A permanent alliance with Russia and other allies would be aimed at ensuring enough upstream investment in the oil industry to meet growing demand, UAE energy minister Suhail al-Mazrouei said.
“In the medium to longer term, our worry is to ensure we have enough capital investments coming to E&P and to assure we will have enough supply,” he said at the International Petroleum Week conference in London.
OPEC is drafting an agreement to codify oil market management policy with Russia and nine other allies, beyond their 1.8 million b/d supply cut agreement that expires at the end of 2018.
Such an agreement could include continued cuts, Mazrouei said, but the overarching priority is to encourage investments in new reservoirs and production capacity to avoid a supply squeeze.
The pact could promote greater intra-coalition investments in projects, the minister suggested.
“I think we are seeing more cooperation, and my hope is that this group of OPEC and non-OPEC will incentivize the adequate investments among themselves to ensure we have adequate supply in the market,” he said. “My worry is not an oversupply. My worry is an undersupply. Everyone is expecting that we will have more demand coming in the future.”
Mazrouei declined to say when this draft agreement would be finalized, other than to express that he hopes it can be signed and delivered by the end of the year, when his stint in the rotating OPEC presidency will conclude.
As for the current output cut agreement, Mazrouei said there was no talk of an early exit from the deal, given that OECD commercial inventories remain some 75 million barrels above the target five-year average, according to OPEC’s analysis.
“That mission is not yet completed,” he said. “This is the task of today. The task of tomorrow is going to be to assure the world that we will have adequate supply.”
The six-country monitoring committee overseeing the deal said that the 24-member OPEC/non-OPEC coalition’s compliance with its required cuts under the deal was a record 133% in January.
The committee, chaired by Saudi energy minister Khalid al-Falih, “expressed satisfaction with the overall results, but noted the recent market volatility, stressing the importance of vigilance and the need to avoid complacency.”