On the back of the oil production freeze agreed upon by Saudi, Russian, Qatari and Venezuelan energy ministers earlier in February, General Secretary of Opec, Abdalla Salem El-Badri, during the IHS CERAWeek in Houston on Monday, hinted there may be further action following the freeze.
However, after being repeatedly asked by the IHS Ceraweek chairman Daniel Yergin, about the freeze itself, its purpose, and the activities he said would follow, El-Badri responded in a mysterious fashion, not revealing much, if anything.
Asked about the freeze El-Badri said: “I think this is a first step to see what we can achieve… Maybe if this is succesful we can take other steps in the future… We want to cooperate, we want to find a solutions.”
El-Badri said the goal was to test what the freeze would bring over a period of several months, and how things would develop.
When it comes to Iran and Iraq, which did not sign the freeze deal, Badri said the two countries were not against the move, but will first listen, “and reply later”.
During a panel in which he participated with IEA’s CEO Fatih Birol, El-Badri said he’s witnessed six oil industry’s downcycles, adding that the latest one, caused by a significant oversupply started by the shale boom in the U.S., was a “nasty“ one.
Both Birol and Badri spoke about the cooperations and conversations between the two organizations, the IEA and the OPEC, which led El-Badri to make a joke: “As far as Opec is concerned, we talk to EU, IEA, Russia, China, India, almost everybody except United States,” he said, spurring a laughter in the audience.
“And we are willing to talk to them (USA) by the way, though”, he said, but adding, just to make sure no unrealistic assumptions are made, “we are not really looking to cut the production but, just let us have a dialog, let us talk to each other, you know…”
Commenting on the current downcycle, Fatih Birol, the recently elected Chief Executive of the International Energy Agency, said that this cycle was different, because any potential price rally in 2017 or 2018, would be kept by shale oil.
“With a sixty dollar oil price, a big chunk of U.S. shale oil, within six months time, may well come back,“ Birol said.
Badri agreed that on every spike in oil prices, the U.S. shale would resume production, sending the oil price down again: “Price can go up $10 but, in two three months it could drop by $20.”
Fossil fuels hard to replace
Touching upon the climate change tackling initiatives, and votes to “keep oil in the ground”, El-Badri said those expectations and wishes were unrealistic, as the fossil fuels make 80% of the total energy mix, and he saw no other energy resource that could replace the 80% made by fossil fuels in decades to come.
Asked if he attended the Paris climate change summit in December 2015, he said he didn’t “because it was a little bit crowded”, sparking laughter in the audience.
He also said that the world population would increase from 7.2 to 9 billion in 2040, and those people who are born into society without cars, electricity and houses won’t care much about the climate change, if they don’t have basic means to live a good life.
Instead of keeping it under ground, El-Badri suggested that the way to tackle the climate change is to research and develop technological solutions to use fossil fuels in a more environmentally friendly way, because the replacement of the fossil fuels (by other sources) will take time.
On the oil price forecast, IEA’s Fatih Birol said the organization expected oil to remain low for the months to come. On the longer term he said IEA expected oil to reach $80 a barrel in 2020.
Asked about where oil would go, at a press conference following the panel discussion, Opec’s El-Badri said if he knew the answer to that, he would “quit OPEC tomorrow”.
Offshore Energy Today Staff