At the Forefront of African Energy Coalitions

Just two years ago, the oil industry was in a tailspin, and chaos reigned supreme.

Cooperation was necessary to survive. Governments were granting extensions to companies struggling to stay afloat. Portfolio consolidation and M&A activity was de-risking projects and enabling them to move forward. Cross-border partnerships were strengthening economies. As a whole the industry was learning to do more with less.

Cooperation proved key to returning stability to the market. These efforts were multifaceted and consistent, and led at an organizational level by H.E. Mohammed Sanusi Barkindo, Secretary General of the Organization of the Petroleum Exporting Countries. Last December, OPEC member countries joined non-OPEC producing countries in the now famous “Declaration of Cooperation” agreement to temporarily cut oil production and stabilize global markets. Collaboration amongst oil producers on this scale was historic.

In recognition of his and OPEC’s decision to prioritize cooperation, Barkindo will receive the “Africa Oil Man of the Year” award during the Energy Coalitions dinner. He will also present the keynote address during the annual conference.

“I am receiving this award on behalf of all of our OPEC Member Countries, as well as the non-OPEC producing countries in the Declaration of Cooperation, who voluntarily joined this historic and landmark agreement, that has turned a new page in the history of our industry in the strategic interests of producers, consumers and the global economy,” said Barkindo in a letter to Africa Oil & Power.

Africa Oil & Power’s theme for 2018, Energy Coalitions, will focus on this drive for coordination, looking at both private and public-sector coordination that strengthened the market and this new mentality of partnership that is expected to continue driving the industry at all levels, from project financing to government support.

OPEC Takes Center Stage

Before Barkindo took the helm of OPEC in August 2016, the price of oil had fallen to below $30 per barrel. At such a price, even the most accessible oil plays aren’t bankable, to say nothing of offshore projects or shale plays, which had come to dominate new exploration.

Talks of production cuts had already made the rounds within OPEC, but members knew that, to have a real impact on the markets, the deal would have to include other oil producers. In particular, bringing Russia on board – a traditional rival of OPEC –  was critical to the deal’s success.

Barkindo and OPEC remained committed to reaching a deal, and ultimately succeeded in December 2016, inking the Declaration of Cooperation between OPEC and 11 non-OPEC member states.

Oil prices quickly rallied after the production cuts were announced, and increased yet again after the members of the deal committed to extending the production cuts through 2018.

Today, the price of oil is consistently over $70 per barrel, and countries and governments are emerging from the downturn more resilient, with newly realized efficiencies.

But the need for energy coalitions is far from over.

At an organizational level, OPEC and the other members of the production deal must still secure a clean exit from the production cuts. In February, Barkindo assured the news media he had the word of Russia’s President Vladimir Putin that Russia would not flood the oil market with reserves once the deal is lifted.

“I have had and received assurances both from (Energy Minister) Alexander Novak and President Putin that they would remain committed to the OPEC/non-OPEC collaboration under the declaration of cooperation,” Barkindo told CNBC at the time.

Additionally, OPEC and Russia are in discussions over a long-term agreement to control crude supplies for up to 20 years.

“We are looking for a very long-term cooperation between OPEC and non-OPEC producing countries,” Barkindo told media at an energy conference in Baghdad in March.

Cooperation at the private-sector level is also set to continue, with major mergers and acquisitions, as well as farm-in and farm-outs, announced for 2017 and 2018. Government-led coordination is also on the rise with several African governments working together on energy infrastructure, trade agreements, local content development and exchange of information.

The need for coordination is also driving Africa’s expanding role on the global stage, with the Africa Petroleum Producers Organization participating in OPEC meetings, and countries like Equatorial Guinea and Gabon joining OPEC recently and the Republic of Congo vying this year for accession. Africa’s legacy oil producers are utilizing OPEC membership as a platform for global relevance while newer and emerging producers – Ghana, Uganda, Kenya, Mozambique, Senegal and others – are witnessing the intrinsic value in increasing Africa’s engagement with the global energy community.

This year, Africa Oil & Power will be the place to re-imagine old alliances and forge new partnerships as these talks of cooperation continue.

Click here to register for Africa’s Elite Energy Event, AOP 2018.