IEEJ：January 2017ｃ IEEJ 2017
○Special Bulletin
A Japanese Perspective on the International Energy Landscape (306)January 13, 2017

At the Atlantic Council Global Energy ForumKen Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn January 12 and 13, the U.S. think tank Atlantic Council sponsored an international
conference named Global Energy Forum in Abu Dhabi. In recent years, the Atlantic Council focusedon studies and recommendations regarding international energy problems, sponsoring relevantinternational conferences. The Global Energy Forum in Abu Dhabi was the think tank’s first
conference specialized on energy problems. The Abu Dhabi and United Arab Emirates governments
provided high-level support for the two-day conference.
The conference came as part of the Abu Dhabi Sustainability Week event from January 12
through 21, dealing mainly with the international energy situation, and geopolitics and energy. A
wide range of specific topics included 2017 international energy market outlooks and challenges,
crude oil prices, post-oil energy market changes and economic structure diversification, the new U.S.
administration and the Middle East, the future prospects for nuclear energy, natural gas andgeopolitics, China’s “One Belt and One Road” initiative and its implications, national wealth funds’
post-oil strategies, energy and water problems, physical and cyber risks regarding energy
infrastructure and transportation, and the new U.S. administration’s energy and environment
policies.
Present at the conference were top management officials of the Atlantic Council. High-levelparticipants from the host country of the UAE included Energy Minister Suhail Mohamed Faraj AlMazrouei, ADNOC CEO Sultan Ahmed Al Jaber and Mubadala Development Company CEOKhaldoon Khalifa Al Mubarak. Among prominent ministerial participants were Saudi Arabian
Energy Minister Khalid A. Al-Falih, Kuwaiti Oil Minister Issam A. Almarzooq and Iraqi Oil
Minister Jabbar Ali al-Luiebi. Other high-level participants included Mohammed Sanusi Barkindo,
Secretary General of the Organization of the Petroleum Exporting Countries, and Fatih Birol,
Executive Director of the International Energy Agency. International energy company executives
attending the conference included Total CEO Patrick Pouyanné. In addition, senior government
officials, international energy industry executives and prominent experts participated as speakers orpanelists at the conference featuring high-level discussions on international energy problems.
While the conference dealt with a wide range of topics as noted above, the most impressive tome were major OPEC ministers’ interesting discussions on the future international oil market,
highlighted in the first half of the first day.
One of the most important points in the discussions was how to interpret last year’s agreement
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IEEJ：January 2017ｃ IEEJ 2017○

between OPEC and non-OPEC oil producing countries on their coordinated production cuts. Theagreement came as a surprise that reversed a majority view among oil market participants. Since
OPEC announced a production cut agreement at an extraordinary meeting in Algeria in lastSeptember, market players have been greatly interested in OPEC and non-OPEC production-cuttingefforts. In response to the oil production cut agreement, crude oil prices have risen. Since December,the key West Texas Intermediate crude oil futures price has remained in a $50-55 per barrel range.
Discussions at the conference indicated that major OPEC ministers seemed to be satisfied with theprice trend at present and confident of the agreement’s impact on the market.
In the discussions, as a matter of course, the chair, panelists and audience made questions about
the present and future compliance with production quotas. In response, participants from oil
producing countries confirmed these countries’ commitment to the agreement and reiterated that thecompliance will be sustained. On January 21 and 22, oil producing countries participating in thecoordinated production cuts will hold a meeting of a ministerial committee to monitor the production
cuts. The meeting is expected to deal with how to monitor the compliance. The production cut plan
has just been put into implementation. As time goes by, the status of the compliance will be unveiled,attracting global attention.
Officials from oil producing countries mostly pointed out that the production cut agreement wasvery important for avoiding severe damage brought to their economies by oil prices’ slip below$30/bbl in the first half of 2016 and for boosting oil prices to levels for investment required tostabilize supply and demand in the international oil market. There are many attention-attracting
points regarding the coordinated production cuts. Given the past records, doubts remain about
Russia’s compliance with the agreement. Concerns exist on future oil production by Iraq and Iran.
Libya and Nigeria, left outside the production cut by country framework, could increase production
depending on improvements in their security situations. Given these points, the determination andinitiatives of Gulf oil producing countries such as Saudi Arabia, the UAE and Kuwait to comply withthe production cut agreement are very important.
Regarding the impact of OPEC’s production cut efforts, vigorous debate came on the presence
and implications of U.S. shale oil. Ministerial and other officials from oil producing countries
reiterated their official stance that they do not necessarily have to view U.S. shale oil as their rival
because shale oil is expected to play a key role in expanding oil supply to meet global oil demand
growth. Undoubtedly, however, U.S. shale oil will have the most important impact on thecoordinated production cuts by OPEC and non-OPEC oil producing countries. Through the oil priceweakness, U.S. shale oil production costs have declined, enhancing U.S. shale oil’s resistance to low
prices. Furthermore, incoming U.S. President Donald Trump could support U.S. shale oil production
expansion through deregulation and infrastructure development.
Already, the number of operating U.S. oil-drilling rigs bottomed out late last May and has
increased by nearly 70% from the bottom. In response, U.S. crude oil production has increased froma little less than 8.5 million barrels per day last summer to around 8.8 million bpd. How the current
oil price range of $50-55/bbl will influence shale oil production is a very important point. Someparticipants in the conference were concerned that U.S. shale oil production could expand to delay
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IEEJ：January 2017ｃ IEEJ 2017○rebalancing in the international oil market. Global oil inventories, though having begun to decline atlast, are still at a historically high level. Inventories must be normalized for the rebalancing. PotentialU.S. shale oil production expansion responding to price hikes could greatly affect the fate of therebalancing.
OPEC has made a commitment to the coordinated production cuts for the first half of this year
to see their effects on the market. Some participants in the conference said the production cuts could
be extended to 12 or more months if the rebalancing is delayed or becomes difficult. One questioned
if OPEC and non-OPEC oil producing countries could enhance the production cuts when further cuts
are required depending on future developments. Given that there are various destabilizing anddisturbing factors in addition to the abovementioned key points in this year’s international oil market,
we must pay attention to future developments.

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