The Organisation of Petroleum Exporting Countries (OPEC) is celebrating its 50th anniversary. OPEC Secretary General Abdalla Salem EL Badri talks to Sanjay Jog. Excerpts:
How is Opec looking at the future?
Since its formation, Opec has been committed to three main objectives: Securing a steady income for producing countries; ensuring an efficient, economic and regular supply of petroleum to consuming nations; and bringing about a fair return on capital for those investing in the petroleum industry.
In the short term, the pace of the global economic recovery and its impact on oil demand is a key consideration. The industry is also faced with extreme price volatility, inflated costs and a lack of qualified personnel. Significant fluctuations in currencies add to the volatile environment. Major uncertainty also surrounds the economic stimulus packages that have been delivered in the recent past. Questions about whether respective countries will do enough to support an ongoing recovery remain unanswered.
Oil producers are faced with the challenge of security of demand and how to better decipher demand patterns and trends. Without the confidence that there will be additional demand for oil, there is little incentive for producers to invest in new capacity. Our data show that as early as 2020, demand for Opec crude could be as low as 29 million barrels per day, or as high as 37 million barrels per day. This translates into an uncertainty gap for upstream investments in Opec member-countries of over $250 billion.
There has been a slow but steady recovery in the global economy. However, in light of current uncertainties, the forecast for global growth in 2010 has been left unchanged at 3.5 per cent. Is Opec keeping a close watch on the market?
The global economy has recovered relative to last year (especially in emerging countries), but uncertainties remain, particularly in relation to the euro zone and potential spillover from the sovereign debt crisis. We are also concerned about the ending of various economic stimulus packages, which could impact negatively on the global economy. Opec has been monitoring the situation closely and will continue to do so.
Although the economic recovery shows signs of improving momentum, what are the important risks that could impact oil demand growth expectations for this year?
This situation obviously has had, and will have into the future, an impact on oil demand. This will especially be the case if economic growth doesn’t materialise or if the pace of recovery is limited. The consequences of this would be to reduce the demand for oil. However, for the larger part, the recovery in the world economy appears to be continuing at a steady pace and this is encouraging. But, in light of the uncertainties, Opec remains only cautiously optimistic. Again, we will continue to monitor the market closely.
What are your projections for world oil demand and world oil supply? Also what are current OECD stock levels?
In OPEC’s latest Monthly Oil Market report, we are forecasting world oil demand growth for 2010 at 0.9 million b/d. Oil supply from non-Opec producers is expected to grow by 5,00,000 b/d. We also see a steady increase in OPEC NGLs, which we are forecasting will grow by 5,00,000 b/d in 2010. Meanwhile, our latest estimate for April showed OECD stock levels at 2.74 billion barrels, which corresponds to an overhang of 174 million barrels. This overhang is split between crude and products.
What is your view of oil prices? Experts are already looking at prices reaching $100 a barrel.
I do not forecast oil prices. We most certainly need a fair and reasonable price, that is good for both producers and consumers.