Abdalla Salem El-Badri, Secretary-General, OPEC, met with Pipeline Magazine for an exclusive interview. Speaking on various issues including the stabilising situation in Libya, Mr El-Badri also covered cooperation with the International Energy Association (IEA) and the impact of the emerging European and US downturn on global oil markets.
What is OPEC’s view on the situation in Libya now, with the recent end to the conflict, and how important is the North African country’s oil output to the OPEC group and global supply?
Abdalla Salem El-Badri: “I hope the problems are almost over for the country and that the IOCs will begin to invest again and restart production, and I hope this will see a return to our projected 1 million bpd in the next six months.
“Libyan oil is a very sweet crude, with a low proportion of sulfur content, which has always seen great demand because of these characteristics. Libya is very important in the production of this very high quality crude and I expect to see an increase in production, of course exploration and development is needed because the potential is there.
“Priority number one – and I refer here to the oil industry and not domestic issues – is to restart Libya’s production and export of oil.”
OPEC has said it predicts production will reach 1 million bpd in the next six months, while the IEA is much less bullish in forecasting only 350,000 to 400,000bpd by year end.
Why is there such a difference in these forecasts?
Abdalla Salem El-Badri: “Everyone has their own thinking on this, but from talking to some of those within senior positions in Libya’s oil industry, from following the news and knowing the IOCs involved, I can say that we expect to see production return to 1 million bpd within that timeframe.
“In Libya, we have the far east and the far west regions, with IOC facilities from Eni near the Algerian border and Repsol in the West side, and in these areas there is only little damage.
“I don’t want to speak for the IEA, but maybe they don’t think the Libyan oil industry is capable of getting its act together very fast, but from my experience I know they have the best expertise. If the government will work with them, and they assure me they will, they can do it.
“Libya has excellent petroleum engineers and other workers. They can divide this work into two or three phases, and they may come back in less than 15 months. Also, I think they have to cooperate with IOCs in this, they must be in front of these companies and encourage the start of production.”
You met recently with the new IEA executive director Maria van der Hoeven – does this meeting point towards greater cooperation in future between OPEC and the IEA, and what would this mean?
Abdalla Salem El-Badri: “We had met in the past, when she was the Netherlands economic affairs minister, so this wasn’t our first meeting, but yes, I met her in Vienna. In my opinion, Maria is very qualified and very much geared toward co-operation with OPEC, and likewise, we are ready to continue our cooperation with the IEA.
“I don’t think there will be any conflicts, because we each try to eliminate conflict and to work together for the benefit of the international oil markets.”
After the IEA’s release of emergency supplies in June, some analysts and other commentators suggested the move was partially designed to call the OPEC’s relevance into question – what are your thoughts on this?
Abdalla Salem El-Badri: “I went to visit Mr Tanaka, former IEA executive Director [after his term ended] to shake hands because he was leaving, and thank him for his cooperation. When we met I spoke to him on the release, and he said it should not be a normal situation, and for me it is history and we have been assured this will not be a normal part of IEA practice, because stocks are a key part of both our organisations, to see adequate supplies of stocks on the international market”
“I am glad the matter is behind us, and for me, this situation is over and we can move on.”
Throughout 2011, we’ve seen considerable fluctuation in oil prices – in light of the successive reductions in demand growth forecasts, do you see an end to this volatility in the near future?
Abdalla Salem El-Badri: “In 2011, volatility is the name of the game and this is because of market speculation. In
2010, the situation was the opposite, pricing was almost calm in comparison. But this year has seen a lot of volatility and a number of problems which has meant forecasting where prices are headed is very difficult.
“Looking forward, we see a slowdown in world economic growth,with the United State’s declining industrial production and European countries’ sovereign debts being big problems, along with unemployment and also manufacturing output problems.
“But the United States is working on solving its problems, and we are also seeing strong ongoing growth in
Asia. China is growing very fast, but we see some signs of a slowdown in its growth in 2012, maybe down to 8.5 per cent from 9 per cent this year, as the country heads off unhealthy inflation in its economy.”
What has Opec learned from the massive oil price declines we saw in the initial stages of the first downturn in 2008-2009? Will OPEC and its members respond any differently this time around?
Abdalla Salem El-Badri: “OPEC has always existed to satisfy the oil market, to keep a balance between supply and
demand and to see oil at reasonable prices.
“In 2008-2009, we saw the oil price affected from US$147 to US$30 per barrel, and now we have taken the
important decision to reduce production to restrain prices…but I don’t think there will be a double-dip recession.
What’s happening now is not because of high oil price...there will be a slowdown but there will be no recession.”
What is the planned level of investment in the global oil industry over the next five years?
Abdalla Salem El-Badri: “In terms of international investment in the oil industry, we expect to see US$300
billion invested to add 21 million barrels per day in gross production by 2015.
Among the leading areas where this will be contributed is Iraq, both in terms of quantity and the amount invested.”
With the lack of consensus following the last extraordinary meeting of your members in June, there was talk of a division between some of your members, particularly Saudi Arabia and some other Gulf countries. Is this the case?
Abdalla Salem El-Badri: “The June meeting was not a political meeting, but a normal OPEC economic oil meeting,
one where OPEC members’ secretariats were presenting their points of view on the direction and state of the oil market at that time. Each gave reports on the economy, oil supplies and demand. “Our point of view over the next six months is that some countries agree [on these reports], some don’t. Any debate here is not a conflict among members or our member countries, but between the secretariats’ reports as they see it.”
We are seeing a huge amount of renewed international interest in Iraq’s oil resources. Is this premature, is economic and political stability sufficient yet for significant oil production?
Abdalla Salem El-Badri: “Security of the oil industry and its people is the most important factor here, for Iraqis
themselves and it’s the national oil industry, though I can’t comment on the political situation. On security of the
production facilities, people can now move around the country and can travel from place to place, which is very, very important to increasing production.”
In your remaining time as secretary general of OPEC, what are some of the most important objectives you hope to champion, and what are your plans after OPEC?
Abdalla Salem El-Badri: “We have conducted a study into the labour strategies of the industry, with new, accurate data on the hiring of qualified people which we will be releasing soon.
"In 2007, the OPEC Heads of State Summit took place in Riyadh and in March 2009, the OPEC International Seminar took place in Vienna. This was one of our most successful, and we will be hosting another one of these in 2012.
“Looking ahead, I want to continue to see our position as a fair, reliable international economic oil organisation
and I will continue to see us successful in that.
“After OPEC, I look forward to returning home to my country, Libya…I love my country, and if you love your
country, you do so through times of crisis just as you do in good times.”
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