Mazrouei: Investment crucial as oil market rebalances

Abu Dhabi / WAM

The collapse in global oil prices between June 2014 and January 2016 led to nearly one trillion US dollars in investment being frozen or discontinued with “many hundreds of thousands of jobs” being lost throughout the industry, according to UAE Minister of Energy and Industry, Suhail bin Mohammed Faraj Faris Al Mazrouei. Now it is time to plan for future investment, he says.
The Minister was addressing the International Petroleum Week conference in London, on the topic on the “Return of oil investments to the world market.”
Al Mazrouei, who is also the President of the OPEC Conference for 2018, added that spending on exploration and production had fallen by 27 percent in both 2015 and 2016. At the same time, with low prices, he added, “it was also a period that saw major stock builds, with the OECD stock overhang increasing to a level of 380 million barrels above the five-year average at the end of July 2016.”
With the oil market being out of balance, “there was a necessity for action to alleviate this imbalance,” he said. These developments, which he described as a “devastating cycle,” led to the efforts by OPEC to reach out to non-OPEC producers.
Following an extensive programme of consultations, with what he described as a focus “on rebalancing the global oil market; and, over time, ensuring that the necessary investments return to our industry, to mitigate future volatility,” 24 OPEC and non-OPEC producers had reached the historic ‘Declaration of Cooperation’ which was signed at the end of 2016. It was renewed for a further year, with the participation of six more countries, in November 2017, he recalled.
During the November meetings, Al Mazrouei said, “30 oil producers affirmed their commitment to restoring stability to the oil market on a sustainable basis, in the interests of producers, consumers, and the global economy. This commitment to cooperation is unparalleled in the history of the oil industry.” There is global recognition, he added, that “without such adjustments, the market would have experienced further extreme volatility, which would have had far-reaching negative consequences for producers, consumers, investors, the industry, and the global economy at large.”
At the end of January 2018, the overhang had fallen to 74 million barrels while oil in floating storage had dropped by almost 50 million barrels since June 2017. The expanded growth strategy of Adnoc up to 2030, he reported, involves “an anticipated capital expenditure of over AED400 billion, around $109 billion, in the next five years.” In the upstream sector, “Adnoc is investing in innovative technologies to improve performance and maximise recovery from the UAE’s oilfields,” while work will continue to develop gas resources with the ultimate goal of self-sufficiency.