Atlantic Council 2019 Global Energy Forum

An Update on Saudi Vision 2030 & the Oil Market

Speaker: H.E. Khalid Al-Falih, Minister of Energy, Industry, and Mineral Resources, Kingdom of Saudi Arabia

Moderator: Frederick Kempe, President and CEO, Atlantic Council


Location:  Abu Dhabi, United Arab Emirates

Time:  9:00 a.m. Local

Date:  Sunday, January 13, 2019

ANNOUNCER:  Ladies and gentlemen, please welcome to the stage Atlantic Council President and CEO Mr. Frederick Kempe.  (Applause.)

FREDERICK KEMPE:  Ladies and gentlemen, good morning.  What a day we had yesterday.  Content-rich presentations were innovative and interactive, packed with newsworthy conversations.  The social networks were alive with the discussions that were here and capped off with an unforgettable and lively night owl session, which was off the record so I can’t tell you anything about it here.  (Laughter.)

This morning we turn to one of the most important stories in the world today.  It’s been a historic year for Saudi Arabia as we learned of new ambitious projects that lie at the heart of the Kingdom’s Vision 2030 transformation program and witnessed Saudi Arabia working to manage a global oil market experiencing some of the most profound changes since the founding of OPEC in the 1970s.

We are pleased and, indeed, we’re honored to be joined this morning by none other than His Excellency Khalid Al-Falih, minister of energy, industry, and mineral resources of the Kingdom of Saudi Arabia, to receive an update on Vision 2030 and the outlook of the oil market.  He has a long biography.  I’m not going to read it.  But if you saw the excitement at the door as he was coming in, I mentioned to somebody backstage it’s as if it was the Mick Jagger of the energy industry, and someone – they said, well, or perhaps the Rembrandt of the energy industry.  And then someone overheard the conversation and said, no, no, he’s more famous than all that.

So it is an honor to have him here.  Whenever he is – he helped us launch this Global Energy Forum two years ago.  We all gain from his wisdom every time he appears here, and Mr. Minister, it’s an honor to have you back.  The floor is yours.  (Applause.)

H.E. MINISTER KHALID AL-FALIH:  (Through interpreter.)  In the name of Allah, a merciful good morning, lovely morning everyone.

(Continues in English.)  (Off mic) – that kind and too generous of an introduction.  Excellencies, ladies and gentlemen, salaam alaikum once again, and a very good morning to each and every one of you.

I want to thank and congratulate our friends and partners from the United Arab Emirates, especially my very dear and close friend, His Excellency Suhail Mazrouei.  (Applause.)  I want to congratulate them for always putting a good show whenever they host an event.  I was here for the ADIPEC conference a few weeks ago and it was truly world class by all standards.  And I’m sure the Sustainability Week is going to again raise the bar, not only for the Emirates, but for all of us in the region.

I want to also congratulate the Atlantic Council for keeping their energy forum going.  This is the third year in a row.  I was here for the inaugural session, and I am pleased to be back.  And it has really become a key event within the Sustainability Week.

As Fred mentioned in the introduction, I want to focus in my opening remarks on two themes:  one is Vision 2030 and the other I’m sure is of interest to many of you, which is – which is what we are doing in the oil markets.

So allow me to start with the Vision 2030 because it is the guiding star for the Kingdom’s economic and social transformation and reform programs, and it is of great interest, I know, to the Council and to the broader international community.  When it was launched in 2016, I think most analysts at that time agreed that its central aims were both ambitious and bold.  They were also – and they remain – breaking all paradigms and offering momentum and energy towards a more prosperous and sustainable future, not only for the Kingdom, but I’m sure its effects will reach wide into the region and beyond.

Today, ladies and gentlemen, I am delighted to say that some of that – some of that excitement, some of those deliverables are being seen and felt on the ground, and I will run through a few examples of what we’ve been doing, not in the planning, but in the implementation of the Vision 2030.  To achieve the 96 strategic objectives of the 2030 Vision, the agenda has been structured into 13 vision realization programs, and these are massive programs on their own.  They comprise a series of initiatives and delivery plans, and they are pinned by robust governance, planning, and focused execution, as well as a powerful delivery culture.

We’re already seeing the fruits of this deliberate and interconnected approach as we move from concept to reality in areas such as the financial sector development program.  And I can give you an example within that program.  The Saudi stock market, Tadawul, within two years has applied and been accepted to join the FTSE Russell, S&P, and MSCI emerging market indexes, which will happen in 2019.  That’s conservatively projected by these indices to lead through passive and active inflows of 30 (billion dollars) to $45 billion into the Saudi capital market within the next two years. 

The Fiscal Balance Program, where we’ve been able to reduce our budget deficit while increasing nonoil revenue by almost 12 percent, and the housing program, which is worth more than 30 billion (dollars), backed by a rapidly expanding mortgage market which essentially didn’t exist, which will grow by an incredible 70 percent in just the next two years.

We’re also giving a laser like focus to human capital development.  Our human capability development program, which is headed by no less than His Royal Highness, the Crown Prince, was launched recently, focusing on the quality of education, upskilling Saudi youth, and improving their competitive reach in a knowledge-base economy quickly emerging in the Kingdom.

Meanwhile, the Quality of Life Program has already made great strides in areas such as infrastructure, entertainment, and tourism, and though there is more to do, we’ve made momentous progress in many aspects of female empowerment and female public and economic activity and particularly employment, which go hand in glove.  And, for example, there has been a 130 percent increase – that’s more than twofold – in the number of Saudi women in the private sector over the last four years and they now make up 30 percent of the total Saudi employees of the private sector. Almost in every enterprise today, both government and private, Saudi women are getting opportunities to work.  Four or five years ago that was truly unthinkable. 

Shifting to my own area of responsibility, encouraging progress is being made.  The National Industrial Development and Logistics Program, otherwise known as NIDLP, which integrates energy, manufacturing, mining, and logistics, is already well underway but will be officially and publicly launched by His Royal Highness, the Crown Prince, on the 28th of January, in a couple of weeks.

This program, which is really the centerpiece of the Vision implementation, is expected to contribute 320 billion (dollars) to the Saudi GDP by 2030.  It is expected to attract 425 billion (dollars) in new investment, create 11 new industries such as aerospace, automotive, pharma and biomedicine, chemicals, and defense, and maximize the return to Saudi Arabia and, indeed, be the nucleus around which other sectors such as banking, services, and logistics will also grow.

We’re also embracing new ways of doing business such as making local content a condition of doing business within the Kingdom.  To enable that, we’re putting new enablers in place.  For example, the Saudi Arabian Military Industry company, or SAMI, was launched with the aim of becoming one of the top 25 global defense companies, directly contributing almost 4 billion (dollars) to GDP by 2030, creating over 40,000 highly-skilled jobs in the defense sector, and playing a key role in increasing the share of nonoil exports to 50 percent.

Likewise, in the energy sector, Saudi Aramco is intending to raise its local content from 30 percent four years ago to 70 percent by 2021.  That’s just in two years.  In fact, they’ve already gone from 30 percent to 51 percent.  That’s why we were delighted a few weeks ago to inaugurate a key infrastructure piece, which is the King Salman Energy Park, or SPARK, targeting the localization of energy manufacturing and the services supply chain, and before that, a few months earlier the King Salman International Complex for Maritime Industries and Services, a key project to complement the growth of the Saudi energy industry and contribute to the diversification objectives outlined by the vision. 

We also recognize the huge potential of SMEs, which is why the Vision set an initial target of moving their contribution to GDP from 20 percent, which is less than half of the industrial average, to 35 percent and the general authority for SMEs is implementing four main initiatives to deliver on the promise including setting up an entrepreneurship and incubation center and a number of venture capital funds.

In the area of petrochemicals, we’re targeting 3.5 percent year-on-year growth, supported by more refinery-integrated projects within the Kingdom including the well-publicized crude to chemical joint venture between Saudi Aramco and SABIC as well as the recent announcement of Total’s refinery in Jubail Satorp that will be also expanded to include a significant amount of chemicals.

In mining and minerals, the Kingdom is set to become the second largest phosphate producer globally and a top 10 aluminum producer.  Gold production will increase tenfold and we’re developing copper smelting.  By 2030, the mineral sector alone is expected to generate 250,000 new jobs, adding 67 billion (dollars) annually to the GDP.  Of course, all of this will be leveraged by our strong energy advantage to attract energy-intensive industries as well as industries enabled by advanced technologies.  At the same time, we will improve energy efficiency and ensure the competitiveness, growth, and profitability of targeted industries and products. 

And in the related field of sustainability, which is the subject of this week’s gathering, we are really seeing incredible progress.  I’ll be saying more about it this week but over the coming decade, liquids burning, which has been talked about a lot when addressing the Kingdom, liquids burning in utilities will be virtually eliminated – that’s about 600,000 barrels per day – as we switch to a more judicious use of our abundant, cleaner, cost competitive, and sustainable resources in solar, wind, and, of course, by doubling our production of natural gas, leading to significant reductions in our greenhouse gas emissions.

But we do not intend, of course, to relinquish our preeminence position in energy upstream.  In fact, we’re reinforcing it with substantial long-term investments and the Kingdom will maintain its policy of sufficient spare capacity to stabilize global oil markets. 

A few days ago, I was delighted to announce an upward revision of the Kingdom’s oil and gas reserves following independent certification by a third-party consultant.  It confirms the high standards of professionalism by Saudi Aramco and governance by the ministry of energy and transparency by the Saudi government and it’s why we believe Saudi Aramco is, indeed, the world’s most valuable company and the world’s most important.

This bodes well for the company’s bond plans, which will be launched in a few months ahead of its acquisition of SABIC shares from the PIF, and, of course, the IPO in the not too distant future. 

For our part in government, we are doing all we can to make it as attractive, profitable, and easy to do business for those who locate in the Kingdom with a record number of business-friendly regulations and incentives to strengthen investor confidence.  In return, companies that do invest are winning increasingly larger shares of business in those enormous and profitable sectors that I talked about. 

So a lot of early progress, ladies and gentlemen, has been made in multiple fronts.  There will undoubtedly be challenges and indeed I knowledge there will be hiccups along the way because the scale and complexity of what we are doing is truly unprecedented on the global stage.

But my message to you is that the vision is steadily and clearly moving from the planning to the implementation phase, and the investment opportunities being unleashed are enormously attractive across virtually all sectors and services.

Turning briefly to the oil market, I am concerned about recent volatility and prevailing negative sentiment, but the present fundamentals are clearly trending in the right direction.  Demand growth, we have to be reminded, remains healthy with forecasts not only for 2019 but for the extended period beyond that to be in the 1.3 to 1.5 million barrels range while supply is starting to reflect already, two weeks into the new year, the impact of our decisions in the fourth quarter.

In fact, while the 1.2 million cut came into effect only on January 1, secondary sources suggest that OPEC production in December was already more than 600,000 barrels per day lower than November, the bulk of which is due to our preemptive actions.  In fact, I can tell you that we in Saudi Arabia went beyond our commitment and have lowered both production and exports over the last couple of months.  And as the new 1.2 million barrel cut materializes, we should start to see the impact positively reflected in inventories, which is of course the key metric for all of us to watch.

Looking at longer term fundamentals, the healthy demand growth rate of the past several years is projected to continue into the future as I mentioned.  However, global economic growth and prosperity will be predicated on the presence of a healthy and vibrant oil industry operating in an environment which attracts the necessary investments that will ensure an equal amount of affordable and accessible oil supplies made available in a reliable and timely manner.  Saudi Arabia is committed to representing a central part of that reliable supply as it has always done, and we will continue, as I mentioned, investing in our industry to do so.

Shifting to shale oil, I believe that it will not sustainably depress the market.  For one thing, despite its healthy growth, it can’t, by itself, meet the combined requirements of demand growth and the natural decline of oil fields around the world, particularly as I just mentioned with long-term investment still lagging in most parts of the world while the emphasis on short-cycle projects still predominates.

Furthermore, the growth of shale oil is highly dependent on stability and balance in the market.  Healthy shale oil growth and a weak oil market are a contradiction in terms.  Instead, market sentiment today is being shaped by undue concerns about demand, underestimation of the impact of agreed supply cuts, and a misreading of the supply-demand trends which causes counterfactual actions by financial players.  In other words, if we look beyond the noise of weekly data and vibrations in the market, and the speculators’ herd-like behavior, I remain convinced that we are on the right track and that the oil market will quickly return to balance.  If we find that more needs to be done, we will do so in unison with our OPEC and un-OPEC partners where collaboration has been proven to work, and it will be essential going forward.

Ladies and gentlemen, I will leave it here, and I look forward to our dialogue and taking on your questions.  Thank you.  (Applause.)

ANNOUNCER:  Ladies and gentlemen, please welcome back to the stage Atlantic Council president and CEO, Mr. Frederick Kempe.  (Applause.)

KEMPE: Thank you. So Mr. Minister, we have a tight 15 minutes, so I’m going to jump right into the questions.  And thank you so much for that – for that powerful and very strong and important statement.

Let me pick up where you ended, which is the markets, and you made a very strong statement about how you were thinking that there is a misreading, and that in a way the markets have seen things wrong.  Could you expand on that a little bit because the prices have been weak in the wake of the OPEC-Plus agreement, and is it really for the reasons you are talking about?  Or was it that the agreement was inadequate itself in balancing the market, or perhaps that some of the participants have been weaker in their commitment than you had anticipated?

MIN. AL-FALIH:  When we started in 2017, there were also similar doubts, and it took some time to – you know, to get the numbers to speak for themselves and for people to see that our conformity level within the OPEC-Plus were not only meeting the 100 percent, but ultimately we had to face the problem of overconforming and delivering close to 150 percent, and we had to adjust to that in the second half of last year.

So I think skepticism of the market, to me, is unjustified given the fact that we have delivered once the same group of countries when needed.  The other, you know, somewhat surprising fact is that if you look at the fundamentals, although there have been – you know, the last three or four months we have seen the trend of rising inventory, the absolute number that we have to bring down is significantly less than what we faced at the end of 2016.  We’re talking – if my memory serves me correctly – in the neighborhood of 40 million barrels of inventories above the five-year average that we need to reverse, and given the 1.2 million barrel cut, given the potential disruptions elsewhere, impact of sanctions that we remain to see on a sustained basis, I just can’t see it taking a long time.  While two years ago when we were coming into the first OPEC-Plus agreement, we had really a very high mountain to climb, and we still managed to do it in a relatively, you know, reasonable period of time.

So I believe – like I said in my prepared remarks – it will not be long before the key metric of inventories correct this sentiment – bearish sentiment that has prevailed.  I think it has turned already the last two weeks on the back of the cuts that we pre-delivered in December and January.  I mentioned already that for us – at least Saudi Arabia – February will even be a steeper, you know, and we will remain – January and February were below our commitment to the OPEC-Plus group.  We did it in the beginning of 2017, and we’re doing it again.  And I am confident that my colleagues – I believe His Excellency Minister Mazrouei also delivered a strong statement here about the Emirates more or less doing the same thing.  These are voluntary, and I’m hoping the others will follow suit, and time will show that.

KEMPE: Yes. Thank you very much.  And thank you for your salute to Minister Mazrouei who played such an important role in his chairmanship of OPEC.

You talked about U.S. shale oil, and I have two questions there.  One of them is with shale oil reaching a new record of 8 million barrels a day by the end of 2018, U.S. crude oil closed the year at 11.7, becoming net oil exporter, first time since 1991, there are some skeptics that say OPEC-Plus is cutting just to make room for more U.S. shale oil, so that’s part of the question:  What do you think of that statement?  But second of all, are we learning more about the dynamic about what you do and how that affects shale oil, so where is the market sensitivity and how does that interact?

MIN. AL-FALIH:  Well, first of all, the U.S. is not the only country that turns from being net importer to exporter, or vice versa.  Many of the former OPEC members have gone the other way around.  So I don’t think – I’ve said it before, I don’t think it’s appropriate to focus on one country and one geography.  We have to look at the totality of world oil markets.

I am of a generation where I remember when the size of the market was in the 60 (million barrel) to 70 million barrel range and many people said the market will never exceed 90 (million barrels).  We’re at 100 (million barrels) and still growing at 1.3 (million barrels) to 1.5 (million barrels).  So, obviously, you need new sources of supply as countries – significant exporters like Indonesia at one point of time, Malaysia, Mexico, you know, turned down Venezuela from, you know, losing 2 million barrels.

I think the U.S. production is more than welcome.  The dynamics of U.S. production being dispersed and distributed among hundreds of companies and, really, without central guidance and management is challenging, not only in terms of making sure it’s profitable to the producers but it’s difficult to predict because you have to talk to so many of them and that is, indeed, a challenge to predict. 

But it’s a reality we have to accept and, in a way, welcome it because it will keep the world from facing the shortages.  We’ve seen the impact of oil prices rising from 40 (dollars), $50 in 2016 and ’17 to 80 (dollars) to 90 (dollars) a few months ago and how that created a lot of stress on some developing economies and, indeed, even consumers in the U.S.  So we know high oil prices are not healthy and U.S. shale and its flexibility and ability to respond quickly to market conditions and prices is a way to moderate the volatility. 

And I remind you, Fred, that this is exactly our objective.  We want to moderate volatility.  So I think we have to think of ourself working, in a way, in conjunction with the shale oil phenomena to keep the markets within a reasonable bound.  But I said in my remarks, you know, a downturn today would be very hurtful and would kill a lot of investment in the U.S. shale business, which is the last thing we want to see.  And, therefore, the action we have taken quickly in December of this year and that we’re seeing implementation as we speak is a lifeline to U.S. shale producers and I can tell you that many of them call me when they see that price trend going down and when they see investors starting to turn away and they say it’s time to do something.  Of course, they want us to do all the work.  They want to take the benefit.  But that’s – (laughter) – you know, that’s life.  (Laughter.)  Like I say, we’re looking not only at our own well-being and our own interests but, truly, we’re looking at global interest as well and a balanced, stable, less volatile oil market is in the interest of all.

KEMPE: So to put my former hat on as Wall Street Journal journalist of many years ago, could you – would you be willing in this audience to define reasonable bound, as you say you’d – keeping the prices in a reasonable bound?

MIN. AL-FALIH:  You know, I’ve been consistent and I’ve been able to avoid being trapped into – (laughter) – setting a price target or a price range.  But, you know, I exercise a lot, and I used to be a runner, and my body, I feel it when it’s time to stop.  You know, the knees start hurting, you know, that you’ve gone – you’ve gone a bit too far and when you feel lethargic, you know, it’s time to jump out of bed and put on your sneakers and go running.  And I think – I think – I think we get the vibes.  We get – we get the signal from the market.  And I can tell you that below 60 (dollars) – below 60 (dollars) now and in 2015-16, we were getting the signals from everywhere:  get your act together and do something.  We heard it from consumers, because if you recall in 2015-16 people were complaining about lack of demand, industrial demand from producing countries.  We were afraid at that time of negative interest rates, of deflation.  And the commodity markets were seen as one trigger, and of course oil is the key within the commodity markets.  And I can tell you that when we hit 86 (dollars) and people were predicting 100-plus (dollars), the signals we were getting also from global markets was that we needed to cool the market and – which we did, on both sides.

I think what we need to do is narrow the range.  I mean, this range of volatility is – I’m not happy with it.  We need to do – we need to do better.  And the more producers that work with us, the better off we’re able.  And the more responsive the producer is in terms of the speed of their reaction, the more successful will be this effort to reduce volatility.

KEMPE: Thank you very much, and also for that wonderful image of an unbalanced market as a knee injury. (Laughter.)  Having had my knee replaced, I don’t balance markets so well.

So let me then go to something else you said with the big news that hit this week, and that was the audit of your oil reserves.  It came in at 268.5 billion barrels, more than previously understood, so congratulations.  More specifically, what can that mean for your oil strategy going forward?  What more specifically do you think that says about the value of Saudi Aramco and your first international bond issuance this year?

MIN. AL-FALIH:  Well, this is three questions in one, so.  (Laughs.)

I think more important than the fact that we had 2.2 billion barrels of oil reserves added and almost 10 percent of our gas reserves also were increased, I think it was a testimony to the process that underlies the booking of these reserves.  This is – this is a process that essentially has happened over 80 years.  So Saudi Aramco has built this mechanism under the ministry’s close guidance and supervision, with appropriate checks and balances.  And we have shown over many decades, since the ’80s, that Saudi Aramco, plus or minus 2 billion barrels a year, has been able to replace its production.

So I just want you to think that there is no reason within the next two decades, for example, to think that we can’t continue to do that.  If we’ve done it successfully for so many decades, I think you can also project not only certify that we have 288 billion (barrels) within the Kingdom – 268 billion (barrels) within the Kingdom, but that the process of producing 4 billion barrels a year and through exploration, development, assessment of the size of the reserves, be able to continuously add to it and almost replace it completely is likely to continue.  And if it doesn’t continue, we’ll be the first one to show it.  So there is no reason for us to care whether our reserves are 268 (billion barrels) or 248 (billion barrels).  We will be, you know, very willing to let the numbers be what they are.  So that’s one thing.

I think the other thing they tell you in addition to what we just talked about, shale and the fact that other regions and other basins and for all we know the land we’re on here in the Emirates also has plenty of oil supply.  So all of the previous concerns that we have to rush into replacement of oil and gas with other sources because we’re reaching a period where it will deplete are unfounded.  God has given us a planet that has a lot of resources, a lot of oil and a lot of gas, and we should use it judiciously and we should use it efficiently in an environmentally acceptable way.

And for us in the Kingdom, I think it allows us to pace ourself and say we’re going to be in the business of using this resource longer than we have, which is since the – since the 1930s.  So how do we do this?  We’re going to do it by shifting a lot from oil as a fuel to oil as a material feedstock.  You will be seeing over the next few years and indeed in the next few decades turning not only our gas, but our liquid fuels into the key material for manufacturing within the Kingdom and around the world.  You will see millions of barrels of oil going into chemicals.  That has technical and commercial challenges today, especially with the advent of U.S. shale, to compete with low-cost ethane.  But we believe if there is a will there is a way, and we’ll be investing in technology.  Indeed, we have invested in a lot of technology that turn crude oil to chemicals, bypassing a lot of the refining processes.  So that’s going to do that.

That takes me into the last part of your question, which is the SABIC-Aramco transaction.  This is not just about financial, you know, benefits, because it will have many financial benefit.  The companies are geographically close by, so there are a lot of synergies and integration opportunities of reducing overheads and unifying marketing channels and allowing a lot to go on between the two companies.  But it will – has also a very strong industrial logic because it will allow the combination of Aramco, which is one of the largest spenders and producers of intellectual capital today, with their research with SABIC, who is also one of the largest in the chemical space, to work together to achieve what I just mentioned:  turning more of our hydrocarbons into the most advanced materials for manufacturing, from aerospace to cars to construction.

I see, inshallah, within my lifetime that a lot of structural steel will be replaced with composites and materials made out of hydrocarbons.  Cars, which need to be lighter and more durable, will also – will also be the same.  And of course, aerospace is already moving in that direction.  But as you think of 9 billion people who need to consume more, and more of them are in the middle class, I think – I think the need to do that is beneficial, both from an economic as well as from human prosperity standpoint.  And of course, it is environmentally sound to turn the oil and gas we have into materials rather than burn it into fuel and emit it into the atmosphere.

KEMPE: Thank you. So in the last two minutes we have here – and we’ve really run out of time, I’m afraid, although I’m sure everyone in the audience could listen to you all day on these issues, and that was a really interesting vision of the future uses of oil – put on you Vision hat for these last two minutes.  As you’re looking forward and you’ve lived through so much of energy change in the energy world, what are you looking at that excites you most in the developments in the energy world, say 10, 20 years out?  What excites you the most?  And then what worries you – biggest concern, biggest opportunity?

MIN. AL-FALIH:  I think – I think what excites me – what excites me the most is renewables.  And it excites, you know, the entire leadership of the Kingdom, spearheaded by His Royal Highness, the Crown Prince.  I mean, it’s no secret that he sees renewables as the future of energy, especially in electricity generation.  And he has set a very ambitious target – we’ll be talking about it – within Sustainability Week.  I talked about it last week within he Kingdom – in the Kingdom when we announced our new energy mix.

So solar really is unbound in terms of it potential.  Coupling it with breakthroughs in storage is the holy grail, so to speak, and we’re going to be pursuing this.  And hopefully I will live long enough to see – to see the ability of countries like Saudi Arabia with abundant solar energy to go 100 percent solar in our electricity generation.  Until then we’re going to be relying on a lot of gas, which is the least – which is the least emitting.  And then beyond that we will use oil and gas for a longer period for the uses I just – I just illustrated.  So I think that’s the most exciting thing.

Another thing that I see as potentially game changing is doing more at scale of turning carbon into an input into manufacturing.  And we’re doing a lot of this in the Kingdom using CO2 to manufacture materials like fertilizers, like methanol, and so on and so forth.  So putting it in cement, putting it – so there is a lot of research.  So material that is being seen today as harmful to the climate, turning it into a building block for society is something that has a lot of potential.  Turning CO2 into an enabler for producing oil, we’re injecting CO2 into reservoirs today to produce oil.  And I think we’ll be doing more of this and want to do it collaboratively.  And we want it to be part of the solution to climate change.

KEMPE: And concern. What keeps you up at night?

MIN. AL-FALIH:  Well, I’ve said before that I really don’t have a problem sleeping at night.  My biggest problem is waking up in the morning.  (Laughter.)  I like my sleep.  If I sound slow this morning, it is because I overslept, I will admit.  (Laughter.)

But I think – I think, you know, as a global – as a global citizen, not necessarily as an – as an energy professional and leader, what bothers me most is the tension that happens on the geopolitical stage.  I mean, there are conflicts that are absolutely unnecessary and unneeded.  You look in the Middle East, you look at what’s happening in Syria, you look at what’s happening in Yemen, you look at what happened in Iraq, you look at what’s happening in Libya, these are great countries with wonderful people that are suffering because of ill-intentioned elements that are sowing the seeds of chaos in our society.  And I hope that well – you know, that the good part of society and the great leaders that we have here in the region and around the world will prevail and bring them peace and prosperity, because there is so much good that we could do in innovation and technology and investment in working together around the world.

And certainly, there is a lot of positive energy.  We have talked about it in Vision 2030.  We’ve seen it here in the Emirates for many, many years of focusing on what good we can do rather than what bad we can do to our neighbors.  And I hope that the Atlantic Council in conducting this forum and talking about how energy can be an enabler for peace and prosperity and progress of humankind is the way forward, and that will allow me to sleep even more.  (Laughter, applause.)

KEMPE: What a wonderful ending – spot to end on this. Thank you for getting up this morning to be with us.

MIN. AL-FALIH:  (Laughs.)

KEMPE: And I’d ask everyone to stay in your seats. We’re going to take a quick photo here and then we’re moving straight into our next session, which is an innovation presentation on zero-emissions fossil fuels by Bill Brown.

So thank you so much, Mr. Minister.  That was excellent.

MIN. AL-FALIH:  Thank you.  Thank you, Fred.  (Applause.)


Looking Ahead: The Future of the Vienna Alliance


H.E. Mohammed Barkindo, Secretary General, Organization of the Petroleum Exporting Countries

H.E. Suhail Al Mazrouei, Minister of Energy and Industry, United Arab Emirates



Helima Croft, Managing Director and Global Head of Commodity Strategy, Global Research, RBC Capital Markets

Closing Remarks: Frederick Kempe, President and CEO, Atlantic Council

Time:  6:05 p.m. Local

Date:  Sunday, January 13, 2019

HELIMA CROFT:  Thank you, Randy.  And thank you all for staying for this panel.  I am an OPEC watcher as my profession.  And so I can say that, not to offend anyone, but I believe we have saved the best for last. 

When we had the first Global Energy Forum two years ago, it was just weeks after the Joint Declaration of Cooperation was announced.  This was basically the first forum where the OPEC ministers brought the message about the agreement to, I would say, a largely skeptical market.  Now we’re two years in and we get a health check, a gut check, on where this agreement stands.  What I like about this forum is, as Randy Bell said, experts have come in from around the world.  I mean, you are the expert community.  But there is a subset here today.  It’s the OPEC watchers that sit in the basement – the basement-dwellers at the secretariat who twice a year eat all the cookies, eat all the sausages, and cover in minute detail everything these ministers say.  They are sitting in the front row.  I am expecting you to ask questions.

So, without further ado, let me introduce the leadership of OPEC for 2018, UAE’s Minister of Energy and Industry Suhail Al Mazrouei.  (Applause.)  And a man who has been there from the beginning of the Joint Declaration of Cooperation, I call him the chief oil diplomat, his excellency Secretary-General Mohammed Barkindo.  (Applause.)  So I’m going to ask a few questions, and then our excellent mic runners are going to come to you.  And if you don’t ask questions, I’m going to start calling some of you out.  (Laughter.) 

So without further ado, your excellencies, can you give us an assessment of 2018?  This seems like it’s been a very challenging year for OPEC.  There have been looming questions about the health of the global economy, because of fears about trade wars and slowdowns in demand, potentially.  There have been questions from Washington about, you know, OPEC, criticism of OPEC.  And we’ve had the fourth quarter, which was an extremely volatile quarter for prices.  So can you sort of look back on the year, talk about what your challenges were, your goals, and sort of give yourself a sort of grade for how the year went?  Minister?

H.E. MINISTER SUHAIL AL MAZROUEI:  Thank you.  Thank you, Helima.  And it’s great to see this crowd, even though we are in the evening of the second day.  So I think that’s a testimony that it’s working.  And so let’s go back to the same time last year.  Same time last year, we were exiting a year of a $53 average, a year of uncertainty on how OPEC and non-OPEC are going to continue in the second year, and is it going to be over when the mission is going to be accomplished?  Those are the main questions that we had last year when we met.

And the first six months of the year, we have demonstrated discipline, I think, both OPEC and in non-OPEC.  And we stayed on course to deliver the promise.  So when we met in June, the first six months of the year we took care of the remainder of the problem, which was the imbalance in the market.  We achieved that.  I’m not – so I was – I’m fully happy with the first half of the year.

The second half of the year, I was not happy with the – with the fluctuation, with the – that we have seen in the market.  But when I look at the other markets as well, we had a shake in almost all of the indices on plays of the geopolitics, sanctions, a combination of the potential of tension between China and the U.S. going to a trade war and all of the political problems.  I think the market was not steady and it was not good for us as producers, neither for the consumers.  Lots of rumors, but I think that that drove us when we met in Abu Dhabi during ADIPEC to change the strategy.

So I think the fact that is the group of OPEC and non-OPEC working, I think the group are working.  (If we ?) have to increase production we will.  If we have to reduce production we will.  The objective, the target, is meeting that, meeting that balance of the market, trying to stay on course on maintaining the five-years’ average.  I think that’s what we would require for a healthy economy and for the consuming nations to prosper and develop.

CROFT: Secretary General?

H.E. SECRETARY GENERAL MOHAMMED BARKINDO:  Thank you.  Thank you, Helima, and good evening, distinguished delegates, ladies and gentlemen.

Let me also join His Excellency Suhail Al Mazrouei in once again congratulating the Atlantic Council for establishing this forum within such a relatively short time to be THE forum to attend early in the year to talk of the outgoing year, and then also to benefit from highly esteemed and resourceful persons like my friend Amos, my brother Dr. Sun and Adam and Jennifer and many others that I met.  We are just coming from the Christmas and new year break, so there’s no better place to converge than in Abu Dhabi, and we are very glad to be here.  I’ve had several meetings today, extremely beneficial.

Now, your question is quite apt on 2018, but I must say I know my brother Suhail Al Mazrouei is very humble and sometimes shy.  But beginning in 2018, as president of the OPEC conference, he feted what the Oxford Dictionary defines as statesmanship as the skillful, if I correctly remember my English language, as a skillful management of statecraft.  I think he has demonstrated that throughout 2018, leading the pack not only within OPEC, but within non-OPEC, to navigate ourselves through this eventful year.

Early in Q2, no less an institution than the IAEA, came out with a verdict of mission accomplished, that we should just pause and probably walk away and congratulate ourselves.  But I remember he said no, we should not beat our chest, we should not declare mission accomplished, we have a job to do.  The Declaration of Cooperation, the decision to adjust the markets by 1.8 million barrels a day must continue until we’re able to help the market to bring down inventories to the five-year average that we chose for ourselves way back in 2016 as the metrics to use in rebalancing the market.

And then we came to June, and the numbers showed that we had overshot our target, that the inventories had actually fallen below the five-year average, I think by probably 32 or million barrels.  And for – if you stay back to think what happened from January 2017 when we started implementing this deal – to use the fashionable word in Washington these days is about deals – (laughter) – it took us – it took us 18 months to June 2018 – 18 months focusing on helping the market to bring down the inventories to the five-year average.  When we found that we had overshot, to reverse ourselves was a complex decision, and in terms of implementing it, was also complex.  But probably observers and analysts will think that it’s just about mathematics or arithmetic.  It’s much more than that because everything had to reverse.  As I told some colleagues this morning, it’s like reversing a VLCC, you know.  If you ask shippers they will tell you how difficult it is to reverse a VLCC.  And then we did that.

Now one of the lessons I have learned personally – and the same thing, I think, with Suhail, and I got this this morning in my roundtable with the financial guys – is that in turning that VLCC in June, beginning with St. Petersburg – our meeting in St. Petersburg, it was not done in a very orderly manner, so the market started speculating.  So this is one of the lessons I have learned today at Atlantic Council.

And then coming down to December, when we are faced with the expiration of the implementation of the 1.8 (million barrels) and then we were facing also bearish focus for 2019 in terms of cooling down of the global economy as confirmed by the IMA, the Fed, and other institutions, and again search in non-OPEC supply, when we started the year in January, I think our focus was probably about 1.5 or so million barrels a day increase.  By December we came up with a figure of nearly 2.5 million barrels non-OPEC supply, most of that of course from the shale basis.  The global economy was cooling down, demand was being revised down, so it was a very contentious situation, and thanks to our president of the conference, Al Mazrouei, working with the Russian – his Russian counterpart Novak and others to try to get us on course because, from history, every time we move from one level to another, it becomes so contentious and so complex, so you need a steady hand, leadership, and I think we’re extremely lucky to have Suhail leading the pack in 2018.

Thank you, Excellency.

CROFT: Thank you.

SEC. GEN. BARKINDO:  Thank you.

CROFT: Well, I wanted to talk with you about the actual 1.2 million barrel a day cut. There were some in the market that said it was insufficient because of concerns about slowdown in demand, particularly concerns about China; that you needed to do more because of the demand outlook.  And then there were others who said, well, this is just giving a lifeline to shale, and we’re going to have more explosive shale growth that will overwhelm the agreement.

So how would you respond to people who basically say demand is weak, shale is going to grow?  Is this agreement – is the 1.2 million barrels really going to be effective?

MIN. AL MAZROUEI:  I think – first of all, I would like to thank Mohammed, and I think he gave me more than what I deserved.  Without a capable secretariat and secretary general, and two of my colleagues who were running the JMMC, we will not achieve what we have achieved in 2018.  But I think we don’t listen, first of all, to those who are either very pessimistic or very optimistic as well.  I mean, if we are to listen to them, we wouldn’t do – we wouldn’t have been doing what we have been doing for the past – since the beginning of the year. 

But I think OPEC have changed, especially within the past two years.  We have become more open, more inclusive.  We take data from all sources.  We listen to analysts.  We listen to heads of state.  Sometimes we get criticized – well, why are we listening or we should – should we react or not.  But we do listen, and I think part of the opening up to all sources of information, integrating with the IEA, the EIA, the IEF, and all.  So when we analyze the market and what is the requirement of the adjustment, it’s not done in isolation of the views of others.  So we look at all of the independent sources, what is their expectation of the growth demand – of the growth and demand, and some people are very pessimistic about 2019.  I am not. 

I don’t think we are going to see a financial crisis like some people are saying.  I think if we do – if every market have someone who is doing what we are doing I think we can always balance, adjust, and grow with a reasonable growth.  A very high growth and demand is not sustainable.  We know that.  But what we are planning for 2019 is even if there is a slowdown we’re ready for it.  We have planned for it, and I think 1.2 (million barrels) is enough. 

The question was should we do it for longer than six months, and I think we had a long debate because there are concerns that there will be more shortage on supply rather than us around the rest of the world.  And as you know, there are two countries which are – which they used to be major producers are not included in the deal and I think there could be some reduction from those two countries which is not included. 

So I don’t agree with the fact that we should do more.  I think 1.2 (million barrels) is enough.  Just wait for a quarter and then you will see that we are right again.

CROFT: Secretary General.

SEC. GEN. BARKINDO:  The decision, as complex as it was, I can confirm to you was data driven.  The data was very clear in terms of the demand projection for 2019 when we revised down from about 1.5 (million barrels) to 1.3 (million barrels) in December, and we also revised upwards the non-OPEC supply to about 2.2 million barrels a day.  And according to our November monthly, if you recall, the delta in terms of the balance was in the region of about 1.1 (million barrels) to 1.2 (million barrels) and, hence, the decision for OPEC member countries to contribute 800,000 barrels a day and then about 400(,000) or so from non-OPEC.  And that’s – as Suhail has just said, we are confident that with a high level of conformity by all the participating countries would be able to navigate through the four quarters and, on the average, have a balanced market for the year, which remains our principal objective.

CROFT: So, Secretary General, I’m going to stay with you because when we were here two years ago, as I mentioned, in the inaugural Global Energy Forum the agreement with non-OPEC was getting a lot of skepticism in the market. People were saying, how can you work with a country like Russia, which in the past had sort of been skeptical when asked about cooperation with OPEC.  People just did not believe in the market, that this agreement that was seen potentially as a shotgun marriage could last.  Could you talk about the status of the relationship with Russia?  Is this a relationship that’s built to last and what type of framework do you think it’s going to take going forward?

SEC. GEN. BARKINDO:  Yes, I recall two years ago the buzzword around the conference – the Atlantic Council conference was about this newfound love between ourselves and the Russian Federation.  I think the skepticism was more of a baggage of our history with the Russian Federation way back, when we had attempted before to strike some relationship with them, in particular, I think, 2008 during the global financial crisis, when it was apparent that we needed to be proactive in a big way to avoid a crash.  Russia showed up.  Unfortunately, they could not participate in the decision.  It turned out, if I recall, in – (inaudible) – in Algiers to be some fiasco.  And people sometimes hardly forget. 

And when we started this round, those of us who – especially some of us who witnessed the fiasco in Algiers, were very, very skeptical.  But times change.  And we have been able to bring them on board, and not only Russia but about 10 other producing countries from the non-OPEC.  And in this innovative organ of the JMMC, we were able to get the Russian Federation and Kuwait, and later Saudi Arabia, co-chairing.  They have been participating with us.  They have been implementing their own part of the – of the bargain.  I think we have come a long way since then.  And as Suhail has just mentioned, we are discussing now how to institutionalize this charter, of which the Russian Federation will continue to play a leadership role.

CROFT: Where is the charter, sir?

SEC. GEN. BARKINDO:  Well, the charter was – the draft charter was initialed.  I think we agreed, as we – as we mentioned after the ministerial meeting, that there is a three-months window.  So by end of March, we are expecting to finalize it.  Hamad and the secretariat, they are following up with the different countries.  I don’t think it was an issue of the charter itself, but the fact that some countries, they would require ministry of foreign affairs to endorse a charter.  Some others, they would have to take it to a parliament.  But in general, every country was comfortable.  And we have taken every comment that we received from every individual country.

I think there was a misunderstanding of the charter.  People are thinking:  Is this going to be another OPEC?  Or is – OPEC is expanding?  And I don’t think that is the interest for the – or the intention of the – of the charter.  The charter is rather a forum that makes OPEC and non-OPEC work together.  It’s similar to the structure that we have today.  But I think everyone, including Russia, are keen to continue working together.  The OPEC, as I – as I mentioned, have changed.  We’re not going to do things naively, like before, alone.  We are going to work with the rest of the producers.  And we will do our share.  But we are not ready to cut like what we used to cut in the past, formerly in barrels, of 5 million barrels, to just adjust for the market.

And I think – I think the fact that this is understood by all of the countries that have joined us, and that what made this agreement and the conformity level from all countries this time, since we started two years ago, different than the history.  If we just trusted the history, we wouldn’t have been doing the deal that we have done.

CROFT: Now, I’m just about to open it up to questions. But the final one from me is how would you respond to your critics?  What do they get wrong about OPEC?

SEC. GEN. BARKINDO:  I don’t know.  There is – there is – I think what they got wrong is they think of the beginning, and they think nothing have changed.  Russia have changed.  We have changed.  I think the producers from the United States have changed as well.  And no one was expecting that the Canadian producers in Alberta would cut production.  It happened.  When – people now, and investors, are looking.  So we are moving from an environment where only companies – or major companies are controlling the production to a market where so many investors are investing their money.  We don’t want them to lose their money.  So now I think – I think OPEC is not a cartel, OPEC is a concerned group of producers who are going to work with the consumers to ensure that they supply them with the right – with the right – with the right crude and ensure it will flow for years and years.  The issue, if we’re not doing it right and if it’s in our favor and the price is too high, then we will – it will not be sustainable. 

And if it is the other way around, if the price is so low, investors will quit – and it’s not countries, as I said, investing, it’s investors who are investing the money – they will quit and we will have a shortage in the market.  And we cannot afford that.

CROFT: Secretary General, how would you respond? What would a world without OPEC look like?

SEC. GEN. BARKINDO:  Well, maybe you should pose this question to somebody sitting there near you, whom we have heard from the grapevine is using his faculty in KAPSARC to undertake this very important – very important study.  (Laughter.)  So Adam Sieminski, I think, is the professor who should tell us at least the preliminary findings of his study what the world would be without OPEC.

Adam, would you like to take the floor?

CROFT: Actually, we’ll –

SEC. GEN. BARKINDO:  Yeah?  He needs a microphone.

CROFT: The man who needs no introduction. With that, Adam Sieminski, you’re on the hot seat.

ADAM SIEMINSKI, PRESIDENT KING ABDULLAH PETROLEUM STUDIES & RESEARCH CENTER  I’ll make this very short.  We would have much greater volatility in oil prices.  And this is not a good thing for the global economy.  What we are able to show in a peer-reviewed academic study using very solid economic assumptions was that existence of OPEC’s spare capacity and the use of that spare capacity reduces the volatility of oil prices and provides a benefit to the global economy that could be as high as $200 billion per year.


SEC. GEN. BARKINDO:  Maybe we should clap for that.  (Laughter.)  (Applause.)

SIEMINSKI: Thank you.

CROFT: Now I’ve become the mic runner, so let’s go to questions. Actually, I am going to call out Hadley Gamble from CNBC, the media partner of the Global Energy Forum.

So, Hadley, I’m going to bring the mic over to you.

Q:  You definitely saved the best for last, I have to say.  Hadley Gamble, CNBC.

Gentlemen, I have to ask you, we’re having a lot of conversations obviously about what you consider a great success in terms of this OPEC-plus agreement and the relationship with Russia and how important, as you say, Mr. Barkindo, that times are changing are we have to continue the conversation now, we have to work in a new narrative.  Many people would say, of course, the fight for market share, that that ship has sailed.  Can you shed some light, both of you, in terms of your conversations with other producers – shale producers, with those in the United States, particularly within the Trump administration – as you work to balance the markets?  What is that going to look like going forward?  Because, as you say, times have changed and that conversation actually has to happen.

MIN. AL-MAZROUEI:  Well, I will – I will have a crack at that and then Mohammed can carry on.  Because Mohammed, I think – a fair word on Mohammed that he has been very engaging with everyone.  He talked to everyone, he engaged with everyone, including the shale oil producers.

So we started, I think, two years ago engaging with them during the SEROIC (ph).  Of course, they brought their lawyers and everyone was – I think Helima was there.  (Chuckles.)  They were kind of – they wanted to talk, but at the same time they were scared that we are going to invite them to join OPEC or something.  (Laughter.)  But the talk was around collaboration on understanding the potential, what is coming, in order for us to balance the market.  It’s not a commercial talk at all.  And we’re not, I mean, expecting them to work with us or to share all of the data.  But I think we are living today in a world where data sharing would result in more planning. 

The shale oil producers are the main beneficiaries of the lack of fluctuation, I mean the fluctuation in the market.  If it goes to $35 or $40, especially today with them trucking some of that production, I think those producers, or those investors, are losing money.  We don’t want that to happen.  We would like in OPEC that those shale producers continue producing.  We need them.  Actually, the economy of the world cannot afford not having them.  So we don’t see them as competitors.  I think we see them as a complementing.  But there is a risk if they overdo it – like they did in the past.  I mean, it will take two years to adjust if there is a huge overproduction, like what we have seen in the past.  And it took us almost 18 months, like Mohammed said, to correct the market.  We don’t want to see 2014 and 2015, and ’16 again.  We would like to avoid it as much as possible.

Therefore, we see a need for us to compare notes, see the production, and any breakthrough that they have in the shale oil production, we benefit from as well.  Our production costs have reduced significantly because of the success of the shale oil.  So I think – I think we will continue the dialogue.  SEROIC (ph) probably is a good venue.  So we are always welcoming them.  And we welcome them.  And we invite them always to attend whenever we have a conference in Vienna.

CROFT: Secretary General, anything to add?

SEC. GEN. BARKINDO:  It was an icebreaking meeting, which I think one of the networks called it bread breaking.  When we initiated it, I was not confident that they would even respond to our invitation, because of the antitrust encumbrances and so on.  But surprisingly, they came up – they showed up.  And in large numbers they came.  And it was a very joyful evening, when one of the chiefs from Continental showed up.  And even the rest of his colleagues were surprised that he showed up.  Harold, are you sure you’re in the right hall?  (Laughter.)  Are you sure – are you sure you are at the right meeting?  And everybody was clapping when he came in.  And then he looked at me.  He said:  Hi, Mr. OPEC.  (Laughter.)  I said:  Hi, Mr. Continental.  (Laughter.)

And his colleagues selected him – since they have no group – selected him to be their chairman that evening.  So he should sit across me and he should represent them in the negotiations.  So it was really fun.  It was bread breaking.  And we had very open and frank discussions.  We share with them our data, and they shared with us their experience.  And they were the ones who told us about his hundred or so companies that had folded or filed for bankruptcy as a result of the downturn.  And they confessed to us in that room, all of them were affected.  They had slashed their CAPEX, they had slashed their workforce, and so on.  And they – in the presence of the antitrust lawyer – he told us that we in OPEC saved them.  We saved the industry and we saved the independent producers in the basins.  That without what we did in December of 2016 it would have been worse than a bloodbath.

And secondly, they also welcomed this icebreaking, bread breaking meeting.  And they agreed with us that we are all in the same boat.  We belong to the same industry.  And that we should continue.  They were the ones who asked us to continue this dialogue with them.  So I think it’s an important step.  We have broken this barrier, just like we did with the financial community as well.  We went to the city, New York, and we met with the financial players, the big hedge funds.  Their role in the evolution of the market continues to grow.  And we have been working in silos.  We sit down in the secretariat as basically supply-demand analysts that we are – oblivious of what is happening around us.  And gradually, we are seeing that these guys are the ones dictating the pace of movements in the market. 

So we had to respond to the vision of the ministers in the conference that, look, hey, it’s now time we have to come out of our comfort zones in the secretariat and reach out to these key, important players, be they the shale producers in the basins, the short-cycle players, be they the financial markets. 

We have seen in Q4 – this Q4 that we are talking about – how the financial markets impacted on the decision that we took.  The decision was the best decision that we could take –1.2 million – that most people in Vienna did not give us any chance.  We were able to pull through thanks to the leadership of Suhail, who had worked tirelessly with the ministers to really come to the decision.  But because we were not able to communicate this decision very well, particularly to the financial markets, who had literally taken over the market in Q4, we got a severe beating.

So we have also learned that now and as feedback from Atlantic Council in our meetings today, so we are taking note.  We will do much better next time.

CROFT: Well, I have been told we have time for about one more question, and so I will go to the gentleman right in front.

Q:  OK, this is a question to Suhail, but before the question I would like to congratulate His Excellency for outstanding year in leading OPEC.

And the question is about the advice to the new president in order for him and to OPEC to excel.  (Applause.)

CROFT: Excellent question.

SEC. GEN. BARKINDO:  Very good question.

MIN. AL MAZROUEI:  Well, I think – I think the – there is first of all a system, and we – when we met here in Abu Dhabi, we had – Mohammed and I had a very candid and open talk with His Excellency.  First of all, even though the minister is a general, but he is a very kind and a very nice person, I enjoyed knowing him better every time he comes to Abu Dhabi and we spend quality time understanding the pressure that he is in in his country.  Venezuela have lost huge production, and I think that one of the reasons that Venezuela is out of the deal of cutting production, along with Iran and Libya – (inaudible, background noise).

So I am not – I am not worried.  I think there is a structure, the JMMC.  My advice to him, first of all, keep the JMMC, so the JMMC is continuing the work. The two capable chairs of the JMMC should not be changed.  Those are the two largest producers.  The chemistry between them, they understand each other, they trust each other, so the fact that we should not – we should change the other members if we want, but not the two chairs of the JMMC.  So that’s – that was the advice we give him, and the fact that – to consult with Mohammed and the secretariat.  Mohammed come up with huge experience.  He understand OPEC much more than me and much more than any minister within OPEC.  He’d been there for – in different capacities. So Mohammed carries wisdom, carries a nice personality, and I think he’d been – he just came from Venezuela, attending the inaugural of the new – of the president, Maduro.

And so talking to the major producers, keeping the JMMC, staying course, and he can, I think, deliver if he is doing that.  And I think he agreed.  And even the president of the country – according to what I hear from Mohammed – is also keen on those advices that we give.

I don’t know, Mohammed, if you want to add to this.

SEC. GEN. BARKINDO:  No, quite correct, Your Excellency.  Minister Manuel Quevedo is a very capable person, an outstanding general who has joined government like other generals in DC, and so on.  He has probably more staying power than some of those generals that quit in D.C.  I just had a round of meetings with him in Caracas in preparation for his tenure as president of the conference and we had very fruitful, very productive meetings.  He is fully aligned with the advice that the president of 2018 has given, and so also is his president.  President Nicolas Maduro, is very, very appreciative of the presidency of Suhail Al Mazrouei in 2018, and he’s instructed Manuel Quevedo and my presidents to make sure that he follows his footsteps and walk with all the other ministers closely to ensure that we build on what we have been able to achieve. 

So we are comfortable that this team will continue and this alliance with our non-OPEC partners will be institutionalized, will remove that element of uncertainty very, very soon, and 2019 will also be a balanced and successful year for our industry.

CROFT: Well, I think that is an excellent way to end what I think has been an outstanding discussion and a fantastic way to close this forum.

Secretary General, thank you so much for your contributions to the global energy system.  Thank you so much for being such an outstanding closer of the conference.  Now I’d like to invite Atlantic Council President and CEO Fred Kempe to the stage.  I would like to just say one more thing before you come up. 

In my opening, I paid tribute to you as a diplomat, Secretary General Barkindo.  I did not, Minister Mazrouei, pay tribute to the fact that at the last OPEC meeting – the last one of your presidency – when you walked in a bunch of the financial analysts broke into applause.  And you may have thought we were breaking into applause because the meeting had run over by a day.  We broke into applause because we were so appreciative of how gracious, how accessible, and how willing you have been as OPEC president to engage with the financial services community. 

So I thank you.  I thank you for what you have done in Abu Dhabi to turn this into, I would argue, the preeminent forum for dialogue about a whole host of issues in energy and national security.  So thank you as well.

MIN. AL MAZROUEI:  A pleasure.  Thank you.  (Applause.)

CROFT: And over to you, Fred Kempe.

FREDERICK KEMPE:  First of all, how about a round of applause for Helima?

CROFT: Thank you. (Applause.)

KEMPE: And to be so praised by a financial analyst, you know, is not easy. So first of all, good evening.  We’re at the end.  As we close out this conference, I want to thank you for spending – for those of you who were the off-record sessions and seminars and workshops three days with us.  The issues we grappled with, from the future of Vienna Alliance to Oil and Gas 4.0, the imperative of decarbonization, the future of nuclear energy, and more, all figure centrally in our shared energy and geopolitical future. 

We decided to focus on a region this time – I think it worked out well – East and Southeast Asia – and it’s here that so many energy and economic trends will have their greatest impact.  If there’s one thing we all take away from the conference I hope that’s the technological landscape is changing at an unprecedented rate.  That came up everywhere.  And these changes are creating more choices, more options, in the energy system than ever before in a competitive landscape that changes constantly. 

The choices – the energy choices in front of us – from gas to renewables to nuclear power are driving diversification in companies and countries.  I think part of the reason this was so lively and interactive is we all have so many questions about the future.  We’ve opened the door for big-bet technologies, strengthening energy security and reshaping the conversation around managing climate change.  I must say, coming here on – this week I never expected to hear the word hydrogen as often as I heard it in the last couple of days.  This morning His Excellency Al-Falih spoke to each of these elements, reminding us that while dynamism and volatility continue to introduce challenges in the energy system, the fungibility of that system has provided us with more solutions than ever before.  But the conversation also spoke to the liveliness of our discussions.  We heard him speak of prices under $60 as a stress fracture from running, at least there was a comparison to the pain of going below that.  And we also heard something about his sleep habits.

In the next year, the Atlantic Council Global Energy Center will be using the discussions and insights gleaned from this year’s forum to guide our work, and that’s particularly important.  We don’t just convene.  We do the work and we hope to do the work with all of you, as Randy said earlier.  I personally hope that we can engage with you again here next year, but also in the meantime. 

So before I close and pass to Minister Mazrouei, I want to thank him.  You properly introduced him as a statesman and the definition of statesman.

So thank you so much.  It’s been an honor working with you this last year.  (Applause.)

MIN. AL-MAZROUEI:  Thank you.

KEMPE: Your team is amazing. Dr. Matar is amazing.  It’s an honor for us to work with all of you, with you and your team.

I also want to thank our partners at ADNOC and Mubadala, at Masdar.  This really is a dream team.  The talent assembled at these companies and at the top of these companies is really breathtaking.

I’d like to thank our knowledge partners at KAPSARC.

And, of course, the generous support of our platinum partner, Crescent Petroleum. 

And I see, Hamid, you’re still here.  Please pass our thanks to Majid.  (Applause.)

And from KAPSARC, Adam, thank you so much for being here.

And our official carrier, Etihad, and the rest of those who made the support possible.

And then before I pass to Minister Mazrouei, please, a big round of applause to everyone on the Atlantic Council team who brought all this together and to the hotel and everybody else who worked on this.  Thank you so much.  (Applause.)  It’s the best team in the business.  And if you think they’re not tired because they look so fresh, it’s just not right.  They are exhausted.  (Chuckles.)  But they put in – put in just a great work.  So thank you all.

With that, I want to turn to Minister Mazrouei to close our program.  Thank you all for being here.  (Applause.)

MIN. AL-MAZROUEI:  Thank you.  Thank you, Fred.

I would like first of all to echo Fred’s thanks to the sponsors and to the team.  I would call them one team, everyone who has worked day and night.  And I can assure you their worth.  The day we closed the last conference last year, so they started working from that day.  And they will continue working as of tomorrow, working until we see you again next year.  That team of capable young individuals, girls and boys, thank you very much.  You have done a great job.

And the second thing that I would like to close with is the fact that the need for such a dialogue to complement the technical discussion that we would have the remainder of the week, the talk about technologies, talk about how can we make life easier for the next generations, from the challenges that we have.  If we have challenges and environmental challenges, how can we make the oil and gas and other fossil fuel more environmentally friendly?

And I can tell you that there is a commitment from OPEC-producing nations to work with the consuming nations to make the hydrocarbon or the fossil fuel cleaner because we cannot do otherwise.  We would require this form of energy and we would always work to make it cleaner.  And I am very optimistic to see that technology has evolved, even in the past three to four years, on gas to save huge gas volumes in the electricity sector.  I didn’t understand the electricity sector.  I dived in it in the past four years as we put the strategy and we have learned that we need to do a changeover to the new – to the new CCGT.  They save 30 percent of the gas, which means cutting emissions by 40 percent or more.

UAE is committed to diversification of energy sources.  And this conference or this forum, ahead of the conference that we have on renewable energy, is the right venue to demonstrate what are we doing to the rest of the world and to learn from the – from the rest of the world what they have done.

I’m really proud of what Fred and his team have accomplished during the past two years and in this year.  I think it’s a success.  But I always challenge Fred that – I told him we need to improve next year.  Next year needs to be better than this year.  And we need to be – we will promise you that we will be more – we will focus more on specifics.  We will bring more talk about technologies, artificial intelligence and the things that are – that are shaping up our future.  And we will bring as well some young people to participate.

I think what we need to do, Fred, is to engage with more students from the universities to attend and invite them.  We have done that in other conferences.  So one of the improvements that we would like to do is to bring young people.

And to all of the partners, please bring those young individuals.  If you are in the media, bring those young analysts and young reporters.  It’s good for them to – you’re young.  (Laughter.)  Everyone is young here.  I’m not talking about you, I’m talking about the – I’m talking about those who are just joining, the year-one joiners, the freshmen and the – and the – of course, “young” is, by definition, young by heart.  And don’t look – don’t look at us – (inaudible).  I’m still young as well.  (Laughter.)

So I think we will leave you with a – with a thank you.  Thank you for staying with us until this – I think it’s 7:00, 7:15 now.  It’s a testimony of the success that you are still with us.  And we still have a talk to do and a dinner probably.  But we look forward to your participation at the remaining of the week.  It’s going to be an interesting and engaging week where the future of energy is going to be discussed.

Thank you very much.

And thank you, Fred.  (Applause.)