MIL-OSI Energy: Opening keynote address by OPEC Secretary General

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Source: Organization of the Petroleum Exporting Countries – OPEC

Delivered by HE Mohammad Sanusi Barkindo, OPEC Secretary General, at African Energy Week 2021 held in Cape Town, South Africa, 9 November 2021.

Excellencies, distinguished delegates, ladies and gentlemen,

It is a distinct honour to address African Energy Week. I would like to congratulate and thank the African Energy Chamber for organizing this event and bringing together stakeholders in the energy industry from across our great continent to discuss the pressing issues of our day.

I would like to express my thanks and appreciation to the Hon. Gwede Mantashe, South Africa’s Minister of Mineral Resources and Energy; HE Dr. Diamantino Pedro Azevedo, Angola’s Minister of Mineral Resources and Petroleum and President of the OPEC Conference 2021; HE Bruno Jean-Richard Itoua, Minister of Hydrocarbons of Congo; HE Gabriel Mbaga Obiang Lima, Minister of Industry, Mines and Energy of Equatorial Guinea; HE Timipre Sylva, Minister of State for Petroleum Resources of Nigeria; all of whom worked to ensure that African Energy Week takes place in Africa, in the great city of Cape Town. Africa must be the destination of Africa related events.

I would also like to sincerely thank NJ Ayuk, Executive Chairman of the African Energy Chamber, for his tireless work in making this event possible.

African countries have historically assumed strong, proactive leadership roles in OPEC. Angola currently holds the Presidency of the OPEC Conference and will be succeeded by Congo next year. In September of this year, we celebrated a monumental milestone, the golden anniversary of Nigeria joining OPEC in 1971.

Recent years have seen an expansion of the African presence in our Organization. Congo became a Member Country in 2018, Equatorial Guinea joined in 2017 and Gabon rejoined in 2016.

This consolidates the incredibly positive, constructive and fruitful roles played by Libya since it joined our Organization in 1962, Algeria since 1969, Nigeria since 1971 and Angola since 2006.

Last year, to commemorate the 60th Anniversary of its founding, OPEC prepared a book chronicling the Organization’s history. What is remarkable are the number of key events that took place in African cities. From the 9th Meeting of the OPEC Conference in Tripoli in 1965, critical meetings and conferences have been held in Algiers (including our first ever Summit), Oran, Lagos, Abuja, Luanda, and Libreville. We hope this expands in the future.

Indeed, the idea for our Organization was conceived in Africa, specifically Egypt. It was at the Cairo Yacht Club in 1959, that the Gentleman’s Agreement was forged which paved the way for the establishment of OPEC in Baghdad in September 1960.

Aside from the African countries who are OPEC members, two African countries have joined the historic “Declaration of Cooperation,” between OPEC and 10 non-OPEC producing countries, namely Sudan and South Sudan. This enterprise, which began in 2016, involves OPEC working in concerted action with 10 non-OPEC Countries towards sustainable stability in the oil market.

The strong bonds between OPEC and Africa reflect the critical role that our continent will play in the future of the energy industry. This is one of the most prominent themes of OPEC’s recently launched World Oil Outlook 2045. Our flagship publication presents OPEC’s medium to long-term projections for the global economy, oil and energy demand and other factors pertaining to the industry.

The first thing to emphasize is that Africa has a young and vibrant population. The Middle East and Africa region is currently experiencing a swift rate of population growth. By 2045, it is forecast to be the leading region by overall population, adding 762 million people in the period 2020-2045.

We foresee a bright future for Africa’s oil industry with significant opportunities for growth. The continent is home to five of the top 30 oil-producing countries in the world and several top gas-producing nations. The world will continue to rely on Africa’s precious resources in the long term in order to meet the rapidly rising global demand for oil and gas.

In 2019, before the COVID-19 pandemic broke out, Africa produced approximately 8.5 mb/d of oil, which is around 9% of world output. The continent’s proven oil reserves amounted to around 126 billion barrels at the end of 2019. Of this, Nigeria held the majority with an estimated 36.9 billion barrels, or 29%, of the continent’s total reserves.

In terms of the downstream sector, last year’s oil demand shock caused by the COVID-19 pandemic resulted in numerous refinery closures worldwide, and we will see additional closures in the coming years.

Looking ahead, from 2021 to 2026, we expect to see around 6.9 mb/d of new refining capacity come online, mostly in the Middle East, Asia-Pacific and Africa. Africa’s potential refining capacity is expected to start increasing in 2022 at just below 0.4 mb/d, before reaching just above 1 mb/d in 2026. Many of these projects will involve petrochemical integration.

Looking longer term to 2045, OPEC forecasts 14 mb/d of capacity additions, mostly in developing countries. In Africa, long-term demand growth will lead to an increase in refinery throughputs of almost 5 mb/d in 2045, up from 2.4 mb/d in 2019.

Another important downstream factor has to do with global refinery utilization rates, which are forecast at a rate of 81% in 2024 and slightly lower by 2026, yet still higher when compared to 2019 levels. These rates are forecast in consideration of recovering demand, in addition to the realization of numerous closures triggered by the COVID-19 pandemic. In the longer term, utilization rates are expected to drop to approximately 76% in 2045 as more capacity comes online and demand declines in developed regions. This, of course, will result in additional closures in order to maintain rates at sustainable levels.

These overall positive developments in the African downstream will help increase local refined product output while reducing product imports from other regions.

In terms of downstream investment, we estimate a total of roughly $1.5 trillion will be spent during the period 2021-2045. $450 billion of this will be invested in new refinery projects and expansions of existing units. Most of these projects will be located in developing countries, including Africa.

Indeed, the importance of creating an investment-enabling environment is a further key conclusion from the WOO. Cumulative oil-related investment requirements amount to $11.8 trillion in the 2021-2045 period. Of this, 80%, or $9.2 trillion is in the upstream, with another $1.5 and $1.1 trillion needed in the downstream and midstream, respectively.

Creating the stability in the oil market necessary to attract the required levels of investment has been one of the primary motivations behind OPEC’s collaborative efforts with 10 non-OPEC countries under the ‘Declaration of Cooperation’ umbrella.  This pioneering framework for multilateral energy cooperation continues to contribute greatly to the post-pandemic economic recovery as a vital stabilizing force in the global oil industry.

Indeed, the ‘Declaration of Cooperation’ has enabled the oil industry to withstand and recover from both the severe oil market downturn of 2014-2016 and the unprecedented oil market contraction following the outbreak of the COVID-19 pandemic.

Ladies and gentlemen,

We cannot talk about Africa’s energy future without discussing the twin challenges of sustainable development and climate change, two sides of the same coin.

This event promotes the vision of ‘Making Energy Poverty History by 2030.’ OPEC wholeheartedly subscribes to this noble vision. As this event takes place in the homeland of the late, great Nelson Mandela, Madiba, I cannot help but recall his words, when he said,

“Overcoming poverty is not a task of chaZrity, it is an act of justice. Like slavery and apartheid, poverty is not natural. It is man-made and it can be overcome and eradicated by the actions of human beings.”

Access to affordable, reliable, sustainable and modern energy, is a right for all, not a privilege of the few, as enshrined by the UN in Sustainable Goal 7.

The unfortunate reality for developing countries is that a staggering 759 million people worldwide did not have access to electricity in 2019, with around 79% of them located in Africa. Moreover, there were roughly 2.6 billion people or 34% of the global population who did not have access to clean cooking fuels and technologies — and this includes a massive 70% of Africans who have no access, exposing them to high levels of household air pollution.

The energy poverty numbers for Africa are stark. And to add in one further number, Africa accounts for only around 3% of global emissions.

These factors need to be carefully considered at the ongoing 26th UN Climate Change Conference of the Parties (COP26), currently taking place in Glasgow.

One of the most eloquent articulations of the need for a just energy transition, was penned by HE Cyril Ramaphosa, President of the Republic of South Africa, in advance of the COP. It was heartening to read how aligned the views of South Africa and OPEC are, in this regard.

As President Ramaphosa wrote,

“We must contend not only with these primary dangers [of climate change], but also with potential economic and social damage should the global community fail to deal with the crisis in a way that works for developing as well as developed markets.”

The President also noted,

“The only way for a transition to be successful is if there is broad commitment to a transition that is just – a journey to net zero that leaves no one behind.”

Similarly, OPEC has argued for a transition that is broad and inclusive, equitable and fair, and reflects common but differentiated responsibility.

President Ramaphosa also highlighted the need to capitalize on the advantages that many African countries have in the energy transition.

“South Africa is endowed with abundant natural and mineral resources. These can be harnessed to build a new economy in such areas as renewable energy and green hydrogen.”

The President also spoke sagaciously about the issue of climate finance.

“South Africa’s ambitions cannot be achieved without the more developed economies meeting promises they have made to provide financial assistance to developing economies in their energy transition….To be clear, this is not about charity. This is about fairness and mutual benefit.”

Well said, Mr President.

OPEC believes that there is no “one size fits all” solution to addressing climate change. Different countries around the world have varying capabilities and diverse needs. Thus, reducing emissions should have multiple paths, as set out by the Intergovernmental Panel on Climate Change (IPCC), and all of them should be regarded as potential options.

As an industry, we must approach these critical issues together through dialogue and cooperation, ensuring that all voices are heard and all viewpoints are considered.

The oil industry can play a role in working towards our common goals. It possesses resources and expertise that should be utilized in developing more efficient technologies, particularly within the sphere of Carbon Capture and Sequestration technologies (CCUS).

Ladies and gentlemen,

The challenges of our age can often appear overwhelming. We will continue to wrestle with the long-term scars of the COVID-19 pandemic for many years, if not decades. And yet, despite this context, this event, in this great country, inspires hope and courage.

In his autobiography, ‘Long Walk to Freedom,’ Nelson Mandela wrote,

“Part of being optimistic is keeping one’s head pointed toward the sun, one’s feet moving forward. There were many dark moments when my faith in humanity was sorely tested, but I would not and could not give myself up to despair. That way lays defeat and death.”

Let us seize the opportunities and confront the challenges of our age, inspired by the titans of African history and the spirit of the great people of this continent.

I wish everyone a successful African Energy Week.

MIL OSI Oil Gas Energy