Falih: New Ways Must be Found to Restore OPEC’s Position

Guarding one of the Park Hayat suites, stands Cobra, the name that former Saudi Minister of Petroleum and Resources Ali al-Naimi gave to his bodyguard, who continued to keep the security of current Minister of Energy, Industry, and Mineral Resources Khalid al-Falih.

Inside his suite, minister al-Falih awaited the press, on his right his assistant Prince Abdul Aziz bin Salman and close to him sat one of Saudi Aramco’s deputies Nabil al-Jame’e. At the press reception Saudi Governor for OPEC Mohammed al-Madi and Saudi Arabia National Representative in OPEC Nasser al-Dossary were also present.

Prior to journalists coming in, al-Falih was watching the news on a large screen as he had just returned from a long day at OPEC. The ministers have finally agreed to appoint Mohammed Barkindo the organization’s new Secretary General.

After reporters were seated, a calm and happy al-Falih asked them about their opinion on the meeting given that OPEC didn’t limit production. Analysts were divided in opinion as some considered it a failure while others a success.

GPC President Yohannes Penini told Bloomberg it is expected for OPEC to set no limit for production and increase its market share with the fall of production share outside of OPEC. That happened since OPEC decided to defend its market share in November 2014.

Al-Falih explained to the reporters that setting a limit for oil production will cause a problem.

Minister al-Falih also assured reporters that OPEC won’t resort to old methods and that ministers will come up with new ways to make the organization more effective. Al-Falih explained that the organization tried many methods before but none worked, which only means that OPEC’s “journey to explore a new system will not stop.”

The quota system is one of the oldest and most complicated one used by OPEC as members tend to increase their production and present the secretariat with inaccurate numbers.

Iranian Oil Minister Bijan Namdar Zangeneh stated last week that he wants the quota system back.

Governor for OPEC Mohammed al-Madi is strongly against the quota system where he repeatedly mentioned during meetings that the market nowadays is competitive and not monopolized as it were during the eighties.

Mohammed al-Madi believes that the marginal producers are high-cost producers who became fierce competitors.

During his meetings with governors, al-Madi warned of any method that might restrain the production as the market is expanding. He explained that many were pleased with the results of the meeting in June except for Algeria and Venezuela, which were looking to freeze the production or even decrease it.

Despite all disagreements, al-Falih was able to successfully lead it with the help of all Gulf ministers.

Current OPEC president Qatari minister Mohammed al-Sada met with the angry ministers and reached an agreement. Emirati Minister Suhail al-Mazroui was also supportive of the Gulf position.

Kuwaiti Minister of Finance Anas al-Salih met with the Iranian Oil Minister and tried to convince him for a positive outcome.

Despite all of their actions, al-Falih told the reporters that he doesn’t want to state his opinion about the organization as he is new to it but he stressed that the world needs OPEC.

Reporters also asked al-Falih about Saudi Aramco which will go public in the largest such move in the world. He explained that following the stock option plan, Aramco will expand internationally. He went on to say that Aramco is very interested in investing in al-Manba’ sector for oil and gas production.

Oil analyst Mohammed al-Ramadi told Asharq Al-Awsat that he thinks Aramco will head towards shale gas as it is working with Sabek, which is looking to invest in shale gas in North America.

Aramco’s policy is to maintain a surplus production to be used in times of crisis. Al-Falih said that they will try to convince investors of maintaining surplus.

Al-Falih also mentioned that the local prices, policies, and maintaining surplus are decisions that will be taken at the level of government and not the company.

Al-Falih clarified that he is no longer president of Aramco.
 

Source: Asharq Al Awsat