The Minister of Petroleum, Industry and Mineral Resources of the Kingdom of Saudi Arabia, Khalid Al-Falih visited Nigeria last week and held talks with Nigeria, to forge a common alliance on the forthcoming OPEC meeting in Vienna. Nigeria's Minister of State for Petroleum Resources, Mr. Ibe Kachikwu and his Saudi counterpart spoke with journalists, including Mike Eboh on a wide range of issues, including oil market stability.
What was the purpose of this visit to Nigeria by the Minister of Petroleum, Industry and Mineral Resources of the Kingdom of Saudi Arabia, Mr. Khalid Al-Falih?
Kachikwu: The focus of the visit was largely on what to do when we get to Vienna and how to work together to get a solution, which we have done traditionally in most meetings.
Having said that, we looked at what has been the experience for us. The refineries are very close to my heart, I did bring up the issues of the experiences that we have had so far and he shared his own experiences in terms of the successes they have had and we have gotten an understanding to come and look deeper into how they did their own trajectory to get to where they are today and what experiences we can get from there.
No formal thing had been agreed yet. We need to collaborate and learn from one other. These are usually very strong business decisions and at the appropriate time, we would nosedive into the details.
Al-Falih: In terms of bi-lateral energy relationships, I would say there are two main areas: one is that Saudi Aramco has become successful to a large degree, of turning deficit in terms of fuel products, to becoming a major export by building a number of large refineries through joint venture approach, by attracting investments and finding an attractive financing scheme for foreign direct investments.
There is a technical and financing success among others, followed by operational success that is needed for Saudi Arabia becoming a major exporter of value added fuel products integrated with petrochemicals which improves the profitability of these manufacturing companies.
I have invited his excellency. He has accepted the invitation to come and see firsthand, these manufacturing complexes and at the same time to see from our team how to structure these investment opportunities to bring Foreign Direct Investment (FDI), into Nigeria.
Saudi Aramco being a global company, the largest upstream company, with a clear approach to be the largest downstream company, that the world would be our playground. Africa is very close to us, it is a very important market going forward and Saudi Aramco believes it would invest in this market in West Africa, we welcome this approach. There is no better place to start than Nigeria. There is a good environment, a huge market and at the same time, a bridge to various regions.
In addition to refining and marketing of refined petroleum products and petrochemicals, there is an opportunity for gas and gas to power. We have announced recently that Saudi Aramco would march its global skill in oil with a large presence in natural gas.
The company is looking to invest in gas in every continent of the world including in Africa, and there is a way not only to invest in gas upstream, but to monetise that gas domestically within the continent. Putting gas to power creates investment opportunities, and it is worthwhile for Saudi Aramco to look at these opportunities.
Once again, if we look for partners, I think you would find that in Nigeria, there are markets, there are resources, there are people and there is expertise. Hopefully, during this visit and during my future visits, as well as visits of my colleagues within Aramco, we can explore these opportunities, both in refining and petrochemicals, on the one hand, and gas and power on the other, we can both bring development and opportunities for Nigerians and Africans, and at the same time, profitable opportunities for us.
Kachikwu: One of the other items is that if you look at the region of global play, if you look at the US to Europe, to Latin America, everyone who is investing, in say Africa, comes in with either technology or funding. Saudi Arabia, and I challenge him to this, because China is playing such a huge role now; and I have said to him that the sort of historical links that we have with Saudi Arabia is probably tighter than anywhere in the world. There is a lot of relationship, and they have the resources and have done well in terms of managing the resources. What I have said to him is that the time is certainly on us to rise to the challenge that China puts on the global play.
Nigeria brings to the fore, the size of its population, obviously some resources and some determination; and the ability to help change the African continent, which is the market of the future. Working together as two historically-linked countries, we could do a lot more, but of course, it is not going to be on a platter, because the reality is that Aramco or any other Saudi investments is going to be internationally benchmarked. We have to provide the right policies, the right marketing environment for this to happen. Those are the sort of conversations we had.
What will be the response of Nigeria and Saudi Arabia should other members decide to cut output?
Al-Falih: I think I speak to 25 countries joined together and indeed nine producers who were not part of the group's 25. You saw the actions we decided to take in 2016, great benefits to the entire global community, producers and consumers, because oil market stability is instrumental to essentially everyone on the planet and we do that by focusing on primarily one plan, which is global inventories. We drive hard and try to be as objective and be focus as possible, looking at only inventories, whether they are building to levels that would destabilise the market and shut down investments, and give sort of opaqueness to where the market is going in the future; or whether we have a reasonable balance between supply and demand, as it is manifested in global inventories.
As we meet in a week's time, our focus will be on fundamentals of supply, demand and inventories and trying to bring that back to a level that will show the market that we have been talking about. I think that would include American producers as well, who are quite troubled today as they prepare for their 2019 budget about continuous building inventories and lack of clarity on where the market is going in 2019.
Kachikwu: I will obviously endorse the points he has made and say that it is a collaborative decision. We will be looking at all the fundamentals and working collaboratively to find solutions, which is exactly what he said.
In terms of whether Nigeria will seek to have an exemption when and if the cuts are agreed upon; it is too early to answer that. All I will say is that Nigeria is very committed to working with OPEC. We have always been committed. Even when we had exemptions, it was carefully analysed. We will continue to work collaboratively with the monitoring group to ensure that we keep within the ceilings that we agreed upon.
Let me say that since the last exemption, Nigeria has been up coming a bit; very solid work done. Our national oil companies have been able to raise volumes. Today, we are at a point where we were before, as at the time the exemptions where granted, our numbers are likely much better today.