Opec confronts security and investment challenges
The organisation’s secretary general has concerns on vulnerability of infrastructure and ESG investment agenda
The oil industry faces two escalating challenges in the shape of risks of attacks on refineries and other infrastructure and investors turning away from the sector, Opec secretary general Mohammad Sanusi Barkindo told delegates at the Oil & Money conference in London on Thursday.
The drone and missile attack on Saudi Aramco’s facilities in September—which took out half of the of the world’s largest producer’s processing capacity—highlighted vulnerabilities to the energy infrastructure more widely.
And Barkindo’s concern was vindicated after the conference when, on Friday morning, Iran confirmed a supertanker, en route to Syria, was hit by missiles. Earlier this week, Turkey embarked on an incursion into Syria, while civil unrest has been building in Iraq, further increasing the threat of damage to energy infrastructure.
“[The Saudi attack] has taught us a lot of lessons, which we urgently need to focus on,” says Barkindo. “The security of energy infrastructure, in the Kingdom or anywhere, should be elevated to high levels.
“We produce for the global markets and we owe it to consumers in the world to remain reliable and dependable suppliers of oil and gas. And, therefore, the protection of these facilities is to protect the security of supply.”
“The issue of investment is like the issue of security ... It needs to be elevated up our agenda." Barkindo
It was only the “heroic” work of Aramco personnel on the ground that contained the resulting oil price spike to 20pc, says Barkindo. “[The spike] is the highest in nearly 40 years but this should be expected. I have spoken colleagues in London who said… they were surprised that it stayed at 20pc and immediately came down.”
Investor attitude and whether the prevailing level of investment will be sufficient to maintain and grow supply to meet global demand is another matter of concern for Barkindo and Opec. A sharp contraction in investment in two consecutive years, 2015 and 2016, cumulatively reduced total commitment, he says. by over 50pc. While he has “already started seeing ticking up of investments” since 2017, the problem remains.
A variety of factors are responsible for investment in the sector becoming unfashionable, including environmental concerns, says Barkindo. “Several bankers… told me of growing encumbrances in the banking community that are facing us. There are clear obstacles to accessing the same pool of funds that all other sectors [access]. Whether telecommunications or infrastructure, it is the same pool of funds.”
20pc: Oil price spike after Saudi Arabia attacks
The oil and gas industry is being “singled out” with these barriers, he warns. “Already we are facing a shortage, a deficit, and now going forward we are faced with obstacles in the name of environmental encumbrances—so the industry needs to raise with one voice.”
Opec thinks it is “totally unfair” on the industry. “And is totally unfair on billions of people in this world that look to us to continue to provide them with energy for their day-to-day lives. We are continuously being put on the defensive.
“The issue of investment is like the issue of security,” he adds. “It needs to be elevated up our agenda. The future of the industry depends on sustained investments.”