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John Hall: The OPEC Seminar 2015 & the 167th Meeting of the OPEC Conference

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This was the OPEC week, starting with the two-day seminar on 3rd June and culminating in the conference on 5th June. TThere was much to be learnt across the three days and so, in this report, I have covered what I felt were the salient points overall. I should mention that I am not representing investors, but consumers and so my focus differs from that of many other attendees.

Bearing in mind what OPEC has at stake in terms of lower oil prices, the mood throughout the seminar was calm and relaxed. The proceedings were opened by Dr Mohammed Bin Saleh Al-Sada, Qatar’s Minister of Energy who confirmed that the lower prices in recent months have led to a massive loss in revenue and created job losses across the industry, with investment and future production threatened.

However, looking ahead, recovery is on the way and demand is picking up with the view that it will continue to do so in the second half of the year, towards the lead up to the next OPEC Meeting near the end of the year. He also asked for the cooperation of all global partners in the market, but he didn’t say whether these would be producers and consumers or just producers alone. He outlined the purpose of the seminar and reiterated that its objective was to create a dialogue between such players to further the interests of the industry. With that, he introduced Abdallah El-Badri, the long term OPEC Secretary General.

Mr El-Badri took us through the key points of the OPEC World Oil Outlook, highlighting the fact that demand for energy will increase by 50% from 2015 until 2040 and that there will be enough resources to meet needs. By 2030, the mix of oil, coal and gas will give each around 25-27% market share so overall 7580% will be made up by fossil fuels. This may seem surprising to environmentalists, but it’s certainly in line with BP’s prediction.

The oil demand will increase by 2030 by another 18mbpd to 111mpd and for this, huge investment will be required. No doubt with current prices around the $65 mark today, that will be a challenge for producers but, as he said, they cannot stand still. Maria Van der Hoeven, Secretary General of the International Energy Agency reminded us that the energy mix should in future include renewables around the world. In spite of the mixed forecast for fossil fuels, renewables will be part of the mix although not as prevalent as some would like.

Rex Tillerson, CEO of Exxon-Mobil, outlined the change in class structure around the world as many attain middle-class status seeking a lifestyle and assets that were not previously available to them or their families, leading to an increase in energy usage of around 35%. This is below the OPEC figure of 50% but over such a timescale, my guess is that there will be a convergence of the figures. The gas share will increase by 65% and overtake coal to become the number two energy source.

New technologies will play a big role to enhance exploration and extraction, particularly in shale, deep water, and rock environments. However, for this to happen there will need to be new policies to give support. In the question time that followed, Mr Tillerson made the point that they have to take the risk to reap the reward whatever the price. He also mentioned that they couldn’t run a business based on price expectation but had to run without knowing what the price would be, taking the long-term view to deliver the energy, whatever the cost. This aligned well with Mr El-Badri’s point that we need to move and make progress irrespective of the oil price today.

Bob Dudley of BP likewise confirmed that their view was one of continuing increase in demand and the convergence of oil, coal, and gas towards an equal share of each. I did ask him later how he felt about the seminar and he said that for him it was good to meet the ministers that they deal with individually, collectively, in the same place at the same time. Going back to the opening comments about the global dialogue between players, I felt that this was advantageous, certainly from an International oil company’s view, to build up a dialogue with ministers individually and also to experience how they interact collectively.


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