Climate Change and Energy Poverty Must be Addressed Concurrently — OPEC Scribe
![](https://www.thevaluechainng.com/wp-content/uploads/2021/07/BARKINDO-cover-1-856x1024.jpg)
Recently, the Secretary General of the Organisation of Petroleum Exporting Countries (OPEC), H.E. Dr. Mohammad S. Barkindo, was in Nigeria on his annual leave, after almost three years of absence. During his stay, he granted a-no-holds-barred interview to VALUECHAIN in his Abuja residence, where the duo of the Publisher, Musa Bashir Usman, and the former Chairman of the Nigerian Association of Energy Correspondents (NAEC), Sopuruchi Onwuka, took the OPEC Scribe on issues bordering the organisation’s 60 years’ anniversary, as well as Nigeria’s 50 years’ celebration of OPEC membership, energy transition, and a host of other issues concerning oil and gas politics. Excerpts:
Today, OPEC is 60 years in existence, and at the same time, we in Nigeria, celebrate our 50th anniversary in OPEC. So far, so good. Do you have something to tell us about the milestone achieved in the 60 years?
Let me, first of all, thank you for providing this platform to me, on behalf of OPEC, to discuss all these issues with your teeming viewers across the country. You have rightly said that we have this beautiful coincidence this year, when OPEC is commemorating its 60 years anniversary – the Diamond anniversary – and Nigeria is also commemorating the 50th anniversary of its membership in OPEC.
In the last 60 years, five founder members of this organisation – Islamic Republic of Iran, Iraq, Kuwait, Kingdom of Saudi Arabia and Venezuela – got together on the Banks of River Tigris in Baghdad, Iraq, in a place called Ashur, in downtown Baghdad, neighborhood of Babylon-Maugham and established this Organisation.
Looking back since this Baghdad conference, when this organisation was founded to date, we can say praise be to God. First of all, we survived, because literally, nobody, especially in the Western world, gave the organisation any chance of surviving and we can see many other commodity organisations could not survive. But OPEC, not only survived, it navigated itself through at least seven super oil cycles, caused by all sorts of crises – from two sides of the equation supply and demand, more often than not, by geopolitics of the region. And at each and every time, the organisation emerges much more stronger when it is touched into the cycle or through the crises.
It may interest you to know that during the 60 years, two of our founder members (Iraq and Iran) that met in Baghdad, unfortunately, found themselves on the opposite sides of a war that raged for eight years, and many thought that would be the end of OPEC. But thank God, with the intervention of our leaders in the organisation, and in the region, we have survived that war, and these two brotherly countries now, are very strong allies, supporting OPEC.
We also had an unfortunate situation, when one founder member country invaded another founder member country, and most said this would be the end of OPEC. But we are grateful to God and to the intervention of the international community, including our leaders in our member countries, we have survived that, and these two brotherly countries are very strong allies, working together, supporting OPEC, and implementing our decisions together.
We have gone through, as I said, at least, seven cycles, some of the cycles were triggered by excessive oversupply and demand went into disequilibrium, some by demand; some by supply; and some by the combination of both. Like last year, when COVID-19 struck, we saw demand contraction of unprecedented levels. In April 2020, we saw global demand for oil contracted by 22 million barrels a day. it was unheard of, and unprecedented. Yet, on the supply side of the equation, we are also facing tank tops, inventories were about to reach unprecedented levels, because of the level of oversupply in circumstances where demand had contracted in an unparallel balance, and we knew we had to act, and we did by reaching out to our non-OPEC member countries, led by the Russian Federation of whom we had already entered into what we call a ‘Declaration of Cooperation’ framework of that we negotiated with them in 2016, and today, we can say also Alhamdulillah (we thank God). We are seeing a gradual and steady recovery both from the global economy on the recovery of the oil market.
We congratulate you on the successful intervention of OPEC and its coalition members in rebalancing the oil market within the cycles in 2016, when there was an oversupply triggered by competition for market share. Last year, we saw a similar circumstance in a very unfortunate manner, as you have just said, but greater concern lies in the long term. There is an emerging sustainable threat from energy transition. How long will you continue to intervene?
Yes, thank you very much. This is an important question. This is a season of energy transition. This is the buzz word across the world, both from the producer community, as well as the consumer community. OPEC, first of all, has been involved in the negotiations for climate change, under the umbrella of the United Nations, literally from its inception. From day one of the Rio Summit, we took a conscious decision in OPEC that we need to be part and parcel of this process. We need to be in a position to provide solutions to the challenges of climate change, and we went into this negotiation with our member countries. We can, therefore say, with pride, that we are the core authors of the United Nations Framework of Conventional Climate Change (UNFCCC), which is the Bible, if you like, of the climate change negotiation process.
We are also co-authors of its protocols, the Kyoto Protocol that was adopted in Japan, We are also coauthors of the Paris Agreement in 2015, and right now, we are fully engaged with parties across the world, all in the developed industrialised countries, as well as in the developing world – both the producers of oil and consumers of oil in order to shape and all-inclusive comprehensive solutions to climate change.
![](https://www.thevaluechainng.com/wp-content/uploads/2021/09/IMG-20210825-WA0000-1024x768.jpg)
Dr. Omar Farouk Ibrahim (right), during the former’s visit to APPO Secretariat, in Congo,
Brazzaville, recently
For us, we live it, it is not theory. In also all our member countries, especially here in Nigeria, day-in-day-out will see the impact of climate change, either in desertification in the North, soil erosions in the East, rising seas in the coastal areas, irregular rainfalls affecting agriculture, global warming, it is literary the same in almost all of our member countries. So, for us, it’s not theory, it’s practical, we live it. But the challenge, is how do we rise in unison to address the greenhouse gases emissions that are emitted by several sources of energy in their use, in order to decarbonise the industries and the world.
The energy transition, contrary to the hype, is not a transition from one set of energy sources to another. No. According to our World Oil Outlook to 2045, all sources of energy will be required in order to meet not only current but future demands for energy, and oil and gas, for your information, will account for over 50 per cent of the global energy mix by 2045. Over 50 per cent, almost 53 per cent, but we are also conscious of the fact that these sources, alone, will not be sufficient to meet the thirst for energy.
Let’s go back to the basics. The projection to 2045 indicates that an additional 1.7 to 1.8 billion people will come into this world. Majority of these new souls will be coming from the developing countries. Right now in the developing countries including here in Nigeria, climate change and energy poverty are two sides of the same coin. Whatever we do here, we must comprehensively address these two challenges. In Sub-Saharan Africa, our numbers showed that over 600 million people have no access to electricity. In Africa, about 900 million people have no access to clean cooking fuels. So, we are facing abject energy poverty, and yet, we are the worst affected by climate change. Therefore, we have every reason to join the rest of the world in finding inclusive sustainable solutions to climate change. However, we cannot do that at the expense of energy poverty.
The United Nations, for the first time in its Sustainable Development Goals (SDG) 7, made it mandatory, made it a right for you and me and everybody to have access to energy. It is not a privilege, it is our right, it is the right of everyone to have access to affordable, sustainable energy. This is what we signed. Therefore, in trying to address climate change, we should not lose sight of the other side of the coin, and here, I will like to commend our member countries, the government of Nigeria, and the civil society for rising to this challenge. We follow very closely developments here, and in all our member countries, how our governments and civil societies are working together and rise to this challenge of our time.
Your tenure, as the Secretary General of OPEC, has been eventful. You are in your second tenure now, and many are wondering how you were able to navigate within countries that, prior to your appointment, would not sit at the same table and discuss. But today, you were able to bring them to the same table, and all of them are in support of what OPEC is doing – countries like Russia, Iran, Saudi Arabia, Iraq and America. People will like to ask: What is the secret behind that performance?
Thank you very much. There is no secret in business. Our American friends call us a fish bowl because we are very transparent, we are very open. What you said is right. The organisation, itself was bedevilled with these differences mainly driven by geopolitics, but also between members of our organisation and other leading producing countries, like the Russian Federation, Azerbaijan, Kazakhstan, Mexico and, of course, the United States, the biggest producers.
I think, the last cycle, not the COVID cycle, we use to think and believe that the last cycle 2014 to 2016, when prices crashed to below $10, when, for the first time, we saw inventories stocks of crude oil and product around the world, in one of our key metrics rose to historic level of 400 million barrels over the five-year-average. This is the metric we use to measure the stability of the market, because there is an inverse relationship, quantitative inverse relationship between stocks and prices. When stocks rise above the five-year-average, prices go down south. So, when you hear me, in most of my advocasies, saying ‘we are working together with our partners to maintain stability in the oil market on a sustainable basis’, I’m referring to that metric.
But in the summer of 2016, when I resumed office in Vienna, stock levels went to over 400 million barrels over the five-year-average. Therefore, prices crashed and went down south. And because of the geopolitics of the time it was almost impossible to get the players round the table to discuss. Some have broken the diplomatic relationship, they have no embassies, there was no communication between them, their ministers could not be seen talking to each other.
But I must tell you that I got very good guidance when I left here (Nigeria) to Vienna, from President Muhammadu Buhari, who nominated me to be elected to this job. Himself (Buhari), being an OPEC (veteran), the only President and Head of State today, who also served as OPEC minister in the 70s, and kept interest in the oil world and OPEC throughout this time, and we had some lengthy conversation with him, and he gave me the benefit of his thoughts, advice and guidance. As soon as I settled down in Vienna, and got all my briefs from my colleagues, I decided to hit the road, and I visited almost all the capitals, introduced myself to leaderships, and began to bring these issues to their table, and making it abundantly clear to them that the “decisions are up to you. We look up to you as leaders to bury your differences, or at least, set them aside, for now, because what is facing us could be catastrophic.”
You remember all our countries went into recession, and that was when the President (Buhari) was elected into office, and as I hopped from capital to capital, meeting the leaderships, thank God, they listened to me. They gave me an audience. They asked appropriate questions. They also gave me their advice, benefits of thought. At the end of the day, they agreed to mandate (their) ministers to return to Vienna, and the rest is history.
On December 10, 2016, we were able to sign this historic pact. It was the first time OPEC sat down with the non-producers and agreed to sign a partnership to guide our cooperation, and we have 10 of them led by the Russian Federation, and President Putin was very understanding and very supportive with that initiative of ours, and he has remained so till now and he gave me his word “we will be standing shoulder-to-shoulder with you, we will support you. We welcome your election as Secretary General”. And there is no reason not to beat our chest today to say that the Declaration of Cooperation (DoC) has worked beautifully well, and we didn’t even know that COVID was coming. We had no idea that COVID 19 was coming, we thought that was the worst cycle, and we had navigated that cycle successfully, we were on the part of recovery, when countries started exiting recession including here in Nigeria., prices were rebounding beautifully, and boom 2020! – we had one virus that shut down the whole world, and we didn’t have to reinvent the wheel, we just fell back on this framework, on this model, and continue to work from last year till now.
In 2020 alone, we held nine ministerial conferences – almost every month, it has never happened. This year, so far, we have done seven already. Every month, we are holdingministerial conferences, because we cannot afford to remove our feet from the brakes, or our hands from the steering wheel, because of these casualties. Every day I wake up, I check the global COVID infection rate on my phone, ipad that they send to me. They give me the rate of vaccination, rate of hospitalisations, fatalities and related data. We are grateful and very hopeful. Now the world has vaccinated over four billion people (one dose) but this is barely half of the global population. Now, the rest are mainly in developing countries, who are struggling to have access to these vaccines, who are also struggling to sensitise their people. It is absolutely necessary for you. It is very safe for you to take this vaccine. You have this artificial divide between the rich industrialised North and the developing countries of South, and WHO (World Health Organisation) keeps telling us that unless and until everyone is vaccinated, we are not safe. The fact that you are vaccinated, with your family and neighbours is not, you are safe.
So, with the benefits of what happened last year, we are very sensitive to action the governments may take. They may surprise us. They may shut down. The moment they start this shutting down, the global economic recovery that we are hoping now, will be reversed. Coming from that low base of contraction 3.5 per cent global growth last year, our numbers are showing at least 5.5 per cent this year. Now, this is dependent on us to continue to march forward, with this vaccination containing the mutations variants and their spread, because otherwise, governments may be forced to take actions that you and I may not like to see. Nobody wants to go back to lockdown. But the market is very sensitive to that, and hence, the relative volatility that you see in pricing, the moment we get bearish numbers from WHO, you see prices going down. But we remain cautious and optimistic that the worst is over, governments and the world will continue to do the needful – going forward to save lives.
You told us about your engagement with Russia. I know that our listener would like to know what your relationship with America during the period was like.
It was evident, and we acknowledged it, when we signed the Declaration of Cooperation (DoC) on the 10 December 2016, that a very important player was not on the table. Of course, we had Russia and other countries. But what about the United States – the biggest producers? You all know about the incumbrances of the Antitrust laws of the US and so on, and unfortunately, over the years in the last 60 years, OPEC has not had fair media representation in the US, because of the various other geopolitical issues in the 70s and 80s, and what have you. So, American officials are always very shy to be even seen with me (laughter) publically. And we agreed that we should not give up. We should explore other innovative ways to reach out to the US.
Now, what do we do? Most of these US companies are operating in our countries – Joint venture partners, PSCs and so on. So, we set out to the US to meet friends to confer with them, to consult with them, to get their advice, and we ended up meeting with the major players, themajor companies, especially independent ones in the Shale-basins of the US, especially the Permian, the bakin, new Aurora- New Mexico and so on
We converged finally after a lot of behind the scenes, work by our friends there. We have friends who understand OPEC, who believe in OPEC, and they helped us to convene this first meeting in Houston at the end of 2016. Beginning of 2017, where we broke bread, as they said it was the first meeting that OPEC sat down with American companies on American soil, discussing about the state of the market, and the industry. We were pleasantly surprised that nearly 100 of them showed up. It was a large gathering of CEOs (chief executive officers) of the companies, and they came and met with us, and had a very good meeting. At the end of the meeting, their spokesperson, in responding and concluding the meeting, said he nowrealised that we are all in the same boat. We are all producing the same commodity – whether it is bonny light in Nigeria or West Texas Intermediate (WTI), it’s all are crude oil, and we sell to the same market. And the decisions that are being taken in OPEC, they are not only for OPEC member countries, but they affect the whole producers in the industry. Therefore, he was glad, and congratulated us for this initiative, and he was reporting this, although it was chartham house rule, he needed our consent to report this to the White House and everybody applauded, the rest is history.
Ever since, we continued with this working relationship with them. We meet regularly with them. We consult each other. We confer (on each other), and this is in the best interest of all of us, all producing countries and consuming countries. Because with the biggest producer on the table, the biggest companies in the world joining us, the transition itself will be more inclusive, the stability of the global oil market will be enhanced, and you will have certainty, in terms of planning the very capital intensive industry, our countries depend on the revenues from these industries. So, nobody wants volatility neither the producer, nor the consumer. So far, so good. We have this working relationship – growing and going forward in addition to that, we have also reached out to the consumer countries. At the moment, we have high level dialogue with the European Union, China, and with India. So, OPEC is on all fronts and has been in the last four to five years. Because times has changed, we have to adapt to the change in energy dynamics in the world and the global energy scene.
The industry is also facing a peculiar challenge, because climate advocacy has actually shut the window of international financing to petroleum projects. Now, in this kind of scenario, we have a lot of OPEC countries, with very huge and robust funds that could help out the industry. Is there any way OPEC is working to support its members, from doing some kind of internal cross subsidisation to see how petroleum projects can be sustained, given the hostility of international lenders?
Thank you very much, this is a very apt question. The challenge of the industry in accessing investment capital is rising almost by the day. As you rightly said, the climate activists, the NGOs (non-governmental organisations) and their allies have now targeted the cost and the financial community. Of course, they have been working with the civil societies in mobilising civil opinion against hydro-carbons, but this is new, and gaining momentum to the extent that several of our member countries have reported to us their inability to conclude funding and investment deals with banks and creditors, because those banks and creditors have signed some agreements of disclosures in funding a hydro-carbons.
Therefore, we all as an industry, it is not an OPEC challenge, per se. It is an industry challenge, and we are now mobilising the industry to face this challenge. It may interest you to know that even the World Bank in which our members are shareholders and are now faced with this obstacle, let alone banks on the Wall Street and so on, just this September, we are converging in Vienna virtually, of course, with all the countries in the Declaration of Corporation (DoC), the 24 and many other stakeholders to discuss this same very issue. We need to come up with a common position, with regards to the issue of capital investments in the industry, and the access to the capital, and fit into the negotiation, leading to COP26 in Glasgow, because the UNFCCC COP26, the conference of the parties, when it convens in Glasgow, one of the key issues that they will discuss and look for a resolution is on this issue. The climate activists are pushing that COP should endorse their position for zero funding to oil and gas, in order to meet their target of net zero emissions by 2050. They are linking the two.
But we have a different view. I have just mentioned to you at the moment, there is no one single source of energy that will meet our current demand. Before COVID strike in last year, this world was consuming an average of 100 million barrels every single day, and yet, we have endemic energy poverty, where our people have no access to electricity, no access to gasoline, diesel, and so on, cooking fuels. So, if you are advocating for zero funding to this industry, which sources of energy will replace hydro-carbon? None. By 2045, the projectionis renewables in general will be less than 20 per cent of the energy mix. So you are sowing the seeds of fresh energy crises that will sentence the people of the developing countries to perpetuity in energy poverty. You are focusing only on your selves, forgetting that the science of climate change has taught us, through the Intergovernmental Panel on Climate Change(IPCC), the same agency you have set up, which is the scientific organ of the UNFCCC, that this is a global challenge that requires a global solution. You cannot address this issue from the prism of the rich industrialised countries. The world goes beyond Europe, North America, Japan. And we have said population-wise, the focus of 1.7 to 1.8 billion people that will come into this world between now and 2045, more than 50 per cent from developing countries, will further complicate the energy poverty situation. So we are working with all these countries. We will convene in Vienna, and, hopefully, we will have a common position that we will take to Glasgow in November this year.
You talked about the frequent ministerial meetings that you held almost on a monthly basis. I would like to ask you, what part of this job is most challenging to you?
Let me answer this way, if you look at OPEC as an orchestra, you may equate my role as that of a conductor. I cannot say this is less important, or that this is more important, this is more difficult or this is very challenging. The conductor is looking at the whole orchestra and making sure that the symphony and everything goes in sync. Even if one tune goes out, you see him shivering (laughter), and giving directions. So, you have to work with people. You have to build relationships with people. It is a very exciting job, because you meet all sorts of people around the world. Every day you are learning from everybody you meet. You have something to learn from them, as you move from one country to the other. As you meet with these people, listening to their own perspectives that may be completely alien to what you used to know.
But if you are interested, like I am in learning – I find it very useful, very enlightening. I thank God, and I thank President Buhari for giving me the opportunity of my life. This year, I am clocking 35 years of my sojourn in OPEC – First, as a delegate, representing my country, later on, as a member of the Economic Commission Board (ECB) for 15 years. Later on, I served on the Board of Governors, as a Governor representing my country. I also served in 2006, when there was a deadlock, they couldn’t agree on the selection of the substantive Secretary General, I was asked to go and serve as the Acting Secretary General pending the time they resolved the issue.
Throughout my working life, I have been associated with this organisation. And probably the only one that have served in all the organs of the organisation and ended up being Secretary General. I can tell you it’s a very exciting job. We are very cconscious of the weight of the responsibility, and the high expectations from us. So, we are all trying to do all we can not to let you people down.
One major issue we see in OPEC is a very slight divide within the countries that are developing very rapidly. And we see countries that are almost sinking in resource curse. I don’t know whether it has bothered OPEC to create an economic model that will aid some of these member countries that are struggling out of resource curse to accelerate development. Is there any kind of economic guidance from OPEC that could see some of them which are mainly domiciled in Sub-Saharan Africa to match up with their colleagues in the Middle East?
The differences you refered are normal differences. When you have a group of countries coming together to form an organisation such as OPEC, they are coming with their various backgrounds, unique, social, economic and political circumstances. Maybe also different aspirations, and of course different capacities, but the founding members decided in the status of the organisation to make all members equal – whether you are the biggest producer or not, or you joined today or you join today or you join in the 60s – you are all equal. Your budget contribution is the same. The smallest country pays the same as Saudi Arabia. But occasionally, these differences emerge during meetings, because every minister goes there to protect the interest of his country.
For example Budget – every member country decides on a benchmark for its annual budget. They fix it on a price benchmark. So, it is your responsibility as minister of oil representing your country to make sure that the decision they are making will ensure that you meet your target. Otherwise, you may derail the aspiration of the budget. And here, more often than not, you have differences. There are those that have higher benchmarks, those on lower benchmarks but at the end of the day, they all come to converge
Now, today, seven of our member countries are from Africa – Algeria, Libya, Nigeria, Angola,Gabon, Equatorial Guinea, and Congo. The smallar producers have capacity challenges. They may have the reserves, but they have huge other complicated challenges visa-vis the biggest producers and what the experience of COVID has shown us, is that we need to work together closely even much more closer than before. We must go beyond supply and demand balance projections, decisions to ensure stability of oil prices. To open areas of cooporations between these countries. This is one of the lessons of COVID. So, discussions are currently ongoing in the participating countries of the DoC, because they all realised thatwe need to move forward.
Let’s take it home, and end there. Recently, the National Assembly passed the much-awaited PIB. You were there when it started from the beginning. It’s waiting for Mr. President’s assent. What aspirations do you think it holds for Nigeria, in terms of utilising the proceeds and for developmental gains before probably 2045?
There is no doubt that one of the good news that cameout of the National Assembly Is the passage of the long-awaited Petroleum Industry Bill (PIB). This Bill has been in and out ofchambers, probably for over 20 years. Some of us that have been associated with this Bill, for quite some time, we were very excited. I personally issued a statement from Vienna, commending the National Assembly for this feat. I recalled that I said to them, by this act, they have engraved their names in gold.
The PIB seeks to reposition this industry on the part of growth and sustainable development. We have talked about the capital intensiveness of this industry. Most of the capital nowadays is not supposed to be coming from the government, but from the private sector, international oil companies (IOCs), banks that we are talking of now caving out the industry from access to funds. But without certainty of the fiscal regimes in a country such as Nigeria, it’s extremely difficult for any bank or any investor to come and take an investment decision. The fact that we have started the discussions, started the process of this Bill, we have put the world and the industry on notice that we may change the terms. So, you can understand why they all held back their investments, waiting, because you came out and told the world that you are working on a Bill that will transform the industry, will bring the terms and conditions – not only of fiscal but regulatory to current international best practices. So any investor reading or hearing that will have to wait; and this has taken quite a while, and, therefore, the industry continues to rely on the government more often than not with cash calls to fund the upstream, continue with the subsidy of the petroleum product in order to make sure that our citizens have access to energy. But with the passing of the Bill, hopefully, and the immediate implementation of the Act, when it is signed, this will completely transform the industry in this country. This is what we have been waiting for a very long time, and the countries in the African Sub-region, were also waiting to see the outcome of this process here, because they know that whatever happens to Nigeria is most likely going to impact on them, as well. So, don’t be surprised, if some of them also adopt some of the terms and conditions we may finally sign into the new law.
Once again, I want to use your platform to congratulate Mr. President, National Assembly, as well as Minister of State for Petroleum Resources, Chief Timipre Sylva, and GMD of the NNPC, Mele Kyari, and their teams for a great job. We are all grateful for what they were able to put out together for the National Assembly. This is priority number on for the industry and we wish them all the best in implementation.
Finally, we will like to know your impression of VALUECHAIN Oil and Gas magazine:
First, I came across Valuechain during the commemoration of our 60th anniversary and Nigeria’s 50 anniversary in OPEC, and you so kindly and very generously reported OPEC activities. You were extremely generous and very kind, and on behalf of OPEC, I will like to thank you very much, and commend you and endorse Valuechain, not only for our OPEC member countries but to all researchers, readers, public commentators on energy of the world of oil and gas.
NB: To watch the video of this interview, go to Valuechainonline O&G TV on youtube channel.