. He is known for being the first
speaking capital cities in terms of population size. European to reach the Indian Ocean via the Atlantic Ocean.
The present name of Luanda is derived from Portuguese and The region where Luanda is located then began to acquire
the city itself dates back to the 1500s when it was founded by importance when colonists erected three strategic fortresses there
a Portuguese globetrotter named São Paulo da Assumpção de during the 17th and 18th centuries. The city thereafter experienced a

OPEC bulletin 5–7/17

Shutterstock

The port of Luanda.

101
 development boom in various domains, accompanied by growing
Focus on Member Countries

affluence and prosperity.

Climate & geography

The semi-arid climate of the city is usually somewhere between
warm and hot, and tends to be dry. The frequency of rainfall is sub-
ject to the Benguela Current, an ocean current that flows northward
from Cape Point to Angola’s Benguela in the western part of the
country. Luanda experiences rainfall mainly during the months of
March and April.
The city is divided into two zones: Baixa de Luanda and Cidade
Alta. The old city — Baixa de Luanda — is considered to be lower
Luanda. It is located on the coast, forming the port of Luanda.
The old town consists mainly of old build-
ings, originating from the colonial era or
the pre-colonial era, and narrow streets.
Alamy

However, it enjoys some modern features

as well.

Shutterstock
Cidade Alta — Upper Luanda — is the
new part of the city. It is characterized
mainly by massive construction and con-
The National Bank of Angola in Luanda.
temporary buildings.
Near the Angolan capital, there is also During the era of slavery, Luanda became a prominent market-
Luanda Sul, an independent ‘satellite’ city place sharing robust trade ties with many merchants, especially the
where many people who work in Luanda Portuguese colony of Brazil. In fact, the Port of Luanda was largely
live. dominated by Brazilian ships.
It is interesting to note that the Portuguese did not attempt
to expand their colony at this time. Moreover, several conflicts
History of a city and country
Red facade took place between Portugal and the Netherlands in Luanda dur-
of an old Luanda was initially inhabited by a group of settlers and soldiers in ing this period of time. However, the city persisted and remained
colonial
1576. It is estimated that there were around 500 residents. Since strong.
house in
Luanda. the Portuguese were considerably concerned with safety and aimed The influence of Brazil on Luanda became more evident during
to maintain their position, they eventually constructed three vital the 17th century. However, eventually its influence on Angola began
fortresses. Thus, in 1618, they erected Fortaleza São Pedro da to dissolve, especially after 1822, as a consequence of Brazil’s
Barra. Subsequently, they built two other forts: Fortaleza de São own independence from Portugal. And in the 19th century, Angola
Miguel in 1634 and Forte de São Francisco do Penedo in 1765. experienced remarkable economic growth and solid development
Fortaleza de São Miguel — or Saint Michael Fortress — remains across various sectors.
well preserved and is maintained by the Angolan authorities. The In 1836, slavery was entirely eradicated. This concluded a sig-
fortress, which has become a distinctive attraction for local and nificant period of growth and progress in Angola. Moreover, Angolan
international tourists, is a testament to the rich and extensive his- ports were finally permitted to trade with foreign merchants and
tory of Angola in general and Luanda in particular. accommodate international ships.
The city underwent several enlargements and developments A few years later, Luanda was able to expand its economy fur-
during the Portuguese era, which lasted from 1575 to 1975, becom- ther by exporting a number of commodities such as coffee, copal,
ing the colony’s most prosperous area. During this time, various cocoa, timber and peanut oil. The country’s notable economic
notable events took place. progress during this time led Luanda to become one of the most
OPEC bulletin 5–7/17

In 1640, Luanda was invaded by the Dutch, an occupation that advanced and prosperous colonies in the immense Portuguese
lasted until 1648. The Portuguese then regained power and recov- empire.
ered the lands they had lost. By the end of the 19th century, an artificial aqueduct was

102
 OPEC CITIES IN
F O C U S
constructed to maintain a regular and reliable supply of water to factors in ongoing efforts to eliminate pov-
the inhabitants of Luanda. The scheme was perceived to be a key erty in the country.

Shutterstock
driver behind substantial growth in the region. There have been other notable achieve-
The Republic of Angola finally gained full independence in ments, too. According to the Open Data for
1975. It then experienced a civil war from 1975 to 2002. However, Africa Initiative, a project developed and
as soon as the war ended, Luanda experienced rapid economic initiated by the African Development Bank,
growth and major new developments, all as a result of the coun- the literacy rate among Luanda’s popula-
try’s booming oil industry. tion reached almost 90 per cent in 2012.
In more recent history, Angola has been a major producer and Furthermore, 90 per cent of the population
net exporter of crude oil, and was admitted as a full member of the as of 2012 has regular access to sanita-
Organization of the Petroleum Exporting Countries (OPEC) in 2007. tion, while nearly 85 per cent has access to
It thus joined other Member Countries in the Organization’s mis- Luanda’s electricity network.
sion to maintain oil market stability and ensure a balanced setting
for all stakeholders involved in the industry.
Sport
From the beginning, the African country engaged in all efforts
undertaken by the Organization to realise its objectives, and thus Finally, sport is an important part of life in
rapidly became an active and valuable member of OPEC. This was the country. In September 2013, Angola
best exemplified when it hosted the 155th (Extraordinary) Meeting hosted the 41st edition of the world’s most
of the OPEC Conference in 2009. The Ministerial Conference, which prominent roller hockey competition for
took place on December 22 of that year, was attended by 12 OPEC men, the Roller Hockey World Cup. The event,
Member Countries and four other oil-producing states as observ- which took place in the cities of Luanda and
A monument in
ers: Kingdom of Bahrain, the Arab Republic of Egypt, the Republic Namibe, attracted 16 different international
Luanda, formerly
of Indonesia and the Sultanate of Oman. teams from five confederations. named Sao Paulo
At that meeting, the OPEC Conference witnessed OPEC and Some 48 matches were played in total and 408 goals were da Assuncao de
Loanda.
non-OPEC countries make joint efforts to build a sustainable envi- scored. Spain was crowned as the competition’s champion while
ronment to restore oil market equilibrium and reinstate industry Argentina, Portugal and Chile came second, third and fourth,
stability. They also took a delineated action to guarantee a steady respectively.
income to producers, a regular supply of crude to consumers and But the real highlight of the competition was that Angola
ensure a fair return to investors. became the first African host of the Roller Hockey World Cup in the
history of the championship. That is another first for a nation that
has seen some trials and tribulations over the years, but which
Reconstruction, expansion and economic
has grown and developed into one of the most dynamic and
development
high-achieving countries on the African continent.
In recent years, the Angolan capital city has attracted enormous Angola has become one of Africa’s most developed nations. Its
investment from the private and public sectors alike. This has wealth, acquired from its natural resources and growing industries,
helped finance the reconstruction of the country, after the damage has led to notable progress today, which is enjoyed by its popula-
caused by Angola’s independence and civil wars. tion as a whole — and its pearl, the city of Luanda, in particular.
Since the end of the Angolan civil war in 2002, the country —
and the city of Luanda in particular — has been undergoing much
Shutterstock

reconstruction and partaking in major development programmes.

This has included the construction of modern houses, sophisticated
and advanced infrastructure, new highways and a contemporary,
world-class airport. The stability and safety experienced after the
end of the civil war have established Luanda as a promising city
with much potential and a bright future.
Social housing in particular now forms a key cornerstone of
OPEC bulletin 5–7/17

the housing industry in Luanda. According to a report carried by

Construction Review Online, Angolan authorities consider this
development, in addition to an improving job market, significant
In September 2013, Angola hosted the 41st edition of the world’s most
prominent roller hockey competition for men, the Roller Hockey World Cup.

103
Focus on Member Countries

fly !
rn to
B o Motivated by his father to fly from a young age,
Prince Turki bin Muqrin bin Abdulaziz today chairs
the Saudi Air Sports Federation (SASF). But his
OPEC bulletin 5–7/17

passion doesn’t stop here! He works to promote air

sports not only in his country but also in the region.
Siham Alawami files this report based on a recent
104 conversation with the Prince.
A s far back as he can remember, Prince Turki
bin Muqrin bin Abdulaziz, Chairman of the Saudi Air
Sports Federation (SASF), wanted to fly. He recalls fond
memories of his childhood and adolescence, and already
at an early age, he realized he was born to fly. “I always
had an interest in aviation from a young age,” he said.
His passion for flying seems to have been inspired
and encouraged by his father, who was also a pilot. He
says he fearlessly went on his first flying adventure at just
ten years of age. “My family has always shared a passion
for aviation.”
Later in 1991, when he was older and more experi-
enced, his father offered him his first flying experience
— where he actually got to fly a plane over London. At the
time, he says, he thought to himself: “My dream is finally
coming true.”

Achievements
It was an experience he would never forget. “On that first
flight, I realized flying was the only thing for me,” he says.
“So I started by flying helicopters in the UK.”
“Later on, I went to study fixed-wing flying and got
my licence. I now hold the US Federal Aviation Agency
(FAA) licence and I am a licensed helicopter and fixed-
wing pilot,” he said.
“It was probably one of my greatest achievements.”
However, he says he stopped flying ‘aerobatics’ — special
flying manoeuvres involving unusual altitudes — grow-
ing more cautious when he and his wife began to have
children.
But flying remained important for many reasons.
“Flying also drove me to live my own life and I have been
inspired to achieve all my dreams,” he added.
“To learn to fly and get a pilot certificate requires long
study, so a good pilot is always learning to advance his
skills,” he explained.
“Private pilots should comply with safety and secu-
rity aviation regulations and know the road map of the
skies to get ready for take-off without an instructor,” he
noted.
“I never have had a real emergency,” he says. “But
OPEC bulletin 5–7/17

as a pilot, I have encountered different situations and

technical failures.”
He urges others to fly, too. “Enjoy flying — whether it

Prince Turki bin Muqrin bin Abdulaziz,

Chairman of the Saudi Air Sports Federation. 105
 air show.
own at the prestigious
One of the acts sh
log o.
‘Save the Dream’
craft featuring the
ICSS next to an air
Ms Alawami from
is a commercial jet or other, it doesn’t matter. Flying the Kingdom of Saudi Arabia,” he said. Registering all aircrafts and
is flying — and it should be safe and fun,” he said. issuing pilot licenses were thus among his top priorities.
“After completing my own private pilot certificate, I considered In this context, Prince Turki reviewed the great efforts already
completing the commercial pilot certificate. But I wondered if I was being exerted by the SASF to protect and enforce aviation laws and
really looking for employment.” In the end, he chose to be a private regulations.
Focus on Member Countries

pilot “because I wanted simply to enjoy the experience of flying,” “Today we have airports in most parts of Saudi Arabia which
he said. host clubs … though we are still in early stages of development,”
he said. He praised the efforts being made by young Saudi ama-
teurs to promote the sport of recreational flying.
Challenges faced by the SASF
As chair of the Saudi Air Sports Federation (SASF), the Prince has
‘Save the Dream Global Pact for Sport’
had to deal with numerous complex challenges both locally and
regionally. These have ranged from dealing with the entrenched Recently, on the sidelines of the ‘My King and My Kingdom at the
culture of air sports to logistical challenges and infrastructure Top’ programme, Prince Turki commented on a recent cooperation
issues. agreement signed in Riyadh between the SASF and the ‘Save the
“A few days after taking office as Chairman of the SASF,” he Dream Global Pact for Sport’, a joint initiative of the International
said, “my main concern was how to protect aviation in Saudi Centre for Sport Security (ICSS) and the Qatar Olympic Committee
Arabia and the region, as we lack the information and culture.” (QOC).
In fact, poor infrastructure for small planes has been a big prob- The idea behind the ‘Save the Dream’ initiative is to create a
lem, in part a consequence of people parking their airplanes out- voluntary network of supporters from the business sector, sports
OPEC bulletin 5–7/17

side airports and tending to practice hang-gliding air sports,” and civil society, all committed to promoting the positive values of
he said. sport within communities and their respective networks and organ-
“My main concern was to protect the great achievements of izations. This global initiative, which is supported by technology

106
 sident of the
ed Hanzab (r), Pre
Sp ort s Fe de rat ion, and Mohamm d ‘Sa ve the Dream’,
uw ail em (l) , President Asian Air n ag ree me nt be tween the SASF an pported by
ilem Als g the cooperatio mmittee (QOC), su
Dr Mubarak Suwa ort Se curity (ICSS), signin d the Qatar Olympic Co
ntr e for Sp curit y (IC SS ) an
International Ce Centre for Sport Se
the International
a joint initiative of
Ooredoo.
technology partner,

partner Ooredoo, is open to the business community and sport The growth of “Enjoy flying — whether it is a
organizations willing to work together to promote and protect the air sports commercial jet or other, it
core values of sport.
doesn’t matter. Flying is
Given such initiatives and
programmes, and the increased
flying — and it should
Security, safety and integrity in sport
promotion of air sports culture, be safe and fun.”
Prince Turki expressed his hope that this initiative would enhance air sports have grown rapidly in Gulf
the prospects of bilateral cooperation. He also, more generally, Cooperation Council (GCC) countries in — Prince Turki
voiced his hope that the SASF would benefit from the ICSS’s inter- general — and Saudi Arabia in particular. This
national expertise in the fields of security, safety and integrity in has created growing demand for airplane parts
sport in order to promote air sports in his country, stressing the and repair stations, Prince Turki noted. For the moment, however,
importance of promoting good safety practices in this regard. the nearest maintenance and repair centre is still in Turkey.
In this context, Prince Turki thanked those associated with Saudi Arabia currently has 27 airports organized into three dif-
the ‘Save the Dream’ initiative for also taking part in the ‘My King ferent categories: international, regional and domestic. However, as
and My Kingdom at the Top’ programme, during a recitation of the Prince Turki noted, each of these airports faces significant logisti-
Pledge of Allegiance to the Custodian of the Two Holy Mosques, cal challenges. More effort is thus needed, he said, to expand and
King Salman bin Abdul Aziz Al Saud, which took place in Riyadh improve the country’s air facilities and to better share the culture
on January 1, 2017. of air sports with others.
That programme is now being launched under the auspices of “Without spreading a private air sports culture and providing
the SASF and the Asian Air Sports Federation — which was the first aviation facilities, this sport will not exist,” he ruefully noted. In
OPEC bulletin 5–7/17

sport body to sign the ‘Save the Dream Global Pact for Sport’ — as fact, he added, “I dream that one day everybody here in the village
part of Saudi Arabia’s efforts to more widely promote youth and and the farm will have their own aircraft.” That is certainly a dream
sports programmes. worth sharing.

All images in this feature courtesy SASF. 107

Arts & Life

Vienna:
Bringing music to the masses …
Two eighth-grade students in Vienna investigate why the Austrian
capital is synonymous with music and in what direction this age-
old bond is headed. Aileen Mikula and Roxana Gheysar spent one
week at the OPEC Secretariat and out and about in the city. Here is
their story.
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108
W hen you think of Vienna what comes to
your mind? Most people associate Vienna with delicious Wiener
Schnitzel, or the beautiful and stunning Alps — yet others think
composers from the 19th century and it really became global in the
19th century with Johann Strauss,” claims Schmidl.
The only exception to this musical growth took place in the
about jaw-dropping classical music. Whether Mozart, Beethoven time of Maria Theresia. The Hapsburg Empire was in danger from
or any other famous composers come to your mind, Vienna is and the Prussian king and invested a large amount of money in the war
always will be a centre of classical music. instead of music, thus courtyard music was very much reduced.
The music in Vienna is unique and is a trademark created to
sell the city’s magnificence, says University Professor, Dr Stefan
Changing focus
Schmidl, of the Austrian Academy of Sciences, Institute of History
of Art and Musicology. “This strong trademark is still active today The focus on music has changed drastically since the baroque
and people actually believe in it.” era. Back then, it was more on choirs and aristocracy. In the late
It is a cliché that originates from the late 18 century. Back
th
18th century and 19th century the bourgeoisie took over and it
then, the Habsburg emperors enjoyed listening to music and became a broader phenomenon. Money is important to music,
composed songs themselves in the Hofkapelle. They supported admits Schmidl, but generally there was enough money in Vienna
music and with the advent of the bourgeoisie in the 19th century to support its growth and development between the aristocracy
“music exploded”, with the Vienna classical movement becoming and the court.
international.
“So if we say who put Vienna musically on the top, it was
the early 19th century, late 18th century classist move-
ment. Composers like Mozart, Beethoven … all these

Caption

OPEC bulletin 5–7/17

109
Arts & Life

The Austrian Academy

of Sciences (OeAW) is
Austria’s central non-
university research and Of course, in the 20th century there is the media, he when music came more to the common people and
science institution. observes. It is a transporter of music and it has multiplied bridged social classes to some degree.
outreach. Schmidl points out: “It is unique that music was used
According to Schmidl, the internet has also impacted as a discourse medium and was accepted and consumed
how people consume music. “You can download it, you by all classes of society. I think this changed in the 20th
do not buy the CDs and … you do not have to listen to century. We do not have this broad impact on society
a whole symphony or a through music anymore.”
whole album — you tend Historically, though, Vienna was definitely a hot spot
to select or listen quicker for many reasons.
than in earlier times. “Vienna was and still is very attractive for compos-
Definitely it changed.” ers and I think this had to do (then) with the condition of
Over the years, con- Vienna being the capital of the Habsburg Empire, which
cert halls also evolved. was very multiethnic and multilingual. All came together
Today there are special- in Vienna from this huge empire, so for a composer it was
ized concert halls like very attractive.”
the opera house, the Schmidl explains: “You had music from all parts of
L–r: Maureen MacNeill, concert house or the the empire. You could hear Hungarian music, Slovak
of the OPEC Bulletin; Musikverein, but, historically, architecture was not music, Romanian music and for a composer this was very
Roxana Gheysar; Dr
devoted to music. fruitful. Brahms is an example of this. He could not have
Stefan Schmidl, Austrian
Academy of Sciences, “This is a very recent phenomenon from the 18th or had this in Munich or Hamburg or other cities.”
Institute of History of Art 19 century. Before that, buildings were used for multi-
th
In addition, there were all kinds of audiences from
and Musicology; and ple purposes,” says Schmidl. every class. And the more types of audiences, the more
Aileen Mikula.
Concert halls really exploded in the late 18th century money, he states.
Many types of people are still very attracted to Vienna
for its music scene and they travel far and wide to partic-
ipate in it as consumers or producers.
OPEC bulletin 5–7/17

110
 L–r: Dr Stefan Schmidl;
Maureen MacNeill;
Aileen; and Roxana.
Music in general brings a lot of people to the city, says However, a strong electronic scene has been rising
Schmidl. “It is a major factor for tourism … I think that up since the 1980s and other modern forms of music.
classical music is the first or second attraction in terms There is still a strong musical scene in Vienna aside from
of tourism.” classical music, he contests.
Being a centre of musical excellence also improves “I think it is necessary to reformulate this trademark
the mental quality of life for locals, he agrees. of the music city and broaden it to include electronic or
other music, not only concentrate on the Mozart cliché,”

Changing trademark he asserts.

Schmidl adds that there needs to be tourism strat-
Vienna’s musical identity is starting to move beyond just egies with new formulations of this trademark. There is
its trademark style of music, even though it still remains enough money to establish and keep this cliché alive but
a leader of classical music, according to Schmidl. it will be necessary to find a new formula in the coming
He adds the classical trademark is sort of museum- years. This has to do more with creativity than politics,
like today. “Classical music is of course very strong here so artists should be supported in this endeavour.
— you have the universities for music and so on — but in
everyday life classical music has no place.”
New Year’s Concert
As the typical classical concert-goers age, and with-
out these numbers being replaced by young people The New Year’s concert is world famous — seen by bil-
with the same enthusiasm for classical music, the situ- lions, according to Schmidl. “And it is the opportunity
ation may change very much in 20 or 30 years, Schmidl to sell the trademark of the music city, Vienna. You can
maintains. not have a better advertisement than the New Year’s
“Of course, you have events like the New Year’s con- Concert.”
cert, which is a global aspect, but in everyday life clas-
sical music does not play the role it played in the 19th
century.”
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111
Arts & Life

Shutterstock
Interior detail from The
Collection of Historic Musical
Instruments section of the The concert evolved over time and did not have Willi Boskovsky, with the artistic direction of the New
Kunsthistorisches Museum
(Museum of Art History), the impact that it has today when it started, he says. Year’s Concerts.
Vienna, Austria. According to literature, the first New Year’s Concert took This turned out to be a stroke of genius, with
place during the darkest chapter of Austrian history and Boskovsky going on to conduct the concert 25 times —
that of the Vienna Philharmonic. between 1955 and 1979 — making such an enduring
It was in the 1930s, in the midst of dictatorship, bar- impression that his resignation constituted the end of an
barianism and war, when people feared for their lives and era. Since 1986, conductors have been rotated annually.
families.
On January 1, 1941, a Philharmonic matinee enti-
Education
tled ‘Johann Strauss Concert’ was performed. It was
seen in part as an expression of Viennese individu- The idea of Vienna as a classical music capital is more
ality, taking place as it did in the middle of the war. embedded in the minds of people outside the country
But is was also misappropriated for national-socialist than inside, contends Schmidl. The trademark is still very
propaganda. attractive for music students from abroad, for example.
From 1929 to 1933, Clemens Krauss conducted an Most still come to study classical music and an instru-
annual concert of Strauss compositions at the Salzburg ment or composing.
Festival, thus anticipating the format of the future New There is not very much emphasis placed in music in
Year’s Concerts. Krauss then conducted the New Year’s the public school system, but the music schools and uni-
Concerts until the end of the war and after a small break versities dedicated to music are excellent.
conducted seven more concerts until 1954. Teachers in Vienna are very good and this level of
After Krauss died on May 16, 1954, the orchestra, after excellence is an economic factor behind why students
much deliberation, decided to entrust concertmaster, choose to come here, says Schmidl.
“If you say abroad that you studied in Vienna, you are
in a better position job-wise. This is especially true when
it comes to Asia.”
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112
 Rehearsal of the Simón
Bolívar Sympony Orchestra
The breakdown of students at the Music and Arts alive, but on the other hand some parties try to use the at the Golden Hall of
Vienna’s Musikverein,
University is approximately 30 per cent Asian, 30 per cent music to support ideological ideas such as the homeland venue to the New Year’s
from other countries abroad and the rest from Austria, and blood and soil. “With music you have to be very care- concert that takes place
reveals Schmidl. ful how it is used for identity reasons.” every year in Vienna.
In terms of comparable countries, Finland is equal to Schmidl says the
Austria in both music education and consuming music, countryside may, for that
states the professor. However, Vienna has plenty of musi- reason, feel more threat-
cal specialties. ened by the changing
“Vienna is very well known for its string sounds — the population. They want
Wiener Streicherklang. But the same goes for brass instru- to keep their music and
ments. For conducting, it is not that famous, but you have culture pure “… which is
a great variety of famous conductors being active here. a paradox. Music lives
So it is definitely still a place for conductors to come.” through change and
exchange. This is a phan-

Countryside tasm of a pure music.”

Inside this complex
There is still a lot of emphasis on music in the country- and fascinating mix of
side and here the city-country schism comes strongly into past and present, clas-
play, states Schmidl. sical and modern, coun-
“This contradiction of capital and countryside really try and city, foreign and Aileen (l) and Roxana in a
broke out in the 1920s and is still there today. People in local music has always souvenir shop listening to
the countryside use music as an identifying factor,” he managed to stay at the heart of Vienna and the city’s iden- sounds from a music box.
says. tity. This may evolve in the years to come, but it seems
The liveliness of music in the countryside is a music in one form or another is here to stay.
European phenomenon, he states. It keeps the traditions
OPEC bulletin 5–7/17

113
 Top composers … at a glance
Arts & Life

Austria and Germany are famous for their composers of classical music. From
Beethoven to Mozart — there is something for everyone. The following gives a
brief profile of some leading lights.

Ludwig van Beethoven in Eisenach and is said to have taught young Johann to play the
violin. At the age of seven, Bach went to school where he received
Composer Ludwig van Beethoven was born on December 17, 1770, religious instruction and studied Latin and other subjects.
in Bonn, Germany. He was an innovator, widening the scope of Bach had a beautiful soprano singing voice which helped him
sonata, symphony, concerto and quartet and combining vocals land a place at a school in Lüneburg. He was a master at counter-
and instruments in a new way. point: composition based on independent musical lines played
At the same time as he was composing these great and immortal together.
works, Beethoven was struggling to come to terms with a shocking With Bach, counterpoint reached its highest point of expression
and terrible fact, one that he tried desperately to conceal. He was — it is much less prominent in the work of later composers. This
going deaf. Despite this, some of his most important works were style of writing has a unique intellectual and aesthetic appeal, aris-
composed during the last ten years of his life, when he could not ing from its complexity, structure and detail. Johann died in 1750
hear. due to a stroke.
Sometime between the births of his two younger brothers,
Beethoven’s father began teaching him music. Beethoven changed
Franz Joseph Haydn
music, the sound of music and what composers did. He wrote
nine symphonies that jolted music out of itself. Life could never Franz Joseph Haydn was born in 1732. Over the course of his 106
and would never be the same again. The “classical” rationality of symphonies, the Austrian became the principal architect of the
structure, harmony, form, melodic development and orchestration classical style of music.
stretched into open-ended possibility. He died in 1827 at the age Haydn was among the creators of the fundamental genres of
of 56 from a stroke. classical music and his influence upon later composers is huge.
Haydn’s most celebrated pupil was Ludwig van Beethoven.

Johann Sebastian Bach Haydn was recruited at the age of eight to sing in the choir at St
Stephen’s Cathedral in Vienna, where he went on to learn to play
A magnificent baroque-era composer, Johann Sebastian Bach is violin and keyboards.
revered through the ages for his work’s musical complexities and After he left the choir, he supported himself by teaching and
stylistic innovations. playing violin while studying counterpoint and harmony.
He was born in 1685 in Eisenach, Thuringia, Germany. Some Haydn is remembered as the first great symphonist and the
of his best-known compositions are the ‘Mass in B Minor’, the composer who essentially invented the string quartet. The princi-
‘Brandenburg Concertos’ and ‘The Well-Tempered Clavier’. pal engineer of the classical style, Haydn exerted influence on the
His father, Johann Ambrosius, worked as the town musician likes of Mozart. He died in 1809 aged 77.
OPEC bulletin 5–7/17

114
Ludwig van Beethoven Johann Sebastian Bach Joseph Haydn
Franz Schubert management of this Strauss Orchestra would eventually be passed
on to the hands of his sons until its disbandment by Eduard
In 1814, the genius of Franz Schubert (1797–1828) was first made Strauss in 1901.
evident in his work Gretchen am Spinnrade, inspired by his reading Strauss died in Vienna on September 25, 1849, at the age of
of Johann Wolfgang von Goethe’s (1749–1832) Faust. 45 from scarlet fever.
His first Mass and his first symphony appeared about this time
and showed the influence of Haydn on him. Schubert composed
Wolfgang Amadeus Mozart
five more of Goethe’s works into songs.
By the end of 1814, Schubert was an assistant at his father’s Wolfgang Amadeus Mozart, born on January 27, 1756, in Salzburg,
school. Between 1820 and 1823 Schubert achieved his musical was an Austrian composer, widely recognized as one of the great-
maturity. Two of his operettas and several of his songs were per- est composers in the history of Western music. He composed more
formed in public; amateur and professional quartets sang his part- than 600 works, many acknowledged as pinnacles of symphonic,
songs for male voices. concertante, chamber, operatic, and choral music.
On November 11, 1828, Schubert began suffering from nausea He is among the most enduringly popular of classical compos-
and headache. Five days later the doctors diagnosed typhoid fever ers, and his influence is profound on subsequent Western art music.
and he died a few days later on November 19. Ludwig van Beethoven composed his own early works in the
shadow of Mozart and Joseph Haydn wrote: “Posterity will not see

Johann Strauss I such a talent again in 100 years.”

Unlike any other composer in musical history, Mozart wrote
Johann Strauss I was an Austrian Romantic composer born in Vienna in all the musical genres of his day and excelled in every one. His
on March 14, 1804. He was famous for his waltzes and he popular- taste, his command of form and his range of expression have made
ized them alongside Joseph Lanner, thereby setting the foundations him seem the most universal of all composers.
for his sons to carry on his musical dynasty. Mozart’s father, Leopold, came from a family of good stand-
The piece he is most famous for is the Radetzky March. His ing (from which he was estranged), which included architects and
mother died of ‘creeping fever’ when he was seven and when he bookbinders.
was 12 his father was discovered drowned, possibly by suicide, in As a boy, Wolfgang Mozart’s early talent for music was remark-
the Danube river. able. At three he was picking out chords on the harpsichord, at four
Strauss was placed as an apprentice to a bookbinder by his playing short pieces, and at five composing.
guardian, and took lessons in the violin and viola, in addition to There are anecdotes about his precise memory of pitch, about
fulfilling his apprenticeship. his scribbling a concerto at the age of five and about his gentleness
He eventually joined a string quartet which played Viennese and sensitivity.
waltzes and rustic German dances and expanded into a small string At 17, Mozart was engaged as a musician at the Salzburg
orchestra in 1824, becoming deputy conductor after it became pop- court, but grew restless and travelled in search of a better position.
ular during the Fasching of 1824. While visiting Vienna in 1781, he was dismissed from his Salzburg
He then formed his own band and began to write music (chiefly position.
dance music). The musical competition between Strauss and Lanner He chose to stay in the capital, where he achieved fame but lit-
was very productive for the development of the waltz and other tle financial security. During his final years in Vienna, he composed
dance music in Vienna. many of his best-known symphonies, concertos and operas, and
Strauss soon became one of the best-known and well- portions of the Requiem, which was largely unfinished at the time
loved dance composers in Vienna. The conducting reins and of his death on December 5, 1791.
OPEC bulletin 5–7/17

115
Franz Schubert Johann Strauss J Wolfgang Amadeus Mozart
B r i Ber fi ei fni nggss
Students and professional groups wanting to know more about OPEC visit the Secretariat
regularly, in order to receive briefings from the Public Relations and Information
Department (PRID). PRID also visits schools under the Secretariat’s outreach programme
to give them presentations on the Organization and the oil industry. Here we feature some
snapshots of such visits.

Visits to the Secretariat

March 20 Students from the Franklin University, Sorengo, Switzerland.

OPEC bulletin 5–7/17

March 21 Youth Information Officers from the German Federal Armed Forces (Bundeswehr), Berlin, Germany.

116
 Puzzle
March 21 Students from the Newbold College of Higher Education, Binfield, UK.

March 22 Visit of students from Russia attending the Diplomatic Academy Vienna, Austria.

March 23 Students from the University of Gothenburg, Sweden. 117

Briefings

March 28 Officials from the Air Force Command of the German Federal Armed Forces (Bundeswehr), Cologne, Germany.

March 28 Visit of Golshani Tourist Group Nourowz 1396 / March 2017, IR Iran.
OPEC bulletin 5–7/17

118 March 30 Visit of students from Russia attending the Diplomatic Academy Vienna, Austria.
 Natiq Aliyev

Obituary
Minister of Industry and Energy
Azerbaijan

N
atiq Aliyev, Minister of Industry and Energy of Secretary General, Mohammad Sanusi Barkindo, con-
the Azerbaijan Republic, passed away suddenly veyed his condolences, along with those of the staff of
on June 9, 2017. the OPEC Secretariat.
Born in Baku, Azerbaijan, in 1947, Minister Aliyev Minister Aliyev’s peers and fellow Ministers would
graduated in 1970 from the Azerbaijan State Oil Academy, greatly miss his “guidance and wisdom”, said the
earning a PhD in Geology and Mineral Sciences. He started Secretary General. “These traits were evidently on show
working in the oil industry in 1970. during the diplomatic efforts that were [undertaken] in
Over the years, Minister Aliyev held various positions the second half of 2016”, he noted, adding that they
within the oil industry. He also held various political posts. “led to the historic OPEC and non-OPEC ‘Declaration of
He was appointed in 1993 Chairman of the Board and Cooperation’.”
President of Azerbaijan’s State Oil Company, and held this Calling Minister Aliyev “one of the key architects of
position until December 2004, when he was appointed this landmark decision”, the Secretary General wished his
OPEC bulletin 5–7/17

Minister of Industry and Energy. soul repose and extended his condolences to his family
In a letter sent to the President of Azerbaijan upon — that they may be “granted strength and comfort dur-
hearing of the Minister’s sad and untimely passing, OPEC ing the coming days, months, and years.”

119
Noticeboard
Forthcoming events

Carbon management technology conference, July 17–20, 2017, fax: +44 207 368 9301; e-mail: enquire@iqpc.co.uk; website: https://
Houston, TX, USA. Details: Society of Petroleum Engineers, 10777 cybersecurityme.iqpc.ae/?utm_medium=portal&mac=OGIQ_Events_
Westheimer, Suite #335, Houston, TX 77042, USA. Tel: +1 713 779 Learn_Listing.
9595; fax: +1 713 779 4216; e-mail: spehou@spe.org; website: http://
fscarbonmanagement.org/cmtc/2017. GTL technology forum and GasPro Americas, September 12–13,
2017, Houston, TX, USA. Details: World Oil, PO Box 2608, Houston,
Unconventional resources technology conference, July 24–26, TX 77252, USA. Tel: +1 713 529 4301; fax: +1 713 520 4433; e-mail:
2017, Austin, TX, USA. Details: Society of Petroleum Engineers, 10777 energyeventseditor@gulfpub.com; website: www.cvent.com/events/
Westheimer, Suite #335, Houston, TX 77042, USA. Tel: +1 713 779 gtl-technology-forum-gaspro-americas-2017/event-summary-3f560fd
9595; fax: +1 713 779 4216; e-mail: spehou@spe.org; website: http:// 9f2ca410ca03072619a2af731.aspx.
urtec.org/2017.
Oil sands trade show and conference, September 12–13, 2017,
The bunkering week, July 25–28, 2017, Singapore. Details: IBC Fort McMurray, AB, Canada. Details: dmg :: events, 6th floor, Northcliffe
Global Conferences, The Bookings Department, Informa UK Ltd, PO House, 2 Derry Street, London W8 5TT, UK. Tel: +44 20 3615 2873; fax:
Box 406, West Byfleet KT14 6WL, UK. Tel: +44 207 017 55 18; fax: +44 +44 20 3615 0679; e-mail: conferencemarketing@dmgevents.com;
207 017 47 15; e-mail: energycustserv@informa.com; website: www. website: https://oilsandstradeshow.com.
bunkeringweek.com.
7th NGLs conference and 5th annual petrochemical seminar,
5 Ship recycling congress, July 26–27, 2017, Singapore. Details:
th
September 13–14, 2017, Houston, TX, USA. Details: Platts, 20
Active Communications International, 5–13 Great Suffolk Street, 4th Canada Square, Canary Wharf, London E14 5LH, UK. Tel: +44 207
Floor, London SE1 0NS, UK. Tel: +44 207 981 98 00; fax: +44 207 1766142; fax: +44 207 176 8512; e-mail: cynthia_rugg@platts.com;
593 00 71; e-mail: claire@acieu.net; website: www.wplgroup.com/aci/ website: www.platts.com/events/americas/ngls-petrochemicals/index.
event/ship-recycling-congress-asia.
Future energy Uganda, September 13–14, 2017, Kampala, Uganda.
9th Chem/petrochem and refinery shutdowns and turnarounds, Details: Spintelligent (Pty) Ltd, 2nd fl, North Wing, Great Westerford,
August 1–9, 2017, Los Angeles, CA, USA. Details: Marcus Evans 240 Main Road, Rondebosch 7700, South Africa. Tel: +27 21 700 35
Conferences, 11 Connaught Place, London W2 2ET, UK. Tel: +44 203 00; fax: +27 21 700 35 01; e-mail: natalie.bacon@spintelligent.com;
002 3002; fax: +44 203 002 3003; e-mail: flaminiag@marcusevansuk. website: www.future-energy-uganda.com.
com; website: www.marcusevans-conferences-northamerican.com/
marcusevans-conferences-event-details.asp?EventID=23394#. LNG transport, storage, handling, Indonesia, September 13–15,
WQdJL9LysdU/?SRC=GulfOilGas. 2017, Bali, Indonesia. Details: World Alliance for Decentralized Energy,
Edinburgh Quay, 133 Fountainbridge, Edinburgh EH3 9BA, UK. Tel: +44
Power Nigeria 2017, September 5–7, 2017, Lagos, Nigeria. Details: 31 625 33 33; e-mail: infor@localpower.org; website: www.lng-world.
Energy Institute, 61 New Cavendish Street, London W1G 7AR, UK. com/lng_bali2016.
Tel: +44 207 467 7116; fax: +44 207 580 2230; e-mail: jwarner@
energyinst.org.uk; website: www.power-nigeria.com. Leadership summit, September 14, 2017, London, UK. Details: The
Petroleum Economist Ltd, 69 Carter Lane, London EC4V 5EQ, UK. Tel:
SPE offshore Europe conference and exhibition, September +44 207 779 8800; fax: +44 207 779 8899; e-mail: customerservice@
5–8, 2017, Aberdeen, UK. Details: Society of Petroleum Engineers, petroleum-economist.com; website: www.cvent.com/events/petroleum-
Part Third Floor East, Portland House, 4 Great Portland Street, London economist-leadership-summit-2017/event-summary-03e76a90275e4
W1W 8QJ, UK. Tel: +44 207 299 3300; fax: +44 207 299 3309; e-mail: 6deb849cc1c150c36bc.aspx.
spelon@spe.org; website: www.offshore-europe.co.uk.
18th Abu Dhabi international downstream summit, September
Pipeline development and expansion, September 7–8, 2017, 17–19, 2017, Abu Dhabi, UAE. Details: The World Refining Association,
Houston, TX, USA. Details: Platts, 20 Canada Square, Canary Wharf, Bedford House, Fulham Green, 69-79 Fulham High Street, London SW6
London E14 5LH, UK. Tel: +44 207 1766142; fax: +44 207 176 8512; 3JW, UK. Tel: +44 207 38 48 013; fax: +44 207 38 47 843; e-mail:
e-mail: cynthia_rugg@platts.com; website: www.platts.com/events/ Support@clarionevents.com; website: http://adid.wraconferences.com.
americas/pipeline-development-and-expansion/index.
Global oil and gas — Middle East and North Africa 2017,
Tanzania oil and gas congress, September 11–12, 2017, Dar-es- September 17–19, 2017, Cairo, Egypt. Details: 8 Tyers Gate, London
Salaam, Tanzania. Details: CWC Associates Ltd, Regent House, Oyster SE1 3HX, UK. Tel: +44 44 20 33 28 95 81; e-mail: james@bme-global.
Wharf, 16–18 Lombard Road, London SW11 3RF, UK. Tel: +44 207 978 com; website: www.thebmegroup.com.
000; fax: +44 207 978 0099; e-mail: sshelton@thecwcgroup.com;
website: www.cwctog.com. 2nd Russia and CIS gas to chemicals conference, September 18–
19, 2017, Moscow, Russia. Details: EPC Conferences; 44 Oxford Drive,
OPEC bulletin 5–7/17

6th edition of cyber security for energy and utilities, September Bermondsey Street, London SE1 2FB, UK. Tel: +44 207 357 8394; fax:
11–13, 2017, Abu Dhabi, UAE. Details: IQPC Ltd, Anchor House, +44 207 357 8395; e-mail: Conferences@EuroPetro.com; website:
15–19 Britten Street, London SW3 3QL, UK. Tel: +44 207 368 9300; www.europetro.com/event/60/0.

120
Non-OPEC oil supply developments

Market Review
show recent increase

Although non-OPEC supply levels decreased sharply

in 2016, preliminary data for the first few months of
May 2017

Month
ly Oil
M a r ke
2017 indicate an output increase, according to the companies have already stepped t Repo
rt
11 May
2017
OPEC Secretariat in Vienna. However, numerous fac- up activities in 2017 as they have
tors may mitigate this during rest of the year. started to increase their spend-
Non-OPE Feature
According to its Monthly Oil Market Report (MOMR) ing amid an incipient recovery in C oil su article
velopm :
pply de
ent
for May, OPEC said low oil prices in 2016 had led to a oil prices. “As a result, US crude
reduction of around 23 per cent in global E&P invest- oil production surpassed 9m Oil mar
ket high
Feature
lights
i
Crude oi ar ticle
ments compared to 2015, along with a deferral of sev- b/d in February 2017, about l price m
Commod
ovemen
ity mar
ts
iii
1
kets
7
eral upstream projects. “Particularly in North America, 0.5m b/d higher than the low World ec
World oi
onomy
l deman
11
Produc d 28
World oi
E&P spending fell by around 38 per cent, as observed seen in September 2016,” t marke
ts and re
finery op
l supply
erations
38

Tanker 54

in the 48 per cent y-o-y decline in US rig counts, as the report said. “For 2017, market
Oil trade
61
65
Stock m
Balanc ovemen
well as lower well completions,” the report said. total US liquids production e of supp
ly and de
Monthly
mand
ts 72
79
endnot
As a result, the report noted, “non-OPEC oil sup- is forecast to increase by
es 81

ply decreased sharply in 2016, contracting by 0.7 0.82m b/d with crude oil contrib-
million barrels/day from the high growth of 2.3m b/d uting 0.6m b/d.”
in 2014 and 1.5m b/d in 2015.” Non-OPEC supply in Taking a closer look at the first two months at the
2016 also saw contractions in OECD Americas (0.5m beginning of 2017, the report said that “tight crude
b/d), China (0.3m b/d), and Latin America (0.1m b/d), output increased by 0.10m b/d from December 2016,
while in the FSU an increase (0.2m b/d) was seen, while NGLs output rose by 0.26m b/d over the same
driven mainly by robust output from Russia. period.”
“The oil supply contraction in OECD Americas in Additionally, with the pick-up in drilling activities,
2016 was mainly due to US onshore crude oil output,” as well as increased cash flows, it noted that “US tight
the report explained. This includes “tight oil, along crude output is expected to rise rapidly and increase
with annual declines in Mexico and outages in the by 0.6m b/d in 2017.” Overall, it said non-OPEC sup-
Canadian oil sands.” Meanwhile, US oil production ply in 2017 is expected to increase by 0.95m b/d.
showed a y-o-y decline of 0.4m b/d in 2016 — “but In addition to supply growth in the US, the report
this trend has reversed so far in 2017, primarily due said “higher oil production is expected in Canada
to higher oil prices together with cost cuts.” (0.22m b/d) and Brazil (0.21m b/d), while Mexico and
Looking ahead, the report suggested that non- China are forecast to see the largest contractions.”
OPEC supply performance in 2017 “will depend on With regard to global supply levels, the report
many factors, including the world economy; higher noted that “[a] large part of the excess supply over-
spending by oil companies, particularly in North hang contained in floating storage has been reduced
America; new economic and energy policies in major and the improvement in the world economy should
economies, especially the US; and the timely imple- help support oil demand.”
mentation of oil projects in Canada and Brazil, as However, it cautioned that “continued rebalanc-
OPEC bulletin 5–7/17

well as oil price developments and to some extent ing in the oil market by year-end will require the col-
geopolitics.” lective efforts of all oil producers to increase market
In fact, it noted that many US oil and gas stability.”

121
 MOMR … oil market highlights
Market Review
May 2017

The OPEC Reference Basket rose 2.0 per recent data. Total world oil demand growth exports to Latin America. Meanwhile, Asia
cent in April to average $51.34/barrel. Crude for 2016 stood at 1.44m b/d to average margins continued healthily on the back of
oil futures recovered on the high conform- 95.12m b/d. For 2017, oil demand growth firm regional demand at a time of peak main-
ity by OPEC and non-OPEC with voluntary is anticipated to be around 1.27m b/d, tenance in the region.
production adjustments and expectations unchanged from the previous report with
for an extension to the year-end; however, total oil demand expected at 96.38m b/d. Average tanker spot freight rates fell 0.4
upward potential was seen as limited by Non-OECD will continue to lead growth at per cent from the month before, despite a
a resurgence in oil output, particularly in 1.04m b/d, while OECD continues to grow, stronger VLCC market. VLCC spot freight
the US. ICE Brent increased 2.4 per cent to albeit at a reduced pace of 0.23m b/d. rates improved, rising by 20 per cent on
$53.82/b and NYMEX WTI rose 2.9 per cent average, as a result of enhanced activity in
to $51.12/b. The Brent-WTI spread narrowed Non-OPEC oil supply in 2016 was revised the market and a tightening in tonnage sup-
slightly to $2.70/b, but still kept the arbitrage marginally lower due to a downward adjust- ply. Nevertheless, the decline in average dirty
open for US crude exports. Money manager ment in Russian oil supply in 4Q16 to now spot freight rates was driven by the drop in
net long positions rose 30 per cent from the show a contraction of 0.71m b/d to average Suezmax and Aframax freight rates, which
end of March until the middle of April, but 57.3m b/d. The forecast for 2017 was revised ended the month down eight per cent and
dropped by one of the largest weekly falls on up by 0.37m b/d to show growth of 0.95m b/d, ten per cent, respectively, as tonnage demand
record in the last week of April. following upward adjustments in all quarters, for both classes was limited, while tonnage
mostly in the US, to average 58.3m b/d. The oversupply was dominant.
The forecast for global economic growth revisions were driven by actual production
remains at 3.3 per cent in 2017, compared to data for February, as well as higher expec- Total OECD commercial oil stocks fell in
growth in 2016 of 3.0 per cent. The recent tations for the remainder of the year. OPEC March to stand at 3,013m b. At this level,
growth dynamic in the global economy has NGLs and non-conventional oil production in OECD commercial oil stocks are 276m b
been confirmed with the exception of the 2017 was revised up by 40,000 b/d to aver- above the latest five-year average. Crude
US, which is still expected to rebound in age 6.22m b/d, representing growth of 0.17m and products stocks indicated a surplus of
the remainder of the year. While US growth b/d. In April, OPEC production decreased by around 187m b and 89m b above the sea-
remains at 2.2 per cent, Euro-zone growth in 18,000 b/d, according to secondary sources, sonal norm, respectively. In terms of forward
2017 was revised to 1.7 per cent from 1.6 per to average 31.73m b/d. cover, OECD commercial stocks stood at 64.8
cent. Japan’s 2017 growth forecast remains days, some 4.8 days higher than the latest
at 1.2 per cent. China’s 2017 growth was also Product markets strengthened in April in the five-year average.
revised higher to 6.5 per cent from 6.3 per Atlantic basin, supported by stronger domes-
cent, while India’s forecast remains at 7.0 tic demand amid higher export opportunities. Demand for OPEC crude in 2016 now stands
per cent. Russia’s and Brazil’s 2017 growth Lower inflows and heavy refinery mainte- at 31.8m b/d, which is 2.0m b/d higher than in
forecasts remain unchanged at 1.2 per cent nance also resulted in a tighter market. The the previous year. In 2017, demand for OPEC
and 0.5 per cent, respectively. main support came from gasoline, with US crude is projected at 31.9m b/d, around 0.2m
domestic demand recovering in April from b/d higher than last year.
World oil demand in 2016 was revised the slump suffered during the first quarter
higher by 65,000 b/d to reflect the most amid the shift to summer grades and higher

The feature article and oil market highlights are taken from OPEC’s Monthly Oil Market Report (MOMR) for May 2017. Published by the
OPEC bulletin 5–7/17

Secretariat’s Petroleum Studies Department, the publication may be downloaded in PDF format from our Website (www.opec.org),
provided OPEC is credited as the source for any usage. The additional graphs and tables on the following pages reflect the latest data on
OPEC Reference Basket and crude and oil product prices in general.

122
World oil market prospects favorable
for the second half of 2017
The world GDP forecast for 2017 is a good indicator of the
positive sentiment that is currently boosting the market, a
feeling which is expected to continue into the second half
June 2017

demand growth due to developments ly Oil


Month
M a r ke
of the year, according to the OPEC Secretariat in Vienna. in the petrochemical industry and the t Repo
13 June
rt
According to its Monthly Oil Market Report (MOMR) transportation sector. 2017

for June, the underlying global dynamic is continuing Meanwhile, non-OPEC supply World oi
l marke
t prospe Fe
cts for th ature art
to improve overall, despite some political challenges. will increase by about 0.5m b/d in e second icle:
half of
2017
Additionally, oil prices in particular will continue to be a the second half of the year over
key determinant for the wellbeing of most producer econ- the first half to average 58.4m b/d, Oil mar
ket high
lights
Feature i
omies and thus will continue to influence global growth. with the US being the main driver Crude oi
l price m
ar ticle
ovemen
ts
iii
Commod 1
“The gradual recovery of the world economy continues behind this growth. The US will
ity mar
kets
World ec 7
onomy
World oi 11
and stronger-than-anticipated growth in 1Q17 has lifted contribute 0.76m b/d, while Produc
t marke
ts and re
World oi
l deman
l supply
d 28

finery op 39

the world GDP growth forecast for 2017 to 3.4 per cent, Brazil and Canada will grow Tanker
erations
market
54
61
Oil trade
up from the 3.1 per cent growth seen in 2016,” according by 0.12 and 0.06, respectively. Balanc
Stock m
e of supp
ovemen
ts 72
65

ly and de
to the June MOMR. However, this will be some- Monthly
mand
endnot
es 81
79

Political uncertainties, including the recent general what offset by lower produc-
election in the UK, seem unlikely to hinder broadly healthy tion from Russia, down by 0.13m b/d, China
OECD growth in the second half of the year. Emerging econ- and Indonesia, each falling by 0.06m b/d and Norway,
omies show more variability, with the pace of growth in which will drop by 0.05m b/d.
China expected to continue to slow gradually in the sec- The OECD is expected to grow by 0.71m b/d in 2H17,
ond half of the year. This is counter-balanced by India, which will broadly offset declines in the former Soviet
where momentum is seen to be picking up as the nega- Union and elsewhere of 0.18m b/d.
tive impact of demonetization fades. Russia and Brazil are OECD commercial oil inventories have seen a decline
also expected to perform well, with some uncertainties at in the first four months of the year, down to 251m b from
play. 339m b compared with the five-year average. This is pre-
Monetary policy will remain a focus as the US Federal sumed to continue in the second half of the year with help
Reserve may raise interest rates further in 2H17, which of ongoing production adjustments by OPEC and partici-
could create some capital outflows from the emerging pating non-OPEC producing countries.
economies. “These trends, along with the steady decline in oil in
Global oil demand should improve in 2H17, with a 2m floating storage, indicate that the rebalancing of the mar-
b/d increase in total consumption to reach 97.4m b/d, ket is underway, but at a slower pace, given the changes in
slightly down from the 95.4m b/d seen in 1H17. OECD fundamentals since December, especially the shift in US
demand will pick up somewhat by about 0.2m b/d y-o-y, supply from an expected contraction to positive growth,”
with OECD Americas being the largest contributor to this stated the June MOMR.
growth, thanks to the driving season providing a boost in Due to these developments, OPEC and participating
demand. In OECD Europe, demand will rise slightly, while non-OPEC countries chose on May 25 at the conclusion
in OECD Pacific it will contract, though this decline will of the 172nd Meeting of the Conference and the 2nd OPEC
be moderated by strong growth in South Korea. and non-OPEC Ministerial Meeting to extend production
In non-OECD, oil demand is expected to grow by adjustments for a further nine months until March 2018, in
OPEC bulletin 5–7/17

around 1.0m b/d y-o-y for the second half of 2017. This is recognition of the continuing need for cooperation among
expected to come largely from India as it recovers from oil exporting countries in order to achieve lasting stability
demonetization, though China will also contribute to in the oil market.

123
 MOMR … oil market highlights
Market Review
June 2017

The OPEC Reference Basket fell 4.2 per average 95.12m b/d. Projected oil demand the barrel as relatively higher yields and
cent in May to average $49.20/b. Crude growth for 2017 was also unchanged at 1.27m increased refinery utilisation outweighed the
futures prices tumbled as supply contin- b/d to average 96.38m b/d. OECD consump- improvement in gasoil demand. Meanwhile
ued to be plentiful with US output continu- tion is seen growing by 0.23m b/d in 2017, in Asia, margins weakened on supply pres-
ing its upward trend this year, despite OPEC in line with the previous report, following sure following the peak of the maintenance
and non-OPEC production adjustments. ICE offsetting revisions in OECD Americas and season amid increasing inflows to the region.
Brent ended 4.5 per cent lower at $51.40/b, Asia Pacific. The forecast for oil demand
while NYMEX WTI dropped five per cent to growth in China and India have also been Tanker market sentiment weakened in May
$48.54/b. The Brent-WTI spread widened left unchanged at 0.34m b/d and 0.12m b/d, as spot freight rates in both dirty and clean
to $2.86/b, further supporting US exports. respectively. segments mostly dropped from the previ-
Money managers decreased bets on higher ous month. The decline in freight rates was
oil prices in both exchanges, trimming com- Non-OPEC oil supply is estimated to have driven by light tonnage demand and high
bined net length positions in futures and averaged 57.30m b/d in 2016, a contraction vessel availability. Aframax rates were the
options to November 2016 levels. of 0.71m b/d and unchanged from the previ- exception, with average spot freight rates
ous report. In 2017, non-OPEC oil supply is improving due to high tonnage demand for
After stronger than anticipated growth projected to grow by 0.84m b/d, following a several destinations combined with port
momentum since the beginning of the year, downward revision of 0.11m b/d to average delays and replacements. Clean tanker freight
the forecast for global economic growth 58.14m b/d. Lower output from Russia, as rates declined on average, mainly due to a
has been revised up to 3.4 per cent in 2017, well as Brunei, the Sudans and Kazakhstan weak market West of Suez.
following growth of 3.1 per cent in 2016. The following the OPEC and non-OPEC decision
recent growth dynamic in the global econ- to extend production adjustments for nine Total OECD commercial oil stocks fell in
omy has been confirmed with the exception months offset higher growth in Canada and April to stand at 3,005m b. At this level,
of potentially temporary dips in the US and the UK. US oil supply growth for 2017 was OECD commercial oil stocks were 251m b
India. US growth in 2017 remains at 2.2 per also revised down by 30,000 b/d due to above the latest five-year average. Crude and
cent and the Euro-zone at 1.7 per cent, while lower output than expected in 1Q17. OPEC products stocks stood at a surplus above the
Japan’s growth forecast was revised up to 1.4 NGLs production and non-conventional liq- seasonal norm of around 171m b and 80m
per cent. The forecasts for China and India uids forecast to grow by 0.17m b/d in 2017 b, respectively. In terms of days of forward
remain unchanged at 6.5 per cent and 7.0 to average 6.22m b/d. In May 2017, OPEC cover, OECD commercial stocks stood at 64.1
per cent, respectively, in 2017. Similarly, the crude oil production increased by 336,000 days, some 4.1 days higher than the latest
forecasts for Russia and Brazil also remain in b/d to average 32.14m b/d, according to sec- five-year average.
line with the previous report at 1.2 per cent ondary sources.
and 0.5 per cent, respectively. Demand for OPEC crude stood at 31.8m
Refinery margins in the Atlantic Basin fell in b/d in 2016, some 2.0m b/d higher than in
World oil demand is estimated to grow by May, despite the strength seen in US gasoline 2015. In 2017, the demand for OPEC crude
1.44m b/d in 2016 due to upward revisions crack spreads amid higher domestic demand. is projected at 32.0m b/d, around 0.3m b/d
of data, in line with the previous report to This was due to weakness in the middle of higher than the previous year.

The feature article and oil market highlights are taken from OPEC’s Monthly Oil Market Report (MOMR) for June 2017. Published by
OPEC bulletin 5–7/17

the Secretariat’s Petroleum Studies Department, the publication may be downloaded in PDF format from our Website (www.opec.org),
provided OPEC is credited as the source for any usage. The additional graphs and tables on the following pages reflect the latest data on
OPEC Reference Basket and crude and oil product prices in general.

124
Table 1: OPEC Reference Basket spot crude prices $/b
2016 2017 Weeks 17–21/2017 (week ending)
Crude/Member Country May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Apr 28 May 5 May 12May 19May 26

Arab Light — Saudi Arabia 43.48 46.28 43.14 43.47 42.70 48.26 43.32 51.92 52.29 53.63 50.68 51.64 49.30 49.66 48.30 47.77 49.96 51.10

Basrah Light — Iraq 42.05 44.63 41.37 42.01 41.88 46.79 41.97 50.87 51.66 52.66 49.82 50.75 48.56 48.66 47.45 46.90 49.39 50.53

Bonny Light — Nigeria 46.85 48.48 45.30 46.35 47.77 50.83 45.20 53.91 54.98 55.24 51.91 53.02 50.77 50.60 49.15 48.75 52.09 53.13

Es Sider — Libya 45.83 47.28 44.00 44.85 45.69 48.74 43.63 52.12 53.08 53.46 50.00 51.04 48.90 48.62 47.28 46.88 50.22 51.26

Girassol — Angola 46.58 48.30 45.09 46.06 46.66 49.37 44.95 53.41 54.41 55.21 51.89 52.68 50.36 50.33 48.87 48.27 51.57 52.71

Iran Heavy — IR Iran 41.67 44.68 41.59 42.17 41.39 47.30 42.42 51.41 51.90 53.16 50.27 51.12 49.00 49.13 48.11 47.49 49.63 50.81

Kuwait Export — Kuwait 41.60 44.50 41.37 41.88 41.22 47.04 42.14 50.93 51.48 52.85 49.87 50.81 48.65 48.84 47.72 47.13 49.29 50.45

Marine — Qatar 44.13 46.37 43.53 43.44 43.51 48.13 44.25 52.08 53.44 54.14 50.89 52.39 50.24 50.56 49.39 48.63 50.74 52.14

Merey — Venezuela 34.28 38.22 36.71 36.46 37.38 42.36 39.37 45.86 46.81 47.03 44.14 46.15 45.16 44.65 44.03 43.57 45.85 46.99

Murban — UAE 47.12 49.28 46.54 46.25 46.42 51.19 47.25 54.93 55.97 56.31 52.96 54.32 51.96 52.46 51.35 50.47 52.46 53.65

Oriente — Ecuador 41.96 44.03 40.72 40.84 41.22 45.98 41.69 48.67 48.64 50.08 46.83 48.70 46.91 46.91 45.38 45.30 47.69 48.77

Rabi Light — Gabon* 45.48 47.15 44.03 44.90 45.51 48.15 43.92 52.22 53.13 54.04 50.63 51.71 49.48 49.20 47.86 47.46 50.80 51.84

Saharan Blend — Algeria 47.73 48.98 45.30 46.35 47.09 49.79 45.13 53.82 54.84 55.06 51.40 51.84 49.80 49.42 48.18 47.78 51.12 52.16

OPEC Reference Basket 43.21 45.84 42.68 43.10 42.89 47.87 43.22 51.67 52.40 53.37 50.32 51.37 49.20 49.35 48.14 47.57 49.96 51.11

Table 2: Selected spot crude prices $/b

2016 2017 Weeks 17–21/2017 (week ending)
Crude/Member Country May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Apr 28 May 5 May 12 May 19 May 26

Arab Heavy — Saudi Arabia 40.69 43.68 40.40 41.00 40.34 46.26 40.96 49.70 50.56 51.97 48.86 49.97 47.92 48.00 47.07 46.42 48.54 49.73

Brega — Libya 46.83 48.28 44.95 45.87 46.74 49.79 45.18 53.52 54.43 54.86 51.40 52.19 49.85 49.77 48.23 47.83 51.17 52.21

North Sea Dtd — North Sea 46.83 48.28 45.00 45.85 46.69 49.74 45.13 53.57 54.58 55.06 51.60 52.59 50.45 50.17 48.83 48.43 51.77 52.81

Dubai — UAE 44.29 46.25 42.64 43.58 43.67 48.94 43.98 52.08 53.71 54.41 51.21 52.31 50.47 50.36 49.55 48.94 51.07 52.29

Ekofisk — North Sea 47.70 48.54 44.99 45.79 47.10 49.58 44.97 53.67 54.62 55.17 51.50 52.57 50.43 50.09 48.32 48.19 51.80 53.07

Iran Light — IR Iran 44.65 46.38 43.54 43.66 44.23 47.99 43.45 51.85 52.35 52.35 49.13 50.04 47.34 47.35 45.42 45.21 48.73 49.71

Isthmus — Mexico 44.76 47.51 45.07 44.22 44.55 49.91 45.64 53.81 54.98 56.09 52.26 53.81 51.85 51.90 50.35 50.23 52.79 53.68

Oman — Oman 44.37 46.61 43.45 44.02 44.01 49.18 44.54 52.72 54.01 55.12 51.71 52.82 50.57 50.84 49.79 49.08 51.20 52.37

Suez Mix — Egypt 43.31 44.90 42.06 42.20 42.78 46.54 42.13 50.59 51.72 51.97 48.24 49.71 47.31 47.32 45.39 45.18 48.70 49.68

Minas — Indonesia* 48.64 51.56 41.84 41.26 40.28 45.20 40.72 49.68 50.63 51.19 48.35 47.95 45.96 45.39 44.29 43.55 46.87 48.63

Urals — Russia 45.08 46.60 43.76 44.06 44.48 48.24 43.83 52.28 53.42 53.67 49.94 51.55 49.04 49.02 47.48 46.88 50.40 51.38

WTI — North America 46.84 48.74 44.90 44.75 45.16 49.89 45.67 52.02 52.50 53.40 49.58 51.06 48.56 49.20 47.21 47.06 49.25 50.30

Note: As per the decision of the 109th ECB (held in February 2008), the OPEC Reference Basket (ORB) has been recalculated including the Ecuadorian crude
Oriente retroactive as of October 19, 2007. As per the decision of the 108th ECB, the ORB has been recalculated including the Angolan crude Girassol, retroactive
January 2007. As of January 2006, monthly averages are based on daily quotations (as approved by the 105th Meeting of the Economic Commission Board). As
of June 16, 2005 (ie 3W June), the ORB has been calculated according to the new methodology as agreed by the 136th (Extraordinary) Meeting of the Conference.
OPEC bulletin 5–7/17

From January 2009–December 2015, the ORB excludes Minas (Indonesia). As of July 2016, the ORB includes Rabi Light (Gabon).
* Indonesia joined in 1962, suspended its Membership on December 31, 2008, reactivated it again on January 1, 2016, but suspended its Membership again
on December 31, 2016. Gabon joined in 1975 and left in 1995; it reactivated its Membership on July 1, 2016.

Brent for dated cargoes; Urals cif Mediterranean. All others fob loading port.
Sources: The netback values for TJL price calculations are taken from RVM; Platt’s; as of January 1, 2016, Argus; Secretariat’s assessments.

125
Market Review
Graph 1: Evolution of the OPEC Reference Basket spot crude prices, 2017 $/b

60
Arab Light Iran Heavy Oriente
Basrah Light Kuwait Export Rabi Light
Bonny Light Marine Saharan Blend
Es Sider Merey OPEC Reference
Girassol Murban Basket
55

50

45

40
Mar 3 10 17 24 31 Apr 7 14 21 28 May 5 12 19 26
9 10 11 12 13 14 15 16 17 18 19 20 21

Graph 2: Evolution of selected spot crude prices, 2017 $/b

60
Arab Heavy Ekofisk Oman
Brega Iran Light Suez Mix
Brent Isthmus Urals
Dubai Minas WTI
OPEC Reference Basket
55

50

45

40
Mar 3 10 17 24 31 Apr 7 14 21 28 May 5 12 19 26
9 10 11 12 13 14 15 16 17 18 19 20 21

Note: As per the decision of the 109th ECB (held in February 2008), the OPEC Reference Basket (ORB) has been recalculated including the Ecuadorian crude Oriente
OPEC bulletin 5–7/17

retroactive as of October 19, 2007. As per the decision of the 108th ECB, the basket has been recalculated including the Angolan crude Girassol, retroactive January
2007. As of January 2006, monthly averages are based on daily quotations (as approved by the 105th Meeting of the Economic Commission Board). As of June 16,
2005 (ie 3W June), the ORB has been calculated according to the new methodology as agreed by the 136th (Extraordinary) Meeting of the Conference. As of January
2009, the ORB excludes Minas (Indonesia).
Indonesia suspended its OPEC Membership on December 31, 2008, this was reactivated from January 1, 2016, but suspended again on December 31, 2016.

126
 Graph 3 Rotterdam

Table and Graph 3: North European market — spot barges, fob Rotterdam $/b
regular fuel oil
gasoline diesel fuel oil 3.5 per naphtha jet kero fuel oil 1%S
naphtha unleaded ultra light jet kero 1 per cent S cent S regular unleaded diesel fuel oil 3.5%S
80
2016 May 44.28 69.51 56.15 56.67 32.52 29.28
June 45.89 70.22 58.80 59.37 37.81 32.24
70
July 41.73 62.35 54.48 53.84 37.60 32.21
August 40.52 64.07 54.91 54.28 36.83 32.87
60
September 43.57 66.62 55.92 55.93 39.48 34.97
October 48.60 70.13 61.50 61.82 43.83 38.10
November 45.82 64.62 57.36 57.29 40.98 35.71 50

December 50.90 71.37 64.50 64.89 46.70 42.28

2017 January 55.06 73.82 65.60 65.05 50.60 43.03 40
February 54.82 75.66 66.35 66.13 49.73 43.13
March 50.70 70.06 62.29 62.21 44.86 39.94 30

April 51.54 75.36 64.21 64.11 46.95 41.71

May 48.43 72.61 61.13 61.11 46.26 40.64
20
May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Note: Prices of premium gasoline and diesel from January 1, 2008, are with 10 ppm sulphur content. Graph
2016
4 South European Market
2017

Table and Graph 4: South European market — spot cargoes, fob Italy $/b
premium
gasoline diesel fuel oil fuel oil prem 50ppm fuel oil 1.0%S
naphtha 50ppm ultra light 1 per cent S 3.5 per cent S naphtha diesel fuel oil 3.5%S
80
2016 May 43.51 61.12 57.91 33.72 31.91
June 45.11 62.71 60.35 36.97 34.59
70
July 41.06 54.85 55.04 36.85 34.84
August 39.93 56.45 55.56 37.35 35.36
60
September 43.20 59.38 57.04 40.02 37.45
October 48.18 62.36 62.83 44.46 40.72
November 45.09 57.83 57.93 40.71 37.30 50

December 49.70 64.86 65.41 48.84 44.01

2017 January 54.21 66.95 66.54 52.19 45.77 40
February 54.46 68.26 67.52 50.41 45.75
March 49.55 62.59 63.15 46.24 42.34 30
Graph 5 US East Coast Market
April 50.67 67.89 65.24 48.03 43.95
May 47.31 63.74 62.28 47.10 42.85 20
May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
2016 2017

Table and Graph 5: US East Coast market — spot cargoes, New York $/b, duties and fees included
regular
gasoline fuel oil fuel oil gasoil* fuel oil 0.3%S LP
unleaded 87 gasoil* jet kero* 0.3 per cent S 3.0 per cent S jet kero* reg unl 87 fuel oil 3.0%S
80
2016 May 65.21 54.64 56.35 44.78 34.16
June 62.59 58.10 59.83 48.86 37.32
70
July 56.77 51.98 55.02 47.21 36.67
August 58.93 53.13 56.49 48.01 36.17
60
September 61.62 54.94 57.81 47.63 38.07
October 65.19 60.48 62.00 50.95 41.15
November 61.34 55.44 57.47 48.22 38.69 50

December 68.59 62.91 63.94 55.97 46.34

2017 January 67.54 64.13 65.12 59.23 48.51 40
February 64.75 64.43 67.20 59.44 47.74
March 62.83 60.48 62.20 53.62 44.19 30
April 67.65 61.79 64.80 55.17 45.96
May 64.47 59.10 60.71 52.99 43.94 20
May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
* FOB barge spot prices. 2016 2017
Source: Platts. As of January 1, 2016, Argus. Prices are average of available days.

127
 Graph 6 Singapore
Market Review
Table and Graph 6: Singapore market — spot cargoes, fob $/b
premium premium
gasoline gasoline fuel oil fuel oil prem unl 95 gasoil fuel oil 180 Cst
naphtha unl 95 unl 92 gasoil jet kero 180 Cst 380 Cst naphtha prem unl 92 jet kero fuel oil 380 Cst
80
2016 May 44.20 59.14 56.00 54.86 55.18 35.80 34.03
June 45.56 59.05 56.49 58.14 58.27 38.62 36.68
70
July 41.74 51.87 49.46 54.27 54.37 38.35 36.47
August 39.96 54.18 51.52 53.47 53.55 38.67 36.61
60
September 42.54 58.00 55.38 54.62 55.07 41.11 38.72
October 47.70 62.99 60.06 61.23 61.02 45.33 43.06
50
November 46.82 58.99 56.51 56.84 56.63 43.90 41.68
December 51.51 66.68 64.25 62.91 64.10 51.68 49.47
2017 January 55.71 69.47 66.77 65.15 65.17 55.05 50.47 40

February 56.58 69.90 67.54 66.76 66.26 54.59 49.07

March 50.82 64.28 61.94 62.94 61.93 50.74 45.64 30
April 52.31 67.66 64.81 64.68 63.88 52.47 47.34
May 48.71 64.40 61.68 61.19 60.82 51.58 46.01 Graph
20
May Jun 7 Middle
Jul EastOctGulf
Aug Sep Nov Market
Dec Jan Feb Mar Apr May
2016 2017

Table and Graph 7: Middle East Gulf market — spot cargoes, fob $/b

fuel oil
naphtha gasoil jet kero 180 Cst naphtha gasoil jet kero fuel oil 180 Cst
80
2016 May 43.40 53.12 53.54 32.96
June 44.82 56.47 56.70 35.55
70
July 41.00 52.57 52.76 35.87
August 39.40 51.62 51.80 36.25
60
September 42.07 53.08 53.61 38.63
October 47.14 59.75 59.62 42.81
50
November 45.93 55.53 55.39 41.24
December 50.85 61.39 62.65 48.61
2017 January 54.42 63.38 63.50 49.35 40

February 55.08 65.11 64.70 48.24

March 49.65 61.19 60.26 44.63 30

April 51.07 63.16 62.46 46.58

May 47.55 59.70 59.42 45.93 20
May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Source: Platts. As of January 1, 2016, Argus. Prices are average of available days. 2016 2017
OPEC bulletin 5–7/17

128
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