5 Questions for Helima Croft

Helima Croft, RBC’s global director of commodity strategy, spoke this week at the Global Energy Forum in Abu Dhabi. Here’s some of what she took away:

This was the first gathering of key OPEC ministers after they signed their deal to cut output in Vienna on November 30. And it comes one week before the first compliance meeting of OPEC and Non-OPEC producers. Can they make the agreement stick?

The assembled oil ministers from the Gulf states and the OPEC Secretary General all expressed confidence that the output agreement will hold and that compliance will be high. The Saudi Oil Minister was especially assertive on this issue and cited the new Saudi-Russia energy bilateral agreement as a vehicle for ensuring ongoing cooperation between the sovereign producers.

Was Iraq the elephant in the room?

Yes. I was actually speaking on the panel with the Iraqi oil minister, Kuwait’s oil minister (who heads the monitoring committee) and the OPEC Secretary General. The Iraqi oil minister used his keynote address to again complain that his country was not exempted from the cuts. He was also concerned that secondary source estimates, not self-reported numbers, would be used as the basis of Iraq’s output target. He quickly pivoted and insisted that Iraq would fully comply and insisted that Iraq was already beginning to curb output. But a number of experts in the room continued to express skepticism about Iraqi compliance and cited the December ramp-up in Iraqi exports as in indication that Iraq will try to free ride on the agreement. Also, there is a question about how Iraq will manage a 210,000 barrels a day cut. It faces financial penalties if it can’t cap output from the big IOC-operated fields in the south, and it may have a difficult time convincing the Kurdish regional government to share the burden of a cut.

The transition to renewables is on everyone’s minds. Were you surprised?

I was somewhat surprised by how our host, the Abu Dhabi government, was singularly focused on showcasing UAE’s intention to have renewables provide 44 percent of the country’s energy mix by 2050. UAE actually launched its 2050 energy strategy right before this flagship conference.

How does this fit within UAE’s overall economic and regional strategy?

The UAE has always been something of a trailblazer in the Gulf. They were one of the first to really focus on economic diversification during the period of high oil prices. They have built a best-in-class sovereign wealth fund that has attracted the best global talent, and they have actually been uniquely focused on promoting women in government. UAE has been playing a much bigger security role in the region in the last few years. They have been a major backer of General Khalifa Haftar and his eastern breakaway government in Libya, and continue to be active in Yemen. It is interesting to think about whether UAE will supplant Saudi Arabia’s dominance in this area.

Did the planned IPO of Saudi Aramco come up?

Yes. The Saudi Oil minister indicated that the partial listing of Aramco — the world’s largest IPO — is still on track for 2018. He also stated that it would be part of a broader privatization push, with ports, airports and even the stock market slated for privatization in 2018.

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