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Al-Ghais to Seek 'Bigger Voice' for Opec in Climate Dialogue

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Opec members recently elected Haitham al-Ghais to be the group's next secretary-general, a role he will assume on Aug. 1. Al-Ghais worked in Kuwait’s foreign ministry early in his career before joining state Kuwait Petroleum Corp. (KPC) in 1993 and representing Kuwait as Opec governor from 2017 until 2021. In his first interview with the media, he talks to Energy Intelligence about the tests that Opec faces ahead.

Q: Congratulations on having been voted unanimously into the position of Opec secretary general. What does this mean and how do you feel about the challenges ahead?

A: It's been the honor of my life to be voted into this position on a unanimous basis by the 13 Opec member countries — acclamation was the word that was used if you recall. It's something that I will cherish forever and this trust that people have put into me, that countries, governments have placed into me, is something that is really, really important for me. It's not just important for me from a professional basis, but it's also important for my country, Kuwait, and it means that there is solid support and credibility for Kuwait, its representatives and all that Kuwait can bring to this position — as a bridge builder, consensus builder, somebody that can bring everybody to the table.

And I think this is really important for us to put into perspective. It's not easy to get 13 countries with diverse interests, diverse backgrounds, diverse ambitions to unite around selecting one person with unanimity. So this only supports me in meeting the challenges ahead. As you said rightly, there are challenges ahead and we will prioritize these challenges when I take office in August with my team and with the countries, and we'll work as hard as we can on overcoming them. So I'm honored and I take it as big support and push to go forward.

Q: You come from a diverse professional and international background. How do you see this helping you in your new role?

A: I come from a diplomat family. I lived in many places, from the UK to Brazil to Germany, and I think that shapes the character of a person and the qualities that one can bring to this position. Opec is a multinational organization with many countries from various continents, various cultures, and languages. And having lived abroad, being educated abroad, and as you move around the world as a young child, I do speak several languages fluently. As a result, when I came back to Kuwait, I worked in the foreign ministry for a couple of years, where I wanted to follow in my father's footsteps as a career diplomat, and that also gave me a sort of diplomatic background and insights into how the diplomatic circles work.

And this secretary-general position is not just a technical position. It's a political role and a diplomatic role as well. So that mix between the technical capabilities and competencies, as well as the diplomatic skills and capabilities, is really something critical to enable you to succeed in this job. When I worked for KPC, I joined the international marketing group and all our dealings and business negotiations and relationships were with customers from all over the world, so this also helps develop relationships, ties, contacts in many places. I started up the KPC Beijing office in 2005, so I still have very good contacts in China. As you know, China is a very important consumer — the biggest and fastest-growing consuming region in the world. I headed up KPC's London office for six years and looked after the European operations of KPC. All this international experience and exposure, I think, is is an added value for the position. It has opened a lot of doors and will continue to open a lot of doors.

Q: As Opec secretary-general, what will be your priorities both in the short and in the long term?

A: I believe the more imminent objective is very clear, it is to preserve the market balance, the state of the market and the health of the market. I think this is critical for all of us and also for the wider global economy to be honest with you, especially coming out of the pandemic. So I think the Declaration of Cooperation [DOC], the cooperation with our non-Opec partners is a critical and most crucial immediate objective, and our role in the Opec Secretariat is to help the countries, the 23 countries of the DOC, to preserve it and and to support it in any way we can. And this in turn means that market stability is a really critical objective that we have to meet. I think we have demonstrated through our unity and our cohesion over the years how successful this has been and how the market really has benefited from this cooperation between Opec-plus members.

Turning more to the medium to longer term, of course, I think this ongoing debate about the energy transition and the move away from fossil fuels, climate change, this is a very important dialogue. It's essential and it's healthy. But I believe that we, as oil-producing countries and Opec as an organization, have to have a bigger role, a bigger say, bigger participation and more visibility in this dialogue, and take a more proactive role. Let's remember, the share of oil in today's energy mix and in the future energy mix will still be quite significant. And to be an important member as a part of this discussion and dialogue, I think is only right. It has to be inclusive and encompass all the parties involved and all the stakeholders. So this is another objective that we have to keep on our radar as this transition evolves.

Q: How important is it to make sure that the alliance with non-Opec producers remains intact longer term?

A: As I said, the DOC has been really a cornerstone and foundation for the stability of oil markets, and it's been tested. We have been successful, first in 2015-16 [after] the market crash, and the DOC went into effect in January 2017. It took a while, but you immediately saw the rebalancing of the market base, the cohesion within that group, the alliance of producers. And through the bodies and mechanisms — whether it's the JMMC (Joint Ministerial Monitoring Committee), the JTC (Joint Technical Committee) — a real robust mechanism and methodology was put in place. I really think it's testament to the unity of this group, how everything moved forward and the rebalancing really started to shape up in 2017-18.

We were tested again in 2020 with the pandemic and what ensued later on, the crash that happened in the market, the historic cuts that took place. So how important is this alliance? I don't think any alliance could have agreed to such massive cuts had there not been shared objectives, a common goal, and above all unity and cohesion. And this is something that we again managed to demonstrate very clearly in 2020. And it's been a success so far, we're doing very well. Look at where we were back in 2020 and where the market is today. Demand is picking up, there are signs of improvement. Yes, we have these [Covid] variants coming up every now and then, but global vaccines are rolling out still continuously. The scientific community is able to deal with these variants in a better way and I think you're going to see jet fuel demand pick up again once the recovery of flights takes place, the opening up happens. And that's going to bring us pretty much towards the end of the year to pre-Covid levels of oil demand.

So the 2022-23 outlook is rosier, I think, and therefore it only demonstrates the importance of maintaining this unity and this alliance for the market. It gives a sense of stability, of information being transmitted. There is transparency in what we do. Everybody understands the methodology, how we look at the market balances, how we measure compliance or conformity. So this is some element for market stability that is important. I think this is really being underestimated sometimes. But the way we are doing these things, it's a regulated mechanism with a lot of agility and flexibility, I think this is something really unprecedented.

Q: The Declaration of Cooperation is supposed to end in 2022. Do you think this is going to continue for longer?

A: I think it's premature to say, but we signed the Charter of Cooperation in July 2019 when the DOC was transformed into a Charter. And the Charter of Cooperation between us at Opec and our non-Opec partners is a broader form of this alliance and more encompassing and a more, let's say, comprehensive form of of cooperation, not just limited to the production adjustments in the agreement. So that in place is definitely something that will bind and keep this alliance together and specifically about the production adjustments, I think it will depend on what the market condition would be by the end of the year. It's now a bit premature to say. But again, as we demonstrated in the past, I think I can say confidently that if this group needs to stick together and do more adjustments, we will stick together and do more adjustments to production. And we'll wait and see what happens towards the end of the year.

Q: COP26 concluded with a deal that came down harder on fossil fuels than before. What role in your view could and should Opec, and oil producers in general, have at future COP events and in the global climate debate as the energy transition plays out?

A. I believe there are lots of forms of potential cooperation between the oil industry at large, oil producing nations, and this dialogue. And I think one of the best venues that we have coming up is COP27, which is going to be held in Egypt and then COP28, which will be held in one of Opec's leading producing countries, in the UAE. And I would love for Opec to have a bigger voice, a louder voice, more participation in these discussions of COP27/28 because you cannot simply transition away from oil. It's like driving a car and shifting from first gear straight into fifth or sixth gear. It does not happen that way. You have to transition smoothly and in a non-disruptive way. And when I say non-disruptive, I mean you cannot but see what is happening today for example with the prices of coal and gas in Europe for example. So the transition has to be orderly, it has to be non-disruptive. And yes, there are ambitions for climate change targets and these are very valid and very important, but they have to be met with a realistic approach and methodology, a planned and carefully taken approach.

Let's remember and remind ourselves, the future of oil in the energy mix is still not a small chunk. With oil today, you're talking about almost 30% of the energy mix. If you add gas, that's another significant portion. If you add coal, that's another. So how is the world going to move away from that to 0% fossil fuels, to 10%, to 20%, and what is the cost? What are the implications and what is required to get to that state? I don't know if all this has been really thoroughly studied and analyzed. But I think it definitely has to be, and Opec and oil-producing nations can help in this discussion and with this analysis. Like I said, in COP27 and 28, hopefully, we will see more participation and more active roles for oil-producing nations and the oil industry at large. I believe that technology can be transformed and used — and should be transformed and used — to adapt oil, gas and fossil fuels in this transition, and not just to put them on the blacklist, as they say, and say nobody should use them. This is what this dialogue and industry should really focus on in the future.

Topics:
Opec/Opec-Plus, Opec-Plus Supply , Oil Supply
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