April 2001 1 Printed in Austria by Ueberreuter Print and Digimedia Publishers Organization of the Petroleum Exporting Countries, Obere Donau- strasse 93, 1020 Vienna, Austria. Telephone: +43 1 211 12/0; Telefax: +43 1 216 4320; Public Relations & Information Department fax: +43 1 214 9827. E-mail: [email protected]E-mail: OPEC News Agency: [email protected]Web site: http://www.opec.org. Hard copy sub- scription: ATS 850 ( 61.77)/12 issues. Membership and aims OPEC is a permanent, intergovernmental Or- ganization, established in Baghdad, September 10–14, 1960, by IR Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Its objective is to co- ordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers; an effi- cient, economic and regular supply of petro- leum to consuming nations; and a fair return on capital to those investing in the industry. The Organization comprises the five Founding Members and six other Full Mem- bers: Qatar (joined in 1961); Indonesia (1962); SP Libyan AJ (1962); United Arab Emirates (Abu Dhabi, 1967); Algeria (1969); and Nigeria (1971). Ecuador joined the Organiza- tion in 1973 and left in 1992; Gabon joined in 1975 and left in 1995. Secretariat officials Secretary General Dr Alí Rodríguez Araque Director, Research Division Dr Shokri M Ghanem Head, Energy Studies Department Dr Rezki Lounnas Head, Petroleum Market Analysis Department Javad Yarjani Head, Data Services Department Dr Muhammad A Al Tayyeb Head, Administration & Human Resources Department Dr Talal Dehrab Head, PR & Information Department Farouk U Muhammed, mni Legal Officer, In charge of the Office of the Secretary General Mrs Dolores Dobarro Web site Visit the OPEC Web site for the latest news and information about the Organization and its Member Countries. The URL is http://www.opec.org This month’s cover ... shows the process of transferring super-cold LNG from tanker to land-based storage tanks in Indonesia, which has just signed a big LNG supply contract with Malaysia (see Newsline on page 17). Photo courtesy Pertamina. 2 NOTICEBOARD Forthcoming conferences and other events 3 COMMENTARY The importance of investment Healthy oil prices are not just beneficial to OPEC nations: they are vital for the long-term future of the oil industry 4 PRESS RELEASES US Congress bill against OPEC violates most basic legal principles Resolutions of the 114th Meeting of the Conference 6 FORUM Challenges facing the oil-producing countries in the 21 st century By HE Dr Alí Rodríguez Araque, OPEC Secretary General 9 SECRETARIAT NOTES OPEC Secretary General meets Austrian Chancellor Schüssel and Foreign Minister Ferrero-Waldner 10 EGYPTIAN CONCERT OPEC Secretariat hosts concert of traditional Egyptian music 11 INTERVIEW OPEC: confronting new realities and meeting the environmental and technological challenges of the 21 st century HE Dr Alí Rodríguez Araque, OPEC Secretary General 17 NEWSLINE Energy stories concerning OPEC and the Third World 26 ENVIRONMENT NOTEBOOK Executive summary of the Quarterly Environment Report 28 MARKET REVIEW Oil market monitoring report for March 2001 45 MEMBER COUNTRY FOCUS Financial and development news about OPEC Countries 49 OPEC FUND NEWS Recent loans and grants made by the OPEC Fund 55 ADVERTISING RATES How to advertise in this magazine 56 ORDER FORM Publications: subscriptions and single orders Indexed and abstracted in PAIS International Vol XXXII, No 4 ISSN 0474-6279 April 2001
Transcript
April 2001 1
Printed in Austria by Ueberreuter Print and Digimedia
P u b l i s h e r sOrganization of the PetroleumExporting Countries, Obere Donau-strasse 93, 1020 Vienna, Austria.
M e m b e r s h i p a n d a i m sOPEC is a permanent, intergovernmental Or-ganization, established in Baghdad, September10–14, 1960, by IR Iran, Iraq, Kuwait, SaudiArabia and Venezuela. Its objective is to co-ordinate and unify petroleum policies amongMember Countries, in order to secure fair andstable prices for petroleum producers; an effi-cient, economic and regular supply of petro-leum to consuming nations; and a fair returnon capital to those investing in the industry.
The Organization comprises the fiveFounding Members and six other Full Mem-bers: Qatar (joined in 1961); Indonesia (1962);SP Libyan AJ (1962); United Arab Emirates(Abu Dhabi, 1967); Algeria (1969); andNigeria (1971). Ecuador joined the Organiza-tion in 1973 and left in 1992; Gabon joined in1975 and left in 1995.
S e c r e t a r i a t o f f i c i a l sSecretary General Dr Alí Rodríguez Araque
Director,Research Division Dr Shokri M Ghanem
Head,Energy Studies Department Dr Rezki Lounnas
Head, Petroleum MarketAnalysis Department Javad Yarjani
Head, Data ServicesDepartment Dr Muhammad A Al Tayyeb
Head, Administration &Human Resources Department Dr Talal Dehrab
Head, PR & InformationDepartment Farouk U Muhammed, mni
Legal Officer,In charge of the Officeof the Secretary General Mrs Dolores Dobarro
W e b s i t eVisit the OPEC Web site for the latest news andinformation about the Organization and itsMember Countries. The URL is
http://www.opec.org
T h i s m o n t h ’ s c o v e r . . .shows the process of transferring super-cold LNG fromtanker to land-based storage tanks in Indonesia, whichhas just signed a big LNG supply contract with Malaysia(see Newsline on page 17).Photo courtesy Pertamina.
2 N O T I C E B O A R DForthcoming conferences and other events
3 C O M M E N T A R YThe importance of investmentHealthy oil prices are not just beneficial to OPEC nations:they are vital for the long-term future of the oil industry
4 P R E S S R E L E A S E SUS Congress bill against OPEC violates most basic legal principlesResolutions of the 114th Meeting of the Conference
6 F O R U MChallenges facing the oil-producing countries in the 21st centuryBy HE Dr Alí Rodríguez Araque, OPEC Secretary General
9 S E C R E T A R I A T N O T E SOPEC Secretary General meets Austrian Chancellor Schüsseland Foreign Minister Ferrero-Waldner
10 E G Y P T I A N C O N C E R TOPEC Secretariat hosts concert of traditional Egyptian music
11 I N T E R V I E WOPEC: confronting new realities and meeting the environmentaland technological challenges of the 21st centuryHE Dr Alí Rodríguez Araque, OPEC Secretary General
17 N E W S L I N EEnergy stories concerning OPEC and the Third World
26 E N V I R O N M E N T N O T E B O O KExecutive summary of the Quarterly Environment Report
28 M A R K E T R E V I E WOil market monitoring report for March 2001
45 M E M B E R C O U N T R Y F O C U SFinancial and development news about OPEC Countries
49 O P E C F U N D N E W SRecent loans and grants made by the OPEC Fund
55 A D V E R T I S I N G R A T E SHow to advertise in this magazine
56 O R D E R F O R MPublications: subscriptions and single orders
Indexed and abstracted in PAIS International
Vol XXXII, No 4 ISSN 0474-6279 April 2001
2 OPEC Bulletin
N O T I C E B O A R D
Forthcoming events
Cairo, Egypt, May 27–31, 2001, Interna-tional Seminar on Status and Prospects forSmall and Medium Sized Reactors. Details:International Atomic Energy Agency, VIC,Wagramer Strasse 5, PO Box 100, A-1400,Vienna, Austria, Tel: +43 (0)1 2600 (0); fax:+43 (0)1 12645; e-mail: [email protected].
Dundee, Scotland, June 4–8, 2001, Mining2001: Global Issues in Corporate Mining Strat-egy and Government Policy. Details: Centre forEnergy, Petroleum and Mineral Law andPolicy, University of Dundee, DD1 4HNScotland, UK. Tel: +44 (0)1382 344300; fax:+44 (0)1382 322578; e-mail: [email protected]; Web site: www.dundee.ac.uk/cepmlp/.
Boston, MA, USA, June 4–15, 2001, Inter-national Gas Business Management CertificateProgramme. Details: IHRDC Headquarters,535 Boylston Street, Boston, MA 02116,USA. Tel: +1 617 536 0202; fax: +1 617 5364396; e-mail: [email protected].
Gorse Hill, Woking, UK, June 5–8, 2001,Fundamentals of the Energy Industry. Details:Petroleum Economist Ltd, 15/17 St. CrossStreet, London EC1N 8UW, UK. Tel: +44(0)20 7831 5588; fax: +44 (0)20 7831 4567or 7831 5313; e-mail: [email protected]; Web site: http://www.petroleum-economist.com.
Kuala Lumpur, Malaysia, June 10–12, 2001,Asia Oil & Gas Conference. Details: Confer-ence Connection Administrators Pte Ltd,212A Telok Ayer Street, Singapore 068645.Tel: +65 226 5280; fax: +65 226 4117; e-mail: [email protected]; Web site:www.cconnection.org.
Warsaw, Poland, June 11–12, 2001, 8th An-nual Central European Gas Conference. De-tails: Overview Conferences, EconoMattersLtd, Rodwell House, 100 Middlesex Street,London E1 7HD, UK. Tel: +44 (0)20 76501418; fax: 7650 1431; e-mail: [email protected]; Web site: www.overview-gas.com.
Dundee, Scotland, June 18–22, 2001, Inter-national Nuclear Law and Policy: Fundamen-tal Concepts, Contemporary Practices andPost-2000 Perspectives. Details: Centre forEnergy, Petroleum and Mineral Law andPolicy, University of Dundee, DD1 4HNScotland, UK. Tel: +44 (0)1382 344300; fax:+44 (0)1382 322578; e-mail:[email protected]; Web site:www.dundee.ac.uk/cepmlp/.
Boston, MA, USA, June 18–22, 2001, In-ternational Power Business Workshop. Details:IHRDC Headquarters, 535 Boylston Street,Boston, MA 02116, USA. Tel: +1 617 5360202; fax: +1 617 536 4396; e-mail:[email protected]; Web site:www.ihrdc.com.
Copenhagen, Denmark, July 2–6, 2001,European Wind Energy Conference and Exhi-bition. Details: WIP, Sylvensteinstrasse 2, D-81369 München, Germany. Tel: +49 89 7201235; fax: +49 89 72012 91; e-mail: [email protected]; Web site: www.wip-munich.de.
Aberdeen, UK, September 4–7, 2001, Off-shore Europe 2001. Details: The OffshoreEurope Partnership, Ocean House, 50 King-ston Road, New Malden, Surrey KT3 3LZ,UK. Tel: +44 20 8949 9222; fax: +44 208949 8193/8186/8204; e-mail: [email protected]; Web site: www.offshore-europe.co.uk.
Boston, MA, USA, September 10–21, 2001,International Petroleum Business ManagementProgramme. Details: IHRDC Headquarters,535 Boylston Street, Boston, MA 02116,USA. Tel: +1 617 536 0202; fax: +1 617 5364396; e-mail: [email protected]; Web site:www.ihrdc.com.
Boston, MA, USA, September 10–October 5, 2001, International PetroleumManagement Certificate Programme. Details:IHRDC Headquarters, 535 Boylston Street,Boston, MA 02116, USA. Tel: +1 617 5360202; fax: +1 617 536 4396; e-mail:[email protected]; Web site: www.ihrdc.com.
April 2001 3
C O M M E N T A R Y
The importance of investmentHealthy oil prices are not just beneficial to OPEC nations:they are vital for the long-term future of the oil industry
E d i t o r i a l p o l i c yOPEC Bulletin is published by the Public
Relations & Information Department. The
contents do not necessarily reflect the official
views of OPEC or its Member Countries.
Names and boundaries on any maps should not
be regarded as authoritative. No responsibility
is taken for claims or contents of advertise-
ments. Editorial material may be freely repro-
duced (unless copyrighted), crediting OPEC
Bulletin as the source. A copy to the Editor-in-
Chief would be appreciated.
C o n t r i b u t o r sOPEC Bulletin welcomes original contribu-
tions on the technical, financial and environ-
mental aspects of all stages of the energy indus-
try, including letters for publication, research
reports and project descriptions with support-
ing illustrations and photographs.
E d i t o r i a l s t a f fEditor-in-Chief Farouk U Muhammed, mni
Editor Graham Patterson
Assistant Editor Philippa Webb
Production Diana Lavnick
Design Elfi Plakolm
Circulation vacant
A d v e r t i s e m e n t sOPEC Bulletin reaches the decision-makersin Member Countries. For details of its rea-sonable advertisement rates see the appropri-ate page at the end of the magazine. Ordersfrom Member Countries (and areas not listedbelow) should be sent directly to the Editor-in-Chief at the Secretariat address. Other-wise, orders should be placed through thefollowing Advertising Representatives:
North America: Donnelly & Associates,PO Box 851471, Richardson, Texas 75085-1471, USA. Tel: +1 972 437 9557; fax: +1 972437 9558.
Europe: G Arnold Teesing BV, Molenland32, 3994 TA Houten, The Netherlands. Tel:+31 30 6340660; fax: +31 30 6590690;e-mail: [email protected].
Southern Africa: International MediaReps, Pvt Bag X18, Bryanston, 2021 SouthAfrica. Tel: +2711 706 2820; fax: +2711 7062892.
Two years have now passed since oilprices began their long, steady recov-ery from the dark days of 1998 and
early 1999. The trend towards healthier prices,after being jump-started by the decision of theOPEC Conference in March 1999 to cutoutput by 1.7 million barrels/day (to whichfour non-OPEC nations — Mexico, Norway,Oman and Russia — added another 400,000b/d), has been sustained beyond all expecta-tions. Last year, the price for OPEC’s Refer-ence Basket of seven crudes averaged some$27.60/barrel for the full twelve months— the highest level since its introduction in1987 — and this year too it has remained over$24/b for the first quarter.
However, the unexpected strength andduration of the recovery has raised doubtsabout the sustainability of such a price level,especially in view of the current global eco-nomic slowdown and its consequent effect onoil demand growth. Concerns about energyinflation have also been voiced in the indus-trialized world, although these have to datebeen relatively muted. And there appears tobe an unspoken consensus that OPEC’s ef-forts to maintain oil prices with the range of$22–28/b, as set out under the Organization’sprice band mechanism, are in the long rununlikely to meet with success.
However, such claims are based on theerroneous assumption that movements in theoil price are a zero-sum game: if one side wins,the other side must lose out. Yet when welook beyond the short term, we find that thisis not the case. It is true that with most of theOPEC Member Countries so heavily depend-ent on hydrocarbon revenues, price develop-ments over the past two years have beenbeneficial for their economies. And indeed, inthe short term at least, a healthier price levelmay cause the net oil-importing nations todevote more of their budgets to financing crudepurchases. Nevertheless, a closer examinationof the issue from a broader, more long-termperspective shows that healthy oil prices aregood not just for oil-exporting nations, but forthe world economy as a whole. Why shouldthis be so?
The key to the matter is the oil industry’sneed for investment. Oil is not only a highly
capital-intensive industry, it is one with manypeculiarities of its own. It requires a constantflow of massive amounts of money not just tomaintain and expand production at existingfields, but to explore for, develop and produceoil from new fields. With world oil demandseen reaching levels in excess of 105m b/d by2020, according to the OPEC World EnergyModel’s reference case, it is clear that bothOPEC and non-OPEC oil-producing coun-tries need to attract enormous amounts ofinvestment in the years to come. Since theOPEC Members have over three-quarters ofworld reserves, it is logical that they shouldattract the bulk of the necessary investment.And one of the keys to attracting that invest-ment is healthy and stable oil prices at a levelthat guarantees investors fair returns for therisks that they are taking.
The alternative to this scenario is dis-tinctly unpalatable — and we had a taste ofit during the price slump of 1998-99. Theinternational oil majors reacted to the lowprice environment by resorting to mergers andtakeovers, and by dramatically cutting costs,especially their E&P budgets. The significanceof this is that upstream exploration by themajors began to grind to a halt as the lack offunds started to bite, and is only now startingto pick up again. However, a slowdown inexploration is precisely what the industry can-not afford, either now or in the future. Oildemand is constantly growing, and thereforethe world’s oil production capacity must beconstantly expanded to meet that need. If itis not, rapidly growing demand could easilyoutpace capacity expansion, and the worldwould find itself facing an energy crunch ofdisastrous proportions.
This, then, is why oil prices that are bothhealthy and stable are beneficial to everyone:they provide the oil-exporting nations with asteady stream of revenues, while at the sametime they do not act as a brake on economicactivity in oil-importing nations. Simultane-ously, they enable investors in the oil industryto obtain reasonable returns on their invest-ment, which is absolutely crucial for the futureof the industry. It is certainly a delicate bal-ance. But it is a balance that OPEC is totallydedicated to maintaining.
4 OPEC Bulletin
P R E S S R E L E A S E S
Press Release No 6/2001Vienna, Austria, April 5, 2001
The OPEC Secretary General, Dr AlíRodríguez Araque, has labelled a bill in-troduced to the United States Congress,that would enable legal action against theOrganization’s Member Countries, “anabsurdity that violates the most basic legalprinciples.”
In an official statement, Rodríguezdiscussed his views on the bill, as well ason an injunction by a federal judge inAlabama against OPEC, based on allegedanti-trust law violations. Following is thefull statement by the OPEC SecretaryGeneral:
Over the past few days, the interna-tional press has reported two separate de-velopments in the United States concern-ing the Organization of the PetroleumExporting Countries, and, as OPEC’sSecretary General, I wish to clarify anumber of points in connection with manyquestions that have been posed to me.This, however, is a preliminary statementon the issue and does not preclude a moredetailed analysis in the future.
Injunction by Alabama judgeThe first case refers to an injunction
by a federal judge in Alabama against whathe calls “collusion” by OPEC to restraintrade, in violation of US anti-trust laws.
There are precedents on this matter.In 1978, the International Association ofMachinists and Aerospace Workers filed
US Congress billagainst OPEC violates most
basic legal principles — Rodríguez
suit against OPEC for violation of US anti-trust laws.
The District Court entered a finaljudgement in favour of the defendants,holding that it lacked jurisdiction (1979).Then, the US Court of Appeals in SanFrancisco held that it did not have theauthority to judge the legality of sovereignacts by foreign states (1981), and finally,the Supreme Court refused to review alower court’s decision dismissing the anti-trust suit against OPEC.
Among the allegations that the Courtof Appeals took into account are the fol-lowing:
“The right of people and nations topermanent sovereignty over their nationalwealth and resources must be exercised inthe interest of their national developmentand of the well-being of people of the Stateconcerned.
“… the United States endorsement ofthis principle derives from its control, asa sovereign, of the development of its ownland and resources.”
Thus, we would be facing a case onwhich there is existing jurisprudence. Wefeel that the decision by the Alabama courtis inconsistent with international anddomestic US law.
US Congress billThe second case pertains to a bill pre-
sented by two US senators that wouldenable the US Justice Department and theFederal Trade Commission to bring actionagainst foreign states, including OPEC
Member Countries, for alleged collusivepractices in setting the price or produc-tion levels of petroleum products.
The political nature of this case isabsolutely undeniable. It has been broughtabout by domestic problems in US poli-tics. Nonetheless, some remarks should bemade:
To judge an Organization — whosemembers are sovereign states and act todefend their common interests — as asimple commercial entity is an absurditythat violates the most basic legal princi-ples.
One of these legal principles has beenrecognised in numerous United Nationsdeclarations as the sovereign right of na-tions over their natural resources. Can thena court, or the congress of one UN mem-ber, ignore principles that have been sol-emnly declared by the UN itself?
One of the senators, Herb Kohl, inpublic remarks, said the following:
“People suffer real consequences everyday in our nation because of OPEC’sactions.”
Meanwhile, the other senator, MikeDeWine, said: “As long as OPEC is al-lowed to control the world’s energy sup-ply, we are guaranteed to have more andmore … shocks and therefore more andmore problems for American consumers.”
In OPEC we assume that these sena-tors must have sought appropriate advicebefore introducing the bill.
Nonetheless, their statements force usto explain to them that the spikes seen in
P R E S S R E L E A S E S
April 2001 5
fuel prices last year occurred, paradoxically,at a time when there was an over-supplyof crude oil in the US.
Thus, the sharp fuel price increases, asMessrs Kohl and DeWine must know,were generated by a bottleneck in suppliesof gasoline and other fuels, due in turn tonew stringent environmental regulations,coupled with declining US refining capac-ity. The latter is a problem that the US hasbeen confronting over the past 20 years,during which time such capacity has fallenby 2.7 million b/d. Moreover, this prob-lem has been compounded by an inad-equate domestic distribution network.
On these issues, the senators could seekbetter advice from someone knowledge-able who would point out that any USgasoline price spikes this coming summerwould be the result of downstream bottle-necks in the country, rather than of shortcrude supplies.
Finally, for the senators’ information,OPEC simply works in order to maintainthe balance of the international oil market.It provides the difference between demandand the supplies from non-OPEC produc-ers. By doing this, we seek to stabilise thedemand/supply balance and consequently,prices. Oil price stability is an essentialingredient for sound economic growth.
Moreover, on some occasions, produc-ers have acted beyond the achievement ofthese goals, as happened last year. Excesssupplies of more than 1.5m b/d were madeavailable. However, prices in the US re-mained high because of the factors we havealready explained. There was, nonetheless,another very important reason — specu-lation in futures trading, as occurs on theNew York Mercantile Exchange(NYMEX), among other exchanges.
Thus, as the Bible says: “Why do youlook at the speck of sawdust in your broth-er’s eye and pay no attention to the plankin your own eye?”
In OPEC, we would never dream ofaccusing the US administration of conspir-ing against our interests, because of itsannouncement to promote an expansionof US domestic oil production.
Finally, in OPEC, we believe it is bestto ignore such populist policies as the onesat hand. Instead, we strive to act in a re-sponsible, considered and co-ordinatedmanner to solve problems that affect oilproducers and consumers alike.
Press Release No 7/2001Vienna, Austria, April 17, 2001
The 114th Meeting of the Conference ofthe Organization of the Petroleum Export-ing Countries, held in Vienna, Austria,from March 16–17, 2001, adopted thefollowing Resolutions, which, in accord-ance with customary procedures, havebeen ratified by the Member Countriesand are issued herewith:
Resolution No 114.385
The Conference,
upon the recommendation of the Boardof Governors,
approves
1. The Statement of Income and Ex-penditure for 2000 showing a totalexpenditure of ATS 166,566,793.
2. The Statement of Accounts as at De-cember 31, 2000, and the Audit Re-port submitted thereon by the ap-pointed Auditors, TPA ControlWirtschaftsprüfung GmbH.
Resolution No 114.386
The Conference resolves that the nextOrdinary Meeting of the Conference shallbe convened in Vienna, Austria, onWednesday, September 26, 2001.
Done in Vienna, Austria, this Seven-teenth day of March 2001.
Head of the Delegation of AlgeriaDr Chakib Khelil
Head of the Delegation of IndonesiaDr Purnomo Yusgiantoro
Head of the Delegation of the IslamicRepublic of IranBijan Namdar Zangeneh
Head of the Delegation of IraqDr Amer Mohammed Rasheed
Head of the Delegation of KuwaitDr Adel K Al-Sabeeh
Head of the Delegation of the SocialistPeoples Libyan Arab JamahiriyaAhmed Abdulkarim Ahmed
Head of the Delegation of NigeriaDr Rilwanu Lukman
Head of the Delegation of QatarAbdullah Bin Hamad Al-Attiyah
Head of the Delegation of Saudi ArabiaAli I Naimi
Head of the Delegation of the UnitedArab EmiratesObaid Bin Saif Al-Nasseri
Head of the Delegation of VenezuelaAlvaro Silva Calderon
Resolutions of the114th Meeting of the
OPEC Conference
6 OPEC Bulletin
F O R U M
a much broader sense, they also illustratesome of the longer-term issues.
Despite OPEC’s best efforts, the oilmarket has been on a real roller-coaster ridein recent years. In late 1997, prices begana downward spiral that was to have far-reaching and long-lasting effects on theindustry. This was in large part due to anoversupplied oil market — a result of thesharp slowdown in demand caused by theAsian economic crisis, clashing head-onwith an OPEC output increase of some2.5 million barrels a day in November ofthat year.
It can be said with certainty that thedisastrous price slide which ensued in 1998has made OPEC more aware than ever ofthe need to make sure that its efforts tobring stability and harmony to the oilmarket are proactive, well-considered andmore timely. The painful experience thatthe oil industry went through has, webelieve, made us all wiser.
The slump lasted throughout thewhole of 1998 (when OPEC cut outputtwice to little effect) and into the earlymonths of 1999, when a third round ofjoint OPEC/non-OPEC cuts totallingaround 2.1 million barrels/day finallyturned the market around. Prices began asteady recovery that has been maintainedto this day, and which has also put OPEConce again in the glare of the media spot-light, as the spectre of the ‘greedy cartel’was resurrected by some commentators.
The year 2000 saw the price recoverycontinuing, and OPEC’s efforts to bringstability to the market also continued inparallel. During the year, there were no lessthan four production hikes — totallingaround 3.7m b/d — in OPEC output, inMarch, June, September and again at theend of October.
Yet despite these four output increases,the market did not respond in the man-ner that one might expect. If prices were
The international oil industrywill need to do a great deal ofplanning and forethought toattract the investment necessaryto meet rising oil demand,notes OPEC Secretary General,HE Dr Alí RodríguezAraque*, in this article.
Challenges facing the oil-producingcountries in the 21st century
solely driven by supply and demand, onemight think that they would assume adownward trajectory as a consequence ofthe extra oil coming onto the market. Butthe expected moderation in prices did nothappen. Crude prices remained firm andin the US, we even saw product pricesspiking temporarily on several occasions.
These recent US product price spikesare a good example of the ‘pull effect’ thatproduct prices can have on the whole ofthe oil market. This is a phenomenon withwhich we are familiar from the behaviourof the commodities market. It often hap-pens that when the price of a commodityrises or falls for reasons that are specific tothat commodity, then the prices of otherrelated commodities also rise or fall, eventhough they may not be affected by thefactors that are driving the price move-ments of the first commodity.
That goes a long way towards explain-ing what has been happening in the USmarket recently. Strong product priceshave pulled crude prices up with them. Letus take the example of heating oil. Inwinter 1999-2000, there was a physicalshortage of barges in the US north-east.This drove heating oil prices upwards, thuspulling crude prices along with them, eventhough there was never a shortage of crudeat any stage.
We saw a similar phenomenon in thespring and summer of last year, when USgasoline prices spiked, first on the WestCoast and then in the Midwest. The rea-sons for this were quite understandable,with new environmental regulationsputting refiners — especially in the Mid-west, where ethanol is used as a compo-nent of reformulated gasoline — undersevere pressure to find sufficient supplies.The ‘pull effect’ exerted by the gasolineprice did its work, and crude prices re-mained strong, even in the face of OPEC’sfour output increases. Thus, even though
* Based on the speech by Dr Rodríguez to theSecond International Oil Summit, Paris,France, April 25, 2001.
In today’s world, the main challengesfacing the international oil industry aretwofold: firstly, to ensure that the
world’s ever-growing energy demand canbe met by providing sufficient, timelysupplies of crude oil and natural gas; andsecondly, to ensure that we do this in amanner that is compatible with the pres-ervation of the global environment.
Before discussing these twin themes,however, let us briefly examine recentdevelopments in the international oilmarket, since they provide a very goodillustration both of the immediate, short-term challenges that are facing us, and, in
F O R U M
April 2001 7
crude supplies were quite ample, prices re-mained firm.
As last year progressed, however, therumblings of a global economic slowdownbecame increasingly ominous, and today,we find ourselves facing a quite differentchallenge: that of maintaining balance inthe oil market in the face of a globaleconomy that is decelerating sharply. Thesituation is in many ways similar to theone we were facing in late 1997. The factthat in 1997, we increased output by 2.5mb/d, whereas this year we have already cutoutput by the same amount demonstratesconclusively that we have taken on boardthe lessons of that period.
As a result, the price of the OPECBasket of crudes has so far this year re-mained within the range specified by ourprice band mechanism of $22 to $28 abarrel. It is admittedly at a lower averagelevel than in 2000, but within the targetedrange nonetheless. From this standpoint,therefore, our proactive strategy can be saidto have produced results, and we will con-tinue, as we always do, to monitor devel-opments closely and take whatever actionwe believe to be necessary for the healthof the market.
Key to the futureLet us now move on to address the
question of exactly why this price stabilityis so important — not just for OPECMember Countries and other oil-export-ing nations, but for the health of the glo-bal energy industry and ultimately, for thehealth of the world economy as a whole.
If one had to sum up the reason forthe necessity of stable oil prices in oneword, that word would be investment.Investment is the key to the future of anybusiness, and the oil industry is a particu-larly good example of this. It requiresconstant investment, both in OPEC andnon-OPEC countries, to meet the world’sever-growing demand for crude. There-fore, the countries that produce the oilneed sufficient financial resources not justto meet the needs of their populations, butto plough huge investments back intomaintaining, developing and expanding oilproduction. And since OPEC Membershave some three-quarters of the world’s oilreserves, it is logical that they will have thegreatest need of upstream investment inthe years to come.
On the subject of investment, I amreminded of something which the USEnergy Secretary, Spencer Abraham, saidrecently at the US Chamber of Commerce
National Energy Summit. He spoke of theserious lack of investment in the energyindustry — a topic which OPEC hasemphasized insistently in the recent past.He said, and I quote:
“… our energy infrastructure is woe-fully antiquated and inadequate tomeet our future needs.”As an example of this lack of invest-
ment in the industry, he noted:“Since 1980, the number of American
refineries has been cut in half. There hasn’tbeen a new refinery built in the UnitedStates in over 25 years.”
And to illustrate the enormous scaleof the investment in energy infrastructurethat will be needed, the Energy Secretarynoted that transporting domestic gas sup-plies to market would require:
“… an additional 38,000 miles oftransmission pipeline and 255,000 milesof distribution lines — at an estimated costof $120–150 billion.”
It is true that parts of the US energyinfrastructure are suffering from seriousunder-investment and are going to need ahuge amount of money to bring them upto 21st century standards. Why should thatbe the case, especially considering that theUS is the world’s biggest energy consumer?One reason is that increasingly stringentenvironmental regulations require cleanerproducts, necessitating considerable down-stream investment — yet the marginsoffered by the industry are unlikely totempt investors.
Greater competitionOne must also bear in mind that to-
day there is simply much greater compe-tition for investors’ money than there was,say, ten or twenty years ago. In recenttimes, energy prices have been at levels thatsimply have not been sufficient to attractthe necessary investment — investmentwhich is vital for the modernizing and up-grading of the industry. Many investorswho, not so very long ago, might have beensatisfied with the steady, if relativelyunspectacular, returns offered by the oilindustry, have been lured away by indus-tries offering higher returns — and oftengreater risks too, as the bursting of the dot-com bubble has demonstrated.
All this illustrates clearly that whilethere are genuine dangers inherent in a lackof sufficient investment in our industry,there is also a growing recognition of thesedangers. However, one might add that itis heartening to see that a great manypeople do, in fact, recognize the problemsthat low prices and consequent under-investment in the oil industry can cause.
Whatever problems our industry mayface from time to time — stubbornly highor low crude prices, or shortages of prod-ucts like gasoline leading to price spikes— none of them are the result of a short-age of crude. Our Organization has alwaysstriven to ensure that the market is suffi-ciently supplied. And our Members, withtheir massive, easy-to-access reserves andtheir inexpensive production costs, are notonly the best source of crude to meet theworld’s growing demand, but will remainso for as long as oil is used as a source ofenergy by mankind.
To sum up, therefore, it is clear thatone of the biggest challenges our industryhas to meet is that of maintaining and
‘It is heartening
to see that many
people recognize
the problems
that low prices
and consequent
underinvestment
can cause.’
F O R U M
8 OPEC Bulletin
encouraging sufficient investment to en-able us to face the future with confidence.But there is another immense task wecannot shirk, for it is inextricably inter-twined with absolutely everything we do.It is this: the challenge of meeting theworld’s energy needs and hence sustain-ing economic growth in such a way as toprotect the global environment.
Nobody can have failed to notice therecent international outcry that ensuedwhen US President George W Bush madeit clear that he did not support the KyotoProtocol, because he believed that it wasnot in his nation’s best economic interests.Country after country queued up to heapcriticism on the US for acting in an envi-ronmentally irresponsible manner. Now,it is not for me to say whether the Presi-dent’s decision is right or wrong. However,if an international leader believes that hisnation’s interests are being threatened, thenhe has not only the right, but the solemnduty to protect those interests. Otherwise,he is failing his people.
Reinvesting in energyThat, after all, is not very different
from what OPEC has been saying withregard to Kyoto: namely, that the Proto-col, if implemented as it stands, wouldcause a great deal of economic damage toour Member Countries by choking off oildemand and depriving them of the rev-enues that they so badly require, not onlyto meet the needs of their people, but toreinvest in their energy industries to en-sure that they are capable of meeting notjust future demand, but also higher envi-ronmental standards.
OPEC has often been portrayed by the
media as wanting to obstruct measures toprotect the global climate. That is unfair.Nobody has the right to pollute the planet,
and we would never seek carte blanche todo so. What we do seek, however, is theright to pursue our development in amanner that allows us to make the bestuse of our natural resources, while alsobeing compatible with the preservation ofenvironmental harmony.
One final point should be made on thepreservation of the environment. Thetreasuries of the industrialized nations havein recent years collected a great deal ofmoney with minimal effort, merely byimposing punitive taxes on oil products.Much of this is done in the name of theenvironment. Yet very little, if any, of the
‘Fossil fuels were
the motor that
drove global
economic growth
throughout the
last century.’
hundreds of billions of dollars these na-tions are raking in every year is actuallyspent on improving the environment.Perhaps if it had been, there would not bea need for such drastic measures as Kyoto?
Environmental spendingIn contrast to such ‘green’ taxes on
products, which tend to be simply pock-eted by the treasuries of the consumingnations, more stable energy prices wouldallow the industry itself to increase genu-ine environmental spending, by reinvest-ing a greater proportion of their revenueson measures including — but by no meanslimited to — upgrading refineries, devel-oping of cleaner fuels, reducing emissions,and the like.
The challenges facing our industry areimmense, but they are by no means insur-mountable. Fossil fuels were the motor thatdrove global economic growth through-out the last century. They brought tremen-dous benefits to mankind. Now, there isa growing recognition that if we want tocontinue using fossil fuel energy to powerthe global economy forward, we have todo so in a way that will allow us to simul-taneously preserve the global environmentfor future generations.
I firmly believe that we can do this. Itwill require planning. It will require fore-thought. It will require massive amountsof investment. It will require greater co-operation and deeper understanding be-tween producers and consumers. But letme emphasize once more that this earth isour common home. We can, and should,all work together to ensure that its boun-tiful natural resources are used for thecommon good.
April 2001 9
S E C R E T A R I A T N O T E S
OPEC Secretary General meetsAustrian Chancellor Schüssel
and Foreign Minister Ferrero-WaldnerIn April, OPEC Secretary General,HE Dr Alí Rodríguez Araque, con-tinued the process of meeting with themost senior figures in the Governmentof the Organization’s host country,Austria. Thus, during the month,Dr Rodríguez paid courtesy calls onAustria’s Federal Chancellor, HE DrWolfgang Schüssel, and on the Minis-ter for Foreign Affairs, HE BenitaFerrero-Waldner. The Secretary Gen-eral has already met with other seniorfigures including Austrian PresidentHE Thomas Klestil.
Dr Rodríguez (right) is welcomed by Austrian Chancellor,HE Dr Wolfgang Schüssel.
Dr Rodríguez shares a lighter moment with Austria’sForeign Minister, HE Benita Ferrero-Waldner.
10 OPEC Bulletin
E G Y P T I A N C O N C E R T
On April 30, the OPEC Secretariat, in co-operation with the EgyptianCultural Centre in Vienna, hosted a concert of traditional Egyptianmusic by the group Banat El Nil (which means ‘The Girls of theNile’). The all-female group of musicians, from the Cairo OperaHouse, delighted the audience packing the press room, whichincluded the Egyptian Ambassador to Austria, HE SamehHassan Shoukry and his wife. Some scenes from what wasa splendid evening’s entertainment are shown here.
OPEC Secretariat hosts concert of traditional Egyptian music by the group
�����������
April 2001 11
I N T E R V I E W
Question: You have served in two highly in-fluential OPEC posts — President of theConference and Secretary General — at aroundthe turn of the new millennium, a symbolicperiod which many people see as providing anopportunity to re-evaluate longstanding phi-losophies, practices and procedures. OPEC it-self entered into the spirit of the occasion withits Second Summit of Heads of State and Gov-
OPEC Secretary General, HE Dr Alí Rodríguez Araqueis a highly-respected figure who has enjoyed a long and distinguished career in theinternational oil industry. Born in 1937, he studied law and economics and workedas a lawyer until 1983. He has held many high-level energy-related posts in the Ven-ezuelan Congress and Government, including that of Minister of Energy and Minesin 1999-2000, and was President of the OPEC Conference last year. He took up theposition of OPEC Secretary General at the start of this year, and granted this inter-view to the OPEC Bulletin in April, shortly after he had completed three months inthe post.
OPEC: confronting new realities andmeeting the environmental and
technological challenges of the 21st century
OPEC Secretary General, HE Dr Alí Rodríguez Araque (centre), is interviewed by Head of PR & Information Department, FaroukU Muhammed, mni (second right), Media Relations Officer, Dr Abdulrahman Al-Kheraigi (right), OPECNA Editor, Fernamdo J Garay(third left), OPEC Bulletin Editor, Graham Patterson (left), and OPEC Review Editor, Keith Marchant (with back to camera).
ernment in Caracas last September. Do youbelieve that such occasions can bring aboutmeaningful change?
Answer: Taking into account that OPECwas founded in the 1960s, and that we havenow arrived in the new millennium, we haveto realize that we are confronting new reali-ties related to the environment, to the emer-
gence of technological advances, and, ofcourse, to the new political realities of oil.One of the main objectives of the Confer-ence of Ministers is to analyze the situationof transition in the world and in our coun-tries.
At the Caracas Summit and at the Sev-enth International Energy Forum in Riyadhwe analyzed the chronic problem of pov-
I N T E R V I E W
12 OPEC Bulletin
erty in the world, and other economic ills inthe developing countries. We strongly be-lieve that one way of eradicating the eco-nomic hardship that haunts many ThirdWorld countries is by pooling our resources.We think that continued North-South dia-logue is not only necessary for the better-ment of our countries, but is also crucial toachieve energy security and much else be-sides.
Q: What are the challenges facing OPEC inthe present international oil market, and whatstrategies should it adopt to confront thosechallenges?
A: We face many challenges. The first is theprice of oil. Of course, the consumer is keenon having a permanently low price. For theinvestor, however, the prime objective is notthe price, but the revenue. And owners ofnatural resources are confronted with thechallenging task of determining the rightways and means to utilize their oil-gener-ated incomes to develop their economies.We can confidently say that OPEC hassucceeded in the price issues. But we arealso confronting problems related to invest-
ment. Before the creation of OPEC, theproblem was how our countries could fullyutilize the income generated by their oilactivities.
Throughout the 1960s the situation wasvery different in each country. However, afterthe nationalization campaigns in many ofthe Member Countries, as in Venezuela —whose own experience I can relate to, hav-ing been a Member of the Parliament —our country signed three kinds of contracts.At the end of the day, and after analyzingthe contracts, the degree of participation ofour people, the income generated from the
oil-related activities, we came to the ines-capable conclusion that what we were get-ting back was a very low return, much lowerthan that of our national oil company, andthat our country obtained before the na-tionalization.
I have some concerns about the indi-vidual negotiations between our countryand the companies, because the investorshave a common position and a common in-terest, and are acting according to that com-mon interest, but our countries are negoti-ating with these investors bilaterally. I believewe have to analyze the situation very care-
fully, because if we do not, we risk a returnto the situation before the creation ofOPEC.
Q: Doesn’t this issue conflict with the sover-eign interests and rights of the individualMember Countries?
A: The main issue related to the sovereigntyaspect is to improve our position in theworld, because the owner of the naturalresource and the investor both have a com-mon interest in oil, in using that naturalresource. But there is a clash of interests, ofcourse, because the owner of the naturalresource wants as high a level of participa-tion as possible, while the investor wantsthe highest revenue possible.
In negotiations, we try to arrive at acommon, acceptable position, but theinvestor enjoys a very strong position at thistime and our countries deal with this issueon an individual basis.
This puts them in a weak position whenthey negotiate the level of participation withinvestors. That is the problem. If you don’t
have the power to negotiate, investors willbenefit, and our own countries will emergebadly bruised.
Q: You have been Secretary General now forthree months. What are your early impressionsof the post from an internal perspective, theperspective of the OPEC Secretariat and alsofrom the perspective of the international oilmarket?
A: There is a very strong link between theinternal and the external issues, especially asregards the Secretariat. As far as the internalissue is concerned, I see a truly qualified team— people with outstanding experience. ButI believe that we need to introduce somechanges in our system in order to improveour activities, our work, and that dependson the vision of OPEC as a whole, becausethe Secretariat is only a tool in order toimplement the decisions of the Conferenceand the Board. The main challenge for theConference and the Board is to define veryclear objectives to help the Secretariat bringabout the changes that we need to intro-duce to make the Organization more effi-cient.
Q: Over the past year or so, OPEC has intro-duced the concept of the price band mechanismand some OPEC officials have talked in termsof a $25/barrel target price. How do you seeOPEC’s pricing mechanisms developing in thefuture, particularly since it now appears thatthe world economy is slowing down sharply,especially in the USA?
A: The price band mechanism is a tool inorder to reduce the frequent fluctuations
I N T E R V I E W
April 2001 13
and volatility in the oil market, to stabilizethe price between $22–28/b, which webelieve is enough to maintain stability. Wealso need to address another factor that isdistorting the prices in reality, and that isthe permanent speculation in the futuresmarkets. As is well known, world oil demandis about 77 million b/d, but in the futuresmarkets about 170m b/d or on some days200m b/d is traded.
That distorts reality, so we have to cre-ate a new situation, or a new benchmark inorder to close the gap between the bench-mark and the physical market. We are aim-
ing to eliminate some of the speculation inthe market. It is not easy, but I think we cando it.
We have to find the best tools or meas-ures to achieve our objectives, one of whichis the stabilization of the market. These dayswe have the price band, and we may havea new marker or a new mechanism in thefuture. One thing is sure, which is thatOPEC Members are keen on keeping a fairprice for producers and consumers.
Q: Oil prices remained strong throughout thewhole of 2000 and the OPEC Reference Bas-ket price for that year was over $27/b, whichwas the highest since it has been introduced.At the time, some commentators said that thiswas not sustainable, that it would damage theworld economy and cause a slowdown in themajor industrialized nations. Now we arewitnessing this slowdown and some commen-tators are saying that they were right all alongand that oil prices are not sustainable at thislevel. Could you comment on that?
A: Of course, a very high oil price can hurt
the economy of many countries, and we areworking hard to maintain prices within ourprice band. But we have to take into ac-count the many other factors that influencethe price, like market speculation, transpor-tation, high taxation in some Europeancountries, and in the case of the US, refin-ing capacity and distribution. In the US overthe last 20 years, about 170 refineries wereshut down, causing capacity to decline by2.7m b/d. It is this which is largely respon-sible for the periodic tightness in the USproduct markets.
When the product price is very high,the impact on the oil price is about 60-80per cent. That is not a problem that OPECcan address — we are already producing allthe oil the world needs in order to meetdemand. Of course, if the price is very low,investment too is expected to be very low,and production and supply would also beaffected too. The reality is that by acting tocorrect the market, we are demonstratingthat we are right in applying a mechanismto maintain stability for the betterment ofall parties concerned.
Q: Is there a need for OPEC to review the
reference points for international oil prices interms of its own Basket of seven crudes, andother benchmarks such as WTI, Brent andDubai, and if so, why is that necessary?
A: It is simply this — WTI, Brent and Dubairepresent only about 1m b/d, whereasOPEC exports about 22m b/d. As we havealways maintained, our aim is to close thegap between the market price and thephysical market. That is our objective.
Q: In the past, OPEC’s image in the westernmedia has often been a negative one, althoughthis situation has improved in recent years.
How can we build on and strengthen theconsiderable progress already made in this area?
A: Firstly, by telling the truth, the whole truth,and nothing but the truth. Then we need totake initiatives, we have to make decisions,we have to draw up plans in order to clarifyto the whole world how OPEC stands, andhow the Organization is reacting to the highoil prices and what measures we have to taketo maintain the stability in the market.
Also, we have to make perfectly clear tothe global community what ways and means
OPEC is constantly adopting to lend ahelping hand to many poor and develop-ing countries, where the OPEC Fund hasbeen instrumental in bringing our efforts tofruition. We have worked very hard tochange those negative perceptions and wewill continue to do so. We are confidentthat consumers will ultimately listen to rea-son and view the Organization favourably.
Let me give you an example whichhappened recently. Last year, the citizens ofmany European countries reacted againstthe oil prices, but their populations werenot blaming OPEC for high oil prices. Theyunderstand perfectly that the high price theyare paying is largely due to taxation, to thehigh level of taxes. That is why we tell thoseconsumers the truth about who is gettingwhat from each barrel of oil.
Q: One notable achievement in tackling theprice slump which began in late 1997 andrestoring stability to the market has been thedegree of co-operation between OPEC and non-OPEC producers. How do you see this develop-ing in the future?
I N T E R V I E W
14 OPEC Bulletin
A: Firstly, I believe that the majority of oil-producing countries have a common inter-est in maintaining a certain price level.Mexico, Oman, Angola, Russia and nowKazakhstan, are coming to the OPEC Con-ferences to co-ordinate their policies withthose of the Organization. It was a very goodexperience at the last Conference when theyoffered their support in order to maintaina good balance between supply and de-mand. We can pool our resources to over-come our common problems, and to deter-mine the right policies and apply them insuch a way as to secure price stability.
Q: Some oil-producing countries seem to feel itis better for them to remain outside the Or-ganization, because in times of pressure theycan gain from the solidarity of operating withOPEC, but they do not have to make thesacrifices that OPEC Member Countries some-times have to make in terms of reducing theirlevels of production. How do you think OPECcan attract new Members?
A: Many producing countries realize that ifthey increase output to take advantage ofOPEC decisions, at the end of the day priceswill come down, and they will be affectedin the same way as the OPEC MemberCountries. That is why many non-OPECproducers are joining us to co-ordinate theirpolicies with OPEC. I believe that in thefuture we could see new Members of theOrganization, because we have a very strongand common interest with these countries.That is the reason why OPEC and non-OPEC countries like Mexico are frequentlyco-ordinating their policies. That is a verygood system which helps the Organizationachieve its short and long term goals.
Q: The producer-consumer dialogue has madeprogress during the 1990s with the series ofinternational energy forums, the latest of whichwas the successful event in Riyadh in Novem-ber 2000. Are you optimistic about the futureof the producer-consumer dialogue, or do youbelieve that the fundamental interests of pro-ducers and consumers are so different that thereis only limited scope for agreement among themon such important issues as pricing and pro-duction?
A: We cannot forget that we are not talkingabout producer and consumer countries. Weare talking about countries that buy oil, and
countries that sell oil. The consumers areour customers. That is the reality of therelationship, so we have to arrive at a com-mon position about the price. At the end ofthe day, the main thing for the consumersis the price, and of course the price is veryimportant for us too, but our income is evenmore important. That is one good reason totry to arrive at a common position, or somekind of agreement which could serve bothconsumers and producers. That is not aneasy job. Let me give you an example. If youare buying a car, you have to do some bar-
gaining and dealing to get the lowest pos-sible price. That means that you have toconsider many of the alternatives, which areavailable in the market. You have to analyzethe situation. And in the case of energy, afar more complex issue, you have to investa lot of time to reach some common ground.That is our mission — a fruitful and pro-ductive dialogue that will not jeopardize theeconomic interests of the global community.
Q: Many OPEC countries are opening up toa greater degree, and are inviting interna-tional oil companies to work with them toexploit their enormous reserves in the most ef-fective way. Some people see a danger in this,because they feel there is a risk of returning tothe pre-OPEC days of the ‘Seven Sisters’, whenthe oil companies ruled the industry and OPECMembers received very little for their oil. What
kind of safeguards need to be taken in order toeliminate the risk of a return to that kind ofsituation?
A: Of course, there is a risk. I suppose itcomes with the territory. If you are an in-vestor and you are coming to my countryto invest in exploration and production,what do you want most? You want to elimi-nate the royalties, and pay very low taxes soyour revenue will be higher. That is yourmain interest. But on the other hand, I amthe owner of my natural resource — not me
Alí Rodríguez personally, but the entirepopulation of my country.
So the investor and the resource ownerhave to arrive at a mutually agreeable posi-tion. From my point of view, you wouldhave to pay royalties because oil is not arenewable resource. If you are extracting abarrel of oil, you cannot reproduce thatbarrel. Therefore, I have to recover some ofthat oil that you are extracting. The elimi-nation of royalties might be very good fora country like England or other countriesthat have high costs and need to increaseproduction, because it is in their nationalinterest.
However, in the case of OPEC MemberCountries, it is an entirely different story.Venezuela, for example, is producing 2.9mb/d and domestic consumption is only400,000 b/d, so we are producing mainly
I N T E R V I E W
April 2001 15
in order to export. If you are an investor,and a Member is an owner and I am also anowner, and we are negotiating on our ownaccount to reach an agreement with theinvestor, then our position is very weak. Weare not acting in this case; we are defendingour common objectives.
I am therefore proposing that OPECshould analyze the possibility of designinga common framework for these negotiations,like at the first meeting in Baghdad in 1960,and prior to that in Cairo. We need to re-analyze all these realities to arrive at a com-mon position. Of course, if we compare, say,Saudi Arabia with Venezuela, then the geo-logical reality in Saudi Arabia is better thanin my country. There are some differences,but we would of course take these into ac-count in order to arrive at a common posi-tion.
Q: Analysts predict that oil demand will con-tinue to rise and the world will in future relymore on OPEC oil. How optimistic are youabout the future prospects for the internationaloil market, given this scenario?
A: I am very optimistic. According to theIEA’s forecast for the next 20 years, oil de-mand will increase to 120m b/d. Accordingto their forecast, we will produce more than50 per cent of that figure. I believe thatdemand will be more than 120m b/d. I be-lieve that OPEC will increase its share of themarket to more than 50 per cent, becauseabout 77 per cent of the world’s provenreserves are in our Member Countries. That
means that more incremental productionwill come from OPEC Countries, so all inall I am very optimistic about the future.
Q: There is a strong move towards encouragingthe use of alternative energy sources, which hascreated a conflict between economic and envi-ronmental interests. How can OPEC reconcilethose conflicting interests?
A: First of all, we have to maintain a reason-able price level, because if prices go too high,two things can happen. The first is that therewould be an increase in high-cost oil pro-duction in other regions of the world out-side OPEC. The second is that there wouldbe a move away from oil towards alternativeenergy resources.
At the same time, we have to invest a lotin new technologies in order to improve thequality of our oil and our products. I don’tlike the expression ‘clean oil’, but we canproduce high-quality oil — an environmen-tally-friendly fuel, if you will — to preserveour Earth. That is why we have to invest inresearch and technology, to make our planetcleaner and friendlier.
Q: The last question touches on the issue of de-velopments in world trade and the activitiesof the WTO. Why is this an important issuefor OPEC? What does it expect to achieve fromits involvement in the ongoing talks?
A: Many people speak about the free mar-ket as if it were a matter of fact. However,I am convinced that today we are confront-
ing a very highly regulated market. I believethat the free market is a fiction. My countryhas direct experience of this. Some years ago,the US imposed a ban on imports of tunafish from several Latin American countries,including Venezuela and Mexico. This wasbecause dolphins were being killed in netsused to catch tuna, and the US used this asan excuse to ban tuna imports. Even whenthere was a GATT ruling in our favour, theUS ignored it.
Regarding the US restrictions againstVenezuelan gasoline a few years ago, we hadthe same problem. Venezuela had to go tothe WTO in order to demand that the USprohibition against our gasoline should belifted. But even after the ruling, the restric-tions were maintained against our country.There are many such measures that havebeen imposed in order to control the mar-ket, and that is the reason because there aremany trade conflicts between countries, eg,the US and Brazil, the US and Japan, andso on.
So that is why I believe that free tradetoday is a fiction. It doesn’t exist in reality.In addition, some people want a free marketfor their own products, but not for theproducts of others. Of course, there have tobe guarantees and agreements in the area ofworld trade, and we have to comply withthose agreements on certain issues. Butbefore signing them, we have to take intoaccount the reality of the present world.
Your Excellency, thank you very much for yourtime.
16 OPEC Bulletin
For an in-depth lookat the oil marketand related issues
the OPEC Reviewcontains research papersby experts from across
the world
Now in its 25th annual volume, the
OPEC Review is published quarterly.Its content covers the international oil
People wishing to submit a paper forpublication should contact the Editor-in-Chief of the OPEC Review, Farouk UMuhammed, at the Public Relations andInformation Department, OPEC Secre-tariat, Obere Donaustrasse 93, A-1020Vienna, Austria.
“The principal objective of the OPEC Review is tobroaden awareness of (energy and related) issues,enhancing scholarship in universities, researchinstitutes and other centres of learning”
Recent issuesDecember 2000
Global energy outlook: an oil price sce-nario analysis — Shokri Ghanem, RezkiLounnas and Garry BrennandThe hybrid permit cum price ceiling policyproposal: intuition from the prices versusquantities literature — Gary W YoheWorld oil reserves: problems in definitionand estimation — Ghazi M HaiderA vector autoregressive analysis of an oil-dependent emerging economy — Nigeria— O Felix Ayadi, Amitava Chatterjee andC Pat ObiThe closure of European nuclear powerplants: a commercial opportunity for thegas-producing countries — Jean-PierrePauwels and Carine Swartenbroekx
September 2000Energy taxes and wages in a general equilib-rium model of production — HenryThompsonResource windfalls: how to use them —Rögnvaldur HannessonEnergy consumption in the Islamic Republicof Iran — A M Samsam Bakhtiari and FShahbudaghlouOil and non-oil sectors in the Saudi Arabianeconomy — Masudul A Choudhury andMohammed A Al-Sahlawi
June 2000The case for conserving oil resources: thefundamentals of supply and demand — Doug-las B ReynoldsVicissitudes in the Hong Kong oil market,1980–97 — Larry Chuen-ho ChowEconomic theory and nuclear energy —Ferdinand E BanksThe economic cost of low domestic productprices in OPEC Member Countries — NadirGürer and Jan Ban
March 2000Energy and interfactor substitution in Tur-key— Carol Dahl and Meftun ErdoganDomestic demand for petroleum in OPECcountries — Ujjayant Chakravorty, FereidunFesharaki and Shuoying ZhouCyclical asymmetry in energy consumptionand intensity: the Japanese experience —Imad A Moosa
Before demand-side management is dis-carded, let’s see what pieces should be kept— Clark W Gellings
December 1999Energy in the Caspian Sea region in the late1990s: the end of the boom? — Christianvon Hirschhausen and Hella EngererHousehold energy demand in Kuwait: anintegrated two-level approach — M NagyEltony and Mohammad HajeehThe economics of the Nigerian liquefiednatural gas project — M Eghre-Ohgeneand O OmoleIncome determination in the GCC memberstates — Richard G Zind
September 1999The Caspian Sea geopolitical game: prospectsfor the new millennium — Gawdad BahgatAn analysis of Libya’s revenue per barrelfrom crude oil upstream activities, 1961–93— Mustafa Bakar Mahmud and Alex RussellEnergy use and productivity performancein the Nigerian manufacturing sector(1970–90) — Adeola F Adenikinju andOlumuyiwa B AlabaBasis risk: an expository note — FerdinandE Banks
June 1999The impact of emissions trading on OPEC— Shokri Ghanem, Rezki Lounnas andGarry BrennandTechnology, oil reserve depletion and themyth of the reserves-to-production ratio— Mamdouh G SalamehDoes devaluation improve the trade bal-ance of Iraq? — T M ZaidanWagner’s law and public expendituregrowth in Kuwait — Nadeem A Burneyand Nadia Al-MussallamThe economic cost of oil or gas production:a generalised methodology — Thomas Stauffer
March 1999The price of crude oil — A M SamsamBakhtiariElectricity demand by the commercial sec-tor in Kuwait: an econometric analysis —M Nagy Eltony and Mohammad HajeehThe oil and gas links between Central Asiaand China: a geopolitical perspective —Xiaojie XuThe development and acquisition of oillicences and leases in Nigeria — LawrenceAtsegbua
Estimating oil product demand inIndonesia using a cointegrating error
correction model
The gas dimension in the Iraqi oilindustry
The Russian coal industry in transition:a linear programming application
The future of gaseous fuels in HongKong
Carol Dahl and Kurtubi
Thamir Abbas Ghadhbanand Saadallah Al-Fathi
Bo Jonsson andPatrik Söderholm
Larry Chuen-ho Chow
N E W S L I N E
April 2001 17
N E W S L I N E f r o m t h e O P E C N A N e w s D e s k
akarta — Indonesian state oil andgas company Pertamina has signed a
$6.2 billion deal to sell 1.5 trillioncubic feet of natural gas to its Malaysiancounterpart, Petronas, over a 20-year pe-riod.
Pertamina said it was committed toexporting natural gas from the WestNatuna field, in the South China Sea, tothe nearby Malaysian gas field of Duyong.The gas would be made available to theDuyong gas pipeline network from July2002.
Pertamina and its production-sharingcontractors, led by Conoco of the UnitedStates, would start supplying 100 millioncu ft/day of natural gas in the first twoyears. In 2004, the amount would increaseto 250m cu ft/d.
Speaking at the contract signing cer-emony, Pertamina’s President Director,Baihaki Hakim, said that Conoco and itspartners would invest $3.9bn in develop-ing block B, in the Natuna Sea, to exploitnatural gas for Petronas.
Production platformsThe development includes major pro-
duction platforms, a 96-km subsea pipe-line, a floating production and storageplatform and offloading vessels, as well asa liquefied petroleum gas (LPG) facility.
Conoco was also to produce 100mbarrels of oil and 100m b of LPG from blockB, one of the most prolific concessions inthe Natuna basin.
The latest contract comes two monthsafter Pertamina signed a similar gas exportdeal with Singapore, estimated to be worthmore than $8bn, under which Pertaminaand its contractors would export 325m cuft/d of gas for a 22-year period.
In a separate development in Indone-sia last month, the country’s FinanceMinister, Prijadi Praptosuhardjo, said thatthe decision by US major ExxonMobil tosuspend its gas operations in the troubledprovince of Aceh would hit revenues badly.
ExxonMobil announced earlier in themonth that it had decided to suspend itsoperations in Aceh after receiving threats
Indonesian state oil firm Pertamina signs$6.2 billion deal to supply natural gas toPetronas of Malaysia over 20-year period
from the separatists of the Free AcehMovement, which has been waging aguerrilla war against the Indonesian gov-ernment in pursuit of its goal of an inde-pendent state.
The Minister said that in addition tothe shutdown of natural gas production,fertilizer exports would also be disrupted,as the fertilizer factories in Aceh dependedon ExxonMobil for their gas supplies.
Restoring securityThe problem could be handled if the
government could restore security in Aceh,he was quoted by the Indonesian newsagency (Antara) as saying.
Meanwhile, the Co-ordinating Min-ister for Social, Political & Security Affairs,Susilo Bambang Yudhoyono, said the gov-ernment had done its best to secureExxonMobil’s gas fields in Aceh province.
The US firm manages four gas fieldsin Aceh — the Arun, South Lhok SukonA, Lhok Sukon D, and Pase A fields.
“The security given to the Arun gasfield is the best ever given to a similarfacility,” the Minister told newsmen, not-ing that the Indonesian military had de-ployed three battalions and one companyto secure the facility after ExxonMobilclosed down its operations there.
“I received a report from the militarythat company employees (living) outsidethe area also want security, as they are beingintimidated by the Free Aceh Movement,”Yudhoyono noted.
He said that if ExxonMobil wanted a100 per cent security guarantee, this couldbe discussed.
The Minister said that although LNG
production could be boosted elsewhere(eg, at the Bontang plant in EastKalimantan) in order to make up for theshortfall caused by the closure of the Acehfields, the government wantedExxonMobil to resume operations to meetlocal and foreign demand.
PT Arun, which operates the LNG
plant, is 55 per cent owned by Pertamina,30 per cent by ExxonMobil, and 30 percent by Japanese LNG buyers.
Japan and South Korea, the largest twoimporters of Indonesian LNG, have report-edly started looking for other suppliers.
Japan’s Tohoku Electric Power Com-pany has already announced that it hascancelled a contract for the purchase of 3million tonnes of LNG from the Arun fieldand had reached an agreement for newsupplies with a Malaysian firm.
Venezuela’s PDVSAunveils new businessplan for 2001-2006Caracas — State oil corporationPetroleos de Venezuela (PDVSA) hasunveiled its 2001–06 business plan, inwhich the company has outlined a strat-egy to reinforce its status as “a secure andreliable supplier of high-quality crude andproducts”.
In the plan, PDVSA said its strategywas also aimed at ensuring “competitive-ness and financial viability by means ofoptimizing costs and an efficient handlingof its assets, adapting to the digital erathrough the use of e-business”.
It went on: “PDVSA maintains thestrategic thrust of concentrating on coreactivities in exploration, production, re-fining and commerce, while at the sametime promoting maximum private capitalinvolvement in the comprehensive devel-opment of the gas business, petrochemi-cals, industrialization of refinery streams,Orimulsion and coal.
“In the core activities, actions are be-ing directed to improving the hydrocar-bons resource base with the addition ofquality reserves, optimizing the down-stream business, consolidating our pres-ence in North America, deepening partici-pation in Latin America and the Carib-bean markets through the Citgo and PDVbrands, and diversifying non-traditionalmarkets,” it noted.
The firm added that its objectives alsocovered optimal performance in health,safety and the environment, as well as theeffective and timely integration of ad-vanced technology.
“PDVSA proposes to improve its hy-drocarbons resource base through theaddition of light and medium gravitycrude reserves, and through improvements
J
N E W S L I N E
18 OPEC Bulletin
companies having the technology and themarket, the development of border reser-voirs, to the manufacture of products witha low environmental impact. This coveredliquefied natural gas projects and gas-to-liquids conversion.
In the chemical and petrochemicalsectors, PDVSA said that it wouldstrengthen its position through the devel-opment of new business ventures usingnatural gas and refinery streams.
“In this direction, the continuation ofthe projects pertaining to the greatestcomparative advantage sectors has beenforeseen, which is to say, going forwardwith the olefins and derivatives jointproject with ExxonMobil, fertilizer pro-duction through Fertinitro II, and metha-nol production capacity.”
PDVSA also said that its subsidiaryPequiven was planning to open Servifertil,a company that began operations in thesecond half of 2000, to private investment,thereby converting it in the medium termto a mixed-capital venture.
“Investments of $4.7bn have beendetermined for the period covered by theplan. Some 22 per cent of this amount willbe direct Pequiven disbursements. Expan-sion of the sector, in terms of petrochemi-cal production capacity, is estimated at 60per cent in six years,” PDVSA said.
The total investment required by thebusiness plan for the period 2001-06 was$45.3bn, of which direct corporate par-ticipation would account for 47 per cent,PDVSA added.
TotalFinaElf of Francereports another oil findin Libya’s Murzuk basinParis — French oil giant TotalFinaElf ofFrance last month reported another oildiscovery in the Murzuk basin, about 800km south of the Libyan capital, Tripoli.
The latest discovery, on block NC 186,is about 30 km from a separate find madeon the same block last autumn.
The new find, in well B-1, hit a sig-nificant column of oil, TotalFinaElf saidin a statement, adding that productiontests had delivered a flow rate of 1,300barrels/day of 40° API oil.
The well is located about 40 km from
existing processing facilities at the ElSharara field, on block NC 115, whereTotalFinaElf also has an interest.
The French company said the facili-ties at El Sharara had sufficient capacityto handle additional quantities of oil, butdid not give more details.
A partnership comprisingTotalFinaElf, Spain’s Repsol-YPF (theoperator), Austria’s OMV and Norway’sSaga is involved on block 186.
Exploration work on the developmentbegan in 1998 and three more explorationwells and four appraisal wells are due tobe drilled there this year.
TotalFinaElf said it would evaluate thetwo discoveries on NC 186 after the drill-ing was completed.
Algeria records rise inoil taxation revenuesto $15 billion for 2000Algiers — Algeria’s revenues from petro-leum taxation in 2000 amounted to theequivalent of $15 billion in local currency,compared with $8bn in 1999, it was an-nounced last month.
This improvement was achievedthanks to an increase in the country’shydrocarbon export revenues, which stoodat about $22bn in 2000, thanks to strongeroil prices, especially in the first half of theyear, according to Sonatrach sources.
The average price of Algerian crude(Saharan Blend) was around $27.60/bar-rel during the first half of 2000, up from$13.50/b in the first six months of 1999.
Oil taxation in Algeria represents themain portion of the country’s tax revenues,compared with ordinary taxation, whichremains weak at only 30 per cent.
In a related development last month,figures from Algeria’s statistics centreshowed that the country’s hydrocarbonsproduction grew by 5.8 per cent last year.
It said the good results of the hydro-carbons sector added to a growth of 5.6per cent and 3.5 per cent registered respec-tively by the chemicals and building ma-terials sectors.
This, in turn, allowed the Algerianindustrial public sector to show a slightrise in growth of 0.9 per cent during theperiod under study.
in the crude recovery factor. The plan inthis area contemplates the start of offshoreexploration, an accelerated seismic cam-paign over the first three years, and maxi-mum efforts in the search for large oil andgas accumulations.”
It added: “Crude production will bedirected to achieving maximum value forthe nation in a highly competitive scenario,and meeting the country’s foreign com-mitments. In accordance with the sce-narios selected, the achievement of a totalproduction capacity of 5.5 million barrels/day, including third-party participation, isforeseen for 2006.
“On the other hand, the importantreserves of the Orinoco belt will require acontinuation of the studies for their de-velopment, with the aim of increasingbitumen production through associationswith third parties for the purpose of ob-taining high-quality crude and products.
“To maintain its competitiveness andensure its permanence in the internationalmarkets, PDVSA foresees carrying outinvestments of $2.6 billion to optimize itsrefining system in Venezuela and adapt itto national and international environmen-tal regulations and product quality require-ments,” said the company.
Refining projects related to the upgrad-ing of heavy crude included the use of newconversion technology at the Isla refineryand the expansion of coking units at theParaguana refining complex.
The company said the development ofthe gas business would be carried out byopening it up to the private sector, espe-cially as regards the production of non-associated gas, as well as the transmissionand distribution business in the country.
“Regarding non-associated gas explo-ration and production, the developmentof the Anaco district, block E, south LakeMaracaibo, the Deltan platform, and othertraditional areas, as well as the awardingof licences in new areas, have been estab-lished as strategic actions,” said PDVSA.
“To maximize the production of natu-ral gas liquids and make use of the exportmarkets, the strategy selected incorporatescutting-edge technology, enlists nationaland international third-party participation,and makes maximum use of installed ca-pacity.”
According to PDVSA, new business ingas ranged from strategic associations with
N E W S L I N E
April 2001 19
This increase followed a period ofrelative stagnation in 1999 (a rise of just0.3 per cent), notably because of the con-tinuous regression of the manufacturingsector, which declined by about 2.1 percent in 2000.
According to the centre, the country’stextile industry, which saw production fallby 13.4 per cent, had been the most af-fected by the recession, followed by woodand paper operations, and the food indus-try, which both declined by 9.8 per cent.
Nigeria prepares fornew licensing roundof oil block acreageAbuja — Nigeria is to embark on a newlicensing round for the allocation of acre-age in its oil blocks in the third quarter ofthis year, according to the PresidentialAdvisor on Petroleum and Energy, DrRilwanu Lukman.
Addressing an industry conference lastmonth, Lukman said that Nigeria wouldcontinue to be Africa’s oil and gas hub,going by its vast reserves of oil and gas andthe potential to increase output.
He said a combination of a high suc-cess rate in the Niger Delta, the govern-ment’s policy objective of increasing re-serves and potential production, availabil-ity of open acreage, skilled manpower, andexcellent logistic facilities, positionedNigeria at the hub of oil activities on theAfrican continent.
The country, he noted, accounted forsome 70 per cent of West Africa’s knownoil reserves, and added that it was currentlyshifting its attention to the deep and ultra-deep offshore to meet its target of increas-ing reserves and production capacity.
Nigeria planned to boost its reservesand production potential to 30 billionbarrels and 3 million barrels/day by 2003and further to 40bn b and 4m b/d by2010, he said.
“To date, some 29 wells have beendrilled in the deep offshore with an unri-valled success rate in excess of 50 per cent.The drilling campaign in the deep offshoreof the Niger Delta has resulted in a seriesof world-class discoveries, which includethe Agbami, Akpo, Bonga, Erha, and Nwafields,” said Lukman.
The successes recorded in the deepoffshore of the Niger Delta were the fruitsof a deliberate government initiative toopen up this frontier to active exploration,he observed.
Lukman recalled that in the mid-1980s, seismic surveys had effectivelyprovided data needed by investors to evalu-ate the acreage and to take the requiredinvestment decisions.
At the same event, the ManagingDirector of Shell Exploration & Produc-tion International, Heinz Rothermund,told delegates that his company, whichproduces about 40 per cent of Nigeria’soutput of 2m b/d, had achieved majorbreakthroughs in preparing and conclud-ing alternative funding schemes with thegovernment.
He said the innovative funding optionshad been one of the prime ingredients inopening up the development of offshorefields in the deep waters of Nigeria.
“It will be essential that sanctity ofcontract, which has characterized the in-vestment climate in Nigeria over verymany years, continues to be successfullymaintained,” he said.
An essential aim of any large projectin Nigeria should be to link the oil indus-try, the authorities, international institu-tions and non-governmental organizationswith an integrated approach, he main-tained.
Rothermund said Shell was workinghard to renew ageing facilities, therebyminimizing the risk to the environment.
The winners of bids for the previouslicensing round in 2000 were announcedlast December.
UAE firm signs loanto expand its crudeoil storage terminalDubai — Vopak ENOC Fujairah, ajoint venture which owns a large independ-ent petroleum storage terminal at Fujairahin the United Arab Emirates, last monthsigned a $15 million loan with EmiratesBank International.
The loan will finance phase two of theterminal’s development, which will in-crease storage capacity from the current500,000 cubic metres to 812,000 cu m,
PTTEP to start new drilling programmeBANGKOK — PTT Exploration and Produc-tion (PTTEP), the upstream unit of the Pe-troleum Authority of Thailand (PTT), saidit would commence a $40 million drillingprogramme in the offshore Arthit concessionin the second quarter of this year. The 10-well programme is a follow up to a highlysuccessful drilling campaign carried out lastyear, PTTEP officials said, adding that theacreage located in the Gulf of Thailand con-tained an estimated 3.64 trillion cubic feetof natural gas reserves. PTTEP drilled sevenwells in Arthit last year, testing 34.5m cu ft/day of gas and 882 b/d of condensate. PTTEPsaid six of the new wells would be for appraisalprospects in the Arthit area, which coversblocks 14A, 15A and 16A. The others wouldbe exploration wells to test a new reservoirrange. A jack-up rig was being readied for thedrilling programme by the Houston-basedTransocean Sedco Forex Company.
Technip reports increase in profitPARIS — French engineering company,Technip, last month reported a sharp increasein its 2000 net profit, which rose to $216.9million, before depreciation and exceptionalitems, from $164.7m a year earlier. Technip,which is active in a number of OPEC Mem-bers, said that the results reflected “a clearincrease in activity linked to oil and gas pro-duction”. After exceptional items and depre-ciation, Technip said that its net profit roseby 24 per cent to $192.6m. Group sales roseto $2.61 billion last year, from $2.43bn in1999. In geographical terms, Technip’s op-erations showed an increase in the MiddleEast to 31 per cent, from 28 per cent a yearearlier, with that region still accounting forthe largest segment of activity. Strong growthwas also reported in Europe, the Far East andthe Americas, but Africa declined sharply.
Norsk Hydro to develop new fieldsBRUSSELS — Development of Norsk Hydro’sgiant Fram West and Vale fields, in the Nor-wegian sector of the North Sea, is set to goahead following approval from the Norwe-gian Ministry of Petroleum. Fram West willbe developed at a cost of $440 million, withfour wells tied back to Hydro’s nearby TrollC platform. An oil source said: “Reserves are100m barrels of oil and 8.0 billion cubicmetres of gas.” First oil from Fram West isscheduled for October 2003, with produc-tion ramping up to surpass 60,000 b/d.Meanwhile, the $100m Vale gas/condensatefield will be developed as a subsea satelliteoperation tied back to the Heimdal riser plat-form. Reserves are 2.5bn cu m of gas and 21mb of condensate. First output from Vale is setfor June 2002.
��������
N E W S L I N E
20 OPEC Bulletin
�������� according to a company statement quotedby the local Khaleej Times newspaper.
Phase one included 20 tanks and wasbuilt with a previous loan, worth $52m,also provided by Emirates Bank Interna-tional and other syndicated banks.
The new loan agreement was signedby Hussain Sultan and Jerome Gelineau,on behalf of Vopak ENOC Fujairah, andIbrahim Lootah, on behalf of EmiratesBank International.
Iraq’s proven reservesincrease to 115 billionbarrels, says MinistryBaghdad — Iraq says it has increasedits proven crude oil reserves by three bil-lion barrels, despite the United Nationssanctions imposed on the country sinceAugust 1990.
“Iraq has succeeded during its years ofsanctions in increasing its oil reserves bythree billion barrels to 115 billion barrels,”Oil Ministry Under-Secretary, TahaHmoud, told the weekly Al-Rafidain news-paper.
“Thanks to President SaddamHussein’s directives and the efforts of theworkers in the oil sector, Iraq’s oil reserveswill continue to increase in leaps andbounds in the future,” he said.
“The Oil Ministry has drawn up anambitious plan to continue oil explorationthroughout Iraq,” he was quoted by thepaper as saying.
Once the necessary equipment wasavailable, exploration would focus at firstin the Western Desert region, borderingSaudi Arabia, he added.
Qatar could soon besupplier of liquefiednatural gas to ChinaDoha — A senior Chinese official toldan industry conference in the Qatari capi-tal Doha last month that the country couldsoon be a potential supplier of liquefiednatural gas to China.
Zhang Hongbo, Deputy Director ofthe gas-based power generation office atthe State Power Corporation of China, said
his country’s power demand had increasedsignificantly with economic growth.
He noted that China’s primary energyfor power generation currently dependedmostly on coal and water resources, butLNG imports could meet the country’sgrowing demand.
Hongbo noted that from a geographi-cal perspective, China had access to manypotential LNG suppliers, including OPECMembers Qatar and Indonesia, as well asAustralia.
The potential regions for LNG importsin China were the provinces of Guangdongand Fujian, as well as eastern China, headded.
China was considering two options forthe import of natural gas — via a pipelineand via shipments of LNG, he went on.
Two potential regional sources ofimported pipeline gas were available forChina. They were Siberia in Russia, andthe republics of Kazakhstan, Turkmenistanand Uzbekistan.
Hongbo said the China National Pe-troleum Corporation had made a lot ofprogress towards bringing Russian gas toChina via pipeline and this seemed themost feasible project.
Kuwait Petroleum Italia,Lubrizol sign contract onlow-emission diesel fuelDoha — Kuwait Petroleum Italia (KPIT)is to introduce a low-emission diesel fuelto the Italian market through a contractwith the Lubrizol Corporation, the firmannounced last month.
KPIT, which is Italy’s third largest fueland lubricant marketer, plans to sellLubrizol’s Purinox fuel technology underthe brand name Q White.
During 2001, KPIT will lease andinstall three of Lubrizol’s patented blend-ing units required to mix the finished, low-emission fuel, which is a stable combina-tion of standard diesel, purified water anda unique Purinox additive package devel-oped by Ohio-based Lubrizol.
KPIT will invest $1 million and willhandle the widespread distribution of QWhite to owners of vehicle fleets and otherdiesel-powered equipment in Italy.
With no need for hardware add-ons,
PetroEcuador to increase oil exportsQUITO — State oil company, PetroEcuador,expects oil exports of 55.7 million barrels thisyear, up by 11.3 per cent from 2000, it wasannounced last month. Meanwhile, the com-pany plans to invest $1.3 billion, up from lastyear’s figure of $859.2 million. The total in-vestments planned include $446.6m whichis earmarked for operational expenses;$414.6m for oil product imports; $30.7m forpayments; $247m for direct investments, and$172m for investments under operative alli-ances. Oil product sales to the domestic mar-ket will rise to 47.8m barrels, up by 15 percent from last year. The company’s direct in-vestment programme will grow substantially,from $36.3m to $134.7m.
Norway’s Statoil hopes for June listingLONDON — Statoil, Norway’s largest oil com-pany, remains hopeful of a June listing in spiteof the latest political wrangling over the pri-vatization of the state’s direct financial inter-ests (SDFI) in 150 offshore licences. “I amstill confident that the politicians want toreach a conclusion within the month ofApril,” Statoil’s Chief Executive Officer, OlavFjell, told the Financial Times newspaper lastmonth. Norway’s minority Labour govern-ment failed last month to receive sufficientbacking for a proposed sale of 20 per cent ofthe SDFI to Statoil and other oil companies.The disagreement has fuelled fears that it willdelay the partial privatization of Statoil to theautumn. Fjell suggested that the dispute be-tween political parties was sufficiently smallto enable them to reach a compromise agree-ment within the next month, so the pre-mar-keting of the SDFI would begin in May andthe listing of Statoil in the following month.
Lundin to boost overseas oil outputBRUSSELS — The Swedish independent oil andgas exploration company, Lundin Oil, an-nounced last month a boost in its Malaysianand Vietnamese oil production. The companysaid that through its subsidiary, Lundin Ma-laysia, and together with Petronas Carigaliand PetroVietnam Exploration and Produc-tion, it had completed the eighth develop-ment well on the Bunga Kekwa field. Thefield is located in the PM-3 commercial ar-rangement area, offshore Malaysia and Viet-nam. “Total production has increased from14,300 b/d of oil to 18,000 b/d,” said aLundin source. A ninth development well wascurrently being drilled to ensure that this levelof output could be sustained for an extendedperiod. The company noted that after com-pletion of the ninth development well, thedrilling unit would be mobilized to the nearbyEast Bunga Raya exploration well, in orderto test a large prospect.
N E W S L I N E
April 2001 21
��������engine modifications or replacements, thetechnology positively impacts the environ-ment by reducing smog-forming nitrogenoxides by up to 15 per cent, particulatematter by up to 25 per cent and blacksmoke by up to 80 per cent.
“Lubrizol is extremely enthusiasticabout this new development, which willenable us to make our low-emission dieselalternative available to the Italian market,”said Lubrizol’s Business Manager forPurinox in Europe, Alex Psaila.
“The fact that KPIT is such a majorfuel marketer devoting substantial re-sources to marketing the technology bodeswell for Europeans who are putting forththe effort to improve air quality. It will bea large-scale initiative,” he noted.
Of the total diesel market in Italy ofsome five billion gallons, KPIT projects amarket of 250 million to 300m gallons foremulsion fuels such as Q White, which istargeted primarily to the public servicesbus segment.
According to KPIT, there is approxi-mately a $1.75bn non-retail diesel fuelmarket in Italy, of which the companyplans to target almost 10 per cent with theQ White technology.
KPIT has earmarked approximatelyone third of its total Q White investmentfor a multi-faceted marketing effort thatwill drive distribution of the fuel.
Successful bidders forIran’s South Pars fieldto be announced soonTehran — Iran’s Petroleum Ministry saidlast month that the development of itsgiant South Pars gas field could contrib-ute to job creation and a reduction in thereliance of the country’s economy on crudeoil.
In a statement issued on the anniver-sary of the nationalization of Iran’s oilindustry on March 20, the Ministry saidthe development of South Pars, located insouthern Gulf waters, could substantiallyincrease national revenue.
Earlier in the month, an unnamedIranian oil official said the country aimedto announce the successful bidders fordeveloping phases 9-12 of the field in thecoming weeks.
“Today is the closing day on South Parsphases 9-12,” the official said, adding thatthere were plans to announce the success-ful bidders in the near future. A total of20 international oil companies are in therunning to develop the prized offshorefield.
The phases will be awarded, eitheraccording to Iran’s standard buy-backterms — where foreign investors are com-pensated by resulting products — orthrough direct financing.
Phases 4-5, involving Italy’s ENI andIran’s Petropars, will need investment of$1.9 billion, while phases 6-8, being han-dled by Petropars and Enterprise Oil, willrequire funding of some $2.65bn.
The Ministry statement also said thatunder Iran’s third five-year economic plan,launched in March 2000, the countryshould maintain its status in the world oilmarket.
It also said that Iran should increaseits oil and gas production capacity throughvarious development projects.
President Hugo Chávezappoints new board forPetroleos de VenezuelaCaracas — Venezuelan President HugoChavez has appointed a new board ofdirectors at state oil corporation Petroleosde Venezuela (PDVSA), it was announcedlast month.
As part of the move, GeneralGuaicaipuro Lameda Montero was ratifiedas the firm’s President. He has been serv-ing in this post since October 2000, whenChavez first appointed him to PDVSA’stop job.
Additionally, Jorge Kamkoff, KarlMazeika, Vincenzo Paglione, and EduardoPraselj were appointed Vice-Presidents,and General Arnoldo Ochoa and GeneralJuan Torres Serrano were named Directors.
Kamkoff, Mazeika and Paglione, whohave all held several different posts in theoil industry, are newcomers to the board.
Kamkoff, a chemical engineer, whograduated from the Central University ofVenezuela and began his career in theindustry in 1970, previously held the postof Vice-President of PDVSA’s Manufac-turing and Marketing Division. He also
South Korea is new member of IEASEOUL — The International Energy Agency(IEA) has announced that it has acceptedSouth Korea’s application to join, making itthe IEA’s 26th member. The country is alreadya member of the Organization for EconomicCo-operation and Development, which itjoined in 1996. The country was invited tobecome an IEA member in July 2000, whenSeoul met the Agency’s key criteria of having90 days of oil supply reserves. South Koreaimports most of its oil and gas to meet localdemand. Its power usage was estimated at239.5 billion kilowatt hours last year, an in-crease of 11.8 per cent from a year earlier,according to the latest data from the KoreaElectric Power Corporation. The country isimplementing a massive restructuring of thenatural gas and electricity industry.
Gloomy outlook for US energy marketNEW YORK — Demand for all forms of en-ergy is rising rapidly, but supply is not keep-ing up with demand, Congressional Chair-man, Frank H Murkowski, told a hearing lastmonth on the current and future energytrends facing America. “The United States haslost control of its energy future. If we fail toregain control, we risk threatening our eco-nomic prosperity, our national security andour very way of life,” he warned. Murkowskiexplained that the nation’s energy supply waslimited by a government regulatory structurethat had not kept pace with technology. Healso pointed out that the country’s ageinginfrastructure had not kept up with the grow-ing energy needs. The US did not haveenough transmission capacity to get thepower to where it was needed most.Murkowski cited the need for more refiner-ies, saying that America’s oil and gas plantswere running at near capacity, which couldlead to fuel shortages this summer.
Caspian oil no threat to Gulf crudeABU DHABI — Oil production from the Cas-pian Sea may contribute to a weakening ofoil prices, but it is unlikely to be a major threatto the market share and power of the Gulfproducers, according to an international en-ergy analyst. An analyst at the James BakerInstitute for Public Policy, at Rice University,Amy Myers Jaffe, said Caspian oil output wasunlikely to represent more than three to fourper cent of world oil demand by 2010. “TheCaspian Basin potential alone does not jus-tify Arab production policies that would drivedown the price of oil, simply to discourageCaspian oil development,” Jaffe told Dubai’sGulf News last month. Jaffe’s paper said othermore complex economic factors dictated thatGulf oil producers may not be able to sustainhigh oil prices in the longer term.
N E W S L I N E
22 OPEC Bulletin
�������� served as Director of PDV Marina from1992 until January 1998.
Mazeika, a chemical engineer, whograduated from the University of Zulia,began his career in the oil industry in 1973.He has served in many posts, including asenior managerial role at Ruhr Öl’sGelsenkirchen refinery in Germany dur-ing the 1980s.
Prior to his latest appointment asPDVSA Vice-President, Mazeika was serv-ing as Executive Director for PDVSA’sExploration, Production and UpgradingDivision.
Paglione, a petroleum engineer, beganhis career in the oil industry in 1974 andhas held many executive posts withPDVSA, most recently that of Presidentof Intevep, PDVSA’s research unit.
Praselj, a chemical engineer, was firstnamed PDVSA Vice-President in Febru-ary 1999 and was ratified in the post.
General Rodriguez Ochoa was firstappointed a PDVSA Director in August1999 and was ratified in the post, whileGeneral Torres Serrano, a chemical engi-neer, who graduated from the CentralUniversity of Venezuela, joins the PDVSAboard for the first time.
First phase of the newSaudi Aramco researchcentre is inauguratedDhahran — Saudi Aramco’s President& Chief Executive Officer, Abdallah SJum’ah, has inaugurated phase one of thecompany’s new research and developmentcentre at its main headquarters, the offi-cial Saudi Press Agency (SPA) reported lastmonth.
The firm began constructing the firstphase of the 12,800 square metre project,which comprises a three-story buildinghousing general laboratories, in 1998.
The project, which has 186 laboratoryunits, also includes a two-story buildingwith a 14-metre high ceiling for research,requiring the use of large equipment oranalysis of large samples of materialsbrought from the locations of the wells andproduction laboratories.
Saudi Aramco is planning to constructthe second phase of the centre within thecoming three years, SPA reported.
Nigeria could build thirdliquefied natural gasplant, says President
Abuja — Nigeria could build a third liq-uefied natural gas plant as soon as anagreement is reached with an interestedforeign consortium, according to PresidentOlusegun Obasanjo.
Obasanjo, who was speaking at ameeting in Abuja with members of theNational Association of Chambers ofCommerce, Industry, Mines and Agricul-ture, did not name the foreign consortium.Arrangements were completed in Febru-ary to build a second LNG plant, west ofthe Niger Delta, to run parallel to theexisting unit, located at Bonny, east of theDelta.
A feasibility study for the second LNG
plant is to be carried out by US majorsExxonMobil, Conoco and Chevron andTexaco (which are merging), who havesigned a memorandum of understandingwith the government and the state-runNigerian National Petroleum Corporation(NNPC).
Nigeria’s existing Bonny LNG plant hasalready exported about 104 cargoes tocustomers in Europe and has also soldsome spot cargoes.
Construction of the third train of theBonny plant has reached an advancedstage, while plans have been finalized toadd fourth and fifth trains, as soon as firmmarket commitments have been made.
The President said that thanks to thecurrent efforts to exploit the country’s vastgas reserves, his administration would soonbe making as much money from gas at itwas from crude oil exports.
Nigeria recorded revenue of $9.65billion from crude exports last year. Crudeexports account for more than 90 per centof the country’s foreign exchange earnings.
Obasanjo said the planned increase inearnings from gas would be achievedthrough higher domestic utilization andgreater exports to neighbouring west Af-rican nations and to the rest of the world.
He said the government was undertak-ing studies to determine whether gas de-posits found in Bauchi, in the north ofthe country, could be commercially ex-ploited.
BP sees bright future for North SeaBRUSSELS — The United Kingdom North Seaoil sector has a bright future and will con-tinue to be a significant revenue earner, ac-cording to a senior official at BP. One of thebiggest North Sea oil players, BP is now morebullish about the offshore region than it wasin the mid-1990s. Steve Marshall, who headsBP’s activities in Scotland and the North Sea,commented in Edinburgh last month: “Fiveyears ago, BP faced the prospect of decliningNorth Sea production — perhaps to as littleas 500,000 to 600,000 barrels/day worth ofoil and gas. “But fresh thinking, the applica-tion of new technologies and the recognitionthat the North Sea could still be a good in-vestment, has changed all that,” he said. Henoted that with more than 800,000 b/d stillbeing produced in the North Sea by BP, andthe prospect of increasing that, the future forthe area remained good.
ExxonMobil sees higher oil, gas demandDOHA — Oil demand will grow substantiallyover the next 20 years and will remain theworld’s leading source of energy, accordingto the Chairman and Chief Executive Officerof ExxonMobil, Lee Raymond. However, inaddressing the Fourth Conference on Natu-ral Gas, held in the Qatari capital Doha lastmonth, he said demand for gas was expectedto grow about 50 per cent faster than oil. Suchgrowth, in both oil and natural gas demand,was all the more significant when one con-sidered that fields currently in productionaround the world experienced natural deple-tion, he noted. This combination of deple-tion and demand growth, which was calledthe “compounding effect” meant that to meetthe energy needs of 2010, the world mustreplace about half of its current oil and gasproduction this decade.
PetroEcuador to upgrade pipelineQUITO — State oil company, PetroEcuador,will invest $12.8 million this year to improvethe infrastructure of the Trans-Ecuadoreanpipeline, it was reported in the country’s capi-tal last month. The move will enable the trans-portation of 142m barrels of crude oil dur-ing the year from the Amazon region to theoil port of Balao on the Pacific Coast.PetroEcuador said the objective was to trans-port 9.2 per cent more oil this year than in2000. Infrastructure work will include theautomization of the pipeline’s stations, inspec-tion of the submarine pipeline of Balao, andinstallation of electronic digital measuringsystems. A small communications networkwill be provided for the stations, as well as afire warning system. In February the line wasinspected and was pronounced capable ofworking for the next 20 years.
N E W S L I N E
April 2001 23
��������Nigeria made its first major discoveryof gas at Afam in the Niger Delta in 1956,with reserves of 850bn cubic feet. The nextimportant gas discovery was at Soku, of3.5 trillion cu ft, and was made in the sameyear.
The country’s proven gas reserves areestimated at 182tr cu ft, or 25bn barrelsof oil equivalent. This is nearly as much asthe estimated proven oil reserves of 27bn b.
Indonesia committedto promoting greateruse of clean fuelsJakarta — Indonesia is committed topromoting the use of clean fuels, accord-ing to Dr Rachmat Sudibjo, DirectorGeneral of Oil & Gas at the Ministry ofEnergy and Mineral Resources.
This commitment was in line with thenational ‘blue sky’ campaign, which isaimed at reducing air pollution, he said ata workshop in the capital Jakarta, organ-ized jointly by Indonesia and the UK.
Under a programme launched in 1996,the Indonesian government hoped to re-duce air pollution by cutting the use ofleaded gasoline, he told the gathering.
Rachmat, who is also the country’sOPEC Governor, said the workshop pro-vided opportunities for Indonesia to learnfrom other nations in terms of promotingthe use of clean fuels.
The one-day event last month wasorganized by the Indonesian-British oiland gas working group.
Algeria’s Sonatrach signsnew oil exploration dealwith UAE’s KeystoneAlgiers — Algerian state oil and gas com-pany Sonatrach and the Gulf KeystonePetroleum Company of the United ArabEmirates (UAE) signed a $24 millionhydrocarbons exploration contract lastmonth.
The accord covers research, appraisaland exploration work in the region ofFerkane (block 126), located at Khenchela,in the north-east of Algeria.
The contract will be implemented in
two phases — the first entailing researchand exploration, carried out over a five-year period. This will require initial invest-ment of $15 million from Gulf Keystonefor the acquisition of 600 km of 3-D seis-mic and the drilling of three wells.
The second phase, costing $9m, willbe conducted over a two-year period andwill involve shooting another 600 km ofseismic, as well as the drilling of one fur-ther well.
The bidding process under which GulfKeystone was awarded block 126 alsoinvolved two other blocks in the south ofthe country.
These were assigned to Anadarko ofthe United States and a Russian associa-tion of Rosneft and StroyTransGas. Theagreements relating to these two blocks(406 and 348) will be signed soon.
In a separate development last month,Algeria’s Energy and Mines Minister, DrChakib Khelil, took office as ActingManaging Director of Sonatrach.
At a ceremony held at the company’sheadquarters, Khelil, who is also the Presi-dent of the OPEC Conference, paid trib-ute to Sonatrach’s outgoing ManagingDirector, Abdelhak Bouhafs.
NIOC to study feasibilityof LNG project with BPand India’s RelianceMumbai — The National Iranian OilCompany (NIOC) is to join forces withBP Amoco and India’s Reliance Group tostudy the construction of a liquefied natu-ral gas plant in Iran.
The $10 million study will determinewhether gas from Iran’s offshore South Parsfield can be shipped to Europe, India andother Asian countries. It will look at theviability of establishing a plant with aninitial capacity of 8 million tonnes/year.
Reliance said in a statement thatNIOC would own 40 per cent of the jointventure, with the Indian firm and BP bothholding shares of 25 per cent. The remain-ing stake would be held by another part-ner.
It noted that while Reliance would leadthe market study efforts, BP would pro-vide the technology, and NIOC would beinvolved in all aspects.
UK oil firms passing on fuel duty cutsLONDON — The United Kingdom PetroleumIndustry Association (UKPIA) has refutedpress claims that major oil companies werefailing to pass on duty cuts announced by thegovernment in March. The Director Generalof the Association, Dr Mike Frend, saidUKPIA members had issued press releasesdetailing their support for the government’smeasures and had implemented the duty re-ductions at the pump after their announce-ment. Frend added that the first reduction ofone penny per litre duty on ultra low sulphurpetrol, which was introduced from October1, 2000, was designed to help refiners meetsome of the higher manufacturing costs ofthe new fuel and speed up its introduction.He noted that the industry had been quickto react to this request.
UK approves Hannay field developmentBRUSSELS — The United Kingdom govern-ment gave its approval last month for the UKsubsidiary of Canadian oil and gas explora-tion and production firm Talisman Energy,to develop the $75 million Hannay field. Thefield is located in Block 20/5C of the UK sec-tor of the North Sea and has estimated re-serves of eight million barrels and a life ex-pectancy of eight years. Drilling is expectedto begin in May, with production scheduledto commence in November at a rate of 12,000b/d. Talisman President and Chief ExecutiveOfficer, Dr Jim Buckee, said: “By workingclosely with our partners, we have been ableto speed the development and approval of thisproject”. Talisman Energy is the largest inde-pendent Canadian oil and gas producer withoperations in Canada, the North Sea, Indo-nesia and Sudan. The company is also con-ducting exploration in the United States, Al-geria, Trinidad and Columbia.
TotalFinaElf starts up Gabon fieldPARIS — TotalFinaElf of France has an-nounced the production start-up at the Atoraoil field in the heart of the equatorial forestin Gabon. The field is located about 35 kmnorth of the town of Gamba, in Ogoouemaritime province. Elf Gabon, which is 58per cent controlled by TotalFinaElf, is theoperator at Atora with a 40 per cent share inthe venture. Other partners include AmeradaHess (40 per cent) and Shell Gabon (20 percent). The French group said work to bringthe field onstream was completed on time andwithin budget and environmental constraints.Oil production from Atora was expected torapidly rise to a plateau of 20,000 b/d,TotalFinaElf said. In a separate development,Elf Gabon has reported a net profit of $181.1million for the year 2000, a 58 per cent in-crease over the $114.3m recorded in 1999.
N E W S L I N E
24 OPEC Bulletin
��������API seeks access to US exploration sitesNEW YORK — The American Petroleum In-stitute (API) has told the House Committeeon resources that a successful national energypolicy must include greater access to govern-ment lands in the United States which con-tain much of the country’s known reserves ofnatural gas and oil. Speaking on behalf of theInstitute, the President of the Americas Di-vision of Phillips Petroleum, Jim L Bowles,said an energy policy must promote respon-sible development of these domestic re-sources. It should recognize that the oil andnatural gas industry’s sophisticated, new tech-nology greatly reduces the adverse impact onthe environment by exploration and produc-tion, both onshore and offshore. “There isno quick fix to our energy problems,” Bowlesstressed. “It is important to encourage respon-sible use of energy and increase supplies ofall fuels, including fossil fuels, as well as al-ternative fuels,” he said.
Petrol price gouging in US ruled outNEW YORK — The sharp increases seen inUnited States gasoline prices last year werenot the result “of tacit or explicit collusionamong market participants,” it was an-nounced last month. US House of Repre-sentatives’ Energy and Commerce Commit-tee Chairman, Billy Tauzin, was assured ofthis by the Federal Trade Commission (FTC),following an official inquiry into the pricehikes. Tauzin said repeated, unsubstantiatedaccusations that oil companies conspired togouge consumers were “politically motivatedand without any merit whatsoever”. In a let-ter to the US Vice-President, Dick Cheney,Tauzin vowed to work with the White Houseto a national energy policy “that will help toavoid future price spikes for American con-sumers”. Tauzin said that while the price fix-ing allegations were exploited during thePresidential election campaign, now was thetime “to work together to assure that Americahas a stable and affordable supply of energyfor the 21st century”.
Pakistani receives ADB loan for energyISLAMABAD — The Asian Development Bank(ADB) will provide Pakistan with a loan of$150 million for restructuring its energy sec-tor. The facility will be extended to the coun-try in two tranches — the first, worth $75m,will be released this year, and the second willbe made available in 2002, according to theofficial Islamic Republic News Agency(IRNA). The loan will be used for integrat-ing Pakistan’s national grid with a view tomaking the country’s energy sector more com-petitive. The plan also envisages movingPakistan’s energy sector from governmentalcontrol towards a market-oriented industry.
Reliance has a natural gas terminal atits 540,000 barrels/day oil refinery atJamnagar in Gujarat. The company hasplans to pipe the gas to Maharashtra,Gujarat, and Madhya Pradesh, India’s mostindustrialized states.
In a separate development last month,Iran’s Petroleum Minister, Bijan NamdarZangeneh, said that his country is plan-ning to reduce the wastage of 10 billioncubic metres of natural gas, which is be-ing burned every year in various parts ofthe oil industry.
The wastage would drop substantiallywith the developments envisioned in thecountry’s petrochemical industry duringthe country’s third five-year developmentplan, he was quoted as saying by the Aftab-Yazd daily.
Overall annual consumption of natu-ral gas stood at 100bn cu m, Zangenehsaid. However, he added that a shortageof piped natural gas in the country hadhampered the industry’s requirements,particularly at power stations.
The Minister noted that the govern-ment had started to switch from fossil fuel-based power stations to natural gas, tak-ing advantage of the cheaper and cleanersource of energy.
He also noted that his Ministry wasimporting gas from central Asia on a swapbasis to meet the needs in the northernparts of the country.
Kuwait’s KUFPEC saysit is ready to expandoperations in TunisiaTunis — The Chairman of the KuwaitForeign Petroleum Exploration Company(KUFPEC), Ahmad Rashed Alerbeid, saidlast month that his firm was ready to boostits investments in future Tunisian oil sec-tor projects.
The official Kuwaiti News Agencyquoted him as saying that his companywas prepared to upgrade its operations, dueto the stable investment climate in Tunisia.
Alerbeid, who was on a visit to Tuni-sia, also inaugurated a KUFPEC-financedoil pipeline from the Sidi Al-Kilani field,located in the coastal governorate of Al-Mahdia, stretching to the port of Sukhaira,in the south of Tunisia.
During his visit, the KUFPEC Chair-man also met with senior Tunisian offi-cials, and discussed the enhancement ofties between the two countries in the oilsector.
KUFPEC is the overseas subsidiary ofthe state-owned Kuwait Petroleum Cor-poration.
Regent Energy announcespurchase of Indonesianoil and gas producerNew York — Regent Energy Corp hasannounced that it has entered into a con-tract for the purchase of a domestic Indo-nesian oil and gas producer, according toa company statement.
The Indonesian company holds a tech-nical assistance contract with state oil andgas company Pertamina, consisting of144,650 acres, located on Java, withindriving distance from Jakarta.
It holds an estimated 100 billion cu-bic feet of gas in proven and probablereserves. One well has been drilled andproduction tested in excess of 5,000m cuft/day.
The deal is valued at some $1.25million. Regent will keep the Indonesianfield personnel in place and provide capi-tal to develop the field.
Chicago Bridge & Ironawarded tankage contractfor Venezuelan oil projectNew York — The Chicago Bridge &Iron Company (CB&I) has been awardedthree separate contracts valued in excessof $75 million to construct tankage fordownstream and upstream components ofthe Hamaca heavy oil project in Venezuela.
CB&I’s Latin American subsidiary,CBI Venezolana, has been operating inVenezuela for more than 50 years and willperform all fabrication and constructionwork on these contracts, using essentiallyall Venezuelan labour.
The Hamaca project, with a total es-timated value of $3.5 billion, will trans-port heavy crude from Venezuela’s Orinocobelt to an upgrading plant to be con-
N E W S L I N E
April 2001 25
��������structed at the Caribbean coastal city ofJose, where it will be upgraded into high-value oil for export.
The Hamaca scheme is a co-venturebetween state oil firm Petroleos de Ven-ezuela, and two US firms, Phillips Petro-leum and Texaco. The companies managetheir interests through a joint operatingcompany called Petrolera Ameriven.
CB&I’s downstream work is locatedat Jose, where the company has beenawarded a contract for the engineering,material supply and construction of largeoil storage tanks, with a total capacity of5.6m barrels. Field construction of theproject is expected to begin in July.
CB&I was previously awarded a sepa-rate contract that is currently under wayfor the engineering, material supply andconstruction of four large flat-bottomtanks, including mechanical work andpiping systems, which interconnect to theexisting Jose terminal.
The upstream portion of CB&I’s workis located near El Tigre, where the com-pany has been awarded a contract for theengineering, material supply and construc-tion of tankage for an intermediate distri-bution and handling facility. Work on thisproject is expected to begin soon.
Algeria to launch biddinground for developmentof Tinhert gas fieldsAlgiers — Algeria is to launch an inter-national bidding round for the develop-ment of the Tinhert gas fields, in the south-east of the country, according to a state-ment by state oil and gas companySonatrach.
The decision followed the failure ofnegotiations with PetroCanada on thedevelopment of the fields. It is also in linewith a recent policy decision to awardblocks only through bidding from now on.
Sonatrach, which had informedPetroCanada that the blocks would beawarded through a bidding procedureshould bilateral negotiations not succeedbefore end-2000, has urged the Canadiancompany to take part in the process.
The two companies came close toreaching an agreement on two separateoccasions. The first of these was in Janu-
ary 2000 in Calgary, and the second wasin December 2000, in Algiers, at whichpoint Sonatrach decided to halt the nego-tiations.
TotalFinaElf to beginoutput from Nigeria’sAmenam field in 2003Abuja — Elf Petroleum Nigeria plans tobegin production at its Amenam/Kponofield, the largest shallow water develop-ment in the Niger Delta, by mid-2003, itwas announced last month.
An official from the company, whichis the Nigerian subsidiary of France’sTotalFinaElf, Olufemi Aribisala, said thatinitial production would be 125,000 b/d.
In a paper to an industry conferencein Abuja co-authored by Pierre Nerguar-arian, another Elf official, Aribisala saidthat cumulative production from the fieldwould amount to almost 500 million bafter about 25 years. Total hydrocarbonaccumulations were estimated at morethan one billion b.
The field is located at a water depth of40 metres, some 30 km from the Nige-rian coast. Elf is the operator on behalf ofits partners, the state-run Nigerian Na-tional Petroleum Corporation (NNPC),and Mobil Producing Nigeria, which is asubsidiary of ExxonMobil.
Aribisala said that out of the 16.5mcubic metres/day of associated gas fromthe field, 15.6m cu m/d would be re-in-jected to enhance oil recovery, improveenergy efficiency and also contribute to areduction of greenhouse gas emissions.
The current field development planenvisaged the drilling of 31 wells on thefield. Eighteen of the wells would be forproduction. Additionally, there would besix gas injector wells, which could be in-creased if the need arose, he added.
There would be also three deviatedwater injector wells and four water pro-ducer wells to provide injection water fromthe shallow water bearing sands.
All the wells would be drilled with twojack-up rigs, working on two drilling plat-forms, at the same time for about threeyears, starting in the first quarter of 2002.
The contracts on the project would beawarded on a lump sum basis.
South Asian gas pipeline under reviewSINGAPORE — A South Asian gas pipeline net-work, taking Bangladeshi gas to India, withlinks to an existing pipeline from Myanmarto Thailand, was due be reviewed at a meet-ing in Bangkok later in March, according tosenior World Bank energy specialist, A S MBashirul Huq. Speaking at the Sixth AsianNatural Gas Markets Conference earlier inMarch, he said the formation of the pipelinenetwork was agreed during a meeting of theBangladesh-India-Myanmar-Sri Lanka-Thai-land Economic Commission held in Yangonin January, as part of an energy sector-driveninfrastructure development. “The membersof the commission felt that it is imperative todevelop a sound common strategy to under-take joint energy infrastructure development,in relation to a natural gas utilization planthat will finally benefit end-users,” he said ina report on the Bangladeshi gas sector.
Lundin announces oil discovery in SudanBRUSSELS — The Swedish oil exploration andproduction company, Lundin Oil, has an-nounced an oil discovery on Block 5A in Su-dan. Lundin’s Sudanese subsidiary is the blockoperator with a 40 per cent interest, alongwith Petronas Carigali (28.5 per cent), OMVSudan Exploration (26.1 per cent), andSudapet (5.0 per cent). The block is locatedwithin the country’s Thar Jath structure,which is operated by the greater Nile Petro-leum Operating Company (GNPOC). Thisconsortium includes a unit of Malaysia’sPetronas, Talisman Energy, the China Na-tional Corporation, and Sudapet. Lundin’sChief Executive Officer, Ian Lundin, com-mented: “We have confirmed that the trendof prolific oil fields, as seen in blocks one,two and four, operated by the GNPOC con-sortium, extends into our block.” Output forall the Thar Jath fields exceeds 200,000 b/d.
Japan’s Arabian Oil Company in the redTOKYO — Japan’s Arabian Oil Company hassuffered losses for the last three years, havingended fiscal 2000 in the red, it was announcedlast month. The company reported a net lossof $130.71 million in 2000, compared witha loss of $23.22m in 1999. Group pre-taxprofits slipped 0.6 per cent to $421.85m,while sales dropped 4.3 per cent to $1.42 bil-lion. The losses were related to the firm’s earlyretirement programme and the transfer ofassets following the loss of its oil concessionin Saudi Arabia. AOC lost its drilling rightsin the Khafji oil field, in the Neutral Zonebetween Saudi Arabia and Kuwait, in Febru-ary 2000. The company said, however, thatit expected a net profit of $18.61m and a pre-tax profit of $335.08m on sales of $1.12bnfor this year.
26 OPEC Bulletin
E N V I R O N M E N T N O T E B O O KE N V I R O N M E N T N O T E B O O K
President George W Bush said inMarch that the United States hadeffectively abandoned the Kyoto Pro-
tocol. “The President has been unequivo-cal. He does not support the Kyoto treaty,”White House spokesman Ari Fleischertold reporters. “It is not in the UnitedStates’ economic best interest,” he said.One of the key reasons for Bush’s rejectionof the Kyoto Protocol is its failure to binddeveloping countries to curb emissions.
A report in the Washington Post news-paper quoted an official source as sayingthe White House had asked the StateDepartment to establish how the US couldlegally withdraw its signature to the ac-
cord. Fleischer made it clear that Bushwould not now submit the treaty for rati-fication by the US Senate. Indeed,Condoleezza Rice, the national securityadviser, has privately told European am-bassadors that the US considered the KyotoProtocol “dead”.
Coming on top of a decision by Bushnot to ask US power plants to cut emis-sions of carbon dioxide, Washington’sstance on the Kyoto pact was seen by someas its kiss of death. “The Kyoto Protocolwouldn’t work without the United States,”Australian Environment Minister RobertHill told reporters, although the Austral-ian Prime Minister offered some support
to the Bush position, saying he understoodUS concern about the absence of commit-ments for developing countries. Chinadescribed the move as “irresponsible”. TheJapanese Prime Minister has urged Bushto change his mind, while the Swedishgovernment, which currently holds theEuropean Union presidency, described themove as appalling and provocative.
In contrast to this latest statement byPresident Bush, Sweden’s EnvironmentMinister said in March that the EuropeanUnion could ratify the Kyoto Protocol byJuly 2002, in time for the tenth anniver-sary of the Rio Earth Summit.
The Summary for Policy Makers of
The OPEC Secretariat established its own Environmen-tal Task Force (ETF) in 1994 to monitor developmentsin the field of energy use and the environment. Itsprincipal objective is to keep OPEC’s Ministers continu-ously informed about the status of the energy/environ-mental debate, as it affects the Organization and itsMember Countries. The ETF’s work is also seen asadding impetus and authority to the discusssions at high-level meetings involving OPEC.
A Quarterly Environmental Report (QER) is circu-lated to Member Countries, in which the ETF reviewsrecent activities in the various international environ-
mental fora, monitors changes in energy taxation, andprovides background information on relevant forth-coming events, etc. Although this is an internalOPEC document, selected extracts from the publicationappear regularly in the OPEC Bulletin for the benefitof a wider readership.
This month’s selection comes from the QER publishedat the end of the first quarter of 2001. It features anextract from the Executive Summary (below), whichcovers recent developments including US President GeorgeW Bush’s rejection of the Kyoto Protocol and the releaseof the IPCC’s Summary for Policy Makers.
US President Bush rejects KyotoProtocol and IPCC releases itsSummary for Policy Makers
Executive Summary
April 2001 27
E N V I R O N M E N T N O T E B O O K
Working Group III of the United Na-tion’s Intergovernmental Panel on Cli-mate Change (IPCC) was approved at theSixth Session of the Group held in Ghana,in February/March. This report confirmsthat emission constraints in Annex I coun-tries have well-established, albeit varied,“spill over” effects on non-Annex I coun-tries. In particular, oil-exporting, non-Annex I countries are likely to suffereconomic losses.
Survey of studiesIn a survey of studies analysing such
losses, the study reporting the highest costsshows reductions of 25 per cent of pro-jected oil revenues with no emissions trad-ing, and 13 per cent of projected oilrevenues with Annex B emissions tradingin 2010. The report emphasises that thesestudies do not consider policies and meas-ures other than Annex B emissions trad-ing, that could lessen the impact onnon-Annex I, oil-exporting countries, suchas those for non-carbon dioxide (CO
2)
gases and non-energy sources of all gases,offsets from sinks, and industry restructur-ing (eg, from energy producer to supplierof energy services). The report says that theeffects on these countries can be furtherreduced by removal of subsidies for fossilfuels, energy tax restructuring accordingto carbon content, increased use of naturalgas, and diversification of the economiesof non-Annex I, oil-exporting countries.
Working Group I of the IPCC ac-cepted in January its contribution to theThird Assessment Report, entitled Cli-mate Change 2001: The Scientific Basis.The report, the most comprehensive studyon climate change to date, was written by123 lead authors and 516 contributingauthors over a three-year period.
The report states that “new evidenceand improved understanding support anupdated conclusion” that the warming ofthe Earth’s surface over the last 50 yearsis attributable to human activities, prima-rily the burning of fossil fuels. The reportsaid that, over the last 250 years, CO
2 in
the Earth’s atmosphere had increased by31 per cent, reaching a concentrationunseen on the planet in 420,000 years andperhaps as far back as 20 million years. Italso stated that the burning of fossil fuels
accounted for some 75 per cent of all man-made CO
2 emissions during the last 20
years, while the remainder was the resultof deforestation.
The latest IPCC report is more defi-nite in its explanation of the reasons forglobal warming than the previous reportin 1995, which said only that there was a“discernible human influence” on globalwarming. The report concludes that, by2100, the temperature of the planet couldrise by between 1.4 and 5.8°C, the mostrapid rise in the last 10,000 years. A worstcase scenario envisages the polar ice capsmelting and sea levels rising by as muchas 88 centimetres, resulting in coastal flood-ing. Changes in the weather would bringdroughts and floods that would displacelarge numbers of the world’s populationand give rise to disease and water short-ages.
IPCC Chairman Robert T Watsonsaid that “we see changes in climate, webelieve we humans are involved and we’reprojecting future climate changes muchmore significant over the next 100 yearsthan the last 100 years”. The full text ofthe Summary for Policy Makers is avail-able at http://www.ipcc.ch.
Gas supply shortageDespite the recent shortage in gas
supplies, US industry is optimistic that theUS has enough gas to meet the expectedincrease of US energy demand throughextensive gas exploration under the im-provements of gas technologies and a goodincentive from relatively high prices ofnatural gas supply. Meanwhile, a US Houserepresentative has proposed the establish-ment of a natural gas reserve, like the SPRfor oil, to stabilise gas prices when gassupplies experience shortages.
In the electricity sector, the US De-partment of Energy is offering grants forclean coal technologies, that are expectedto be able to maintain the role of coalsupplies for power generation under themore stringent environmental regulations.In addition to the policy for electricity,nuclear power may become another op-tion for their expansion planning afterconsidering the latest sharp increase ofenergy prices, particularly natural gas, andthe latest development of nuclear tech-
nologies that could be built shorter and atlower costs.
A number of stories in the full versionof this edition of the QER relate to fuelcell-powered vehicles. This reflects thegrowing amount of attention that is beingpaid to this subject by the internationalmedia and research bodies in industrial-ised countries, as efforts are made to finda substitute for the internal combustionengine, which has dominated the automo-bile industry since the dawn of the motor-ing era more than a century ago.
Fuel cell developmentAmong the points noted in these sto-
ries are the following: the seriousness withwhich governments and major interna-tional companies are taking the fuel cell;the present advanced state of develop-ment, with road-going prototypes alreadybeing tested and 2004 being targeted asthe date on which some companies willlaunch fuel cell vehicles in limited com-mercial volumes; the source of the hydro-gen, which initially is likely to be mainlyhydrocarbons and then, increasingly, non-hydrocarbons; and the high costs, althoughthese are likely to fall later.
Not all manufacturers are convincedof the commercial viability of the fuel cellvehicle within the foreseeable future, how-ever. BMW says it intends to stick with arange of traditional combustion engines,although it is undertaking trials of runningthem with hydrogen instead of petrol;critics, meanwhile, point out that doingthis is inefficient, because hydrogen has alower energy density than petrol and thiswill result in a substantial power loss. Ontop of all this, even conventionally pow-ered cars are expected to be much lessthirsty, with scientists at the Massachu-setts Institute of Technology predictingthat the fuel consumption of a typical carwill drop by 35 per cent by 2020.
At a legislative level during the firstquarter of 2001, continued efforts werereported in both the European Union(EU) and the United States of America toencourage more efficient and less pollut-ing vehicles. Even motorbikes sold in theEU after 2003 will have to respect cleaneremissions standards, following an agree-ment reached in March.
28 OPEC Bulletin
M A R K E T R E V I E W
Table A: Monthly average spot quotations of OPEC Reference Basket and selectedcrudes including differentials $/b
fell by $1.71/b to average $23.70/b inMarch. The components that suffered thebiggest losses were Brent-related BonnyLight and Saharan Blend, shedding$3.05/b and $2.98/b from their values,respectively. Isthmus and Tia Juana Lightfollowed, losing $2.03/b and $1.71/brespectively. Dubai’s loss was $1.12/band Arabian Light’s $1.05/b. Minas, onthe other hand, edged up by 2¢/b (seeTable A).
In the first week of March, the weeklyBasket improved by 51¢/b to $24.58/b,while, in the second and third weeks,it registered successive losses of 70¢/b and$1.08/b to reach $22.80/b; it then im-proved by 66¢/b in the last week, to endthe month at $23.46/b. The price gain inthe first week came from expectations ofan announcement of a production cut atthe March Meeting of the OPEC Confer-ence. Extra support came from a snow-storm hitting the US north-east, which isthe largest regional consumer of heatingoil, and also from a draw on US crude oilinventories. In the second week, news andspeculation about the volume of OPEC
cuts, in addition to signs of a slowdownin world economic growth, especially inthe USA, where there was a plunge in thefinancial markets, were the basic reasonsbehind the price decline. A considerablebuild in US crude inventories was anadditional factor. Concern about the worldeconomy continued into the third weekand was augmented by a perception by themarket that world oil supply was morethan adequate, and this caused a contangoto develop in the market. The reluctanceof European refiners to buy, despite theabove conditions, put further pressure onprices. All these factors overshadowed thedecision of the OPEC Conference to cutproduction by 1.0m b/d and the downtrendin prices continued. The main driver ofprices in the fourth week was the productmarket in the USA, but the price rally wascapped by a higher-than-expected build inUS crude inventories.
US and European marketsDelays in the arrival of cargoes in the
USA, due to weather conditions, causedrefiners to rush out to buy alternatives, andalthough sweet crudes from Canada wereplentiful due to refinery turnarounds, thelack of pipeline space meant that theycould not be moved to the required USlocations. The picture changed, as USrefiners saw plenty of transatlantic cargoes
March1
1. This section is based on the OPEC MonthlyOil Market Report prepared by the ResearchDivision of the Secretariat — published inmid-month and containing up-to-date analy-sis, additional information, graphs andtables. Researchers and other readers maydownload the publication in PDF formatfrom our Web site (www.opec.org), providedOPEC is credited as source for any usage.
2. An average of Saharan Blend, Minas, BonnyLight, Arabian Light, Dubai, Tia JuanaLight and Isthmus.
coming, especially since Europe preferredsour grades. The arrival of these cargoestowards the month-end, combined withhigh freight rates, pushed Colombia’sCusiana into a deep discount to WTI.Sour grades also strengthened in the USA,due to uncertainty about Basrah Light.
In Europe, the closed arbitrage to theUSA, the plentiful availability of WestAfrican crudes, refinery turnarounds andweak refiners’ margins together forced theprices of North Sea grades to fall. Cheapsour grades encouraged refiners to preferthem to sweet grades, putting furtherpressure on prices.
In the Mediterranean, Urals was strong,as north-west Europe attracted cargoesdue to good sour crude margins; furtherstrength was due to refineries in the regionreturning from their turnarounds. Evenabundant exports of Iraq’s Kirkuk did notease the market, since these were coun-tered by delays in Urals loading in thesecond part of the month.
Far Eastern marketsMinas prices maintained their sup-
port, through the Chinese buying reducedsupplies of the grade, due to the returnfrom turnarounds of the 150,000 b/dBalongan refinery in Indonesia keepingsupplies limited. Tapis lost support, be-cause of a fall in naphtha prices. Middle
April 2001 29
M A R K E T R E V I E W
East grades were put under pressure by aninflow of North Sea and West Africangrades, as the Brent-Dubai differentialnarrowed. Abu Dhabi grades, which aredistillate-rich, suffered as a result of theend of the winter season.
Product markets andrefinery operations
With the exception of fuel oil in Singa-pore, all product prices in the three mainworld markets, the US Gulf, Rotterdamand Singapore, experienced heavy losses inMarch, particularly in the USA. Eventhough tumbling crude markets consti-tuted the underlying reason for this, theypaved the way for improved refiners’margins (see Table B).
US Gulf marketProduct prices lost heavily in the US
Gulf in March, driven largely by plungingcrude markets, coupled with plentifulsupply that was caused by a spate of refin-ery secondary process restarts, followingcompletion of turnaround maintenance.The average regular gasoline price plungedby a further $1.90/b, affected by an aggres-sive selling-off of unleaded winter gradesin preparation for more stringent summergasoline specifications, and despite esca-lating draws on gasoline stocks during themonth and some refinery problems. Sus-tained warm temperatures, together witha market that focused on gasoline on theback of higher distillate stock volumes,compared with last year’s levels, led toanother tumble in the gasoil price, by anaverage $3.29/b, although agriculturaldemand emerged from the Mid-continentregion. The fuel oil price reversed theuptrend that had been sustained duringthe previous two months and moved downsharply, by an average of almost $2/b, onfading utility and Mexican demand andin line with slumping crude prices (seeTable B).
Refiners’ margins in the US Gulf cen-tre rose sharply, as the crude price fallswere steeper than the increases in productvalues, particularly for gasoline.
US refinery throughput declined byabout 150,000 b/d to hover around 14.84mb/d in March, reflecting largely the ongo-ing maintenance season which took place
sharply, by an average $1.50/b, amid thindemand, especially from the largest Euro-pean heating oil consumer, Germany,on the back of its adequate level of distil-late inventories. The average fuel oil pricemoved down by a modest 63¢/b,mitigated by robust exports to the USAand the Far East, despite sizeable crudelosses and a boost in Russian supply, in thewake of the lifting of its export ban (seeTable B).
Refiners’ margins rebounded, as themargin for Brent recouped most of its lossesand jumped into positive territory, gainingalmost $1.00/b, bolstered by tight refiningsupply and deteriorating crude prices.
Refinery throughput in the Eur-16countries fell by a further 570,000 b/d toregister 11.54m b/d in March, represent-
Table C: Refinery operations in selected OECD countries
1. Refinery capacities used are in barrels per calendar day. na Not available.2. European Union plus Norway. R Revised since last issue.Sources: OPEC Statistics, Argus, Euroilstock Inventory Report/IEA.
in both Atlantic Coast and Midwest refin-eries, following the end of most turna-round programmes in the US Gulf Coast(see Table C). The corresponding utiliza-tion rate of 89.7 per cent was almostunchanged from last year’s level.
Rotterdam marketTight product supply, as a result of
heavy European refinery maintenance,prevented prices from declining sharply inMarch, as was witnessed in US productmarkets, even though crude prices plum-meted. The firm closure of transatlanticgasoline cargoes, except in the last week ofthe month, at a time of lean regionalbuying interest, hampered the gasolinemarket, which experienced an averagedecrease of 98¢/b. The gasoil price fell
according to UN figures. Compared withyear-ago fixtures, the current volume isonly 370,000 b/d lower. The rise in OPECchartering has had a positive impact onglobal fixtures, which rose by 4.50m b/dto a monthly average of 25.84m b/d, ascrude oil exports increased amid strongexpectations about the OPEC productioncut in March. However, this volume ofglobal fixtures was 400,000 b/d lower thana year ago. The OPEC area’s share ofglobal spot-chartering improved by 2.22percentage points over the precedingmonth, to stand at 58.56 per cent, but thiswas 0.52 points lower than last year. MiddleEast eastbound and westbound charteringimproved by 260,000 b/d to 4.54m b/dand by 920,000 b/d to 2.79m b/d, respec-tively. The westbound long-haul share ofOPEC fixtures rose by 2.91 points to18.44 per cent, while they declined by5.65 points to around 30 per cent on theeastbound route. Together, they accountedfor 48.42 per cent of total chartering in theOPEC area, which was 2.74 points lowerthan in the previous month. According topreliminary estimates, sailings from theOPEC area increased by 1.25m b/d to amonthly average of 22.27m b/d in March,which was about six per cent higher thanthat of February. Sailings from the MiddleEast averaged 15.63m b/d during themonth, an improvement of 1.04m b/dover the previous month, and accountedfor 70 per cent of total OPEC fixtures.Arrivals in the US Gulf Coast, the EastCoast and the Caribbean declined by40,000 b/d to a monthly average 7.81mb/d, due to lower imports, while arrivalsin NW Europe and Euromed increased by360,000 b/d to 6.33m b/d and by 40,000b/d to 4.30m b/d, respectively. The esti-mated oil-at-sea on March 25 is 455m b,which was 10m b less than that observedat the end of February.
The VLCC market in the Middle Eastexperienced steady activity throughoutMarch, benefiting from increased volumefixtures. The freight rates on the MiddleEast westbound long-haul route almoststabilized at the previous month’s averagelevel of Worldscale 90, only one pointlower than that reported in February, while,on the eastbound route, the rates declinedby seven points to a monthly average ofW93. Suezmax freight rates on the routefrom West Africa to the US Gulf Coast
ing an 84.6 per cent refinery utilizationrate — this was barely 0.5 percentagepoints lower than the previous year’s fig-ure. Lower European refinery throughputwas linked to heavy maintenance and runcuts, in response to weaker refiners’ mar-gins during recent months (see Table C).
Singapore marketProduct markets went in divergent
directions in March, as light product pricesfell, while the fuel oil market shrugged offcrude losses and gained modestly. Despitethe strong US West Coast gasoline mar-ket, which attracted about 1.25m b ofAsian material, particularly from Chinaand South Korea, the average gasolineprice tumbled by $1.45/b, reversing therising trend that it had enjoyed during theprevious two months; it was underminedlargely by dwindling Indonesian demand.The gasoil price continued its downwardtrend, by an average 74¢/b, amid sus-tained abundant regional supply findinglimited outlets for demand; this was de-spite reduced Middle East exports thatwere either sold mostly through termcontracts or moved to Mediterranean andRotterdam markets on the back of pricedifferentials. The fuel oil price increasedby an average of 35¢/b, on sustained ro-bust Chinese buying and a tight Asianbunker market late in the month (seeTable B).
Refiners’ margins in Singapore recov-ered slightly, but Dubai remained deep innegative territory, under pressure fromplunging gasoline prices, which outstrippeda moderate reduction in the Dubai mar-ket, compared with other benchmarkcrudes.
In Japan, refinery throughput stoodat 4.70m b/d in February, registering arise of 140,000 b from the previousmonth. The corresponding refinery utili-zation rate was 94.7 per cent, which was5.3 percentage points above last year’slevel (see Table C).
The oil futures market
NYMEX WTI moved from $27.62/b onMarch 1, to $28.39/b at the end of the firstweek. The main leader in the price rallywas gasoline as there were concerns overlow (blendstocks) inventories due to a
significant shut-down in US methyl ter-tiary butyl ether production during De-cember to February. A later winternorth-east storm further supported thefundamentals and rumours of outages ofrefineries in the USA and Venezuela pushedprices higher, despite the build in UScrude oil inventories. On the technicalside, the Commodity Futures TradingCommission report showed a highernumber of short positions of the non-commercials, indicating the possibility ofa short-covering rally which helped pushprices higher, while spread trading at theend of the week pushed prices lower. Thespread trading was basically selling front-months and buying cheaper outsidemonths and was done by banks, accordingto market sources.
The second week finished with WTIdown by $1.74/b to $26.55/b as bearishdemand outlook was the overwhelmingsentiment. A huge build up in US inven-tories and a feeling that there is plenty ofoil around, despite 25-year low invento-ries in the USA, overcame any concernsabout OPEC production cuts. During theweek, the spread trading continued buy-ing outer months.
WTI futures finished the third weekunchanged at $26.54/b as the market wasmainly associated with the weakness infinancial stock markets. The feeling ofweak demand due to slower economicgrowth overshadowed OPEC’s produc-tion cut of 1m b/d at its 114th (Extraor-dinary) Meeting of the Conference.
The strength in product markets wasthe main support for crude prices in thefourth week. The decision by Mexico tocut production by 40,000 b/d in supportof OPEC’s production cut also contrib-uted to the rally. However, an unexpectedbuild up in US crude stocks reversed therally, and NYMEX WTI finished themonth at $26.29/b.
The tanker market
OPEC area spot-chartering showed amoderate increase during March, rising by3.11m b/d to a monthly average of 15.13mb/d. This reflected the normal recoverycycle at the end of 1Q, combined with there-emergence of Iraq’s production thismonth, when its exports rose sharply,
April 2001 31
M A R K E T R E V I E W
continued to fall considerably, by 33 pointsto W115, affected by lower imports intothe US market and heavy competitionfrom the VLCC tanker availability in theAtlantic Basin, which squeezed theSuezmax market further. Aframax freightrates from the Caribbean to the US EastCoast reversed their upward trend and lostall the preceding month’s gain, as theydropped by 56 points to W234, due topoor weather, particularly fog, which closedmany ports and delayed cargoes. On theroute from the Mediterranean to NWEurope, the Aframax freight rates alsomoved down, by 11 points to W225,while, within the Mediterranean route,the rates were almost unchanged from lastmonth’s level, easing by one point to W215.Freight rates for 70–100,00 dwt tankersfor cargoes from Indonesia to the US WestCoast witnessed a significant decline,plunging by 26 points to W225 in March.
Product freight rates from the MiddleEast to the Far East continued to weakenin March, decreasing by 24 points to W297,on tight Middle East product supply andthin buying activity in the Asia-Pacificmarket. In the Mediterranean, freight ratessaw the biggest drop among the producttankers, as they fell by 93 points to W287on the route to NW Europe, while withinthe Mediterranean, the rates dropped by60 points to W269. The rates also fellsubstantially on the route from the Car-ibbean to the US Gulf Coast, by 77 pointsto W249. Freight rates on the Singapore/Far East route eased by two points fromlast month’s level, to stand at W371.
World oil demand
Figures for 2000
WorldAt the time of publication, the revised
data for the year 2000 and earlier were notavailable; thus, the figures have been keptunchanged from the previous report. It isimportant to mention that we do notanticipate considerable changes, once therevised data have been incorporated. It isnormal to expect minor adjustments, inthe order of 30,000–50,000 b/d for totalworld oil demand, but these will not changethe overall demand picture significantly.Nonetheless, in the next issue of the re-
port, all the changes in previous years’ datawill be incorporated.
Based on the above and according tolast month’s data, total world oil demandin 2000 rose by 730,000 b/d, or 1.0 percent, and averaged 75.71m b/d. The quar-terly breakdown reveals that, comparedwith 1999, consumption decreased by 0.4per cent during 1Q, but recovered for theremaining three quarters, rising by 1.6 percent, 2.0 per cent and 0.7 per cent, respec-tively. On a regional basis, total OECD oilconsumption registered a marginal de-cline of 40,000 b/d, or 0.1 per cent, toaverage 47.58m b/d. Total DC consump-tion is projected to have gained 510,000b/d, or 2.8 per cent. With respect to the‘Other regions’, apparent consumption,derived from production and trade statis-tics, seems to have grown by 260,000 b/d,or 2.9 per cent, to 9.25m b/d. A closer lookat the demand picture there reveals thatapparent consumption in China grew atan impressive rate of 12.6 per cent inter-annually, which translates into a volumet-ric gain of more than 500,000 b/d. Thisis explained by the huge rise in the levelof Chinese imports. In contrast, apparentconsumption in the FSU continues tocontract, this time by 7.0 per cent, or280,000 b/d. In the case of the FSU, theloss in apparent demand stems from therise in the level of exports outpacing theincrease in production.
Projections for 2001The world oil demand forecast for the
present year has, once again, been reviseddown, by 40,000 b/d, and now standsslightly below 77m b/d, at 76.97m b/d,which translates into a growth rate of 1.7per cent, or 1.26m b/d. Meanwhile, asstated in previous issues of the report, thisdemand forecast is very likely to be reviseddown further in the months to come.Topping the list for this assumption is thepersistent slowdown in the US economy.According to our latest projections, theGDP growth rate for the US economy hasbeen revised down by 0.7 percentage pointsfrom the previous 1.8 per cent and nowstands at 1.1 per cent. This huge decelera-tion in the US economy will definitelyhave an impact on the level of oil con-sumption. Curiously, preliminary figuresfrom the US Department of Energy’sEnergy Information Administration (EIA)
show that US 1Q demand averaged 19.8mb/d, a 4.4 per cent increase over 1Q oflast year. 1Q gasoline demand reached8.2m b/d, while heating oil consumptiongrew by more than four per cent. Onereasonable explanation for this jump inconsumption might be that 1Q00 con-sumption was low, due to stocking inanticipation of Y2K problems. It is argu-able that this huge contraction in the USeconomy will have a domino effect on itstrading partners (Asia and, to a lesser extent,Western Europe). The first signs of eco-nomic slowdown are starting to emerge inthese two regions. Regional projected GDP
growth rates have been revised down.According to the latest estimates, OECDEurope’s GDP growth has shed 0.2 pointsto register 2.6 per cent. Likewise, theOECD Pacific GDP projection now standsat 1.0 per cent, which is 0.2 points lowerthan a month ago. With respect to Asia,regional economic expansion has been low-ered marginally to 4.6 per cent, from theprevious 4.7 per cent. The ongoing sub-stitution of fuel oil (especially in Italy),high taxation of petroleum products,stricter environmental measures and re-structuring in energy industries continueto undermine demand for oil in the shortand long terms in Western Europe. Fi-nally, another factor weakening demand isthe ongoing phasing-out of governmentsubsidies in many developing countries,especially in Asia, and this will ultimatelytranslate into higher prices at the consum-ers’ end.
OECDTotal OECD oil demand is projected
to rise by 570,000 b/d, or 1.2 per cent, toaverage 48.15m b/d for the year, a littlehigher than last month’s estimate. Slightlyless than two-thirds of the gain will takeplace in the USA. Projections of inlanddeliveries of petroleum products in theUSA have been revised up, to account forthe better-than-anticipated 1Q demand.As stated earlier, preliminary figures fromthe EIA suggest that 1Q product demandrose by 4.4 per cent to 19.8m b/d. Accord-ing to the EIA, 1Q gasoline consumptionset a record high of 8.2m b/d for thisquarter. Demand for distillates, compris-ing home heating oil and diesel, registeredits highest 1Q level since 1979 at 4.1mb/d. However, these findings should be
32 OPEC Bulletin
M A R K E T R E V I E W
treated with caution, since they are pre-liminary figures and subject to furtherrevision. Western Europe’s demand growthestimate has been kept unchanged at140,000 b/d, or 0.9 per cent, to reach anaverage of 15.11m b/d. In contrast, OECDPacific consumption growth has beenlowered and now stands at 70,000 b/d, or0.8 per cent, in line with the projectedeconomic slowdown in this group. In thetwo biggest countries of this group, Japanand South Korea, consumption is pro-jected to show zero growth, or even de-cline, during the present year.
Developing countriesDC oil demand has been revised down
further, by 50,000 b/d. Consumption isnow expected to rise by 540,000 b/d, or2.9 per cent, to average 19.42m b/d for theyear. The estimated growth rate in con-sumption for the Asian countries has beenlowered from the previous 3.7 per cent to3.5 per cent. The fundamental factor forthe lower demand outlook is that Asianregional GDP is projected to grow at alower-than-anticipated rate. As mentionedearlier, these economies are highly export-dependent and are therefore extremely re-liant upon the health of their tradingpartners. Projections for the remainingregions of this group (Latin America, theMiddle East and Africa) have been ad-justed to capture changes in regional eco-nomic indicators.
Other regionsCurrent projections keep apparent
consumption for ‘Other regions’ un-changed at 9.41m b/d, rising by 160,000b/d, or 1.7 per cent, during the year.Apparent demand in the FSU is projectedto shrink by 0.9 per cent, or 30,000 b/d,a very conservative estimate when com-pared with the previous year. There is thepotential for a further downward adjust-ment. It will all depend on the level ofexports and domestic consumption and,to some extent, the level of productionreached during the year. For the FSU,these are all unknowns that must be fol-lowed closely. In our forecast, we estimatethat China’s apparent demand will expe-rience a growth rate of 3.5 per cent for thepresent year, even though the estimate foreconomic expansion remains very healthyat 7.0 per cent. Very preliminary trade
statistics show a sharp rise in crude oilimports for the first two months of theyear. As mentioned in the last report,China’s consumption will be critical, inorder to balance the global supply/de-mand equation. A small increase in Chi-nese consumption or, even worse, a decline,will mean that the critical balance betweensupply and demand will have to be ad-justed in order to avoid the negative im-pact of prices. Therefore, developments inthis market should be followed closely.
World oil supply
Non-OPEC
Historical data, including 1999A downward revision of 60,000 b/d to
44.47m b/d has been made to the 1998non-OPEC supply figure, compared withthe last report.
Figures for 2000The 2000 non-OPEC supply figure
has been revised down by around 10,000b/d to 45.80m b/d; this is the result ofrevisions made to 1Q, 2Q and 4Q figures,which have been revised down by 20,000b/d to 45.83m b/d and by 60,000 b/d to45.48m b/d and up by 40,000 b/d to46.21m b/d, respectively; 3Q figure hasbeen left unchanged at 45.67m b/d. Theyearly average increase is estimated ataround 1.21m b/d, compared with the1999 figure.
Expectations for 2001The 2001 non-OPEC supply forecast
figure has been revised down by around340,000 b/d to 46.15m b/d, which is350,000 b/d more than the revised 2000figure. The expected 2001 non-OPECquarterly distribution has been reviseddown by 380,000 b/d to 46.29m b/d,410,000 b/d to 45.91m b/d, 340,000b/d to 45.97m b/d and 320,000 b/d to46.37m b/d, respectively.
The FSU net oil export figures for2000 and 2001 have been revised down by10,000 b/d to 4.13m b/d and by 200,000b/d to 4.32m b/d, respectively, comparedwith the last report’s figures (see Table D).
OPEC natural gas liquidsOPEC NGL data for the 2000 estimate
and 2001 forecast remain unchanged, at2.91m b/d and 2.95m b/d, respectively.
that, in March, OPEC output was 28.31mb/d, which was 750,000 b/d higher thanthe revised February level of 27.56m b/d.This will put OPEC crude oil productionfor 1Q01 at 28.03m b/d. Table E showsOPEC production, as reported by selectedsecondary sources.
Stock movements
USAA substantial build of 25.9m b to
303.2m b in crude oil stocks, on the backof increasing imports, resulted in an in-crease of 8.8m b, or 310,000 b/d, to 923.5mb in US commercial onland stocks duringMarch 2–30. Draws on all major productinventories, except residual fuel oil, cappedthis build, as distillates and gasoline moveddown considerably by 11.6m b to 104.0mb, due to reduced distillate output andhealthy demand, and by 10.0m b to193.0m b, on lower gasoline imports.
Unfinished oil stocks rose by 7.6m b to101.3m b, while ‘other oils’ decreased by2.1m b to 142.1m b. Total stocks were15.7m b higher than the level witnesseda year ago.
During the same period, the US Stra-tegic Petroleum Reserve (SPR) rose by600,000 b to 542.3m b (see Table F).
Western EuropeIn March, total oil inventories in the
Eur-16 rose by a further 7.3m b, or 240,000b/d, to reach 1,080.6m b. Extensive refin-ery turnarounds decreased crude demand,causing large stock-builds of almost 18mb. The rise in crude stocks outstripped amoderate reduction in total product in-ventories of 10.6m b, as a consequence ofheavy cuts in refinery production, particu-larly for middle distillate stocks, which fellby 6.1m b, despite a surge in Russiansupply. Gasoline also fell, by 2.3m b, onrobust transatlantic arbitrage movementslate in the month (see Table G).
JapanIn Japan, commercial onland oil stocks
rose by 400,000 b, or 10,000 b/d, to176.9m b in February. This marginal buildresulted from a rise of 5.0m b to 110.2mb in crude stocks, due to increasing im-ports. The crude build was capped by adraw of 4.6m b to 66.7m b on total majorinventories, particularly in middle distil-lates, which fell by 4.8m b to 32.0m b onongoing healthy demand, while othermajor products (gasoline and residual fueloil) remained almost unchanged from theJanuary level. The total level was aboutthree per cent above last year’s level (seeTable H).
Balance of supply/demandFor 2000, the non-OPEC supply estimatehas been revised down by around 10,000b/d to 48.7m b/d, while world oil demandremains unchanged at 75.7m b/d, fromlast month’s report. This has resulted inrevising up the difference item by less than100,000 b/d, and this is now estimatedat 27.0m b/d. The balances for 1Q and2Q have been revised down by lessthan 100,000 b/d to –500,000 b/d and2.0m b/d, while 3Q remains unchangedat 1.3m b/d; 4Q has been revised up byless than 100,000 b/d to 900,000 b/d. The1999 balance remains unchanged from
Table E: OPEC crude oil production, based on secondary sources 1,000 b/d
Total OPEC 26,499 28,833 27,943 27,561 28,313 28,025 751
* Not all sources available.Totals may not add, due to independent rounding.
last month’s report, at –1.1m b/d (seeTable I).
For 2001, non-OPEC supply has beenrevised down by more than 300,000 b/dto 49.1m b/d, and world oil demand hasbeen revised down by less than 100,000b/d to 77.0m b/d; the annual difference,therefore, is estimated at 27.9m b/d, up bymore than 300,000 b/d from the last re-port. The quarterly distribution forecastshave been revised up by 500,000 b/d to27.8m b/d, 300,000 b/d to 26.2m b/d,400,000 b/d to 28.2 and 200,000 b/d to29.4m b/d, respectively. The balance for1Q01 is introduced for the first time, at200,000 b/d.
34 OPEC Bulletin
M A R K E T R E V I E W
Table F: US onland commercial petroleum stocks1 m b
Change Sept 29, 00 Dec 29, 00 March 2, 01 March 30, 01 Mar/Feb March 30, 00
Note: Totals may not add up due to independent rounding.1. Secondary sources.2. Stock change and miscellaneous.
Table I above, prepared by the Secretariat’s Energy Studies Department, shows OPEC’s current forecast of world supply and demand foroil and natural gas liquids.
The monthly evolution of spot prices for selected OPEC and non-OPEC crudes is presented in Tables One and Two on page 37, whileGraphs One and Two (on pages 36 and 38) show the evolution on a weekly basis. Tables Three to Eight, and the corresponding graphson pages 39–44, show the evolution of monthly average spot prices for important products in six major markets. (Data for Tables 1–8 isprovided by courtesy of Platt’s Energy Services).
36 OPEC Bulletin
M A R K E T R E V I E W
Graph 1:Evolution of spot prices for selected OPEC crudes,
1. Tia Juana Light spot price = (TJL netback/Isthmus netback) x Isthmus spot price.2. OPEC Basket: an average of Saharan Blend, Minas, Bonny Light, Arabian Light, Dubai, Tia Juana Light and Isthmus.Kirkuk ex Ceyhan; Brent for dated cargoes; Urals cif Mediterranean. All others fob loading port.Sources: The netback values for TJL price calculations are taken from RVM; Platt’s Oilgram Price Report; Secretariat’s calculations.
2000Member Country/ Mar April May June July Aug Sept Oct Nov Dec Jan Feb Marchtype of crude (API°) 4Wav 4Wav 5Wav 4Wav 4Wav 5Wav 4Wav 5Wav 4Wav 4Wav 5Wav 4Wav 1W 2W 3W 4W 4Wav
2000Country/ Mar April May June July Aug Sept Oct Nov Dec Jan Feb Marchtype of crude (API°) 4Wav 4Wav 5Wav 4Wav 4Wav 5Wav 4Wav 5Wav 4Wav 4Wav 5Wav 4Wav 1W 2W 3W 4W 4Wav
M E M B E R C O U N T R Y F O C U SM E M B E R C O U N T R Y F O C U S
opecna news desk ... from the opecna news desk ... from the opecna
Economists say Middle East nationswill outperform global average
Dubai — The outlook for the economies in the Middle Eastis bullish, despite the slowdown in the United States, andregional gross domestic product (GDP) is expected to comfort-ably outperform the global average, according to economists ona tour of the region.
Middle East economic growth this year would probably bebetween 3.7 and 3.9 per cent, against estimates of a globalaverage of 2.0–2.4 per cent, they said.
The Global Head of Treasury Research at Standard Char-tered Bank, Dr Gerard Lyons, noted that growth rates in thesix Gulf Co-operation Council (GCC) members were inevitablylinked to petroleum prices.
Kuwait and the United Arab Emirates (UAE) were expectedto fare best this year, he added.
With oil revenues accounting for around 90 per cent ofgovernment revenue, Kuwait would benefit strongly from highercrude prices, whereas the UAE’s performance would be downto a combination of higher oil prices and strong non-oil growth,which accounts for two thirds of its GDP.
Another economist, Singapore-based Vasan Shridharan, saidthat regional growth last year was estimated at 4.7 per cent andthe expected 3.7 per cent growth this year would still see theregion outperforming most Asian economies, with Gulf statesbest placed to beat the US slowdown.
“GCC revenues were predicted at oil being at only $20/barrel last year,” he said. “Furthermore, Dubai and Abu Dhabiare expected to invest in huge infrastructure development overthe next two years, driving growth into the future.”
He added that Saudi Arabia had even targeted a balancedbudget — an indication of projected revenues this year.
The economists, whose tour also took in Qatar and Bahrain,said they also felt oil prices would remain relatively stable at thelower end of the $22–28/b bracket in the second and thirdquarters of this year, with the real test coming in the last quarter.
“Demand is relatively inelastic, and so prices will reallydepend on supply management by oil producers,” StandardChartered’s Lyons was quoted as saying by Dubai’s daily news-paper, Gulf News.________________________________________________
Sonatrach, Sonelgaz sign co-operationagreement with Italy’s Enelpower
Algiers — Algeria’s state oil and gas company, Sonatrach, andthe national electricity and gas distribution firm, Sonelgaz,signed a co-operation agreement with the Italian company,Enelpower, in the North African capital last month.
Under the terms of the accord, signed in the presence of the
Algerian Minister of Energy and Mines, Dr Chakib Khelil, thethree firms agreed to jointly develop — in Algeria and abroad— projects tied to power generation, transport and the distri-bution of gas and electricity.
According to a statement released after the accord wassigned, the agreement should enter into force within one year,following the completion of technical and feasibility studies.
Speaking at the signing ceremony, Khelil stressed the im-portance of the accord for the two Algerian energy companies“in their quest for a privileged place in the European market andmore integrated and open competition”.
He noted that the agreement with Enelpower would allowAlgeria to hasten the realization of its commitments towardselectricity projects in Europe, notably in Spain and Italy.
Khelil pointed out that Sonatrach and Sonelgaz — unitedfor the first time in a large-scale project through their joint firm,the Algerian Energy Company — had a unique opportunity forpooling their resources and competence.
The agreement was signed by Sonelgaz Managing Director,Aissa Benghanem, Sonatrach Vice-President, Ali Hached, andthe Acting Managing Director of Enelpower, Franco Tato.
Sonatrach supplies 4.0 billion cubic metres/year of gas toEnel, making it the Italian company’s top supplier. The twofirms are also discussing another gas supply contract.________________________________________________
Japan commits $120 millionto electrification in Nigeria
Abuja — The Japanese government has committed $120million for the electrification of two rural communities inNassarawa State, in northern Nigeria, the Minister of Power andSteel, Olusegun Agagu, announced in the country’s capital lastmonth.
He said the assistance — which was part of a fundingprogramme that wealthy nations had committed to Nigeriasince the country returned to democratic rule in May 1999 —was the first phase of Japanese efforts to help such development.
In the second phase of the scheme, Agagu said that Japanwould provide electricity to the communities of Bogoro, inBauchi State, and Lalshingi, in Gombe State. Meanwhile, a thirdcommunity, Damasak, in Borno State, would benefit in thethird phase.
The Minister said there would be more bilateral co-opera-tion for the funding of rural electrification, social projects, thesupply of offshore materials and the training of staff. He alsohighlighted that the Nigerian government had allocated $176million to expand rural electricity grids.
He said that the government had completed 200 ruralelectricity projects since it came to power in May 1999, addingthat 100 other such projects would be completed by the endof May this year.
46 OPEC Bulletin
M E M B E R C O U N T R Y F O C U S
Agagu said that out of the 774 local government areas in thecountry, 575 were already connected to the national grid, whilework was in progress on 98 others, as part of the efforts to boostthe development of rural areas.
He said that incessant vandalization of electricity equipmentwas a threat to the rural electrification project.
He noted, however, that a proposed bill, which wouldoutlaw the sale of high tension and other major electricitytransmission and distribution materials in local shops, wouldassist in bringing the problem to an end.________________________________________________
Qatar’s budget for 2001-2002forecasts surplus of $136m
Doha — Qatar has forecast a surplus of $136 million in thestate budget for the fiscal year 2001–2002, the Minister ofFinance, Economy and Trade, Yousef Kamal, commented lastmonth.
The surplus, which was due to an increase in oil revenues,would be the first in 14 years if it were realized, he said.
Kamal said revenue in the new budget, which would becomeeffective on April 1, was estimated at $4.94 billion, based onan average oil price of $16.50/barrel.
Revenue for the 2000–2001 budget was calculated at $3.45bn,based on an average oil price of $15/b.
Spending was forecast at $4.81bn in the new budget, com-pared with $4.20bn last year.
Estimates of allocations for major public projects in fiscal2001–2002 reached $865m, compared with an average $401mper year over the past five years.
Kamal said: “As the budget for the new fiscal year suggestedan average price of the barrel of oil at $16.50/b, there are positiveindications that the budget will achieve a surplus that couldreach over three per cent of the gross national product.”
The government’s policy, he added, was aimed at pressingahead with the restructuring of the economy and the diversi-fication of income sources.
The Minister said that this policy had led to an increase inliquefied natural gas exports from 6.5m tonnes in 1999 to 11mt in 2000, in addition to an increase in the country’s exportsof fertilizers and other chemical products.________________________________________________
Nigeria, Yugoslavia record20 per cent growth in trade
Lagos — Nigeria and Yugoslavia have recorded 20 per centgrowth in their bilateral trade over the last two years, theYugoslavian Ambassador to Nigeria, Tihomir Nemadic, com-mented last month.
He continued that both countries were currently discussingways in which to reactivate and hold another session of theYugoslav-Nigeria joint economic commission in Abuja. The lastsession was held in Belgrade in 1991.
Nemadic said the commission would work out details forbilateral agreements and areas of mutual co-operation betweenthe two countries.
A foundation of the Yugoslav-Nigeria association of busi-nessmen would soon be set up to foster interaction betweeninvestors from both countries, he added.
Nemadic explained that the Yugoslav national airline wascurrently engaged in technical co-operation with some Nigerianindigenous airlines and that the Yugoslav firm would proposea bilateral air services’ agreement with Nigeria to run theBelgrade-Lagos-Johannesburg route, to open up communica-tions between the Balkans and Africa.
He listed Yugoslavia’s other areas of interest in the Nigerianeconomy as being in construction, housing and agriculture.________________________________________________
UAE law to set limit for foreignstakeholding at 70 per cent
Dubai — Foreign companies can expect to secure stakes ofup to 70 per cent in local United Arab Emirates’ (UAE) firmsafter a new commercial law takes effect, according to Abu DhabiChamber of Commerce Board Member, Hussain Al Nowais.
Al Nowais, who is also Chairman of Emirates Holdings,commented that the UAE’s insurance market would be openedto foreign firms as well.
Final discussions were under way at the Ministry of Economyand Commerce to amend the present companies’ clause thatdeals with foreign participation (51:49) in order to allow up to70 per cent shareholding by foreigners, Al Nowais said.
However, he stressed that the majority shareholding forforeign companies should be restricted to specific industries,although this was not yet finalized.
He also explained that the future of free zones in the countrywas likely to be affected by the new companies’ law.
“There is also a proposal to open up the insurance sector toforeign companies and this could happen by the end of 2001,”Al Nowais said in his address to a conference on energy,infrastructure and finance in the Middle East.
Regarding the globalization challenges facing the UAE, heunderscored the need for a bigger local market, a commonmarket in the Gulf Co-operation Council (GCC), the openingup of the capital markets, reforms in education and a larger,skilled local workforce.
“The private sector will take the lead in the growth of theregion. There could be greater inter-Emirates and inter-GCCintegration in policy making.”
Earlier at the conference, the Managing Director of theMiddle East Capital Group, Dr Henry Azzam, said the privatesector would play a crucial role in driving growth in the Gulf.
“We are noticing a confident private sector, which will leadthe economies and compensate for the lower growth in the oilsectors.”
Azzam also urged governments to reconsider their roles indealing with the private sector to bring about a balance between“chaos and order”.
April 2001 47
M E M B E R C O U N T R Y F O C U S
He said that “too much order and control stifles creativityand this doesn’t help the private sector”.
Azzam was also bullish about the stock markets in the GCC,and said he expected to see a turnaround in Saudi Arabia, Kuwaitand the UAE.________________________________________________
Italy’s Danielli to invest in ironand steel project in Algeria
Algiers — Italy’s leading iron and steel company, DanielliOfficine Meccaniche, plans to invest $230 million in an ironbar project in Algeria, it was officially announced in the NorthAfrican country’s capital last month.
The Algerian iron and steel company, Sider, will participatein the project with a 15 per cent share.
The project will be built in the free trade area of Djen Djen,300 km east of Algiers.
A team from the Italian firm visited the site of the futurecomplex in March. The project will produce 1.7m tonnes ofround bar iron, of which 1.2m t will be exported and theremaining 500,000 t will be sold on the local market.
Construction is scheduled to start at the end of this year,and the project is expected to be operational in 2004.________________________________________________
Around $2.2 billion spent onNigerian aluminium smelter
Ikot Abasi, Nigeria — Around $2.2 billion has so far beenspent on the aluminium smelter at Ikot Abasi, in the south-eastof Nigeria, according to the Chairman of the AluminiumSmelter Company of Nigeria (Alscon), Steven Lawani.
He told the Nigerian Vice-President, Atiku Abubakar, whovisited the smelter, that the plant, jointly owned by Nigeria andthe German company, Ferostaal, was 86 per cent completed.
However, he blamed the slow pace of work carried out onthe smelter, conceived in 1981, to lethargy and bad decisionsmade by previous governments, adding that if quick action hadbeen taken, the plant would have been completed in 1993.
The Managing Director of the smelter, Dieter Matron,noted that if the plant had been completed in the scheduled time,it would have cost $1.3bn, instead of $2.2bn by 1995.
Out of the $2.2bn already spent, $2.0bn had been used onconstruction, provision of infrastructure and workers’ residen-tial quarters.
Matron said $230 million was spent on the dredging of theImo River and the laying of gas pipelines to the smelter.
The river dredging became necessary to facilitate the trans-portation of raw materials and finished products in and out ofthe plant, he explained.
Before the plant was shut in May 1999, due to a lack ofworking capital, it had produced 40,000 tonnes of aluminiumingots at a rate of 100 t/day.
When fully operational, at the installed capacity of 193,000
t/year, the smelter would yield about $350m annually, Matronsaid.
Meanwhile, company spokesman Malam Garba Shehu saidthe smelter planned to recall 800 workers sent on compulsoryleave when it closed shop in 1999.
The workers would be recalled to increase the 100-personworkforce, as part of the preparations to resume production.
The government released $110m to the smelter in Februaryto enable it to return to production and promised that a balanceof $40m would be paid before June.
It was also expected that a loan of 400m deutschmarks wouldbe obtained from the German Industrial Development Bank tofund a programme for the completion of all construction workat the smelter and to attain 100 per cent output capacity.________________________________________________
Global Environment Facility, FAOto finance projects in Algeria
Algiers — The Global Environment Facility (GEF) and theFood and Agriculture Organization (FAO) will finance projectsworth around $33 million in Algeria, it was officially announcedin the country’s capital last month.
The GEF’s Chairman and CEO, Dr Mohamed El-Ashry,said his organization would grant Algeria $14m which wouldbe used for the protection of the environment.
El-Ashry, who was on a five-day visit to Algeria, indicatedat a press conference that the GEF was also examining thegranting of an additional $8.0m which would be used for thepreservation of the national heritage.
The GEF is giving particular attention to desertification inAfrica, and notably to Algeria, which possesses one of the largestdesert areas in the world.
During his stay in Algeria, El-Ashry held discussions withthe country’s Minister of Environment, Cherif Rahmani, andmet several of the country’s top officials, including AlgerianPresident, Abdelaziz Bouteflika and Prime Minister, Ali Benflis.
Meanwhile, the FAO plans to finance 28 agricultural projectsin Algeria, with support amounting to $11.2m.
According to the country’s Minister of Agriculture, SaadBerkat, the schemes were tied to the development of the agri-culture, fishing and hydrous resources industries.________________________________________________
Iran signs petrochemical deals withItalian and South Korean firms
Tehran — The National Iranian Petrochemical Company(NIPC) signed two contracts last month with firms from Italyand South Korea to set up carbon monoxide and acetic acidplants, according to a report by the official Islamic RepublicNews Agency (IRNA).
The contract to set up the carbon monoxide plant was signedbetween NIPC and a joint Iranian-Italian consortium at aceremony attended by the Iranian Deputy Minister of Petro-
48 OPEC Bulletin
M E M B E R C O U N T R Y F O C U S
leum and NIPC Managing Director, Mohammad-RezaNematzadeh.
Iran was determined to expand its petrochemical industryand raise its output, said Nematzadeh. He called for furthercontributions by Iranian and foreign companies to implementdevelopment projects in the country.
The UK unit of Italian firm Aston Projetti won the tenderfor the construction of the carbon monoxide plant, in partner-ship with Iran’s Civil Engineering Advisory Company.
The contract is worth $37 million, plus an Iranian invest-ment component of 80 billion Iranian rials.
The company will operate with a nominal production ca-pacity of 140,000 tonnes/year of carbon monoxide. It is ex-pected that the project will be implemented within a period of22 months.
Meanwhile, the contract for the establishment of the aceticacid production plant in the Bandar Imam special economiczone was signed by the South Korean firm LG, the Iranian OykCompany, and the Fanavaran Petrochemical Company.
The contract, worth $54.77 million, plus an Iranian com-ponent of 110bn rials, will be implemented within a period of20 months.
The company will operate with a nominal production ca-pacity of 150,000 t/y. The raw materials used by the plant willbe methanol and carbon dioxide.________________________________________________
Nigeria, South Africa signsix co-operation agreements
Abuja — Nigeria and South Africa signed six agreements lastmonth to boost co-operation on defence, agriculture, scienceand technology, arts and culture, and policing.
The Ministries of Foreign Affairs of the two African coun-tries also signed a memorandum of understanding (MOU) onbilateral co-operation.
Speaking after the signing ceremony at the end of the thirdsession of the bi-national commission meeting between the twocountries, South African Vice-President, Jacob Zuma, said theagreements would focus mainly on the sharing of informationand expertise, technology and training of personnel, fact-findingand research visits by experts, and heritage.
“I am positive that by the next session of the bi-nationalcommission, consensus will have been reached on health, tour-ism, information, sports and social development,” he said.
Zuma noted that the successful conclusion of the accord ondefence co-operation would strengthen relations between thearmed forces of both countries and their ability to contributetowards peace, security and stability on the African continent.
“Our two countries and their leaders have been successfulin convincing the world that Africa is serious about endingconflicts on the continent and ensuring that peace, stability anddemocracy flourish,” he stressed.
Zuma added that many world leaders were now convincedof Africa’s determination to end its own marginalization.
He said that, for the first time, developed countries had given
Africa a chance by allowing it to say what “we think needs tobe done on our continent and to take the lead in finding solutionsto our own problems”.
He attributed this situation to the calibre of African lead-ership that was emerging, a leadership that, he said, valued thefreedom and prosperity of its people and that was determinedto ensure democracy and sustainable development were achievedin Africa.
Zuma pointed out that many leaders from developed na-tions, and from international and multinational institutions,had come to recognize that a fresh approach to Africa was necessary.
“This has culminated in our two leaders, Nigerian President,Olusegun Obasanjo and Thabo Mbeki of South Africa, togetherwith Algerian President, Abdelaziz Bouteflika, being tasked todevelop a plan that will ensure that Africa has the possibility topull herself out of her current dismal state,” he said.________________________________________________
Iran’s non-oil exports increasedby 12.4 per cent in 2000
Tehran — Iran’s non-oil exports reached $3.7 billion for theIranian fiscal year which ended on March 20, according to theDirector General of Customs, Abbas Karbassian.
This was up 12.4 per cent from the previous year, Karbassiannoted, although it was lower than the forecast in the country’sthird five-year development plan (2000–2005).
The plan had forecast the value of non-oil exports for theyear at $4.3bn, as opposed to the $3.7bn actually achieved.
Explaining the difference between the forecast and the result,Karbassian said that exports of rugs, pistachios and minerals hadbeen 13 per cent lower than expected.________________________________________________
Algeria sees improvement innon-oil and service exports
Algiers — Algeria’s non-oil and service exports were valuedat more than $1.5 billion in 2000, up by 42 per cent comparedwith the previous year’s figures.
According to a statement issued by the Algerian ExportCentre (Promex), the export of services (transport, insurance,banking) fetched the country $928 million, while non-oil rev-enues reached $650m.
However, in spite of the rise in non-oil exports, overseas salesin this sector remained low, representing only 3.18 per cent ofthe country’s total global exports.
Meanwhile, hydrocarbons, which fetched Algeria more than$20bn, dominated the country’s exports.
To promote non-oil exports, the country’s Ministry of Tradehas initiated a support programme, aimed at boosting the sector.
In addition to a range of incentives, the programme includesother measures, such as the holding of fairs abroad, a facility foraccess to information, and the training of executives and com-pany managers.
April 2001 49
O P E C F U N D N E W S
No 17/2001Vienna, Austria, March 8, 2001
OPEC Fund andEgypt sign agreementto protect investment
An agreement for the encouragement andprotection of investment has been signedbetween the OPEC Fund for Interna-tional Development and the Arab Repub-lic of Egypt. Drawn up within theframework of the Fund’s Private SectorFacility, the convention was initialled byHE Dr Ahmed El-Dersh, Minister ofPlanning and Minister of State for Inter-national Co-operation of Egypt, and byHE Dr Y Seyyid Abdulai, Director-Gen-eral of the OPEC Fund.
The Fund’s Private Sector Facility isa new financing window, endowed withits own resources, through which the Fundchannels support directly to the privatesector in developing countries. The objec-tives of the Facility are to promote eco-nomic development by encouraging thegrowth of productive private enterprise
and supporting the development of localcapital markets. Under the Facility, loansare made to financial institutions for on-lending to small, medium and micro-en-terprises, as well as directly to specificprojects. Equity participation in privateenterprises is also undertaken, either di-rectly or through country or regional in-vestment funds. As a pre-condition tosuch investment, the Fund requires signa-ture of a standard agreement with thecountry concerned for the encouragementand protection of investment. Recognizedas a gesture of trust and confidence, theagreement accords the OPEC Fund thesame privileges as those normally given tointernational development institutions inwhich the country holds membership.
Egypt has made considerable economicprogress in recent years thanks tostabilization efforts and an aggressive struc-tural reform programme. The average GDP
growth rate accelerated from 1.9 per centper annum at the beginning of the 1990sto 5.5 per cent per year in the second halfof the decade. During the same period,annual inflation fell from 21 per cent toless than four per cent, and per capita GDP
reached $1,440 in 1999. These achieve-ments have helped foster a hospitableenabling environment for the promotionof enterprises in the country’s private sec-tor, a situation regarded by government ascritical to the rapid development of thecountry.
No 18/2001Vienna, Austria, March 19, 2001
Agreement to encourageinvestment is signed byOPEC Fund and Albania
An agreement for the encouragement andprotection of investment has been signedbetween the OPEC Fund for Interna-tional Development and the Republic ofAlbania. Drawn up within the frameworkof the Fund’s Private Sector Facility, theconvention was initialled by HE AnastasAngjeli, Minister of Finance of the Repub-lic of Albania, and by HE Dr Y SeyyidAbdulai, Director-General of the OPECFund.
The Fund’s Private Sector Facility is anew financing window, endowed with itsown resources, through which the Fundchannels support directly to the privatesector in developing countries. The objec-tives of the Facility are to promote eco-nomic development by encouraging thegrowth of productive private enterpriseand supporting the development of localcapital markets. Under the Facility, loansare made to financial institutions for on-lending to small, medium and micro-en-terprises, as well as directly to specificprojects.
Equity participation in private enter-prises is also undertaken, either directly orthrough country or regional investmentfunds. As a pre-condition to such invest-ment, the Fund requires signature of astandard agreement with the country con-cerned for the encouragement and protec-tion of investment. Recognized as a gestureof trust and confidence, the agreementaccords the OPEC Fund the same privi-leges as those normally given to interna-tional development institutions in whichthe country holds membership.
Thanks to a series of structural re-forms, Albania, a country with a popula-tion of 3.4 million people, has madeconsiderable economic progress in recentyears, evidenced by an increase of GNP percapita from $660 in 1995 to $870 in 1999.Also in 1999, GDP growth reached 7.3 percent and inflation was brought to belowzero levels as a result of tight monetarypolicies and external aid. Significant
OPEC Fund for International Development,Parkring 8, PO Box 995, 1011 Vienna, Austria.Tel: +43 1 515640; fax: +43 1 513 9238; tx: 1-31734 fund a; cable: opecfund; e-mail:[email protected]; Web site: http://www.opecfund.org.
OPEC Fund approvessix new loans worth
more than $31 millionIn March, the Governing Board of the OPEC Fund for InternationalDevelopment approved six new loans to Chad, Equatorial Guinea, Ethiopia,Guatemala, Tajikistan and Vietnam, worth more than $31 million, andthree new grants to Guatemala, Palestine and an African HIV/AIDSsummit.
50 OPEC Bulletin
O P E C F U N D N E W S
progress has been made in the privatiza-tion of strategic sectors, including agricul-ture, commercial banks and small andmedium enterprises. These achievementshave helped foster a hospitable enablingenvironment for the promotion of enter-prises in the country’s private sector,a situation regarded by government ascritical to the rapid development of thecountry.
No 19/2001Vienna, Austria, March 23, 2001
OPEC Fund andSyria sign agreementto protect investment
An agreement for the encouragement andprotection of investment has been signedbetween the OPEC Fund for Inter-national Development and the SyrianArab Republic. Drawn up within theframework of the Fund’s Private SectorFacility, the convention was initialled byHE Dr Mohammed Imady, Minister ofEconomy and Foreign Trade of the SyrianArab Republic, and by HE Dr Y SeyyidAbdulai, Director-General of the OPECFund.
The Fund’s Private Sector Facility is anew financing window, endowed with itsown resources, through which the Fundchannels support directly to the privatesector in developing countries. The objec-tives of the Facility are to promote eco-nomic development by encouraging thegrowth of productive private enterpriseand supporting the development of localcapital markets. Under the Facility, loansare made to financial institutions for on-lending to small, medium and micro-en-terprises, as well as directly to specificprojects.
Equity participation in private enter-prises is also undertaken, either directly orthrough country or regional investmentfunds. As a pre-condition to such invest-ment, the Fund requires signature of astandard agreement with the country con-cerned for the encouragement and protec-tion of investment. Recognized as a gestureof trust and confidence, the agreementaccords the OPEC Fund the same privi-
leges as those normally given to interna-tional development institutions in whichthe country holds membership.
Syria, a country with a population of15.7 million people in 1999 and a GNP percapita of $1,010, is endowed with abun-dant natural resources, including fertilesoil, ground and surface water, and oil andnatural gas. Crude petroleum exportsamounted to 325,000 barrels per day in1999, and oil export earnings reached $1.91billion or 55 per cent of total exportrevenue. Syria’s GDP rose from $16.5bnin 1995 to $19.4bn in 1999, and grew ata rate of 5.3 per cent during 1999. Agri-culture contributes 30 per cent of GDP,industry 17 per cent and services 53 percent.
The country’s private sector continuesto grow, and the government has encour-aged foreign private investment by provid-ing many concessions to the domesticprivate sector as well as to joint ventureswith foreign investors.
No 20/2001Vienna, Austria, March 27, 2001
IOI receives $52,000research grant fromOPEC Fund
The OPEC Fund for International Devel-opment has approved a research grant inthe amount of $52,000 to sponsor theattendance of eight participants from de-veloping counties at an International OceanInstitute (IOI) training programme sched-uled to take place from May 28–August3, 2001, at Dalhousie University in Hali-fax, Canada.
Based on similar programmes previ-ously carried out by IOI, the ten-weekworkshop will address the implementa-tion and further elaboration on the themeof ‘The UN Convention on the Law of theSea: Its Implementation and Agenda 21’.Participants will learn about integratedcoastal management and the developmentof ports and harbours, as well as the sus-tainable development of living and non-living resources. Activities will also includeseminars, roundtable discussions and fieldtrips. The course is specifically designed to
enhance the knowledge and strengthenthe capabilities of mid-career professionalsfrom developing countries in improvedocean management and decision-makingskills. Taking into account the under-representation of women in the upperlevels of administration and policy-mak-ing, special emphasis will be placed onachieving an equal number of male andfemale participants.
Founded in 1972, IOI is an independ-ent, non-governmental organization ac-tive in promoting education, training andresearch to enhance the peaceful uses ofoceans and their resources. It is regardedas a world authority on integrated ap-proaches to the conservation of the marineenvironment, and has established nineoperational centres around the world. Thisis the third time the OPEC Fund hassupported IOI training activities: a $50,000grant was extended in 1997, and a secondfor $48,000 was given in 1999.
No 21/2001Vienna, Austria, March 27, 2001
OPEC Fund approves$100,000 grant to boostscientific research
The OPEC Fund for International Devel-opment has approved a grant of $100,000in support of an ongoing initiative devel-oped by the Third World Academy ofSciences (TWAS), which seeks tostrengthen research productivity amongscientists in developing countries througha structured programme of exchange andco-operation.
In many parts of the South, scientistswork in relative isolation and are unableto benefit from the sharing of expertise andresources. The Associate MembershipScheme at Centres of Excellence in theSouth was set up by TWAS in 1994 spe-cifically to fill this need and to promote,in a viable way, South-South collaborationin science and technology. The programmehas since developed into one of the mostsuccessful of its kind, with the number ofparticipating centres rising from 16 to 88in just five years.
Consisting of a network of Centres of
April 2001 51
O P E C F U N D N E W S
Excellence in a variety of scientific disci-plines, the scheme accepts new membersby means of a merit-based, highly com-petitive selection process, giving specialconsideration to scientists from remoteinstitutions in developing countries. Ap-pointments are granted for a fixed periodof three years, during which the successfulcandidates may visit the host centre intheir field of interest twice, for two-threemonths each time. They may pursue theirown research interests and/or collaboratewith the research teams at the host centrein programmes of common interest. At theend of the period, participants will beeligible to renew their membership foranother three years.
TWAS is a non-governmental, non-profit, scientific organization establishedin 1985. It is the first international forumto facilitate mutual contacts amongscientists from the South with a view tostrengthening their scientific work andfostering collaboration. The Fund haspreviously extended two grants to TWAS:one in 1988 for $100,000 in support ofa Wind Erosion and Sand TransportLaboratory in the Sudan, and a second in1992 for $100,000 to help finance anexchange programme for scientists andresearchers.
No 22/2001Vienna, Austria, March 27, 2001
OPEC Fund extends$100,000 in emergencyrelief to Mongolia
The OPEC Fund for International Devel-opment has approved an emergency assist-ance grant of $100,000 to help purchaseurgently needed relief items for nomadicfarming families in Mongolia affected bythe exceptionally harsh winter weather.Still trying to recover from a similar catas-trophe that occurred during the winter of1999-2000, affecting almost half a millionherders, these people are in desperate needof food, medical supplies and clothing.
Mongolia has just experienced its sec-ond Dzud, a severe blizzard preceded byone of the worst droughts in over 60 years.With most of the country buried under a
deep layer of snow, and temperatures plum-meting to well below zero, damage is es-timated at around $84 million.
At least 300,000 herders are livingunder harsh conditions and have lost over850,000 head of livestock, a devastatingblow for a population that relies on animalhusbandry for their livelihoods as well asfor the provision of food, shelter and fuel.The situation is worsening, and it is pre-dicted that up to 6.6m animals, or 20 percent of the country’s total herd, will perishby the end of May. With agriculture pro-viding the mainstay of Mongolia’seconomy, these losses have caused an eco-nomic crisis in a country where almost halfof its inhabitants live in poverty.
In January this year, a UN/Govern-ment of Mongolia Appeal for Assistancewas launched to raise funds for the pro-curement of priority items for livestocksurvival operations, food and medicalsupplies, water and sanitation items, aswell as blankets and clothing.
The Fund’s grant will be channelledthrough the International Federation ofRed Cross and Red Crescent Societies,and will be used to purchase relief itemssuch as food, first aid kits, radios and sparebatteries.
No 23/2001Vienna, Austria, March 27, 2001
OPEC FundGoverning Boardholds 94th Session
The Governing Board of the OPEC Fundfor International Development convenedits 94th Session at the Fund’s headquartersin Vienna in March.1. Following adoption of the meeting’sagenda, the Director-General of the Fund,HE Dr Y Seyyid Abdulai, reporting to theBoard on the Fund’s activities, indicatedthat on a cumulative basis, and as of theend of February 2001, $4,548.2 millionhad been approved in loans to the publicsector and $2,945.9m disbursed.
The loans, which were extended forproject and programme financing andbalance of payments support, as well aswithin the framework of the HIPC Initia-
tive, number 880. All major economicand social sectors have benefited fromthe Fund’s assistance, including agricul-ture, transportation, health, education,water supply and sewerage, industry, en-ergy, etc.
The Director-General further disclosedthat a total of 13 operations had beenapproved under the Fund’s Private SectorFacility. As of the end of February 2001,cumulative commitments through thiswindow totalled $53.2m.
In addition, the Fund has approved atotal of 536 grants in support of variousactivities in the areas of technical assist-ance, food aid, emergency relief and re-search. Cumulative grant commitments,as of the end of February 2001, amountedto $247.4m, of which $166.7m has beendisbursed.
Moreover, the Fund has contributed,in grant form, substantial amounts to theresources of other international develop-ment institutions benefiting the South;these contributions total $972m, most ofwhich has been disbursed. To date, theFund has provided development assist-ance to 107 countries in Africa, Asia, LatinAmerica and the Caribbean, the MiddleEast and Europe.2. In last month’s session, the Board ap-proved six public sector project loans wortha total of $31.4m. They are detailed asfollows:
Country/project $ million
ChadAm Timan-HarazeMangueigne road 4.8Equatorial GuineaRio Muni school construction 3.6EthiopiaAddis Ababa Airport II 4.0GuatemalaSustainable management of theLake Amatitlan watershed 5.0TajikistanShkev-Zigar road 4.0VietnamRural electrification phase II 10.0
Total 31.4
All of the above loans have a maturityof 20 years, including a grace period of fiveyears, and carry interest at rates ranging
52 OPEC Bulletin
O P E C F U N D N E W S
from one per cent to 1.25 per cent, withthe exception of the loan to Guatemalawhich bears interest of 2.5 per cent.
The projects will be co-financed withthe governments of the beneficiary coun-tries and with other donors including threeOPEC aid institutions — the Arab Bankfor Economic Development in Africa, theKuwait Fund for Arab Economic Devel-opment and the Saudi Fund for Develop-ment. Other contributors include theInter-American Development Bank.3. The Board also approved three newgrants aimed at financing activities in thehealth, education and agriculture sectors.They total $516,000 and are broken downas follows:— $200,000 to help finance an African
summit on HIV/AIDS;— $116,000 to boost social productivity
and literacy in Guatemala; and— $200,000 to help finance the comple-
tion of a rehabilitation centre in Pal-estine.
4. The Board also discussed the Fund’sPrivate Sector Facility; two new privatesector investment proposals were approvedand a number of pipeline proposals dis-cussed.5. Also in last month’s session, the Boardreviewed financial and budget matters;discussed the OPEC Fund’s organizationalstrengthening programme; reviewed aworking paper on the Fund’s FifteenthLending Programme, which will cover theperiod 2002–3; examined a note on theFund’s corporate strategy; reviewed aprogress report on ongoing grants; consid-ered a draft of the Fund’s 2000 AnnualReport and looked at operations underactive consideration in the public sector.6. In addition, the Board reviewed im-plementation of the HIPC (Heavily In-debted Poor Countries) Initiative, andauthorized the Fund to participate in thedelivery of debt relief to a number ofcountries in Africa and Latin Americaeligible for assistance under the Initiative’sEnhanced Framework. The Initiative is aninstrument set up by the internationaldonor community to help bring debt lev-els and debt service burdens of the con-cerned developing countries to sustainablelevels.7. The next Governing Board Sessionwill take place in Pörtschach, Carinthia,Austria, on June 14, 2001.
No 24/2001Vienna, Austria, March 27, 2001
Fund approves grant of$200,000 for AfricanHIV/AIDS summit
The OPEC Fund for International Devel-opment has approved a grant of $200,000to help finance a top-level summit onHIV/AIDS, which was due to be held inAbuja, Nigeria, from April 26–27, 2001.The African Summit on HIV/AIDS, Tu-berculosis and Other Related InfectiousDiseases will bring together heads of stateand government, ministers and experts,with the objective of working out a sus-tainable solution to the suffering caused byHIV/AIDS on the continent.
Since the onset of the AIDS epidemicin the early 1980s, the virus has infectedmore than 47 million people around theglobe. Of the 5.4m new cases reported in2000, almost three-quarters were in sub-Saharan Africa alone. The situation therehas been exacerbated by the re-emergenceof tuberculosis (TB), a disease frequentlyresponsible for the deaths of AIDS pa-tients, and by increased incidence ofmalaria. In a very real sense, HIV/AIDShas become a major developmental haz-ard. Unless urgent steps are taken to com-bat the disease, it threatens to underminethe political, social and economic fabric ofthe continent.
Hosted by the federal government ofNigeria and co-financed by member statesof the Organization of African Unity, alongwith UNAIDS, the World Health Or-ganization, UNICEF and others, the Sum-mit will serve as a major launching pad fora new level of collective action againstHIV/AIDS. A critical appraisal will bemade of current HIV/AIDS preventionstrategies and other disease control meth-ods and a new set of goals will be draftedat a preparatory meeting of ministers andexperts.
The outcome of the Summit will be aunified plan of action embracing a legis-lative framework for national, regional andcontinental initiatives on containment ofHIV/AIDS, TB and other infectious dis-eases. At a wider level, the Summit isexpected to sensitize the international
community to the problems associatedwith HIV/AIDS, leading to increasedpolitical commitment and greater resourcemobilization.
Data summary
Sector:Health.
Project:African Summit on HIV/AIDS, Tu-berculosis and Other Related Infec-tious Diseases.
OPEC Fund grant:$200,000
Beneficiaries:Member states of the Organization ofAfrican Unity (OAU).
Total cost:$1.89m
Co-financiers:OAU member states; UNAIDS; WorldHealth Organization; Economic Com-mission for Africa; United NationsDevelopment Programme; AfricanDevelopment Bank; World Bank.
Executing agency:OAU.
Grant administrator:OPEC Fund.
Project duration:April 24–27, 2001.
No 25/2001Vienna, Austria, March 27, 2001
OPEC Fund extendsgrant to help tacklepoverty in Guatemala
The OPEC Fund for International Devel-opment has approved a grant of $116,000in support of a programme to boost socialproductivity and literacy, and alleviatepoverty among Guatemala’s rural poor.Sponsored by the Fundación DoloresBedoya de Molina, a registered, non-gov-ernmental organization, the initiative willtarget 20 farming communities in thecentral department of Alta Verapaz, offer-ing literacy programmes, training and creditto help recipients set up small, productiveenterprises.
Guatemala is characterized by an un-
April 2001 53
O P E C F U N D N E W S
even distribution of land and income, withabout two-thirds of the population livingin extreme poverty. Social indicators inrural regions are of great concern, espe-cially illiteracy rates, which are consider-ably higher than those in urban areas. Ataround 64 per cent, the percentage ofunskilled workers is also high, largelybecause many individuals begin workingat an early age to help support their fami-lies.
Using an integrated, community-basedapproach, the Fundación Dolores Bedoyade Molina has launched, in co-operationwith Guatemala’s Ministry of Education,a multi-faceted programme to help ad-dress poverty issues in Alta Verapaz, anarea heavily dependent on small-scaleagriculture both for income generationand subsistence. Illiteracy levels in theregion stand at 66 per cent.
Some 21 families from the selectedbeneficiary communities will have theopportunity to take part in a basic literacyprogramme and receive instruction on theplanning, setting up and management ofsmall enterprises. The teaching materialsused will be designed especially for theprogramme and geared towards the spe-cific needs of the beneficiaries. On com-pletion, each family will be eligible toreceive a small loan to help them launchtheir own business in a chosen activity. Inaddition to traditional farming pursuits,participants will be encouraged to con-sider alternatives such as horticulture, fishbreeding and bee keeping, as well as live-stock raising and small-scale forestryschemes.
Throughout the programme, empha-sis will be placed on the concept of ‘TheFamily as a Team’, with all family mem-bers, particularly women, encouraged tocontribute towards the household’s in-come-generating activities. Once theentire training cycle is completed, benefi-ciaries will be encouraged to pass on theirnewly-acquired skills and experience toothers in the community.
Data summary
Sector:Education/agriculture.
Project:Productive activities and literacy pro-gramme in Alta Verapaz, Guatemala.
OPEC Fund grant:$116,000
Beneficiary:Guatemala.
Total cost:$303,000
Co-financiers:Fundación Dolores Bedoya de Molina;Ministry of Education of Guatemala;beneficiary communities.
Executing agency:Fundación Dolores Bedoya de Molina;Ministry of Education of Guatemala.
Grant administrator:OPEC Fund.
Project duration:One year.
No 26/2001Vienna, March 27, 2001
OPEC Fund helpscontruction of medicalcentre in Palestine
The OPEC Fund for International Devel-opment has approved a grant of $200,000in support of a project to complete theAmal Centre for the Rehabilitation of theHandicapped in Nablus, Palestine. Theinitiative is being spearheaded by the Unionof Health Care Committees (UHCC) inco-operation with the Spanish charityFundación del Valle.
Although equipped and designed totreat a wide range of neurological andphysiological disorders, especially congeni-tal defects among children, this 2,400square metre centre has been operating atlimited capacity since opening in July 2000because of a lack of certain essential facili-ties. The need to install these facilities isnow urgent if the Centre is to adequatelyaccommodate the growing number ofpatients suffering from injuries and dis-abilities resulting from the prevailing con-ditions in Palestine.
Founded in 1985, the UHCC, a na-tional, non-profit, non-governmental or-ganization, places emphasis on programmesthat provide care and rehabilitation tospecial needs populations. The comple-tion of the Amal Centre has been givenhigh priority by the UHCC, which aims
to turn the facility into the most advancedintegrated welfare centre in northern Pal-estine.
In addition to medical treatment, theCentre will provide vocational, social andpsychological rehabilitation services to thephysically handicapped.
The outstanding works to be com-pleted under the project include the instal-lation of a central heating system and acentral switchboard with six additionaltelephone lines, as well as two electricceiling lifts in the hydrotherapy unit forlifting the disabled in and out of swim-ming pools.
Two workshops will be constructedfor manufacturing prosthetics, artificialjoints and corrective shoes. An ambulancewill be purchased that will not only be usedto transport the ill and injured, but willalso serve as a mobile medical unit toprovide the handicapped living in ruralareas with regular medical care. Two vo-cational workshops will offer rehabilita-tive training programmes in wood andcopper works.
Once completed, the Amal Centre willbe prepared to receive patients from thecities of Nablus, Jenin, Tulkarem, Qalqilia,Ramallah, eight refugee camps, and some259 small villages, serving at least 430,000people.
Data summary
Sector:Health.
Project:Completion of the Amal Centre forthe Rehabilitation of the Handicappedin Nablus, Palestine.
OPEC Fund grant:$200,000
Beneficiary:Palestine.
Total cost:$1.4m
Co-financiers:HRH Prince Hamad Bin Khalifa ofQatar; Fundación Del Valle; Palestin-ian Authority; local contributors.
Executing agency:UHCC; Fundación Del Valle.
Grant administrator:OPEC Fund.
Project duration:One year.
54 OPEC Bulletin
O P E C F U N D N E W S
No 27/2001Vienna, Austria, March 30, 2001
OPEC Fund and EBRDsign memorandumof understanding
A memorandum of understanding (MOU)was concluded between the OPEC Fundfor International Development and theEuropean Bank for Reconstruction andDevelopment (EBRD). Signed at EBRD’sheadquarters in London by HE Dr Y SeyyidAbdulai, Director-General of the OPECFund, and Mr Jean Lemierre, President ofEBRD, the MOU will enhance ties betweenthe two institutions by fostering a strategicpartnership for activities in countries ofcommon interest.
“The EBRD and the OPEC Fundshare a common philosophy and approachtowards economic and social problems inCentral Asia and southeastern Europe,targeting both the public and private sec-tors. We look forward to establishing astrong partnership with the EBRD,” saidDr Abdulai.
The MOU covers the exchange of data,know-how and other forms of mutualsupport that will enhance the operationalcapacity of both institutions and lead toincreased benefits for recipient countries.
The Fund and EBRD have alreadylaunched joint undertakings in Uzbekistan,
Kazakhstan and Bosnia and Herzegovina,directed at the financing of small andmedium enterprises. Together, they areexploring the possibility of other jointventures in Central Asia.
The Fund was established in 1976 topromote co-operation between OPECmember countries and other developingcountries as an expression of South-Southsolidarity. It is mandated to extend con-cessionary financial assistance in the formof loans for development projects andprogrammes and for balance of paymentssupport; to provide grants in support oftechnical assistance, food aid, research andsimilar activities, and emergency relief; toparticipate in the financing of private sec-tor activities located in developing coun-tries; and to contribute to the resources ofother development institutions whose workbenefits developing countries.
By the end of February 2001, the levelof cumulative assistance extended by theFund had reached $5.82 billion and ben-efited a very large number (108) of devel-oping countries in all continents.
The EBRD was founded in 1991 tofoster the transition towards open market-oriented economies and to promote pri-vate and entrepreneurial initiative in thecountries of Central and Eastern Europe.It encourages co-financing and foreigndirect investment from the private andpublic sectors, helps to mobilize domesticcapital, and provides technical co-opera-tion in relevant areas.
The 33rd Meeting of the Meeting of theMinisterial Monitoring Sub-Committee(MMSC) will be held at the OPEC Sec-retariat, Vienna, Austria, on June 4, 2001.
The 115th (Extraordinary) Meeting ofthe Conference will be held at the OPECSecretariat, Vienna, Austria, on June 5–6,2001.
The 104th Meeting of the Board of Gover-nors will be held at the OPEC Secretariat,Vienna, Austria, on August 28, 2001.
The 96th Meeting of the Economic Commis-sion Board (ECB) will be held at the OPECSecretariat on September 17, 2001.
The 34th Meeting of the Ministerial Moni-toring Sub-Committee (MMSC) will beheld at the OPEC Secretariat, Vienna,Austria, on September 25, 2001.
The 116th Meeting of the Conference will beheld at the OPEC Secretariat, Vienna,Austria, on September 26, 2001.
The OPEC Anniversary Seminar onOPEC and the Global Energy Balance: To-wards a Sustainable Energy Future will beheld in Vienna, Austria, on September28–29, 2001. Details can be obtainedfrom: CWC Associates Ltd, ElizabethMcLaughlin, The Business Design Cen-tre, 52 Upper Street, London N1 0QH,UK. Tel: +44 (0)20 7704 0308; fax: +44(0)20 7704 8440; e-mail: [email protected]; Web site: www.thecwcgroup.com.
The 3rd (Annual) Multi-Disciplinary Train-ing Course for Member Countries’ Traineeswill be held at the OPEC Secretariat,Vienna, Austria, in October 2001.
The 3rd Informal Brainstorming Session willbe held at the OPEC Secretariat, Vienna,Austria, in November 2001.
ForthcomingOPEC
Meetings
SECRETARIAT NOTES
April 2001 55
Reach decision-makers through OPEC BulletinThe OPEC Bulletin is distributed on subscription and to a selected readership in the following fields: oil and gas industry; energyand economics ministries; press and media; consultancy, science and research; service and ancillary industries. Recipients includeOPEC Ministers, other top-level officials and decision-makers in government and business circles, together with policy advisers inkey industrial organizations.
The magazine not only conveys the viewpoints of OPEC and its Member Countries but also promotes discussion and dialogueamong all interested parties in the industry. It regularly features articles by officials of the Secretariat and leading industry observers.Each issue includes a topical OPEC commentary, oil and product market reports, official statements, and the latest energy and non-energy news from Member Countries and other developing countries.
�����������Orders are accepted subject to the terms and conditions, current rates and technical data set out in the advertising brochure. Thesemay be varied without notice by the Publisher (OPEC). In particular, the Publisher reserves the right to refuse or withdraw advertisingfelt to be incompatible with the aims, standards or interests of the Organization, without necessarily stating a reason.
�� ������������������� �North America: Donnelly & Associates, PO Box 851471, Richardson, Texas 75085-1471, USA. Tel: +1 972 437 9557; fax: +1 972 437 9558.Europe: G Arnold Teesing BV, Molenland 32, 3994 TA Houten, The Netherlands. Tel: +31 30 6340660; fax: +31 30 6590690.Middle East: Imprint International, Suite 3, 16 Colinette Rd, London SW15 6QQ, UK. Tel: +44 (0)181 785 3775; fax: +44 (0)171 837 2764Southern Africa: International Media Reps, Pvt Bag X18, Bryanston, 2021 South Africa. Tel: +2711 706 2820; fax: +2711 706 2892.Orders from Member Countries (and areas not listed below) should be sent directly to OPEC.
������������������������������Multiple: 1X 3X 6X 12Xfull page 2,300 2,150 2,000 1,8501/2 (horizontal) 1,500 1,400 1,300 1,2001/3 (1 column) 800 750 700 6501/6 (1/2 column) 500 450 400 3501/9 (1/3 column) 300 275 250 225Colour surcharge Special position surchargeSpot colour: 400 per page; 550 per spread. Specific inside page: plus 10 per cent3 or 4 colours: 950 per page; 1,300 per spread. Inside cover (front or back): plus 35 per cent
The back cover: plus 50 per cent
�������Payment sent within 10 days of invoice date qualifies for two per cent discount. Agency commission of 15 per cent of gross billing(rate, colour, position, but excluding any charges for process work), if client’s payment received by Publisher within 30 days.
���������������� ����!"#$���������Frequency: Published 12 times per year.Deadlines: Contact Publisher or local advertising representative at the address above.Language: Advertisement text is acceptable in any OPEC Member Country language, but orders should be placed in English.Printing/binding: Sheet-fed offset-litho; perfect binding (glued spine).Page size: 210 mm x 275 mm (8 1/
4" x 10 7/
8").
Full bleed: +3 mm (1/4") overlap, live material up to 5 mm (1/
2") from edge.
Text block: 175 mm x 241 mm (6 7/8" x 9 1/
2").
Readership: Estimated to be on circulation to around 20,000 readers in 151 countries.Material: Originals preferred as film positives (right-reading when emulsion side down). Design and typesetting charged at 15 per cent
of advert cost. Artwork accepted (but deadline advanced by one week). Reversing and artwork processing charged at cost andbilled separately. Printer requires proof or pre-print.
Screen: 60 dots per cm (133dpi) ±5 per cent (North America: 133 line screen).Colour indication: Use Pantone matching scheme, or send proof (otherwise no responsibility can be accepted for colour match).Proofs: Sent only on request; approval assumed unless corrections received within two weeks of despatch.Payment: Due upon receipt of invoice/proof of printing, either by direct transfer to the following account number: 2646784
Creditanstalt, Vienna, Austria. Or by banker’s cheque, made payable to OPEC. Net 30 days. Payment may also be madeby the following credit cards: American Express, Visa, Euro Card/Master Card and Diners’ Club.
A D V E R T I S I N G R A T E S & D A T A
56 OPEC Bulletin
OPEC Annual Statistical Bulletin 1999This 144-page book, including colour graphs and tables, comes with a 3.5" diskette featuring all the data in the book and more, runningunder Windows™ on IBM™ (or compatible) PCs. A hard copy of the book plus diskette costs Austrian Schillings (ATS) 940 ( 68.31).A PDF version of the book can be downloaded free of charge from www.opec.org.
❐ Please send me ................. copies of the OPEC Annual Statistical Bulletin 1999 (book plus diskette)
OPEC Bulletinis published monthly and a hard copy subscription costs ATS 850 ( 61.77) for 12 issues. Subscription commences with the currentissue (unless otherwise requested) after receipt of payment. A PDF version of the magazine can be downloaded free of charge fromwww.opec.org.
❐ I wish to subscribe to the OPEC Bulletin for a one-year period
OPEC News Agencyprovides a twice-daily news service on energy developments within Member Countries as well as reports from the key world energycentres. OPECNA also carries up-to-date data and reports prepared by the OPEC Secretariat. Charges depend on the mode of trans-mission (e-mail, telefax or post) and location of subscriber.
❐ I would like information on subscription prices to OPECNA
OPEC Monthly Oil Market ReportPublished monthly, this source of key information about OPEC Member Country output also contains the Secretariat’s analyses of oil andproduct price movements, futures markets, the energy supply/demand balance, stock movements and global economic trends. $525 peryear (including airmail delivery) for an annual hard copy subscription of 12 issues. A PDF version can be downloaded free of charge fromwww.opec.org.
❐ I wish to subscribe to the MOMR for a one-year period ❐ Please send me a sample copy
OPEC Reviewcontains research papers by international experts on energy, the oil market, economic development and the environment. Availablequarterly only from the commercial publisher. For details contact: Paula O’Connor, Journals Marketing Department, Blackwell Publishers,108 Cowley Road, Oxford OX4 1JF, UK. Tel: +44 (0)1865 791 100; fax: +44 (0)1865 791 347. Institutional subscribers £129/yr (North/South America $214); Individuals £57/yr (North/South America $95).
Shipping address (please print in block letters): Invoicing address (if different from shipping address):
Name: Name:Address: Address:
How to pay:Invoice me ❐ Credit card ❐ (American Express, Visa, Eurocard/MasterCard and Diners Club)Credit card company: Credit card no: Expiry date:
Holder: Signature:
Please mail this form to:PR & Information Department or telefax to:OPEC Secretariat PR & Information DepartmentObere Donaustrasse 93, A-1020 Vienna, Austria +43 1 214 98 27
Windows™ is a trademark of the Microsoft Corporation. IBM™ is a trademark of the IBM Corporation.
