CERAWeek Exclusive: Dr. Daniel Yergin speaks with HE Mohammed Barkindo Secretary General of OPEC

In an exclusive CERAWeek interview, Secretary General of OPEC Mohammed Barkindo speaks with Dr. Dan Yergin about the historic OPEC agreement and how he sees the role of countries in the future. Here's an excerpt of their exchange:

Dr. Yergin: I would like to ask you, of course, the big thing is the OPEC and non-OPEC agreement from last November which very much has changed the outlook, just compare a year ago, prices were much lower than they are today. What drove the agreement?

Mr. Secretary-General: What drove the agreement? I think the commitment of all 24 participating countries-13 from OPEC, 11 from non-OPEC led by the Russian Federation-to come together voluntarily to take stock where we came from since 2014 when this market took a correction. And the fallout, and to decide to take a proactive action in a collaborative manner to restore stability to this market.

Dr. Yergin: What was the pressure that these countries were all facing?

Mr. Secretary-General: In the run-up to the three landmark decisions, the Algiers Accord on the 28th of September in Algiers and the Vienna Agreement on the 30th of November in Vienna, and the historic OPEC/non-OPEC declaration of cooperation on the 10th of December, we were able to mobilize our heads of state and governments, our ministers, and other stakeholders and opinion leaders to all come on board. This common goal of restoring stability in the interest of not only us producers, but consumers and the global economy in general.

Dr. Yergin: So, you use the word historic. What's historic about this? What makes this different from previous agreements?

Mr. Secretary-General: The declaration of cooperation that was entered into by 24 participating countries was historic in the sense that this is the first time- I went through the classic, The Prize, your work, several times- it remains the classic for all stakeholders in the industry. This is the first time that we bring together under one umbrella 24 of these countries, with the two leading producers in the world, the Kingdom of Saudi Arabia and Russian Federation taking the lead in ensuring that we'll restore stability to this market that has been out of balance for the past two or three years with severe consequences on our industry on the economies of the producing countries. For the first time, also affecting consuming countries. Therefore, in all facets, it was a historic decision that has the potential to change for good the landscape in the interest of the global economy.

Dr. Yergin: It took a lot of hard work to make the agreement.

Mr. Secretary-General: Yes, yes it did. I had met with the US several in the course of our efforts to rebuild confidence within our group OPEC, and also to develop confidence and consensus between us, OPEC, and the non-OPEC, led by the Russian Federation. It was probably the most extensive consultations, both within OPEC, that involved all our ministers and several of our heads of state were involved behind the scenes to ensure that we overcame the challenges, particularly of geopolitics, that came to impact severely on our ability to reach consensus.

Dr. Yergin: So May 25th is a key date, that's when you'll be meeting next. What will be the key indicators in the market that you'll be looking at when you make judgements about the future?

Mr. Secretary-General: The conference will reconvene on the 25th of May in Vienna. We are going to have two meetings. One among ourselves as OPEC, and then between us and the non-OPEC participating countries on the afternoon of the 25th. One of the key indicators is to look at our objective that we have set for ourselves on 10th of December to jointly to rebalance this market that has been out of balance since the fall of 2014. In restoring this balance to restore this one key variable of stocks, inventories that had risen to very unsustainable levels sending this supply equation out of balance. To what extent have we been able to accelerate the stock down to bring it to the five year average, industry average, would be a key indicator of the performance of the implementation.

But nevertheless, I remain confident that we are going to achieve our overall objective by getting all the participating countries to play their own role in a fair and equitable matter in the interest of all.

Dr. Yergin: Right. We've been talking about the short term. OPEC recently came out with its long-term outlook. There's much discussion about what will be the role of oil 10, 20, 30 years from now. What's OPEC's view of the direction of oil demand?

Mr. Secretary-General: I think also for probably the first time, these are historic times. Both ourselves and our friends in the IEA-Fatih Birol and myself-we have come to this conclusion as a result of our outlooks that have been issued. Oil will continue to play a dominant role in the global energy mix for the foreseeable future, right up to 2040 and beyond oil and gas will account for over 50% of the energy basket. Big demand that we read quite often recently does not seem to be featuring in the foreseeable future based on these projections of both institutions. Therefore, the industry and the global economy should continue to focus on how we will improve the environmental credentials of oil and gas for us to continue to be reliable and dependable suppliers of oil to global markets to fuel growth and development.

Dr. Yergin: We're very happy that you're here at CERAWeek. The position of the United States in the world oil market has changed pretty dramatically over the last five years, and will continue to change. How do you see the role of the US in the future as a producer of oil in the global market?

Mr. Secretary-General: The US has been a leading producer and also a leading consumer. But more importantly also, the US has been a leader technologically in driving this industry over the past several decades. Recently, we have seen how the combination of technology and innovative operational techniques and management ingenuity of American companies had given birth to the shale revolution that has played a very important role in the supply-demand balance. We in OPEC, we see the US as a partner in this business. We are in this global industry together. There's a role for even renewables, a little non-conventional players like shale in meeting the growing demand for energy. We consider ourselves friends of the United States. Whatever we do, we believe in the best interest of American companies, American oil industry.

My message this CERAWeek is to the American companies to see OPEC as a partner. That we can work together to see that our industry continues to grow from strength to strength, technologically driven in the most market-friendly manner. The market is still the dominant player. The market will always play its own part. But we as producers, we have to continue to strive to be the suppliers of choice, dependable and reliable to these markets because the resource base is there, and you have the technology in the US. We have seen you are the biggest market. All the projections for renewables and other alternative sources of energy continue to point as fossil fuels, particularly oil and gas, as the dominant source of energy which you are blessed with as well. We are in this boat together. I'm really glad to be at CERAWeek this year, which is a very important year, coming out of the most severe oil cycle that we have seen.

Explore additional CERAWeek sessions and see the full interview between Dr. Yergin and Mr. Secretary General Barkindo at www.ceraweek.com.

This is an excerpted from CERAWeek 2017 and has been professionally transcribed as accurately as possible. Please note, some words and phrases may have been unintentionally excluded.

Posted 10 March 2017

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.