Interview with H.E. Suhail Mohamed Al Mazrouei, UAE Minister of Energy & Industry and President of OPEC Conference 2018
Stephen Sedgwick: The deal to cut oil production between OPEC and non-OPEC has worked and is still working. But how do you see it going forward beyond 2018? How is it going to transform into this longer-term charter, which you have recently mentioned as an ideal goal?
OPEC President: We are living in an age of transparency and cooperation and not one where OPEC alone is responsible for the market. As you say, the output agreement is working and beyond expectations. When we started last year, everyone was skeptical about whether it would work and whether producers would adhere, but average compliance in 2017 was 107%. If you look at the last few months, we have continued to overdeliver, even when prices were at $60/bl and above. The level of understanding and trust within the group also increased gradually throughout 2017 if you look at conformity levels. As the President of OPEC, together with the Secretary General, that gives me hope that we can keep this group together for longer.
Stephen Sedgwick: How do you reconcile the need for this discipline on production to remain while at the same time encouraging investment in new output and while producers compete for market share in Asia?
Stephen Sedgwick: Do you see the UAE’s imports of condensate from the US continuing?
Which leads us to 2016 when OPEC decided to cut production to support the market, which was coupled with strong demand during 2016-2017. Demand estimates were revised, and they continue to be so with 2018 also looking strong. Within that context, OPEC has remained disciplined on its output agreement and the consequences have been a visible drawdown in oil inventories. About half a billion barrels of oil has been drawn down in a short period of time, which has led to the backwardated structure that we see today. The incentive to carry oil is not there and there has been a dramatic impact on the use of tankage – the velocity of the barrel is going to increase
Sean Evers: Did the industry miscalculate how much new storage capacity to build during the period you just outlined?
As the US shale experience demonstrates, a friendly regulatory environment is needed to encourage investment in unconventional technology. Although Oman could benefit from further reductions in red tape, compared with the rest of the region, the sultanate has honored a tradition of welcoming and supporting international investment.