OPEC loses $1trn to oil price fluctuation

The Secretary-General of the Organisation of Petroleum Exporting Countries (OPEC), Dr Mohammed Barkindo, on Monday disclosed that the organisation lost $1 trillion to dwindling oil prices.
Barkindo, who is in Nigeria on a four-day working visit, said this at a news conference organised by the Minster of State for Petroleum, Dr Ibe Kachikwu.
According to him, the downturn, which lasted from 2014 to January 2016, meant that OPEC member countries could not earn about $1 trillion of oil revenue.
He said the industry further lost $1 trillion in terms of deferred projects and outright cancellation of projects across its entire value chain.
“We need consistent investments in order to maintain current production and take care of reserves and secure future supplies,” he said.
He said it was agreed that non-members of OPEC be invited to build a platform of 24 producing countries to agree on a joint supply agreement seeking to adjust about 1.8 million barrels a day.
“For the first time in history we were able to build a platform of 24 producing countries within six months in order to address the stock overhang which has been the variable to the supply equation that had sent this market off balance since 2014.
“Today, I can confidently report that those three historic events have altogether changed the energy landscape and turned a historic page in oil for good.
“We are on the course of pulling this industry out of the worst recession that we have entered to restore stability to the market on a sustainable basis that will allow investments to come back on a continuous basis,” he said.
He commended the government for staying afloat during the price-crash, calling the period “the worst energy circle in recent memory’’.
“Some of us who have been around for quite a while have witnessed all these five circles and it is a consensus in terms of the gravity of this circle, prices have crashed by over 80 per cent from the fall of 2014 to January 2016.
“How you survived as a government and as institutions under this great industry remains a miracle.
“I visited all other countries and I have seen how they struggle but you have weathered the storm, I think the worst is behind us.’’
He said the agreements reached by the cartel and non-OPEC members in Algiers and Vienna during their meetings in November and December 2016 were lifesaving measures as they had overcome market challenges.
Also, Barkindo commended Nigeria for exiting the Joint Venture Cash Call debt (JVC).
Cash calls is the counterpart funding which the Federal Government, represented by the Nigerian National Petroleum Corporation (NNPC), annually pays as its 60 per cent equity shareholding in various oil and gas fields.
It is operated by international oil companies in the country for more than four decades and indigenous oil firms and Nigeria owe arrears of $6.8 billion.
Kachikwu had said an outstanding debt of $5.1 billion would be paid over five years through incremental oil production volumes.
Barkindo commended Kachikwu for securing the feat on behalf of government.
He said: “I must single out the frontal approach on the lingering issue of funding our exploration as well as production, the JVC.
“Many of my colleagues, here that we served together, will testify that government after government, regime after regime we have battled with this issue continuously without solution.
“This is a confession: the day you overcame this issue that had beleaguered this industry as well as government, you made my day.
“Same for the day of all participants who knew what the government had battled to stay afloat on the issue of cash-call.
“The approach has been innovative, the solution is very practical.
“You are clearing an overhaul of debt too high, yet maintaining the level of production.
‘’You also focusing on an incremental level of growth that will continue to sustain not only the industry but also the domestic economy’’.
He also commended government for embracing diversification, disclosing that it was a topical issue that arose during his member-visits to other OPEC countries.
“I am just coming from Saudi Arabia, the largest producer who depends solely on oil and gas but it came up with a programme to diversify its economy within the context of the vision 2030.
“Therefore, I urge all colleagues and industry chieftains to rally round the honourable minister to march forward.
“Despite all reform programmes on diversification which we support, we should support farming. Diversification for now remains the music for the future.
“Our economies will continue to determine what you do, and with what we have seen, the future is brighter than what we have hitherto expected.’’
On his visit to Nigeria, he said he had to insist on reducing his entourage to Nigeria, because everyone was willing to come to Nigeria and see firsthand Kachikwu’s “giant strides’’.
He commended Kachikwu for building the confidence of OPEC members and earning their respect saying, “the minister was able to convince OPEC member countries to drop their candidates for his candidate.
“That shows the level of respect they have for him, for him to have persuaded sovereign nations and say I have a better candidate.
“With those words, history was made in June in Vienna. It says a lot about who you are, your character.
“Continue with this tradition of maintaining stability, continue to remain focused, we have a lot to achieve’’.