Abdalla Salem El-Badri took the OPEC helm as Secretary General on January 1, 2007. Since that time he has helped the organisation weather some of its toughest times. Here he talks to Pipeline about what the future holds for this influential group.
PIPELINE: Will OPEC change as the global energy map changes? – Will we see new members, perhaps?
Abdalla Salem El-Badri: OPEC has grown in strength since it foundation half a century ago in 1960, and will continue to become even stronger in the years ahead. Today, member country reserves stand at one trillion barrels and our daily production is about 29 million bpd – this represents more than one-third of world production.
The energy map continues to evolve. We only have to look to developments in Brazil, the Canadian oil sands and all of our own member countries to see its dynamic nature. Demand for oil will increase markedly in the coming years. Despite the dynamic nature of the energy map, OPEC Member Countries will still be expected to meet the lion’s share of this incremental demand for the foreseeable future. In line with this, OPEC will remain committed to ensuring a secure and steady supply of oil to consumers.
We are now a 12-member strong organisation. Our five founder members – Iran, Iraq, Kuwait, Saudi Arabia and Venezuela – have been joined by Algeria, Angola, Ecuador, the Socialist People’s Libyan Arab Jamahiriya, Nigeria, Qatar and the United Arab Emirates. As far as new members are concerned, we welcome discussions with any producing country that meets our criteria.
PIPELINE: What is the biggest challenge facing OPEC?
Abdalla Salem El-Badri: There is no doubt that recent years have been a particularly challenging time for everyone, not least our member countries. Today, we are thankfully witnessing a global economic recovery. But the pace of the recovery remains very uncertain. And we are also only just beginning to recover from the extreme oil price volatility observed in 2008 and 2009.
A big concern for us is whether the world economy can cope if government-led financial stimulus packages are removed or not renewed. What will happen to the world economic recovery when these packages are no longer forthcoming? Worldwide unemployment rates are still very high and household budgets are tight.
We also face the ongoing challenge of trying to gain better understanding and clarity regarding the outlook for oil demand. On top of the economic uncertainties I have already outlined, we are faced with new policies in developed countries that appear to discriminate against oil and other fossil fuels. Without a clear understanding of future oil demand, the much-needed investment in capacity expansion to meet future demand may not be forthcoming.
Despite these uncertainties, and escalating production costs and lack of skilled human resources facing our industry, ambitious plans to expand upstream and downstream capacity are already underway in OPEC member countries. We remain committed to providing the world with a secure and steady supply of oil.
PIPELINE: Will we see more stability in pricing next year? Are today’s prices sustainable?
Abdalla Salem El-Badri: For the foreseeable future, I hope that oil prices will remain close to their current range of around $80/b. We do not want prices to rise too high so that they in any way impede the economic recovery. But we also need an oil price that supports investment in the energy sector. Today’s prices are supportive of this. I expect to see some volatility remaining with us for the remainder of 2010, but I hope this will decrease in 2011.
PIPELINE: How frustrating is it when quotas are set but not adhered to?
Abdalla Salem El-Badri: In 2009, soon after our decision to reduce production by 4.2 million b/d, compliance was excellent, standing at 80 per cent. Now, it is closer to 50 per cent. The oil market is very well supplied; there are significant stock overhangs. It is therefore imperative that our Member Countries show more discipline when it comes to adhering to their production allocations.
PIPELINE: What can we expect to see from the October meeting? A rise in production, as analysts seem to expect?
Abdalla Salem El-Badri: We will hold our next Ministerial meeting in Vienna on October 14. It is still too far away to predict the outcome of that meeting. Ministers will make a decision taking into consideration the state of the global economy and market fundamentals at the time.
PIPELINE: What is your opinion of non-OPEC players, such as Russia, and is there room for a gas OPEC?
Abdalla Salem El-Badri: Non-OPEC producers play an important role in the energy industry. OPEC frequently meets with them to exchange ideas and views about the oil market. A number of non-OPEC producers also attend our Ministerial meetings as observers.
The Gas Exporting Countries Forum has been created as a platform to bring together all stakeholders in the gas industry. It appears to be an ideal forum for the sharing of information. Naturally, we follow such developments closely, since we are both stakeholders in the energy industry. But the dynamics in the gas industry are very different from those in the oil industry.
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