Secretary General of the Organisation of Petroleum Exporting Countries (OPEC), Mohammed Barkindo, has put the total loss in revenue for the 14 members of the organisation, including Nigeria, since crude oil price took a plunge in July 2014, at 1 trillion dollars.
Barkindo also disclosed that capital investment in the oil industry, particularly in the upstream sector, shrunk by 26 per cent in 2015 and projected to further dip in 2016 with the 2017 outlook looking bleak.
He made the disclosures on Saturday in an interview with newsmen on the sideline of the annual meetings of the International Monetary Fund (IMF) and the World Bank Group in Washington D.C., United States.
He described the low oil and contracting investment as posing a a serious threat to future supplies of crude oil to the global community with consequences on the fragile state of the economy.
The Yola-born former group managing director of the Nigerian National Petroleum Corporation (NNPC) said it was not only the oil and gas industry that was being buffeted in the current economic downturn but also other sectors of the global economy.
He attributed the low prices of crude oil to the shale oil production technology in the United States which necessitated a drastic reduction in oil import by the US from Nigeria and other countries as well as the saturation of the oil market by non-OPEC members.
“When the last good run of prices saw crude oil price rising to over 140 dollars a barrel, in conventional economics it was just a matter of time that there will be correction in the market.
“But what most forecasting agencies, including OPEC and others failed to get correctly was the length of time it was going to take for this correction and for the market to re-balance.
“This is perhaps the longest cycle [of price drop] that we have seen in recent times. It is taking us now into the third year of the correction with the rebalancing target being put at four.
“So, it is not only OPEC that missed the target but most agencies, including the IMF and the World Bank. You have heard in the last two days of extensive consultations and discussions that some of these models [of forecasting oil prices] were found wanting.
“Nobody expected that the cycle will last this long with the severe consequences on huge revenue that we have lost,” he said.
Barkindo, however, expressed ‘cautious optimism’ that the current trend which saw the prices go above 50 dollars as a result of the cut in output from OPEC members would continue.
“The objective of this decision taken in Algiers [Algeria] is to restore stability in the market and to address the issue of high inventory that is depressing prices.
“At the moment, we have stocks both onshore and offshore of over 3 billion barrels of crude oil. The decision in Algiers was aimed at stimulating further stock drawdown on a sustained basis which we have seen happening for almost five weeks now in the United States, which is the biggest market.
“The sum total of that, hopefully, will bring forward rebalancing of the market so that we will be able to achieve some form of equilibrium in prices with impact of revenues to member countries, especially our country Nigeria which has suffered both from lower prices [of crude oil] as well as low production.
“What is unique about this cycle is that it has brought about convergence of views from the producers as well as the consumers.
“This cycle has taken too long because we had all thought it would be for a while. But we are moving into the third year of low crude oil prices with serious consequences on revenue.
“There is now more pressure from consuming nations that OPEC should take action in order to restore stability and balance in the market in the interest of the producers and the consumers.
“I remain optimistic that together we will achieve this global objective, he said.