The co-operation between Opec and allied non-Opec producers since January 1, 2017 has helped “stock overhang being brought down to almost zero”, said HE the Minister of Energy and Industry, Dr Mohamed bin Saleh al-Sada.
The 'Declaration of Co-operation' agreement between Opec (Organisation of the Petroleum Exporting Countries) and allied non-Opec countries effective from January 1, 2017, has been very successful in balancing the market by reducing the overhang of a staggering 340mn barrels above the OECD (Organisation for Economic Co-operation and Development) five-year average commercial stock levels of 2.81bn barrels, he said.
“With a committed production adjustment over the 500 days till mid-May this year, the stock overhang has been brought down to almost zero,” al-Sada told S&P Global Platts ahead of “Opec's most important meeting in years” on June 22.
Currently both the “fundamentals” and “geopolitics” are very robust and are having a strong influence on the market. These factors have dramatically changed the market, al-Sada noted.
“Whether production cuts should be prolonged, or re-negotiated, in the context of market fundamental and changing geopolitics would be reviewed by and allied non-Opec countries during the forthcoming meetings on June 22-23 in Vienna. They will surely arrive at an appropriate decision to the benefit of both suppliers and consumers,” al-Sada told S&P Global Platts.
On whether Qatar would support Opec co-operation with Russia after the current deal expires, the minister said, “The production adjustment has been a thoughtful and agreed step to rebalance the market. It has worked well and there is certainly a good opportunity to extend and enhance the co-operation with the countries who have contributed to the stabilisation of the market in the best interest of all and the world economy at large.
“During the next ministerial meetings the market situation will be reviewed and decision made on the next course of action taking into consideration the short term and long term market stability. While talking of the production adjustments and rebalancing the market, I may mention that up to April 2018, while oil prices increased by nearly 25% compared to the same period last year, investment in oil industry has not picked up in a commensurate manner.
“Global spending peaked at $900bn in 2014 but the crash in oil prices thereafter reduced the investment by half in 2017. It is estimated that the industry would only be spending $510bn in 2018. It would be safe to say that except for shale plays in the US, there is still a general hesitation in committing resources for oil exploration and development. There is a need to stimulate investments to ensure adequate oil supplies are available to meet the growing demand and offset declines in some parts of the world."
He said oil exploration in Qatar was an ongoing activity. Supply growth in the near term is likely to come from increased output at Qatar's existing fields, particularly through the use of enhanced oil recovery (EOR) techniques in several fields, including Al-Shaheen, Dukhan, Idd Al-Sharqi, Bul Hanine, and Maydan Mahzam.
“Qatar is focusing on field development, especially at the Bul Hanine offshore oilfield. Qatar is looking to increase production by around 40,000bpd. A 25-year contract has been signed with Total to develop Qatar's major Al-Shaheen offshore field in partnership with Qatar Petroleum,” al-Sada added.