Abdalla Salem El-Badri, Secretary-General, OPEC: Interview

Interview: Abdalla Salem El-Badri

What role does Saudi Arabia play in OPEC, given that it is the organisation’s leading oil producer?

ABDALLA SALEM EL-BADRI: Yes, Saudi Arabia is OPEC’s largest producer, with major reserves and potential, but there is far more to Saudi Arabia’s role than just its size. It is vital to OPEC’s decision-making process and in helping it to achieve the central objective of oil market stability. In this regard, Saudi Arabia is always looking to find positive solutions to any challenges the organisation may face, and to work constructively with all other members.

Saudi Arabia is also a founding member of OPEC and over the years it has contributed much to the organisation. For example, in 2007 it hosted the Third Summit of OPEC Heads of State and Government, which concluded with a solemn declaration in which principles were set out to guide the future work of the organisation.

We respect and appreciate its support and input. And this goes for all member countries: each of them has a voice and their views are important to the organisation’s present and future.

We see increasing internal demand for oil products within OPEC member countries, which threatens their export capacity. What do members need to do in terms of reducing domestic consumption to ensure optimum earnings?

EL-BADRI: Many OPEC members are seeing increasing domestic demand for crude oil and oil products, as populations expand and economies grow. It is a trend that these countries are aware of, and it is evident that many are investigating ways to reduce this internal oil demand growth in their countries. The focus is on better managing domestic oil demand, through energy efficiency measures and finding and developing new sources of energy supply, such as natural gas and renewables. It is clear that these are now viewed as high priorities for Saudi Arabia, as a means of utilising its natural resources more efficiently.

Given the ever-increasing global focus on climate change, what should OPEC members be doing in terms of oil production and diversification?

EL-BADRI: Current climate change negotiations to develop an agreement in Paris at the end of 2015 and raise the level of ambitions for the pre-2020 period are extremely important. It is also important to make sure the interests and concerns of all of us are taken into account. At OPEC, we recognise the importance of continually looking to advance the environmental credentials of oil, both in production and use. For member countries, this includes investing in carbon capture and storage, reducing gas flaring, developing hybrid solar-gas power stations and solar-powered desalination units, and producing cleaner petroleum products. It is also essential for oil-producing countries to look at ways to diversify, in terms of looking for alternative sources of income, and in developing other sources of energy, particularly when many have distinct advantages in terms of solar and wind. Developments in this regard are already evident in a number of OPEC member states.

Given the rise in US tight oil production, what strategic approach should OPEC members take in order to respond to this new technology?

EL-BADRI: The past few years have seen a significant expansion in US tight oil production, although growth in 2015 is expected to be much lower than in 2014. Let me stress that this is a welcome addition to the market. It adds depth and diversity, and has given a boost to the country in terms of the economy and job creation. We do not view it as a threat. OPEC’s decision in June 2015 was to keep its production ceiling of 30m barrels a day. Our members are making sure their consumers’ demand for oil is being met with the required supply. We should also recognise that many of our members have huge untapped tight oil resources. But at present, it is more economic for countries to produce lower-cost production.