I should first like to thank the Government of India, under the able leadership of Prime Minister Narendra Modi, for hosting this prestigious, high-level gathering here in New Delhi. It is always a great pleasure to return to your great country, with its rich history, culture and traditions. On behalf of OPEC, kindly accept our best wishes for the forthcoming Du Vali.
This inaugural forum is the first “CERA Week” to be held in India, marking a new promising phase of India’s transition to a global economic powerhouse – a New India.
This premier energy forum also marks a new stage in the growing strategic relationship between OPEC and India, and builds on previous meetings and interactions that we have had so far.
My friend, Hon. Minister Pradhan, reminded me on Sunday, during our OPEC-India bilateral meeting, that within less than a year, we have already met five times.
As Secretary General, I visited New Delhi on the occasion of the 2016 Petrotech Conference in December of last year. Along with some of my colleagues from the OPEC Secretariat, we had a series of high-level productive meetings with government and industry leaders.
We again learnt of India’s solid and steadfast support for the work of the Organization, particularly its ongoing efforts seeking oil market stabilization, and noted its deep appreciation for the value of the ongoing OPEC-India Dialogue.
This was followed, earlier this year, on the 22nd of May in Vienna, by the 2nd High-level Meeting of the OPEC-India Energy Dialogue. Attended by the Minister of Petroleum and Natural Gas, His Excellency, Dharmendra Pradhan, and joined by Indian oil industry leaders, it built on earlier high-level gatherings in a solid and substantive way.
The dialogue between OPEC and India – the relationship that we celebrate here today – is rather unique given India’s role as one of the most dynamic countries in the world.
The oil and gas industry, in particular, is expanding rapidly. It is not only fuelling the country’s vibrant economy, enticing investors and oil producers from near and far. It is also serving as a ‘focal point’ for some of the leading joint projects being undertaken by OPEC’s Member Countries, who recognize India’s unprecedented growth potential.
Such projects signal India’s rapidly growing importance on the global energy scene.
Excellencies, ladies and gentlemen,
India’s economy has been experiencing some of the greatest structural changes in a generation. A slate of bold new reforms, embarked upon under the visionary leadership of Prime Minister Modi, has put the country firmly on a sustainable dynamic growth path – particularly when it comes to energy.
These reforms have included demonetization policy, the goods and services tax (GST), and efforts to diversify the energy mix. They have all been designed to move the country toward sustainable growth and stability.
Additionally, the country’s expanding middle class represents a growing source of demand – and not just for energy but for goods and services from around the world.
Comprised of a young and increasingly educated population, India’s middle class is vigorous, fast moving and upwardly mobile – all key elements for long-term sustainable growth.
In addition, during this period, India is expected to see major growth in the transportation sector, as well as an expansion in exports of numerous goods and services. It has a world-renowned IT sector, which today is one of the leading global start-up hubs for technology companies, as well as a strong services sector and solid manufacturing base.
India’s role in the global marketplace and its growing involvement in international trading networks are admirable signposts for a country undergoing a great economic transformation.
At OPEC, we have been paying close attention to these macroeconomic and business trends in India. Some of them shall directly benefit the growing populations of OPEC’s own Member Countries.
In particular, we have been working to better understand the potential impacts that such beneficial economic changes may have on future oil demand.
OPEC even sees world oil demand growth increasingly shifting to India.
We anticipate, in fact, that by 2040, India’s oil demand will increase by more than 150% to 10.1 mb/d from around 4 mb/d currently.
The country’s total share of global oil demand is also seen rising to over 9% by 2040 from 4% now.
The data clearly points to expanded energy use, as Minister Pradhan himself has stated recently, which shall include roles for other energy resources as well.
Ladies and gentlemen,
There are many factors helping to foster, strengthen and support the deepening relationship between OPEC and India. In fact, since 2000, trade between India and OPEC Member Countries has grown substantially.
In the period from 2000 to 2015, overall imports of India from OPEC Member Countries increased from $2 billion to nearly $140 billion in 2015. OPEC MCs imports from India increased from $5 billion in 2000-2001 to $56 billion by 2015.
In terms of crude oil, what we see is similarly impressive in terms of growth. India’s total imports have risen to close to 4.3 mb/d in 2016 from around 1.5 mb/d in 2000. Nearly 80% of these total imports came from OPEC Member Countries.
Underlying all this, of course, is demand, which in India has been remarkable in recent years. Last year, India had the fastest rising oil demand growth in the world, with an increase of close to 340,000 b/d or 8.3%. It is currently the world’s third-largest oil consumer, with continued and sustained growth prospects in the medium- to long-term.
In the downstream, India is already a major producer and net exporter of refined petroleum products, with output of close to 5 mb/d, according to our latest Monthly Oil Market Report.
As a large oil consumer, India thus shares with OPEC, and with oil producers and consumers around the world, a common interest in oil market stability on a sustainable basis.
Along with other oil producers, we have all seen that constructive dialogue and flexible cooperation can play an important role in maintaining stable oil markets.
The historic ‘Declaration of Cooperation’ signed by 24 countries demonstrated that, with firm resolve and broad consensus, the instability seen in the oil markets, as well as the sharp contraction of investments in the industry, the multiplier effect that low oil prices have had on deflation, and the acute financial stress of companies and steep reductions in export revenues of producing countries, all of which have characterized the current and most vicious of all oil cycles, could be overcome.
Given recent data, it is clear that the efforts of OPEC and non-OPEC producers to conform to the production adjustments of the ‘Declaration’ have been fruitful and worthwhile. Let me share with you the key oil market highlights from our latest Monthly Oil Market Report:
The global economic recovery has gained traction. OECD economic growth in the 1H17 was better than expected. Moreover, the good momentum and the potential tax reform in the US, the ongoing dynamic in the Euro-zone and, to some extent, in Japan, solid growth in China and India and an improving situation in Russia are all lifting the growth forest to 3.6% in 2017 and 3.5% in 2018.
The global oil demand growth in 2017 is better than expected – to grow at 1.45 mb/d – and the demand outlook for 2018 is anticipated to be quite robust at similar levels – of above 1.4 mb/d.
The commercial oil stocks in the OECD have continued to fall. At the start of 2017, the OECD stock overhang was at 338 mb above the five-year average. This has since then fallen by 167 mb at a faster pace – by 130 mb alone during the last five months – which was attributed mainly to high conformity levels, above 100%, of participating OPEC and non-OPEC countries, and stronger oil demand in the second half of the year. The overhang in stocks nevertheless stood at 171 mb for the month of August. Of this, 146 mb constitutes crude and 25 mb products, almost converging with the five-year average.
In addition, floating storage has also been on a declining trend during the first eight months of 2017 and is down by an estimated 40 mb since the start of the year, supported by a narrowing contango. In fact, Brent has flipped into backwardation for the first time since the second half of 2014.
Just a few days ago, I attended first Russian Energy Week in Moscow, where I shared a speaking platform with President Vladimir Putin, and held talks on oil market developments with Alexander Novak, Minister of Energy of the Russian Federation, Khalid Al-Falih, Saudi Arabia’s Minister of Energy, Industry and Mineral Resources and also the President of the OPEC Conference, as well as other OPEC and non-OPEC Ministers, all of whom are part of the historic ‘Declaration of Cooperation’. The statements reaffirmed the broader commitment to joint action by all for the market stability beyond the short-term.
We all remain confident that the recent extension of the terms of the ‘Declaration’ – through to early 2018 – is already accelerating the rebalancing process as confirmed by the latest monthly data.
The oil supply and demand variables are fast returning to balance after a record three years of unprecedented downturn, as evidenced by the continuously positive fundamentals, due largely to the full and timely implementation of supply adjustments by OPEC and non-OPEC countries.
Emerging from this most vicious of all oil cycles, the need to sustain the rebalanced market in the medium- to long-term, some extra-ordinary measures could be considered by countries participating in ‘the Declaration of Cooperation’, including expanding the membership. This is a shared responsibility of all producers, be they conventional or non-conventional, short- or long-cycle investors. We all, at the end of the day, when all is said and done, belong to the same industry and operate in the same markets. We urge our friends in the shale basins of North America to take this shared responsibility with all the seriousness it deserves, as one of the key lessons learnt from the current, unique supply-driven cycle.
The IOCs, independent oil companies and others have reduced their investments by more than 50% during two consecutive years in 2015 and 2016. However, NOCs have not only weathered the storm from the downturn but have also bravely continued investing across the supply chain. In this way, OPEC will continue to be a dependable and reliable supplier of first choice to rapidly growing countries like India. OPEC has a vested interest in the sustained healthy economic growth and prosperity of India. Thank you for your attention.
- Being plenary remarks delivered by HE Mohammad Sanusi Barkindo, OPEC Secretary General, at the India Energy Forum, 8-10 October 2017, New Delhi.