Today, I would like to talk about some of the funding challenges facing our industry here in Africa and globally, as well as examine a few of the policy issues affecting investment in the sector.

Before I do so, I would like to draw your kind attention to a couple of important milestones in Nigeria’s recent history. One year ago this month, the Petroleum Industry Bill was adopted by both houses of the 9th National Assembly and signed into law by President Muhammadu Buhari. This was a ground-breaking achievement, culminating many long years of hard work. I am confident that the implementation of the law will help unlock the full potential of our petroleum industry, strengthen its ability to attract long-term investment, as well as support a dynamic and diverse economy.

If our NOCs are to continue to innovate and flourish, it is of utmost importance that they have predictable and unfettered access to investment capital. Regular Investment at adequate levels is the lifeblood of our industry. It is essential if we are to develop new technologies, strengthen our human capacity and remain leaders in innovation so that we can do our part to meet the world’s growing need for energy, shrink our overall environmental footprint, and expand access to underserved communities.

Yet our industry is now facing huge challenges along multiple fronts, and these threaten our investment potential now and in the longer term. To put it bluntly, the oil and gas industry is under siege!

For starters, the evolving geopolitical developments in Eastern Europe, the ongoing war in Ukraine, the ongoing COVID-19 pandemic and inflationary pressures across the globe have come together in a perfect storm that is causing significant volatility and uncertainty in the commodity markets and, more importantly, in the world of energy.

Against this backdrop, a number of industrialized countries and multilateral institutions continue to pursue stringent policies aimed at accelerating the energy transition and fundamentally altering the energy mix.

Putting these issues aside for a moment, we must not forget that our industry is still reeling from the enormous investment losses of recent years.

In a very short timespan, the industry has been hit by two major cycles – the severe market downturn in 2015 and 2016, and the even more far-reaching impact of the COVID-19 pandemic.

In 2020, the first year of the pandemic and one of the darkest periods in the history of oil, upstream oil capital expenditure fell by around 30%. This exceeded the colossal 26% annual declines experienced during the severe industry downturn in 2015 and 2016.

Looking further down the road, OPEC’s most recent World Oil Outlook gives us some perspective on what is to come. It shows the global oil sector will need cumulative investments of $11.8 trillion in the upstream, midstream and downstream through to 2045 to meet expectations for significant growth in energy demand.

With regard to demand, there is only one direction, and that is up. In fact, OPEC projects that total primary energy demand will expand by a robust 28% in the period to 2045. Oil is expected to retain the largest share of the energy mix, accounting for just over a 28% share in 2045, followed by gas at around 24%. In other words, oil and gas together will continue to supply more than half of the world’s energy needs for many decades. These hydrocarbons are especially vital to the energy mix in regions like Africa, which will see massive population shifts and economic growth in the coming years. These developments increase the urgency of eradicating energy poverty.

The impacts of the two major market cycles are manifesting themselves in real time.

Years of underinvestment in the oil sector help explain the current market tightness and razor-thin spare capacity margins.

In OPEC’s 62-year history, spare capacity has never been as low as it is today, and this takes into account periods of war, natural disaster and other market shocks. If this trend continues, it could haunt us in the future.

We could, however, unlock resources and strengthen capacity if the oil produced by the Islamic Republic of Iran and Venezuela were allowed to return to the market. As we know, their oil industries have been held hostage by geopolitics, while Libya has faced internal challenges that have at times sharply curbed its exports. Unfortunately, the disruptions affecting these three OPEC Member Countries not only contribute to the current market tightness, they directly affect the welfare and development of these great nations.

Here, it is also important to remember that it takes time to return to normal operations and restore production capacity. This is especially the case in countries that have had to endure restrictions on investment and exports, and following severe market shocks like we saw in 2020. As we all know, you cannot turn a tap and solve the world’s oil needs overnight; it takes time, technology, logistics and capital.

Reading the daily news feed, the upstream has become a favourite scapegoat for the current market conditions. However, this discounts the current capacity challenges that also plague the downstream, especially with regard to transportation fuels. Refinery closures in recent years – coupled with a number of untimely accidents at important regional refineries – have curtailed supplies and helped fuel the energy market volatility of recent months.

OPEC’s 2022 Annual Statistical Bulletin helps shed light on the situation. Worldwide refinery capacity fell by more than 330,000 barrels per calendar day year-on-year in 2020 and remained below pre-pandemic levels last year despite the robust global economic rebound. The Middle East, China, as well as Africa and India, have recorded refining capacity additions. However, refinery capacity in the OECD declined for the third consecutive year in 2021. Comparing the pre-pandemic year of 2019 to 2021, OECD refining capacity fell by a significant 1.5 million barrels per calendar day, or 3.3%. Given the global refining squeeze at the moment, the construction of the Dangote refinery in Lagos, with its capacity of around 650,000 barrels per day, is a huge step in the direction of addressing not only  Nigeria’s longer-term demand – but significantly improving the capacity outlook of the global down-stream sector.

The urgent need to ensure predictable investment is one reason OPEC joined hands with a number of key non-OPEC oil-producing countries in the Declaration of Cooperation back in December of 2016. With our combined expertise and experience to guide us, the participating countries were able to move quickly and decisively to address the widening market crisis at the onset of COVID-19. Rarely in the history of our industry have we witnessed such far-reaching efforts to restore sustainable stability to the global oil market, which in turn has been vital to the global economic recovery.

Let me stress here that many African producing countries, both OPEC and non-OPEC Members, have been instrumental in supporting the framework Declaration of Cooperation from the start. These efforts have not gone unnoticed by policymakers, energy analysts and some of the leading stakeholders in the international oil industry. We remain optimistic these market-stabilization efforts will extend beyond the Declaration of Cooperation’s current production adjustment schedule, which is due to expire at the end of August, particularly taking into consideration the persistent volatility and enormous uncertainties in the market. Last week’s important OPEC and non-OPEC Ministerial Meeting, which by the way was the 30th held since the beginning of the DoC, demonstrated once again the commitment of our participating countries to remain resolutely focused on oil market stability and supporting the global economy.

OPEC is a unique Organization and has always dedicated itself to cooperation and teamwork regardless of the geopolitical landscape.

We have drawn on this experience to support the growth and stability of the global oil market by continually expanding data exchanges, technical capacity and high-level cooperation with many leading oil-consuming countries, producers and institutions. Our first High-level Meeting of the OPEC-Africa Energy Dialogue took place last year, marking a major milestone in our collaboration with like-minded organizations across this great continent.

These efforts to build strong sustainable relationships are proving their worth. Over the longer term, we believe these Dialogues will facilitate the sharing of experiences, lessons learnt and best practices to support efforts for an inclusive and sustainable way forward.

Regrettably, we are seeing global energy cooperation becoming more fragmented.

New regional alignments are threatening to reverse years of progress towards creating a more stable and interconnected energy system. We cannot afford to allow multilateral energy cooperation and global energy security become collateral damage of geopolitics.

As many of you know, I have been involved in the global climate negotiations since their inception three decades ago, representing Nigeria in the early years and more recently OPEC. The past negotiating sessions were never easy. However, there was always space around the table for multiple viewpoints to be heard and consensual outcomes to be found.

Unfortunately, the policy narrative in the run-up to and during COP26 last year in Glasgow, UK was heavily distorted against hydrocarbons and divorced from the reality of the world’s energy needs. Developing countries were urged to turn their backs on their own hydrocarbon assets, even though their right to sovereignty over the use of these natural resources is carved in the Paris Agreement’s principle of equity in the context of sustainable development.

Efforts to unwisely encourage divestment in the hydrocarbon industries are unfortunately becoming more pronounced. Last month, UN Secretary-General António Guterres suggested in remarks at a White House-sponsored event that our industry is ignoring its responsibility to address the climate change challenge and is undermining global climate policies.

Such misleading pronouncements are terribly unfair to many of us in this industry who have dedicated ourselves to working towards inclusive, just and sustainable solutions to the climate challenge. In fact, key stakeholders in the industry are participating in the intergovernmental arrangements and initiatives to develop, deploy and promote cutting-edge technologies to reduce emissions from the production and consumption of energy.

Furthermore, I would respectfully point out that the G7 countries only a few weeks ago called on energy-exporting countries to increase oil production and acknowledged the critical role of OPEC in this regard.

Then at last week’s G7 Summit in Germany, the leaders took a step in the right direction by recognizing the need for continued investment in fossil fuels to help meet the world’s energy needs. It is imperative that they translate these words into policy actions that affirm the importance of a broad portfolio of energy options, including oil and gas, and support an investment climate that makes this possible.

Inopportune remarks and efforts to discourage oil exploration and development are bound to sow the seeds of a more pronounced energy crisis and undermine global energy security. Moreover, they jeopardize efforts to achieve universal, reliable and affordable energy access for people across the globe, including those in developing countries.

Both the market and consumers deserve clear and consistent policies which recognize that oil is indispensable to global economic development and the world’s energy mix. Our industry cannot afford to sleepwalk into another crisis. It is of utmost importance that we seize opportunities to encourage world leaders to return to the roots and principles of the Paris Agreement. This means focusing on inclusive, Party-driven negotiations and decision-making based on the science and data, not emotions and rhetoric.

COP27, which will take place in Egypt later this year, offers a prime opportunity for developing nations, including those producing oil and gas, to make our voices heard. This is a chance to return to a balanced and holistic process to address critical issues such as adaptation, mitigation and the means of implementation, especially climate finance and technology.

Furthermore, COP27 provides a platform to reaffirm the importance of multilateralism and mutual respect among nations. These principles are pillars of OPEC’s own success dating back to its founding in 1960 in Baghdad, Iraq.

We also need more cooperation and financial firepower when it comes to tackling energy poverty. Globally, more than 750 million people lack reliable electricity. A further 2.6 billion do not have safe and clean fuels and technologies for cooking and heating. In Sub-Saharan Africa, OPEC data show that an estimated 47% of people have no electricity and approximately 85% lack access to clean cooking and heating fuels. Considering the enormous energy resources available on this continent, this is simply hard to accept.

At OPEC, we are committed to expand energy access and help achieve the UN Sustainable Development Goals. Many of our Member Countries are already taking a lead in developing and deploying innovative technologies that can help ensure a stable and sustainable energy supply for all. We are proud that our sister Organization, the OPEC Fund for International Development, has helped finance energy projects across the global south since it was set up by OPEC Member Countries, including Nigeria in 1976.

Each step we take to improve energy access is a step in the right direction, but we need all forms of energy to reach our destination. As Nelson Mandela once said, "You can start changing our world for the better daily, no matter how small the action."

When I first became Nigeria’s delegate to OPEC in 1986, little did I know that I would end up as its Secretary General 30 years later. I will forever be grateful to President Muhammadu Buhari for sending me to OPEC to serve as its 28th Secretary General. It has been gratifying to enjoy his full support, advice and guidance throughout my tenure, during which time I drank from his fountain of wisdom and reservoir of knowledge of OPEC. Muhammadu Buhari is the only current President in the world to have served as Minister of Petroleum and Head of delegation to the Organization.

Serving as Secretary General of OPEC for two terms has been the honour of a lifetime. Over the past six years, we have witnessed both challenging and historic moments, which have underscored time and again the importance of cooperation and teamwork. It has also been a source of pride to see African oil-producing countries becoming more prominent on the global energy stage, not only in OPEC, but through organizations like the Gas Exporting Countries Forum and International Energy Forum with whom we share many members in common.

Together with my very able colleagues at the Secretariat in Vienna, our Member Countries and those in the Declaration of Cooperation framework, we have turned a historic page and wrote several glorious chapters of our industry in the last six years.

At the end of this month, I will hand over the baton as Secretary General to my brother and friend Haitham Al-Ghais of the State of Kuwait. He is a seasoned veteran of the oil industry and an astute diplomat who has dedicated himself to OPEC for many years.

As we move on to a new chapter, we can take comfort in knowing that OPEC and its Member Countries will continue to devote themselves to the core principles of the Organization’s statute: supporting a stable and secure energy future for the benefit of producers, consumers and the global economy. The best is yet to come for OPEC, for Nigeria, and for this great industry.

By HE Mohammad Sanusi Barkindo,

OPEC Secretary General.