OPEC and the non-OPEC producers’ part of the production cuts deal will have a plan for long-term cooperation drafted by the end of 2018, as they seek to institutionalize their current collaboration into a supergroup of oil producers led by Saudi Arabia and Russia, the UAE’s Energy Minister Suhail Al Mazrouei told The National in an interview published on Thursday.
The producers aim “together with the secretary general [of OPEC, Mohammad Barkindo], to put together a draft agreement for this group [of 24] to stay together for a longer time”, Al Mazrouei said.
Putting together a draft charter and discussing it during the year is one of the UAE’s aspirations, said the minister whose country is currently holding OPEC’s presidency.
“If we achieve the market balance, I think we can see significant amount of investments coming to the E&P business and we can see that many of the 24 countries who have signed the Declaration of Cooperation can benefit from it,” Al Mazrouei told The National.
The idea to follow up on the current OPEC/non-OPEC cooperation came originally from OPEC’s Secretary General Mohammad Barkindo, who said as early as in October last year that the partnership could be institutionalized.
Last month, Khalid al-Falih, the energy minister of OPEC’s de facto leader and largest producer Saudi Arabia, said that “There is a readiness to continue cooperation beyond 2018...The mechanism hasn’t been determined yet, but there is a consensus to continue.”
Al-Falih, as well as Russia’s Energy Minister Alexander Novak, has hinted several times that the cooperation could continue in some form—although not necessarily in oil market management—even after the end of 2018, when the current pact to curtail oil production expires.
In an interview with S&P Global Platts published earlier this week, Novak said that Russia wanted to build a long-term relationship with Saudi Arabia and the broad OPEC alliance once their agreement expires.
By Tsvetana Paraskova for Oilprice.com
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It makes a lot of sense for Russia to have a permanent arrangement with OPEC for the purpose of stabilizing the oil prices well into the future. Saudi Arabia and Russia who between them account for 26% of global oil production and 25% of oil exports are already cementing their strategic partnership with Russia hoping to invest in Saudi Aramco's projects and Saudi Arabia investing in gas production projects in the Russian sector of the Arctic.
All in all, it amounts to Russia being invited to become a member of OPEC.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London