A Review of the Nigerian Energy Industry

Qatar throws weight behind OPEC’s permanent relations with Russia

*Qatar’s Energy Minister Mohammad bin Saleh al-Sada gestures as he attends a news conference following a meeting between OPEC and non-OPEC oil producers, in Doha, Qatar April 17, 2016. REUTERS/Ibraheem Al Omari.

*Says too early to exit oil cuts as $400b investment still too low

OpeOluwani Akintayo
with Agency report

07 April 2018, Sweetcrude, Lagos — Qatar has said it is in support of the Organisation of the Petroleum Exporting Countries, OPEC, and Russia forming permanent allies even after the joint oil cut agreement are over.

The country’s Energy Minister while speaking with Reuters, said keeping the bond forever will allow for growth in the sector.

According to him, OPEC and its partners should also maintain oil supply curbs to guarantee good price levels which will give rise to investment and help avoid a big supply and price shock in the long run.

“The platform should stay (referring to the idea of longer term OPEC and non-OPEC cooperation). It is in the interest of everybody. The agreement on supply curbs is another thing”.

“There is a clear recovery in oil prices. But it has not been met with an increase in investments … Investment has been very low. My concern is that medium- to long-term demand is met comfortably,” Sada said in an interview. “Investors are still cautious and over-conservative”.

He added that global oil demand was set to rise by at least 1.5 million barrels per day a year or by a healthy 1.5 percent.

However, according to him, the global oil investment purse of around $400 billion was still too small to guarantee the required level of investment to replace production from mature fields and the launch of new projects.

“I would see the need to keep the (OPEC cooperation) momentum … We need to restore investments. It could take months … OPEC could start being concerned about gross over-tightening.”

OPEC and its partners led by Russia have cut outputs since the start of 2017 to ease a global oil glut as a result of the U.S. shale oil boom that saw oil prices crashing to below $30 per barrel.

Investment in the oil sector also fell by over $1 trillion in the past three years.

OPEC’s production restraints have helped cut global oil stocks in industrialised nations from as high as 350 million barrels to as low as 50 million barrels, Sada said.

The tightening of the market propelled oil prices above $71 per barrel this year but also encouraged U.S. shale oil drillers to increase investments and return to record production growth.

“Even with shale, the market is heading for balance,” said Sada.

He said record U.S. shale output was almost fully absorbed by demand increases but elsewhere investments were not growing.

Some 6.5 million bpd of U.S. shale production has become an integral part of the global supply portfolio and demand could absorb even more as production was falling in places like Venezuela, Mexico, Colombia, and China, said Sada.

Russia has been hinting that OPEC should start considering exiting the cuts sooner rather than later to avoid giving too much of a boost to U.S. shale oil output.

OPEC’s leader Saudi Arabia has said cuts could be extended in one form or another into 2019 and also said Riyadh and Moscow were considering a deal to extend their short-term oil cuts alliance to as long as 10 or even 20 years.

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