January/February 2004 1 Vol XXXV, No 1 ISSN 0474-6279 January/February 2004 This month’s cover ... shows the Sanctuary of “Riad-El-Feth”, Algiers Photo: OPEC Secretariat 02 Editorial Information 03 Commentary Maintaining the balance 04 Conference Notes OPEC decides to reduce production by 1.0m b/d at 129 th (Extraordinary) Conference in Algiers 8 Farewell Gathering Former Secretary General bids farewell to OPEC 10 Forum The maximization of Iran’s oil revenues 18 Newsline Iran signs $2.0bn deal with Japan to develop massive Azadegan oil field Oil and gas news from OPEC (p19) 24 Market Review Covering November/December 48 Member Country Focus Development and economic news from OPEC 51 Appointments/Obituary 52 OPEC Fund News 56 Noticeboard 57 Secretariat Notes Fund Director General meets with Austrian President (p52) Massive quake relief efforts for Iran (p49) Photo: Reuters/Mohamed Azakir Photo: Reuters/Itsuo Inouye Iran, Japan sign deal to develop Azadegan (p18) OPEC Conference cuts output by 1.0m b/d (p4)
Transcript
January/February 2004 1
Vol XXXV, No 1 ISSN 0474-6279 January/February 2004
Th i s mon th ’ s c ove r . . .shows the Sanctuary of “Riad-El-Feth”, Algiers
Photo: OPEC Secretariat
02 Editorial Information
03 Commentary Maintaining the balance
04 Conference Notes OPEC decides to reduce production by 1.0m b/d at 129th (Extraordinary) Conference in Algiers
8 Farewell Gathering Former Secretary General bids farewell to OPEC
10 Forum The maximization of Iran’s oil revenues
18 Newsline Iran signs $2.0bn deal with Japan to develop massive Azadegan oil field Oil and gas news from OPEC (p19)
24 Market Review Covering November/December
48 Member Country Focus Development and economic news from OPEC
51 Appointments/Obituary
52 OPEC Fund News
56 Noticeboard
57 Secretariat NotesFund Director General meets with Austrian President (p52)
Massive quake relief efforts for Iran (p49)
Phot
o: R
eute
rs/M
oham
ed A
zaki
rPh
oto:
Reu
ters
/Itsu
o In
ouye
Iran, Japan sign deal to develop Azadegan (p18)
OPEC Conference cuts output by 1.0m b/d (p4)
January/February 2004 32 OPEC Bulletin
C O M M E N T A R Y
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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-ordi-nate and unify petroleum policies among Mem-ber Countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum 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.
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Sec re ta r i a t o f f i c i a l s
Secretary GeneralHE Dr Purnomo Yusgiantoro
Indonesian Governor for OPECActing for the Secretary GeneralDr Maizar Rahman
Director, Research DivisionDr Adnan Shihab-Eldin
Head, Data Services DepartmentDr Muhammad A Al Tayyeb
Head, Administration & Human Resources DepartmentSenussi J Senussi
Head, Energy Studies DepartmentMohamed Hamel
Head, PR & Information DepartmentDr Omar Farouk Ibrahim
The OPEC Bulletin reaches the decision-makers in Member Countries. For details of its reasonable advertisement rates see the appropriate page at the end of the magazine. Orders from Member Countries should be sent directly to the Editor-in-Chief at the Secretariat address. Otherwise, orders should be placed through the Advertising Representatives, whose contact details are at the end of the magazine.
January/February 2004 32 OPEC Bulletin
C O M M E N T A R Y
s the OPEC Oil and Energy Ministers gathered in Algiers in February for the 129th (Extraordinary) Meeting of the Conference, a number of commentators were predicting
that the Organization would maintain its production ceiling for the OPEC-10 Member Countries (excluding Iraq) unchanged at 24.5 million barrels/day. When the actual decision, therefore, was announced — a cut of 1.0m b/d to 23.5m b/d, effective from April 1 — some of them expressed surprise and wondered if the cut was in fact necessary, given the recent firmness in oil prices. Although it is certainly true that prices have remained strong in recent months, this should not be misinterpreted as indicating that the market is insufficiently supplied with crude. Quite the contrary — all the available evidence points to a well-supplied market. However, there are currently a number of other factors that must be taken into account which have contributed to the price strength, the most important of which can be summarized as follows. Firstly, as noted in a recent issue of OPEC’s Monthly Oil Market Report (downloadable free of charge from the official OPEC website at www.opec.org), commercial crude oil stocks in the US have recently fallen to their lowest level since 1975, dropping through the perceived lower minimum operating level (LOI) of 270m b to 264m b in early January. The fact that stock levels have breached the LOI, set by the National Petroleum Council in 1998 to mark the minimum operating crude
Maintaining the balanceDespite the recent firmness in oil prices,all signs are that the markets are in fact
well-supplied with crude
oil stock requirement by refiners, has had a bullish effect on the market and on prices. Secondly, markets continue to be affected by a variety of other factors, including excessive levels of speculation and the ongoing geopolitical uncertainties. Also of significance is the fall in the value of the dollar, which has weakened the purchasing power of oil-exporting nations. Oil exporters cannot, of course, influence currency movements directly, but they can at least seek to minimize their effects by striving to maintain market stability. Finally, as is well known, the second quarter of the year is traditionally the weakest for oil demand. The northern hemisphere winter has passed, and with it the peak in heating oil use, but the summer driving season, when gasoline demand is strongest, is not yet in full swing. Prompt action is therefore required in order to prevent excess supply building up in the second quarter and exerting downward pressure on prices, destabilizing the market. To reiterate, therefore, the recent strength in oil prices should not mislead observers into thinking that the market is insufficiently supplied with crude. The various other factors outlined above, which lie outside OPEC’s sphere of influence, have contributed to keeping prices firm. As the second quarter of the year approaches, however, the Organization’s decision in Algiers to cut supplies by 1.0m b/d to maintain balance and stability in the market is a necessary move.
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C O N F E R E N C E N O T E S
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OPEC decides to reduce production by1.0m b/d at 129th (Extraordinary) Meeting
of the Conference in Algiers
OPEC decided to cut production by 1.0 million barrels/day with effect from April 1, 2004, at the 129th (Extraordinary) Meeting of the Conference in Algiers on February 7. In his opening address to the Meet-ing, OPEC Conference President and Secretary General and Indonesian Min-ister of Energy and Mineral Resources, Dr Purnomo Yusgiantoro, said that crude oil prices have remained high since the last Meeting on December 4, and that there have been calls for OPEC to raise its out-put ceiling to help bring prices down. He said that OPEC is sensitive to
OPEC production allocations(1,000 b/d; effective April 1, 2004)
Indonesia’s Minister of Energy andMineral Resources, Conference President and OPEC Secretary General, HE Dr Purnomo Yusgiantoro (left) is seen here with the President of Algeria,HE Abdelaziz Bouteflika.
C O N F E R E N C E N O T E S
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Kuwait’s Minister of Energy, HE SheikhAhmad Fahad Al-Ahmad Al-Sabah (left) and
Algeria’s Minister of Energy & Mines,HE Dr Chakib Khelil, speak to the press.
Iran’s Minister of Petroleum,HE Bijan Namdar Zangeneh (left)
talks to Iraq’s Minister of Oil,HE Dr Ibrahim Bahr Alolom.
The Saudi Delegation was headed by the Minister of Petroleum and Mineral
Resources, HE Ali I Naimi (front centre), and included OPEC Governor,
Dr Majid A Al-Moneef (front left);Ambassador to Algeria, HE Bakr Ahmed
Kazaz (front right), and(back, left to right)
Dr Ibrahim H Al-Muhanna, Ali H Twairqi and Yasser M Mufti.
C O N F E R E N C E N O T E S
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January/February 2004 7
such calls, because if oil prices pass cer-tain threshold levels — either upper or lower levels — they can have an adverse impact in a broader economic and politi-cal realm, which may ultimately rebound on the petroleum industry. He pointed out that continued geo-political tensions, excessive market spec-ulation, weather conditions and US gas prices had pushed crude oil prices above the higher range of the price band’s tar-geted level. The Secretary General said that even if OPEC could make a significant and im-mediate increase in supply now, the Or-ganization would be reluctant to do so. This is because OPEC views oil market dynamics as a continuum, which extends beyond immediate short-term concerns and embraces likely developments months and perhaps even a year ahead. He said that OPEC projections indi-cate that there will be a significant surplus of oil in the second quarter of this year, and, if this is not handled in a timely and effective manner, there is likely to be excessive downward pressure on prices, leading to a protracted spell of volatility in the market, which will be in nobody’s interests. The closing communiqué from the Conference noted that, despite the in-creased demand observed in 2003, espe-cially in the fourth quarter, OPEC pro-duction ensured that the market remained well supplied throughout 2003. “However, in view of the projected significant supply surplus in the season-ally low demand second quarter, the Con-
Venezuela’s Minister of Energy and Mines, HE Rafael Ramírez (left), listens to his country’s OPEC Governor,Iván Orellana.
Bottom: Nigeria’s Presidential Adviser on Petroleum & Energy, HE Dr Edmund M Daukoru, talks to journalists.
Centre: Qatar’s Second Deputy Prime Minister and Minister of Energy &Industry, HE Abdullah bin Hamad AlAttiyah (centre), is seen here with OPECGovernor Abdulla H Salatt (left) and Mohammad Al-Mannai.
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ference decided that remedial supply re-sponses are needed to maintain market balance and avert downward pressure on oil prices. To this end, the Conference de-cided to maintain the OPEC production ceiling (excluding Iraq) at 24.5m b/d un-til the end of March 2004, with a strong commitment from Member Countries to comply with the agreed production lev-els,” said the communiqué. “Furthermore, whilst reaffirming its pledge to guarantee adequate supplies to consumers, as consistently shown in the past, the Conference decided to reduce the 24.5m b/d ceiling by 1.0m b/d, to 23.5m b/d, effective April 1, 2004, dis-tributed pro rata,” the statement added. The Conference also extended its deepest condolences to the government and people of the Islamic Republic of Iran for the terrible loss they suffered as a con-sequence of the disastrous earthquake that struck the country some weeks previous-ly, and expressed its sadness at the recent death of Dr Fuad Rouhani, who served as the Organization’s first Secretary Gen-eral and Chairman of the OPEC Board of Governors from 1961 to 1964. The Conference reiterated that its next Ordinary Meeting will convene in Vienna, Austria, on March 31, 2004 and that an Extraordinary Meeting will take place in Beirut, Lebanon, on June 3, 2004.
The non-OPEC Delegates in attendance were HE Desidério da Graça Veríssimo e Costa (second right) and Manuel Vicente of Angola (right); HE Nasser bin Khamis
Al Jashmi of Oman (centre); and HE Salvador Beltrán-del-Rio (second left) and
Raúl Cardoso of Mexico (left).
Top: The United Arab Emirates’Minister of Petroleum and Mineral
Resources, HE Obaid bin SaifAl-Nasseri (centre), with OPEC Gover-
nor Saif Bin Ahmed Al-Ghafly (left), and Chargé d’Affaires, Mohamad Al-Sayegh.
Centre: Libya’s Chairman of theManagement Committee of the NOC, HE Dr Abdulhafid Mahmoud Zlitni
(centre), is pictured with Ambassador to Algeria, HE Guma A Eswesi (left) and
OPEC Governor Hammouda M El Aswad.
F A R E W E L L G A T H E R I N G
8 OPEC Bulletin
OPEC’s former Secretary General, HE Dr Alvaro Silva-Calderón of Venezuela, bade farewell to the staff of the Secretariat in December.Here is his farewell speech.
Thank you very much for the support and co-operation that you have offered me during my term as Secretary General. I really appreciate that support, particu-larly because it came from such a qualified and professional group of people. During my short stay in the Organiza-tion, you made me feel as if I was among family. The Organization is very familiar to me, as it has been at the centre of my professional life since its foundation, and I can truly say that it is for me an im-portant part of my life. As in all families, there are sometimes
Dr Silva-Calderón and his wife Judith are pictured here with Internal Au-ditor Ali Omar (left), Senior Executive Secretaries to the SG, Jane Marchl (third left) and Brigitte Wolek-Käferhaus (third right), Senior Executive Sec-retary to the Director of Research, Vivien Pilles-Broadley (second right), and the Head of the SG’s Office, Karin Chacin (right).
difficult situations that we have to face. During my stay with the Organization, we faced some very tough circumstances, like the far-reaching geopolitical events which have shaken the world in recent months and that directly involved our Member Countries. The Organization, however, has man-aged to thrive and pull through these dif-ficulties. It has successfully demonstrated its stature as an international organization able to guarantee oil supply even in ab-normally difficult circumstances. It has gained recognition as an important play-er in the world economy. It is no longer perceived as an enemy. On the contrary — the Organization is now recognised as a partner by most other organizations and players in the international oil market.The Organization has achieved market and price stability for the benefit of all, consumers and producers. Average price levels are well inside the band, although on occasions they may be on the low side, or at a higher level, as is currently
the case. However, this level has not dis-turbed world economic growth, which is currently showing significant signs of improvement. From the perspective of the Member Countries, who also play a part in the world economy, there is indeed satisfac-tion with the current price levels, and we hope that this satisfaction will continue in the future, supported by the efforts that we in OPEC have made in and that we shall continue to make. The international image and repu-tation of the Organization has been strengthened due to the professionalism and commitment of all of you. We all should maintain this conviction within ourselves, either in or outside the Organi-zation, in or outside our own countries. That is what I expect of you, and that is exactly what I will continue to do, wher-ever I may be in the foreseeable future.Thank you very much and I wish you all a Happy New Year for 2004 and many happy new years in the future.
Former Secretary General bids farewell to OPEC
Dr Silva-Calderón receives a silver salver as a gift from the Head of OPEC’s Administration and HumanResources Department, Senussi J Senussi.
* Based on the address delivered by HE Kazempour Ardebili to the Institute for International Energy
Studies conference in Tehran, IR Iran, on October 18–19, 2003.
successful policy with the aim of maximizing Iran’s oil revenues has to be based on the identification
and recognition of political and econom-ic challenges, balancing the internal and external concerns and a thorough under-standing of international policies and de-velopments. Timely decisions and dyna-mism in its application can lead and secure the national interest and security.
Let me now briefly touch upon the world demand for oil to the year 2020, Iran’s share in meeting this demand, and then examine how Iran could maximize its oil revenues. According to the base case scenario of OPEC’s World Energy Mod-el (OWEM), published in March 2003, world oil demand will grow annually by 1.7 per cent to reach 107 million barrels/day by the year 2020, which is 31m b/d more than the oil demand for the year 2000 (see Table 1). As regards supply, the most important change is the increase in the Russian oil production to the level of 9.1m b/d by 2010, rising further to a relatively sta-ble figure of 9.5m b/d in the following decade. Similarly, the Caspian Sea region will also enjoy rapid growth in produc-
tion, reaching 3.1m b/d by the year 2010, twice its current level. However, the trend will slow down in the following decade and production will reach 4.2m b/d by 2020. OPEC’s share of the oil market will rise to about 49 per cent of the world total by the year 2020. Throughout this period, non-OPEC production will be relatively flat. Production increases in developing countries and non-conven-tional oil will make up for the loss of production in Western Europe and North America. Although the Persian Gulf region carries a significant weight in supply-ing world oil and gas requirements at present, its strategic importance in this regard is likely to grow within the next
Iran’s policies for the
maximization of its oil
revenues in future years are
outlined in this article by
the country’s Governor for
OPEC, HE Hossein
Kazempour Ardebili.*
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Table 1: World oil demand outlook (OWEM base case scenario)
Regionm b/d Annual growth rates
per cent
2000 2005 2010 2015 2020 2000–2010 2010–2020
Total OECD 47.7 48.8 50.6 52.1 53.4 0.6 0.5
Developing countries 23.7 27.3 33.1 39.8 47.4 3.4 3.6
Transition economies* 4.5 5.0 5.6 6.0 6.4 2.1 1.4
Total world 76.0 81.0 89.3 97.9 107.3 1.6 1.9
* Including the former Soviet Union and Eastern Europe.Source: Oil and Energy Outlook to 2020: OWEM Scenarios Report, OPEC Secretariat, March 2003.
Table 2: OPEC’s proven crude oil reserves
Countryend-2002 2003*
m b per cent m b per cent
Algeria 11,314 1.3 11,314 1.3
Indonesia 4,722 0.6 4,722 0.5
IR Iran 99,080 11.7 130,798 14.9
Iraq 112,500 13.3 112,500 12.8
Kuwait 96,500 11.4 96,500 11.0
SP Libyan AJ 36,000 4.3 36,000 4.1
Nigeria 31,506 3.7 31,506 3.6
Qatar 15,207 1.8 15,207 1.7
Saudi Arabia 262,697 31.1 262,697 30.0
United Arab Emirates 97,800 11.6 97,800 11.2
Venezuela 77,685 9.2 77,685 8.9
OPEC 845,011 100.0 876,729 100.0
* Percentages are based on the assumption that there were no alterations in the reserves of other countries.Source: OPEC Annual Statistical Bulletin 2002, OPEC Secretariat.
20 years. Saudi Arabia with 263 billion b, Iran with 130bn b and Iraq with 112bn b of oil reserves account for half of the world proven reserves. Although in re-cent years Iran’s oil reserves have been quoted at about 99bn b, accounting for new exploration and assessment results, the recoverable oil reserves of the country have increased and now stand at 130bn b, which constitutes about 12 per cent of the world total and 15 per cent of OPEC reserves. This means that Iran is the country endowed with the second-largest oil re-serves in the world. Moreover, with 26.7 trillion cubic metres of gas, Iran is also holder of the world’s second-largest gas reserves. Field by field details of Iran’s crude oil reserves are shown in Tables 2, 3, 4 and 5. Oil and gas contribute about 80 per cent of the country’s hard currency earn-ings and account for more than 98 per cent of the national primary energy con-sumption. As such, the pivotal role of oil and gas in our economic development is well recognized and warrants the pru-dent examination of options pertaining to strategies and planning that guarantee the long-term maximization of oil and gas revenues. There now follows a review of produc-tion, export and oil revenues in selected OPEC Member Countries from 1960-2002. Iran, with one hundred years of history in oil production, is regarded as the first oil producer with the longest history in the Persian Gulf region. In OPEC’s found-
ing year (1960), Venezuela, with a pro-duction of 2.85m b/d ranked first among Member Countries, with Kuwait, Saudi Arabia and Iran following, respectively. In the year 1970, Iran ranked first, with a production level of 3.83m b/d and Saudi Arabia, Venezuela and Kuwait followed narrowly behind. In the year 1980, Iran ranked behind other OPEC oil producers including Saudi
Arabia and Iraq, but since then the coun-try has succeeded in securing second place among the OPEC Member Countries. Despite two decades of war and eco-nomic sanctions, Iran’s huge oil reserves and capable manpower conducive for the sustainability of production mean that the country has been able to retain its posi-tion as the second-largest oil producer in OPEC. It should be noted that a failure
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Table 3: Reserve additions and improved recovery status in 2002
in taking full and rapid advantage of the opportunities created by market openings would enable other OPEC producers to undermine Iran’s current position. The long-term evolution of maintain-ing market shares can be examined by ap-plying a linear progression of OPEC pro-duction as a percentage of the world and the corresponding share of each member country’s quota within OPEC. A compari-son of OPEC, Saudi Arabia and Iran in this respect is shown in Graph 1. Sau-di Arabia is the only Member Country in OPEC whose market share has in-creased in line with OPEC’s global mar-ket share.
Oil revenues In the year 1970, the oil revenues of
Iran, Saudi Arabia and Venezuela were almost at parity. However, as a result of increasing domestic consumption and the lower allocated quota, Iran has expe-rienced a period of lower revenues. The oil revenues of OPEC Member Countries during the last four decades are summa-rized in Table 7. A quick glance at Table 8 reveals that Iran’s oil revenues stood in third place in 1970, while they dropped to fourth in 2002.
Iran’s past and present position within OPEC Table 8 reflects Iran’s past and present position within OPEC with regard to pro-duction, exports and oil revenues. We will now examine the prospects for
building up Iran’s oil production capacity in the period up to 2020. Certain en-ergy institutions have reported a rather pessimistic outlook for Iran’s production capacity in the next twenty years, which are either politically motivated or stem from lack of reliable information. These forecasts assume an increment of 700,000 b/d in Iran’s oil production, raising it to 4.2m b/d in 2020 from 3.5m b/d in the year 2000. These views are contrary to the existing facts and figures. Iran’s production capac-ity is currently 4.2m b/d, and there are plans to expand it to 5.0m b/d by 2010 and further to 8.0m b/d by 2020. Based on the OWEM reference case outlook for OPEC oil demand, and as-suming Iran’s share of OPEC production
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Graph 1: A comparison of OPEC share in world production with Saudi Arabia and Iran’s quotas in OPEC (per cent)
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Table 7: OPEC Members’ revenues from crude oil, oil products and gas liquids (bn $)
Country 1960 1970 1980 1985 1990 1995 2000 2002
IR Iran 0.60 2.36 11.69 13.01 16.83 14.97 25.44 19.22
* In 2003, Iran’s oil reserves expanded to 130bn b and Iran was promoted to the second rank.Source: OPEC Annual Statistical Bulletin 2002, OPEC Secretariat.
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Table 9: Prospects for Iran’s oil production capacity (m b/d)
2000 2005 2010 2015 2020
Demand for OPEC oil 30.2 29.9 35.9 43.3 52.1
OPEC NGL production 3.2 3.6 4.0 3.6 5.1
Demand for OPEC crude oil 27.0 26.3 31.9 39.7 47.0
Iran’s share of the call on OPEC oil,including 5 per cent contingency capacity 4.2 4.1 4.9 6.1 7.3
Notes: Required capacity build-ups are in addition to capacity upkeep in each period. Establishment of a 10 per cent excess capacity is also inevitable. In fact, the extra revenues made on temporary occasions should be saved for investment settlements. At the same time, to enhance our bargaining power for higher market share allocations, we should bear the cost of excess capacity build-ups.
Graph 2: The range of Iran’s budgetary flexibility to acquire market share
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The range ofIran's budgetary
flexibility toacquire market share
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F O R U M
at 14.68 per cent, Iran’s capacity require-ment will amount to 4.5m b/d by 2005, 5.4m b/d by 2010, 6.7m b/d by 2015 and 8.0m b/d by 2020. This is a moderate, pragmatic and attainable objective, engi-neered thoughtfully and commensurate with our deserved position in the supply side and world demand outlook. Given Iran’s current production ca-pacity of 4.2m b/d in 2003, the total re-quired additional capacity expansion by the year 2020 will amount to 3.8m b/d. To meet the objectives set in the long-term plan, a yearly additional capacity build of about 150,000 b/d by 2005 is required, followed by about 1.2m b/d for each of the following five years. Domestic consumption of oil prod-ucts, as a determining factor in the calcula-tion of export volumes, has been assumed to grow at an annual rate of 2 per cent during the forecast period. It is assumed that the gas substitution and the impact of optimization of oil product consumption in the country will reduce the domestic consumption growth rate to manageable proportions. Provided that the oil price assumption of OWEM prevails, Iran’s oil revenues will increase from $27.8bn in the year 2000 to $56.1bn in 2020. In fact, if the market conditions war-rant, any additional barrel of oil exports would increase oil revenues to the extent that it is compatible with the price elas-ticity of demand. Beyond this point, oil prices will fluctuate dramatically with a declining trend in a disproportionate man-ner leading to a loss of revenues. Given a hypothetical threshold price
for maintaining the budgetary hard cur-rency requirements of the country, excess revenues resulting from the differential between the budgetary prices and those prevailing in the market provide a safe cushion for the country to compensate for a possible loss of revenues for short periods and to engage in venturing after higher market shares. That means that the excess revenues, which are represented by the grey area in Graph 2, will provide opportunities for the country to possibly disengage itself from considerations focus-ing only on the price. While in the cushion zone, Iran can pursue to improve its market share, in the context of the prevailing call on OPEC oil and at given market prices to generate incremental revenue.
Conclusion In the ever-changing geopolitics of en-ergy, particularly in the Persian Gulf, the strategy of maximizing Iranian oil reve-nues shall be based on acquiring a larger share in the oil market at an acceptable price level by:
• Increasing the share of oil in the world energy mix;
• Increasing OPEC’s share in the world oil market; and
• Increasing Iran’s share within OPEC.
The policy measures to be adopted include the following:
— A capacity build-up to respond to the current and future call on Iran’s oil
commensurate with its immense re-coverable oil reserves.
— Seeking a higher market share within the context of our commitments to OPEC, while observing the accepta-ble balance with other major produc-ers in line with our national security and interest.
— Pursuing the policy of conservation in domestic oil consumption through substitution with gas and promoting energy efficiency.
— Enhancing co-operation with interna-tional oil companies (IOCs) to acquire modern technologies.
— Upgrading the quality of crude oil for export and oil products through in-vesting in the country’s refineries to process and consume lower grades of crude oil domestically.
— Diversifying and creating markets through the establishment of inter-dependencies with consumers.
— Domestic consensus-building on the principle that, in the process of maxi-mizing oil revenues in the long term, securing a larger share of the market at lower prices is unavoidable.
— However, the policy of a higher market share should be pursued to the extent that the minimum budgetary revenue requirement is not compromised.
— Iran should seek a higher market share and shall invest in capacity building and further promote its co-operation with IOCs to enhance its access to technology and market development strategies, to foster its national secu-rity and interests.
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This section is compiled from various sources, including the OPEC News Agency (OPECNA), which transmits three daily bulletins of news, analysis and features from OPEC Member Countries and emerging economies. For those who are inter-ested in oil, energy and economic development issues, more details on OPECNA can be found in the advert on p9.
Iran has signed a $2.0 billion deal with Japan to develop the massive Azadegan oil field in south-western Iran, which is estimated to have reserves of around 26 billion barrels, according to Japanese and international media reports.
The accord was signed in the Iranian capital by the President of Japan’s Inpex Corp, Kunihiko Matsuo, and the Gen-eral Manager of the National Iranian Oil Company, Seyed Mehdi Mirmoezi, reported the Kyodo News Agency.
The Iranian Minister of Petroleum, Bijan Namdar Zangeneh (below right),
was also present at the signing ceremony. “Japan is the world’s second largest oil consumer and Iran is the second largest oil producer in OPEC, so we are actually two sides of the same coin,” he was quoted as saying by the BBC.
The Japanese partner, which will have full development rights to the southern part of Azadegan, will hold a 75 per cent stake in the project, while Iran will have the remaining 25 per cent.
Production is slated to begin at Azade-gan at a rate of 50,000 barrels/day in 2007, according to reports. The field is expected
to pump 150,000 b/d by mid-2008, and reach 260,000 b/d by early 2012. Experts say the deal will push Iran closer to its production capacity goal of 5 million b/d from the current 4.2m b/d.
The Japanese Prime Minister, Ju-nichiro Koizumi (below left), expressed his satisfaction with the Azadegan deal. “It is a welcome move when we consider the future relationship between Japan and Iran,” he said, according to a report in the Japanese newspaper Mainichi Shimbun.
The project is one of the largest that Iran has signed with a foreign country
Iran signs $2.0bn deal with Japan to developmassive Azadegan oil field
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since the Islamic Revolution of 1979. Negotiations on the deal began around three years ago, but were delayed by US concerns over Iran’s nuclear plans.
Japan, which has limited natural re-sources, has been keen to reach agreement on developing Azadegan to meet its long-term energy needs, and diversify its sources of oil imports. Two other OPEC Member Countries, Saudi Arabia and the United Arab Emirates, accounted for nearly two-thirds of Japan’s oil imports in 2001.
Another Japanese newspaper, the Yo-miuri Shimbun, reported that the project is expected to help provide a steady supply of crude oil to Japan. The country has been seeking a new long-term oil deal since the Japanese-operated Arabian Oil Co’s min-ing rights for the Khafji oil field in Saudi Arabia expired in February 2000.
Japan is now pinning its hopes on the development of Azadegan as a new “Japa-nese flag” crude oil supplier, according to the Yomiuri Shimbun report.
Around half of Japan’s energy needs are met by oil, some 88 per cent of which is imported from the Middle East. The price of imported oil in Japan is higher than in the US or Europe, due to the transport costs.
Saudi Aramco signs gas exploration deals with more oil companiesState oil firm Saudi Aramco has an-nounced that it will be partnering with more oil companies to find and develop gas reservoirs, as part of the Kingdom of Saudi Arabia’s upstream gas offering.
The exploration activities will take place in a 30,000 square kilometre area in the Kingdom’s Rub Al-Khali (the Empty Quarter), according to a company state-ment.
The announcement that Russia’s Lu-koil had won the bid for the region dubbed Contract Area A was made by the Minister of Petroleum and Mineral Resources, Ali I Naimi.
To explore Contract Area A, Lukoil and Saudi Aramco will establish an exploration and producing company, with Saudi Ara-mco as a 20 per cent shareholder.
The winners of the bidding for
Contract Areas B and C have also been announced by Saudi Aramco. Contract Area B went to Sinopec of China, while Contract Area C was won by a consortium of Italian oil company ENI and Spanish oil company Repsol.
“Saudi Aramco is very pleased to have another opportunity to partner with international oil companies,” said the company’s President and Chief Executive Officer, Abdallah S Jum’ah.
“We look forward to putting forth our best efforts to leverage the Kingdom’s natural resources. We recognize the importance of natural gas to the future of the country, and it’s gratifying to see ourselves participate in this endeavor,” he added.
OPEC NOCs again feature strongly in PIW annual company rankingsThe national oil companies (NOCs) of all eleven OPEC Member Countries feature in the top half of the latest annual ranking list of the world’s top oil and gas com-panies, published by industry newsletter Petroleum Intelligence Weekly.
OPEC NOCs occupied three of the top four places, with Saudi Aramco once again holding onto the top spot. US major ExxonMobil was second, Petroleos de Ven-ezuela was third and the National Iranian Oil Company was fourth, all unchanged from last year.
The top ten was rounded out by Anglo-Dutch firm Royal Dutch/Shell, the UK’s BP, US major ChevronTexaco, Mexico’s Pemex, France’s Total and PetroChina.
The placings of the other OPEC NOCs were as follows: Kuwait Petro-leum Corporation at 11 (up one place from last year); Indonesia’s Pertamina and Algeria’s Sonatrach joint 13th; the UAE’s Abu Dhabi National Oil Co at 16; the Iraq National Oil Co at 21; the Nigerian National Petroleum Corporation at 22; Libya’s National Oil Corp at 23 and Qatar Petroleum at 25.
The PIW rankings are based on crite-ria including oil reserves and production, natural gas reserves and output, refinery capacity and product sales volumes.
According to the newsletter, the latest
ranking list shows that “private sector firms are continuing to move ahead, mainly at the expense of the traditional NOCs.”
Although the top six places in the list were unchanged from last year, fac-tors such as “competition, acquisitions and privatisation are helping the more dynamic private sector firms and a se-lect group of smaller state-owned firms climb higher in the relative standings,” said PIW.
This overall trend, it added, looks set to continue, although there would prob-ably be changes due to political impacts and competitive pressures.
Nigeria’s NLNG sets completion dates for new production trainsThe Nigeria Liquefied Natural Gas Company (NLNG) has announced that its new LNG projects, which form NLNG-Plus, will expand production at its complex by 8 million tons/year of LNG and 1.5m t/y of liquefied petroleum gas (LPG) and condensate.
NLNG Managing Director Andrew Jamieson said in Lagos that NLNG-Plus, comprising production trains 4 and 5, would be completed in 2005, according to a report by the OPEC News Agency.
He added that train 4 would start up in June 2005, while the fifth would start up in December of the same year.
On completion of the NLNG-Plus projects, the overall capacity of NLNG would be 17m t/y of LNG, 3.4m t/y of LPG and 2.8 billion cubic feet/day of natural gas feedstock, said Jamieson.
Studies for train 6 were at an advanced stage and that all the volumes of LNG from the train were already sold, he went on.
This train will be similar to trains 4 and 5 and the final investment decision on the project will be taken soon, noted Jamieson.
NLNG was incorporated in May 1989 to harness Nigeria’s vast natural gas resources and produce LNG for export. It is a joint venture between the state-run Nigerian National Petroleum Corporation (49 per cent), Anglo-Dutch oil giant Royal Dutch/Shell (25.6 per cent), France’s Total (15 per cent), and Italy’s Agip (10.4 per cent).
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20 OPEC Bulletin January/February 2004 21
Italy’s ENI announces start-up of Elephant oil field in LibyaItalian oil giant ENI has announced the start-up of production from Libya’s Elephant oil field, located 800 km south of Tripoli.
The initial flow rate of 10,000 barrels/day is expected to increase to 150,000 b/d by the end of 2006, said the firm in a statement.
The joint venture for the exploration and exploitation of the area is made up of Libya’s National Oil Corporation (NOC), ENI and the Korea National Oil Corporation (KNOC).
The operator of the Elephant field is the Agip Oil Company, a company equally owned by Libya’s NOC and ENI.
ENI has been operating in Libya since 1959 and is currently one of the major international producers there, with approximately 14 per cent of the country’s annual oil production.
By the end of 2004, ENI is also planning the start of production for the Western Libya gas project, which will allow the export of 8 billion cubic metres/year of gas to Italy.
Yusgiantoro stresses need for improved oil, gas incentivesThe Indonesian Minister of Energy and Mineral Resources, Dr Purnomo Yusgiantoro (pictured below), has called for more incentives to attract investors in the oil and gas industry.
“We need to create more stimuli, for instance, by changing the 70:30 per cent profit-sharing ratio in oil and gas exploration and production contracts,” Purnomo, who is also OPEC Secretary General, was quoted as saying by the OPEC News Agency after attending a cabinet session at the State Palace.
A better share of the oil and gas
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In briefExxonMobil releases energy trends studyIRVING, TEXAS — A new report released by ExxonMobil says that the world will require about 40 per cent more energy in 2020 than today and consumption levels will reach almost 300 million barrels/day of oil equivalent. “Developing reliable, affordable supplies to meet this energy demand will be an enormous challenge,” said the company’s Vice-President for Safety, Health and the Environment, Frank Sprow. According to the report, 80 per cent of the energy growth from 2000 through 2020 will be devoted to improving living standards in many parts of the developing world, where about 85 per cent of the world’s population will live in 20 years. “Because 80 per cent of the world’s growth in energy demand through 2020 will be in developing countries, 80 per cent of the growth in carbon emissions will also be in the developing world,” Sprow added.
BP gets okay for Angolan projectLONDON — Angola’s state oil company, So-nangol, has authorised UK oil major BP to proceed with the awarding of major contracts for the development of the Greater Pluto-nio offshore project. The plan to develop six fields will be the first development in Angola’s block 18 and the first BP-operated project in Angola. The fields Galio, Cromio, Paladio, Plutonio, Cobalto and Platina are collectively known as Greater Plutonio, and are located in water depths of 1,200–1,500 metres. The development will consist of a single spread-moored floating, production, storage and offloading (FPSO) vessel linked by risers to a network of subsea flowlines, manifolds and wells. Following authorization to proceed, BP has awarded two of the major contracts for the development. The contract for engineering, procurement, construction and management went to Kellogg Brown & Root, while the FPSO hull and topside equip-ment went to South Korea’s Hyundai.
ConocoPhillips starts Bayu-Undan outputHOUSTON — ConocoPhillips has announced that first liquids production began on Feb-ruary 10 from the Bayu-Undan field in the Timor Sea joint petroleum development area between Timor-Leste and Australia. In the first phase, the Bayu-Undan gas recycle facil-ity will produce and process wet gas; separate and store condensate, propane and butane; and re-inject dry gas back into the reservoir. Full design rates of 1.1 billion cubic feet/day of gas; 115,000 barrels/day of combined condensate, propane and butane; and 950 million cu ft/d of dry gas recycled into the reservoir are anticipated to be reached by the third quarter of 2004.
20 OPEC Bulletin January/February 2004 21
would attract investors, Purnomo said, after reviewing oil and gas policies during the cabinet meeting, which was chaired by President Megawati Soekarnoputri.
Separately, Indonesia’s Investment Co-ordinating Board said foreign direct investment (FDI) in January dropped by nearly 24 per cent to $264.4 million from $324.2m for the same month last year.
The number of FDI projects dropped by 50 per cent to 49 projects, down from 99 projects a year ago.
Although domestic investment improved slightly to 1.044 trillion rupiahs ($124.28m), up from 1.033tr rupiahs in January 2003, the new funds were only committed to seven projects, compared with 13 a year ago.
While the oil and gas sector in the past has been the major FDI attraction, the board said that the food sector attracted most of the January investment, followed by the construction, chemical and pharmacy industries.
Most of the FDI came from the United Kingdom, followed by Brazil and Japan.
Citgo announces start-up of gasoline hydrotreater at Lake Charles refineryCitgo Petroleum has announced the completion of construction and the successful start-up of a new gasoline hydrotreater unit at its refinery in Lake Charles, Louisiana.
The unit is designed to remove sulphur from the gasoline stream while at the same time maintaining the octane value of the fuel. It is a critical part of the refining process to meet the new tier II fuel rules and regulations, which impose dramati-cally lower limits on the sulphur content of gasoline and will be phased in over a three-year period.
The new unit is the first of two identical gasoline hydrotreaters at the Lake Charles refinery and is currently operating at its 35,000 barrels/day design capacity. The unit was successfully started on December 28 last year.
“This is one of the smoothest start-ups I have ever been involved with,” com-mented Citgo’s Vice-President at Lake Charles, Al Prebula.
“We are very proud of the project, particularly the safety performance during construction and start-up,” he added.
The second unit will be completed in mid-2004 and will come on line as needed to meet federally-mandated clean fuels regulations. The cost of the two gasoline hydrotreaters is $210 million.
In addition, Citgo is planning ad-ditional investments at the Lake Charles refinery over the next five years to meet future environmental regulations.
Citgo, which is based in Tulsa, Okla-homa, is owned by PDV America Inc, an indirect wholly-owned subsidiary of state oil firm Petróleos de Venezuela.
Qatar Petroleum and Dolphin Energy sign final development planQatar Petroleum and Dolphin Energy have announced the signing of the final field development plan for the forthcom-ing Dolphin Gas Project, according to a statement by Qatar Petroleum.
The plan, signed at Qatar Petroleum’s headquarters in Doha, was inked by the country’s Second Deputy Prime Minis-ter and Minister of Energy & Industry, Abdullah bin Hamad Al Attiyah, and by Dolphin Energy’s Chief Executive Officer, Ahmed Ali Al Sayegh.
The signing of the development plan represents the final investment decision for the project and sets out the details for the various development stages — the drilling programme, offshore and onshore construction, compression station and ex-port facilities.
Once the development plan is fully im-plemented in 2006, Dolphin Energy will produce natural gas from Qatar’s offshore North field and process it onshore at Ras Laffan Industrial City to extract conden-sate and natural gas liquids (NGL) products. The resulting export gas will subsequently be transported by the Dolphin pipeline to the UAE.
The project will attain full capacity within two years of the start of production, with an export gas rate of 2 billion cubic feet/day, condensate production of around 100,000 barrels/day and NGL products of around 8,000 tons/day.
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In briefIEA meeting calls for co-operationBANGKOK — Over 120 delegates from forty countries attended the International Energy Agency’s (IEA) Energy Experts’ Meeting in February, co-hosted by Thailand’s Ministry of Energy. Delegates called for continuing co-operation among energy producers and consumers to enhance global energy security and market stability both from a supply and demand perspective. Discussions focused on issues ranging from global oil market stabil-ity, cross-border trading in electricity and gas, growing LNG trade, and the investment outlook for energy infrastructure. The IEA’s Deputy Executive Director, Ambassador William C Ramsay, said that the purpose of holding the meeting in Bangkok “was to raise global awareness of the already considerable and growing importance of Asian countries in world energy markets, now and even more in the future.”
Shell to recategorise some proven reservesLONDON — Anglo-Dutch oil giant Royal Dutch/Shell has announced that, following internal reviews, some of its proven hydrocar-bon reserves will be recategorised. The total recategorisation represents 3.9 billion barrels of oil equivalent of proven reserves, or 20 per cent of proven reserves as at December 31, 2002. Over 90 per cent of the change is a re-duction in the proven undeveloped category; the balance is a reduction in the proven de-veloped category. Two-thirds (2.7bn b) relates to crude oil and natural gas liquids, and one third (1.2bn boe or 7.2 trillion cubic feet) to natural gas. “The recategorisation of proved reserves does not materially change the esti-mated total volume of hydrocarbons in place, nor the volumes that are expected ultimately to be recovered. It is anticipated that most of these reserves will be re-booked in the proved category over time as field developments ma-ture,” said Shell in a statement.
Total signs tanker chartering contractPARIS — French oil major Total has signed a five-year contract to charter the first two Stena Product-Max (P-Max) tankers cur-rently under construction. The new P-Max class of tankers are medium-sized, short and wide-bodied with reduced draft. They have an intermediate loading capacity of 65,000 tons, between the standard 45,000 t vessels and the 70,000–80,000 t Panamax. The tankers, specially designed for efficient and safe transportation, are under construction in the Croatian shipyard Brodosplit in Split for delivery in 2005 and 2006. Specifically engineered to reduce the risk of accidents and oil pollution, the tankers are the result of a collaboration between Total and Stena.
22 OPEC Bulletin January/February 2004 23
Speaking at the signing ceremony, Al Attiyah said: “The signature of this de-velopment plan further strengthens Qatar Petroleum’s relationship with Dolphin En-ergy, following the signing of the original development and production sharing agreement in December 2001.
“This cross-border initiative is benefi-cial to the people of both countries, and is a fine example of energy and industrial co-operation between brotherly GCC countries. The plan also cements the fi-nancial commitment of Dolphin Energy to the project,” the Minister added.
Dolphin Energy’s Al Sayegh com-mented: “The development plan confirms the approval of both Qatar Petroleum and Dolphin Energy on key financial and technical parameters under which our company will produce gas in Qatar.”
Dolphin Energy was created to develop substantial energy projects throughout the nations of the Gulf Co-operation Council. Its major strategic initiative, the Dolphin project, involves the production and processing of natural gas from Qatar’s North field, and transportation of the dry gas by pipeline to the United Arab Emirates, beginning in 2006.
Dolphin Energy’s first energy initiative will come on stream in the first quarter of 2004, when the natural gas pipeline from Al Ain to Fujairah is inaugurated. This pipeline will supply the Union Water and Electricity Company in Fujairah, initially with natural gas from Oman, and subse-quently with Dolphin gas from Qatar.
Dolphin Energy’s shareholders are the Mubadala Development Company, which is wholly-owned by the govern-ment of Abu Dhabi, Total of France and Occidental Petroleum of the US.
UAE’s ADCO usesadvanced technologyto save time, cut costsThe Emirate of Abu Dhabi has intro-duced advanced drilling technology to boost its hydrocarbons recovery, which is reducing drilling time and cutting costs significantly, according to the Abu Dhabi Chamber of Commerce and Industry’s (ADCCI) magazine. The Abu Dhabi Company for On-
shore Oil Operations (ADCO), managed to reduce time to deliver wells by 46 per cent, equivalent to 1,400 days, and cut costs by 25 per cent, or around $73 mil-lion, the OPEC News Agency quoted the ADCCI magazine as saying. “In terms of the ADCO 2004-2007 business plan, it started implementing its Well Delivery Limit System (WDL) in making a major contribution by reduc-ing the number of rigs required to meet the target. “Most of the activities were carried out in the Bu Hasa and Asab fields,” the ADCCI magazine added. ADCO, which is a subsidiary of the Abu Dhabi National Oil Company (ADNOC), has estimated hydrocarbon reserves of more than 20 billion barrels.It is set to enhance its output capacity through an ambitious programme to meet growing demand from its customers in Ja-pan, South Korea, the US, and Europe. At least $15bn has been pumped into development projects over the past decade and more than $10bn is expected to be invested during 2004-2007. Abu Dhabi is the largest of the seven Emirates that make up the United Arab Emirates, and it accounts for the majority of the country’s oil production.
Iraqi oil revenues could top $1.0bn per month, says US reportThe Bush administration has issued a report to Congress saying that Iraq’s oil export revenues could surpass $1 billion per month in 2004 if prices hold at current levels and exports are maintained, accord-ing to a Reuters report. The White House study said that Iraq’s crude oil exports should increase significantly once the pipeline from the country’s northern Kirkuk oil fields to Turkey’s Mediterranean port of Ceyhan is sufficiently protected against sabotage to allow it to reopen. The report on progress in rebuilding Iraq noted that the country’s domestic consumption of oil was currently around 500,000-600,000 barrels/day of oil. How-ever, refinery output of products including kerosene, diesel and gasoline remains at
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In briefUS refinery system hits record levelsWASHINGTON — The US refinery system ran at record levels last year, producing record or near record levels of gasoline and distillate as well as importing record or near record levels of gasoline and distillate last year, according to the American Petroleum Institute (API) in its Monthly Statistical Report for December 2003. The report shows that the industry responded to the challenges of 2003 by working hard to deliver needed fuel to consumers. Refineries utilized an average of 92.4 per cent of capac-ity, well above rates typical in many other industries. “The year’s first-quarter challenges included a cold winter, the shutdown of the Venezuelan oil industry, Nigerian strikes and the anticipated Iraq war,” said the API’s Director of Policy Analysis and Statistics, Dr John Felmy. High petroleum prices stimulated demand for natural gas, and in-ventories of gas declined sharply to record low levels to meet the increased demand, he noted.
Motiva to sell Delaware City refineryHOUSTON — Shell Oil Products US has an-nounced that Motiva Enterprises has signed a letter of interest to sell its Delaware City refinery to the Premcor Refining Group. The transaction is expected to close in the second quarter of 2004 after all regulatory and other approvals are obtained. The cost will be ap-proximately $800 million, plus contingent payments totalling up to $125m, and an additional amount representing the value of refined product and crude inventory at clos-ing. The Delaware City refinery, which began production in 1957 as part of the Tidewater Oil Company’s refining system, is located 15 miles south of Wilmington and has the capac-ity to refine in excess of 180,000 barrels/day of crude oil. Headquartered in Houston, Motiva Enterprises is a refining and market-ing joint venture owned by affiliates of Shell and Saudi Aramco.
BP to sell equity stake in Sinopec LONDON — UK oil giant BP has announced that it intends to sell its entire 2.1 per cent equity stake in China Petroleum and Chemi-cal Corporation (Sinopec). The company will carry out the sale through a placing of the shares on public markets. BP acquired the stake of approximately 1.8 billion ‘H’ shares in Sinopec when 20 per cent of the company was floated on international markets in Oc-tober 2000. Commenting on the move, the President of BP China, Gary Dirks, said: “The decision to sell our stake in Sinopec is entirely separate from our joint business activities with the company, to which we remain committed.”
22 OPEC Bulletin January/February 2004 23
pre-war levels because of continuing at-tacks on crude oil pipelines and electric power shortages, it added. In order to meet Iraq’s domestic demand, the US-led Coalition Provisional Authority is spending $7–$8 million per day to import refined oil products from Turkey, Kuwait and Jordan, said the report. It added that gasoline supplies consist-ently exceeded daily demand, and supplies of other products including diesel and kerosene also have improved. In a separate development, the United Nations Secretary General, Kofi Annan, has said that elections cannot be organ-ized in Iraq before the June 30 deadline for a transfer of sovereignty, the UN News Agency has reported. Annan was speaking to reporters fol-lowing a meeting with his Special Adviser, Lakhdar Brahimi, who had just returned from a fact-finding mission to Iraq, and the ‘Group of Friends’ of the country. “We hope that as we move forward we will be able to work with the Iraqis and the coalition to find a mechanism for establishing a caretaker or an interim government until such time that elections are organized,” Annan said. He added that there was an “emerging consensus or understanding that elections cannot be held before end of June, and that the June 30 date for handover of sovereignty must be respected.” UN spokesman Fred Eckhard also told reporters in New York that the Secretary General had “emphasized that it is crucial that we do not give the impression that Iraq’s fate could be decided over the heads of its people, stressing the need to engage the Iraqi people.”
Explosion at Algeria’s Skikda LNG complex caused by gas leakPreliminary results of an enquiry into the explosion that partly destroyed Algeria’s Skikda liquefied natural gas (LNG) complex in January have shown that the accident was caused by a gas leak, according to the OPEC News Agency. The Algerian Energy and Mines Minister, Dr Chakib Khelil, told report-ers that the explosion was due to a failure
in a pipeline, which caused a gas leak, and not in a boiler, as some media reports had said. A commission of inquiry has been set up by the Algerian authorities to investi-gate the accident. The commission, which is due to submit its final conclusions in about three months’ time, is being as-sisted by officials from state oil and gas firm Sonatrach, an insurance company, and foreign experts. The explosion at the Skikda LNG plant killed at least 23 people, forcing all activ-ity at the oil and gas refining complex to be halted. Three of Skikda’s six LNG trains were destroyed by the blast, according to a Reuters report. Algeria is the world’s number two LNG exporter after fellow OPEC Member Indonesia and is one of Europe’s primary sources of natural gas. The country has two LNG plants — the Skikda facility, which accounts for about 25 per cent of the country’s LNG exports, and a larger plant at Arzew to the west, which produces the other 75 per cent. Last year, the Skikda plant’s output of LNG was around 4.6 million tonnes, or about a quarter of Algeria’s total LNG production of 19.6m t. It was not immediately clear what impact the Skikda explosion would have on European LNG imports. The Reuters report quoted an independent gas analyst and former Director of LNG at BP, Andrew Flower, as saying that the port at Skikda is designed to load small LNG tankers and is used for short-distance exports to southern Europe rather than for shipments across the Atlantic to the United States. “Skikda can only take small ships. They normally ply across the Mediter-ranean to Italy, Spain and France. The French and the Italians could really have problems as their terminals at Fos and La Spezia can only take small ships,” Reuters quoted him as saying. A spokesperson for Italian oil and gas firm ENI said although the company im-ported LNG from Skikda, this was a small proportion of its total supply. Algerian President Abdelaziz Boutef-lika was quoted as saying that his country would meet its commitments to supply its foreign partners with the required energy products.
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ExxonMobil plans LNG import terminalIRVING, TEXAS — ExxonMobil affiliate Vista del Sol LNG Terminal has announced plans to develop a $600 million LNG receiving terminal along the Gulf Coast of Texas. The proposed project, to be located in San Patricio County, about two miles west of Ingleside, Texas, was announced at an event attended by Texas Governor Rick Perry, the Consul General of the State of Qatar, Mohamed Al-Hayki, and officials from ExxonMobil. The terminal, which will process imported LNG for distribution throughout Texas and the United States, should take about three years to build and involve employment for some 600 workers during peak construction. In October last year, ExxonMobil and Qatar Petroleum announced a deal to supply 15.6 million tonnes/year of LNG from Qatar to the US for an expected period of 25 years.
ConocoPhillips earns $1bn in 4QHOUSTON — US major ConocoPhillips has reported fourth quarter net income of just over $1 billion, compared with a net loss of $428 million for the same quarter in 2002. Total revenues were $26.0bn, versus $23.5bn a year ago. Income from continuing operations for the fourth quarter was $985m, compared with $558m for the same period a year ago. “Operationally, we performed well overall during the fourth quarter, and there remains opportunity for improvement,” said the firm’s President and Chief Executive Officer, Jim Mulva. “We produced 1.61m barrels/day of oil equivalent and ran our re-fineries at 94 per cent of capacity. Compared with last quarter, lower US refining margins combined with higher turnaround expenses significantly reduced downstream earnings,” he added. US oil firms Conoco and Phillips finalized their merger in August 2002.
India, IEA discuss emergency stocksNEW DELHI — The Indian Ministry of Pe-troleum and Natural Gas, the government of India and the Paris-based International Energy Agency (IEA) organized a workshop in New Delhi in January to discuss oil emer-gency response policies and measures, in par-ticular the role of strategic stocks in oil crisis management. India’s Minister of Petroleum and Natural Gas, Shri Ram Naik, informed the participants in the workshop about the recent decision of the government of India to establish a strategic crude oil reserve of 5 million tonnes. He also emphasized the need for mutual co-operation between India and IEA on the subject of energy security. The discussions during the workshop focused on different models available globally on various aspects of strategic oil reserves.
In brief
24 OPEC Bulletin
M A R K E T R E V I E W
January/February 2004 25
M A R K E T R E V I E W
November/DecemberThis section is based on the OPEC Monthly Oil Market Report prepared by the Research Division of the Secretariat — published mid-month and containing up-to-date analysis, additional information, graphs and tables. The publication may be down-loaded in PDF format from our Web site (www.opec.org), provided OPEC is credited as the source for any usage.
Crude oil price movementsNovember
The OPEC Reference Basket1 slid a few cents per barrel but closed more than half-a-dollar above the upper limit of the price band mechanism. The Basket lost 9¢/b with respect to October to average $28.45/b. With the sustained recovery from this year’s lows in April and May, the Basket’s year-to-date average stood at $27.95/b at the end of November, a significant increase of $4.01/b or 16.7 per cent above the $23.93/b of 2002 (see Table A). Following a six-month high in mid-October, the Basket moved lower in the subsequent weeks extending the fall to the first week of November when it lost 45¢/b or 1.6 per cent to average $27.33/b. Then it made an upturn gaining $1.32/b or almost five per cent in the following week and rising a further 71¢/b to $29.36/b by the third week of the month. By month-end, the Basket had shed 89¢/b, or three per cent, to close at $28.47/b, followed by a slight 3¢/b gain during the first week of December and another rise of 86¢/b or three per cent to $29.36/b in the second week of the month. Following weak values in the second
half of October, crude oil prices regained strength over much of November before undergoing a considerable correction to-wards month-end. Atlantic benchmarks gained over $1/b early in November, supported by concerns about low heating oil stocks in the US with the approach of the northern hemisphere winter season. The price strength drew additional sup-port from the 2.5m b draw on gasoline stocks reported by the Energy Informa-tion Administration (EIA) in the week of October 31. Asia-Pacific’s thirst for West African and North Sea crude, especially China’s, remained unabated. Demand for direct-burning crude remained strong in Japan on the continued closure of nuclear plants. At mid-month, West Texas Inter-mediate (WTI) and Brent posted further gains, with the US benchmark closing at $32.37/b on November 14 while Brent surged to $29.56/b on the International Petroleum Exchange (IPE) in London. The factors behind the excessive but mainly speculative rally were fears of in-adequate crude oil and product inventories in the US and Europe, preliminary figures showing OPEC-10 was implementing the September 24 agreement calling for pro-duction cuts, and the dramatic increase in speculators’ long positions on the New York Mercantile Exchange (NYMEX), which in-dicates that the market expected prices to rise in the future. In the following week, crude prices edged to levels last seen just before the war in Iraq. The NYMEX sweet crude contract passed the $33/b mark on
November 18 to close at $33.28/b, and the Brent contract surged to $30.47/b on the same day. According to some analysts, the rally was sparked by unseasonably strong gasoline demand in the US and fears that OPEC could engineer another production cut in its December 4 Ministerial Meet-ing to counteract the seasonal decline in demand during the 2Q of 2004. Adding to the bullish market mode was the looming methyl tertiary butyl ether ban in Califor-nia, Connecticut and New York as well as persistent strong demand from Asia-Pacific which soaked up West African crude, oth-erwise bound for the US. Crude oil prices collapsed as speculators’ exuberant net-long positions over the past few weeks turned out to be unsustainable. Speculators took profits and reduced their exposure ahead of the forthcoming OPEC Meeting, as the unexpected September decision was still fresh in their minds. With the speculative premium mostly erased from crude prices, market fundamentals are expected to take the driver seat, thus minimising oil price volatility.
US and European markets The release of bullish stock data in the US earlier in November, combined with in-cidents in Saudi Arabia and Turkey, pushed the sweet crude benchmark NYMEX WTI to $32.95/b on November 20. However, buying interest by US refiners was timid amid soft refining margins and aggressive moves to push down stock levels to mini-mise tax payments on crude and product
1. An average of Saharan Blend, Minas, Bonny Light, Arabian Light, Dubai, Tia Juana Light and Isthmus.
Table A: Monthly average spot quotations for OPEC’s Reference Basketand selected crudes including differentials $/b
inventories, an established pattern over the last few years. Crude oil stocks retreated in the second half of the month, closing at 284.3m b on November 28, according to the EIA’s weekly status report, which was 4.1m b below the same week last year. Falling import levels and unworkable trans-atlantic arbitrage opportunities given high freight rates were behind the stock draw-down. In Europe, healthy refining margins early in the month supported demand for sour grades. Urals prices strengthened in the Mediterranean market, following delays in the Bosporus Straits and the closure of the main Black Sea Urals loading terminal at Novorossiysk. Later in November, dwin-dling regional demand, limited arbitrage opportunities to the US and an overhang of early December loading cargoes weighed heavily on the North Sea cash market.
Far East market The strength of regional benchmark Dubai amid robust regional demand, es-pecially from China, narrowed the spread against Brent-Forcados-Oseberg-related (BFO) crudes inducing a flow of West Af-rican cargoes despite the high freight rates. The closing of the BFO/Dubai spread, to-gether with high prices for regional sweet grades, supported imports of some 10m b of Angolan crude to the Asia-Pacific region in the first half of November. Continued strong demand by China narrowed Dubai’s discount to January forward BFO to just 40¢/b, a level seen only in late April and early May of this year, throwing open the arbitrage window for Brent related crude. By the first half of the month, 1.3m b/d of December West African crude had been sold to Asia-Pacific. However, the bullish mode on the Asia-Pacific market was not confined to sweet foreign grades, regional crudes from Australia and Malaysia also cleared as premiums to their respective benchmarks strengthened.
December
The OPEC Reference Basket finished 2003 with an impressive cumulative average of $28.10/b, the highest nominal yearly average since 1984. A rough calculation assuming a daily average production of 26.92 b/d results in a total revenue of approximately $275 billion for the Or-ganization during 2003. The 18 per cent
increase in total revenue, with respect to 2002, was due to the combined effects of a 1.59m b/d increase in production and a rise of $3.74/b in the Basket’s average yearly price (see Table A). During the month of December the Basket added another 99¢/b to average $29.44/b, a level not seen since the start of hostilities in the Middle East. On a weekly count the Basket started the month of December with a minor dip, losing 4¢/b to average $28.43/b, before switching to a 86¢/b gain in the second week to stand at $29.29/b. The Basket added another 90¢/b to $30.19/b in the third week but then fell by 45¢/b to close at $29.74/b. The Basket made another upturn in the first week of January adding 58¢/b to $30.11/b, fol-lowed by a further 68¢/b rise to $30.79/b in the second week. Crude prices were supported early in December by rampant demand for products in Asia, especially China, falling US commercial crude stocks and the sign of a solid economic recovery in the US. This led the Atlantic benchmarks WTI and BFO to breach the $31/b and $29/b marks, respectively. The narrowing of the BFO-Dubai spread resulted in an inflow of some 1.3–1.4m b/d of West African crudes to the Asia Pacific region. Strong diesel demand in China, which has crip-pled exports and could ultimately make the country a net importer, supported regional crude prices and contributed to the clos-ing of the spread to Atlantic basin crudes. The considerable draw on US crude stocks together with strong 3Q economic growth figures further underpinned crude prices early in December. Meanwhile OPEC in its 128th (Extraordinary) Meeting of the Conference on December 4, decided to maintain current agreed production lev-els until further notice, dissipating market expectations prior to the Meeting. During the second week of December, the first cold snap, together with all the factors present earlier in the month, pushed WTI futures above the $33/b mark on December 12 with IPE Brent breaking through the $30/b mark on the same day. Meanwhile, US commercial crude stocks continued to fall closing just above the perceived operational minimum level of 270m b at 271.9m b on December 12. The cold weather also pushed up the NYMEX gas futures con-tract, leading utilities to seek the alterna-
tive crude products, fuel oil and gasoil. Strong demand from Asia, which induced the flow of considerable volumes of West African crudes, continued to deprive the US market of one of its natural supply sources. Nonetheless, US refiners did not seem especially concerned. They argued that inventory management efficiency has improved as a result of the industry consolidation and that crude oil is read-ily available in the international market. Crude markets picked up in the third week of December only to ease a little towards the end of the month, yet WTI futures prices stayed well above the $32/b mark. Crude oil inventories fell below the psychological barrier of 270m b, while the East/West tug of war for West African crudes continued. Despite the widening of the WTI/BFO spread to around $3/b, high freight rates discouraged transatlantic movements to the US. Shipping rates were under pressure by continuous delays in the Bosporus Straits which tightened vessel availability.
US and European markets Commercial crude oil stocks in the US ran down in December, breaching the 270m b minimum operational level. According to the weekly statistics of the American Petroleum Institute (API), US crude oil stocks fell to 267.5m b at the end of December from 282.9m b the month before. High freight rates prevented the flow of transatlantic supplies despite a workable arbitrage. Expensive freight rates made it even more difficult to move Latin American sour grades like Colombian Cuisiana and Ecuadorian Oriente. Strong Asian demand and a narrow arbitrage in-duced the flow of West African grades to the East, competing with the US for the same barrels. Meanwhile, US buying remained lacklustre as refiners minimised inventory holding for year-end tax pur-poses. Crude oil imports dropped below the 9.0m b/d level early in December but recovered thereafter, implying that crude oil was readily available in the international market. The European market firmed early in December, boosted by a sharp decline in Caspian and Russian crudes as a result of the delays in the Bosporus Straits. Buoy-ant margins prompted European refiners to step up buying of North Sea distillate-rich grades underpinning prices of For-ties and Oseberg. North Sea light sweet
grades drew support later in the month, as buying interest surged ahead of the New Year, clearing most availability until at least the first two weeks of January.
Far East market Demand for West African grades to Asia Pacific remained buoyant during the first half of December, underpinned by the narrowing of the BFO/Dubai premium which fell below $1.4/b. Regional sweet crudes were also supported by dwindling availability from Malaysia and Australia. Nevertheless, high freight rates made re-gional refiners turn to local grades later in the month. Expensive transportation costs, combined with the slow-down of Chinese demand, left West African crude sellers with little alternative but to send their crude to the West. Middle East crude prices weakened following the allocation of January term volumes while trading for February cargoes was under pressure by the perceived expensive official selling prices. In late December and early January, the lack of competing crudes, due to the high freight rates, supported demand for light sweet regional Australian and Malaysian grades, while Chinese demand continued to support the heavy grades.
Product markets and refinery operations
November
Average petroleum product prices expe-rienced mixed movements in November, influenced largely by regional fundamen-tals rather than crude price trends, with the price of the seasonal product, gasoil, fairing best in all three markets. Refining margins moved in different tracks, but they maintained positive values in the world’s main refining centres. (see Table B)
US Gulf market Average spot product prices exhibited divergent trends in the US Gulf market in November. On average, prices for the light and the heavy ends of the barrel, which is made up of gasoline and high sulphur fuel oil (HSFO), fell by two per cent, while the gasoil counterpart rose by a similar magnitude, amid a nearly two per cent
increase in WTI’s average value for the same period. Nevertheless, the Energy Information Administration’s four-week average, representing the bulk of US re-finery and product activity in November, showed that average refinery throughput in the US crept lower, albeit the supply of major products was higher than in the previous month. This essentially implied a policy by refiners to boost the output of the seasonal product, distillates, which together with jet fuel registered an increase of almost two per cent to stand at 3.8m b/d and 1.5m b/d respectively. While average US gasoline refinery output remained almost steady at 8.7m b/d, the US fuel oil refin-ery supply was reduced by nearly nine per cent to around 500,000 b/d. Meanwhile, gasoline demand continued to surpass last year’s level by a hefty 2.6 per cent, regis-tering almost 9m b/d, but still down two per cent below the October level, which was in line with the usual seasonal decline in gasoline consumption. Although mild weather dominated the densely populated north-eastern region of the US, distillate demand was robust, close to 4m b/d. This equalled the level attained during the colder than normal November of last year. Fuel demand also moved around one per cent higher compared to the previous month and nearly three per cent above last year’s level. This rise in distillate and fuel oil demand seemed to reflect the active stock-piling of heating oil and low sulphur fuel oil (LSFO) in tertiary inventories for
use during the remaining winter months, as demand for low sulphur gasoil from the agricultural sector waned during November (see Table B). As a result of the combination of a mod-est increase in the WTI price and weaker gross product worth (GPW), which is the sum of each product price multiplied by its refinery yield, the average refining mar-gins for WTI fell in the US Gulf Coast in November to remain barely above $1/b. US refinery throughput decreased further in November, sliding by 85,000 b/d to 15.49m b/d. Despite a fall of 0.5 per cent to 93.2 per cent on the month, the US refinery utilisation rate added 1.2 per cent compared to the previous year’s runs. (see Table C)
Rotterdam market Average spot product prices in Rotterdam were range-bound in November, despite a significant fall of 4 per cent in the price of their underlying crude, Brent. However, the European product markets were mainly shaped by the following developments. Firstly, the gasoline market was better supplied than in the previous months, reflecting two principal factors, which were rising refinery gasoline output with the resolution of refinery operational problems in the UK and Germany, and the continuing slowdown in transatlantic arbitrages for most of the month due to high freight rates. Secondly, strong demand from commercial aviation in Europe and
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rapid military airline requirements in Iraq supported the jet fuel market. Gasoil saw sluggish demand, affected by the mild weather, which was further exacerbated on news that end-user heating oil stocks in Germany had been filled to 66 per cent by the end of November. Thirdly, a number of developments led to an overhang in the regional fuel oil supply. These were the reduction of refinery intakes of fuel oil feedstocks on improving competitive crude margins, the continuous flow of Rus-sian straight-run fuel oil, increased refinery fuel oil output, and slack purchases from utilities in South European countries. Brent refining margins rebounded in November to move into positive territory, despite rising freight costs. The exceptional weakness of Brent was the underlying factor behind the improvement in refining margins as the GPW remained almost steady. Refinery throughput in Eur-16 coun-tries moved sharply higher by 400,000 b/d to average 12.47m b/d in November, with the equivalent utilisation rate rising to 90.8 per cent, representing similar levels as in the corresponding period last year (see Table C).
Singapore market Average spot product prices moved in different directions in Singapore in No-vember, but showed unusual premiums compared to the two aforementioned markets (see Table B). The gasoil price rose a considerable four per cent, followed by a moderate one per cent increase in the gasoline price. By contrast, the HSFO coun-terpart, slid one per cent, thereby balancing out the almost one per cent increase in the
average marker crude, Dubai, for the same period. Nevertheless, an overall analysis of the Asian product market sheds light on some important factors influencing them. Firstly, the Asian gasoline market retained the previous month’s fundamentals. Gaso-line exports from China and Taiwan con-tinued to be low as they had to meet strong domestic demand. Furthermore, the price of gasoline’s underlying feedstock, naphtha, enjoyed a continuing surge of more than $2/b in the month of November, linked to healthy downstream industry margins. This, together with reduced exports from Saudi Arabia’s Aramco in early Decem-ber, squeezed naphtha supply. However, gasoline demand in Australia came to a halt during November, as stock-piling for the driving season ended. A second fac-tor moving the market was the strength of Asian demand for distillate products, particularly for jet fuel and to a lesser extent gasoil. A good month for Chinese airlines, together with stockpiling of kero-sene, which is widely used for heating in most Asian countries, supported jet fuel demand. Gasoil consumption during the month originated mainly from China where tight supply occurred. In contrast, a lack of Chinese HSFO buying at a time of continuous arrivals of foreign HSFO cargoes resulted in a supply glut. Nonetheless, LSFO enjoyed strong demand, supported by the delayed restart of nuclear power genera-tors in Japan and rising liquefied natural gas (LNG) prices in South Korea, which encouraged a switch to LSFO. The relative strength in the GPW, in comparison with the cost of Dubai, out-paced an increase in freight costs, further
boosting refining margins of the marker crude to hover moderately above $1/b in Singapore in November. In Japan, refinery throughput enjoyed another rise of 140,000 b/d to register almost 4.1m b/d in November. This in-dicated a 85.8 per cent utilisation rate, a drop of 4.4 per cent from the year before (see Table C).
December
Average petroleum product prices contin-ued to exhibit mixed trends in December, with Asian product premiums exceeding those of the US Gulf and Rotterdam markets. Thus, refining margins soared to a historically high level in Singapore, while they remained moderately in posi-tive territory in the two other centres (see Table B).
US Gulf market Spot product prices showed mixed trends in the US Gulf in December. On average, prices for gasoline and gasoil rose four per cent and five per cent, respectively, amid an almost four per cent increase in WTI’s average value. The HSFO counterpart, however, shrugged off the rise in its marker crude WTI to plunge by seven per cent for the same period. Nonetheless, the EIA’s four-week average, representing major US refinery and product activity in December, indicated that gasoline demand declined for the second consecutive month, sliding further by 1.2 per cent to register nearly 8.9m b/d, although still higher than the corresponding period last year. This came in contrast to the expectation of heavy traf-fic during the holiday season. Furthermore, the prolonged warmer than normal temperatures from October to December, despite several short-lived cold snaps in some US regions, resulted in mild weather generally dominating most of the US during the first half of the winter months, according to the National Oce-anic and Atmospheric Administration (NOAA). Therefore, distillate demand fell by around three per cent below last month’s and the previous year’s levels. Lastly, fuel oil demand also plummeted by 14 per cent and 18 per cent below the level of both the previous month and the preceding year, respectively, reflecting largely lower utility consumption.
Table C: Refinery operations in selected OECD countries
1. Refinery capacities used are in barrels per calendar day.R Revised since last issue.Sources: OPEC statistics, Argus, Euroilstock Inventory Report/IEA.
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Average refining margins in the US Gulf in December fell further, but remained moderately in positive territory, as a significant rise in the WTI price was partially offset by a moderate increase in the gross product worth. US refinery throughput crept higher, increasing by 60,000 b/d to 15.54m b/d. The corresponding refinery utilisation rate was 93.5 per cent, representing a 2.3 per cent increase over the previous year’s runs (see Table C).
Rotterdam market Although the average price of the Eu-ropean marker crude Brent rose a consider-able four per cent during December, the HSFO counterpart plunged by 13 per cent. Other product prices saw modest gains, as gasoline edged up one per cent and gasoil two per cent. However, an overall analysis of the European product markets showed the following developments. Firstly, narrowing gasoline price differentials between Europe and the US East Coast, coupled with persistently high freight rates, hindered transatlantic gasoline exports. However, robust demand from Nigeria and Iraq via the Eastern Mediterranean basin alleviated the gasoline surplus in Europe. Secondly, distillate supply was hindered by restricted Russian exports due to increased domestic demand. This was compounded by lower European refinery input, which implied lower output of the main product, distil-lates. Meanwhile, rising Russian fuel oil exports, together with mild weather and decreased efforts to send fuel oil to the Far East market, constituted the main factors for the prevailing abundant fuel oil supply in the European market. The exceptional strength of the Brent price overwhelmed a moderate rise in light and middle product prices. This led to a sharp decline in Brent’s margins, though they still roughly exhibited a value close to $1/b. Refinery throughput in the Eur-16 countries fell to nearly 12.30m b/d in December, representing a drop of 120,000 b/d from the preceding month’s level. The equivalent refinery utilisation rate of 89.5 per cent represented a loss of 0.5 per cent from the corresponding period last year (see Table C).
Singapore market Average spot product prices in
Singapore in December continued to enjoy an unusual premium over other world product markets, which implies tightened supply coinciding with steady robust demand for the light and middle ends of the barrel. The average gasoline price, for instance, made an impressive gain of nearly ten per cent, followed by a five per cent increase in the gasoil price. The fuel oil price skidded one per cent, though the marker crude, Dubai, tracked the opposite direction for an average price rise of 1.6 per cent during the same period. The Asian product market was shaped by three main developments, the first of which was strong gasoline fundamen-tals. China continued to sharply reduce gasoline exports due to healthy domestic demand. The Asian gasoline supply was further exacerbated by a reduction in the quantity of naphtha available for process-ing into gasoline, reflecting the diversion of naphtha to the petrochemical industry where it generates higher profits. Moreover, naphtha exports from the Middle East were cut significantly, as a consequence of planned and unplanned refinery outages and strong regional de-mand. The second development shaping the Asian product market was Asian refiners’ seasonal policies, which favour the main regional heating fuel, kerosene, and jet fuel, and, in turn, affects the gasoil sup-ply. This, together with continuous firm gasoil demand in China, led to a prevailing surge in the Asian gasoil price. Thirdly, the prolonged absence of China’s fuel oil purchases due to governmental quota re-strictions left an abundant fuel oil supply in the market. A combination of the relative weakness of Dubai compared to the other marker crudes and strong product prices supported by robust demand and curtailed supply added another boost to already healthy refining margins in Singapore in Decem-ber. According to an industry survey, this resulted in average crude refining margins in December that were the best for the last seven years (see Table B). Refinery throughput in Japan rose fur-ther, increasing by 200,000 b/d to 4.3m b/d in December. This, however, indicated a 90.1 per cent utilisation rate, a drop of almost five per cent from last year (see Table C).
The oil futures marketNovember
Aside from a brief period in the first week of November when speculators held a net-short position of 2,988 contracts, most of the month non-commercials showed a more optimistic side, although always exercising considerable caution, especially in the second half of the month. The Com-modity Futures Trading Commission’s (CFTC) Commitments of Traders report for the second week of November showed a large increase in long positions (21,965 lots) while shorts gained only 2,407, result-ing in a 16,750 lot return to the net-long arena. Meanwhile, front-month WTI fu-tures gained more than $2/b on November 11 to close at $31.15/b. For the week ending November 18, the CFTC reported a large increase in non-commercial long positions while shorts remained largely unchanged for the week ending November 18, implying that specu-lators had to a large extent turned bullish. Long positions rose by more than 40,000 lots while shorts only gained 1,318 result-ing in a net-long position of 56,469 lots. Open interest gained 50,841 to 590,275 lots indicating that WTI futures trading had become more attractive. Not surpris-ingly the WTI futures contract added another $2/b during the week to surpass the $33/b mark and close at $33.28/b on November 18. The rally in both long positions and WTI prices was induced by speculators’ belief that OPEC might engi-neer a new production curb in its December Meeting to counteract the seasonal drop in demand during the forthcoming spring season. High seasonal gasoline demand and falling heating oil inventories in the US also helped underpin prices. Large non-com-mercials disposed heavily of their long posi-tion ahead of the extended Thanksgiving holiday weekend and OPEC’s impending December 4 Meeting. According to the CFTC’s Commitments of Traders report on November 25, speculators trimmed long positions by 25,175 lots to 82,886 and also disposed of their shorts by a mere 443 lots, leaving the net-long at 31,737 lots. The sell-off in long positions caused WTI prices to plunge by $3.5/b in just one week. Curiously, speculators remained
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bullish in the run-up to the OPEC Meet-ing, maybe in the belief that OPEC would delay any decisions on output levels to the beginning of next year when market fundamentals and price trends would be clearer. After the spike in mid-November, prices have returned to a more moderate and sustained level, thus, if the coming winter generates enough demand for oil to compensate for the rise in non-OPEC and OPEC supply, prices should remain within the $28–32/b range for WTI. On the other hand, if the winter turns out to be mild and the optimistic 900,000 b/d expected rise in 1Q04 world oil demand does not materialise, prices could go on a downward spiral, especially heading into the low demand spring season.
December
Enough factors combined to bring the bulls out in December, with speculators very active in the NYMEX building up their long holdings in an attempt to profit from a rising market. The factors which combined to stir up investment funds’ optimistic market perception were low US crude oil inventories, freezing winter temperatures in the US north-east region (a prime heating oil market), weather forecasts predicting below normal winter temperatures and OPEC’s decision early in the month to keep output unchanged although hinting that a cut might be in the cards at OPEC’s Meeting in Algiers on February 10. The CFTC Commitments of Traders Report for the week ending December 2 showed an almost unchanged net-long po-sition with respect to the previous week, as non-commercials awaited the outcome of OPEC’s December 4 Meeting follow-ing the book squaring that took place ahead of the long Thanksgiving holiday. The CFTC report for the following week showed a slight increase in net-long hold-ing by non-commercials. Big speculators added 770 lots to their net-longs which stood at 33,221 contracts on December 9. Open interest rose in the same week by 23,851 lots to 568,500 lots underlining the rise in interest and participation by market makers. Taking advantage of the cold winter temperatures and crude draw downs in the US, which approached the 270m b perceived minimum operational
level, speculators decided to break the rela-tive stability of the past three weeks and bought the market heavily. According to the Commitments of Traders report for the week of December 16 non-commercials boosted long posi-tions by 26,945 lots to 116,883 contacts while short positions rose by just 3,729 lots to 60,446, resulting in a net-long position of 56,437 contracts. Speculators reduced their net-long holdings during the week of December 23 by 8,495 contracts to 47,942 on profit-taking, which induced a fall in WTI futures prices. Further draws on US crude stocks towards the end of the month, which fell below the 270m b mark, together with cold winter temperatures, prompted non-commercials to increase their net-long holdings by 2,645 lots to 50,587 in the week of December 30. Continued cold weather and draws on US crude oil stocks made large speculators increase their net long positions by ap-proximately 21 per cent, or 61,356 lots, during the first week of January. In the following week of January 13, the CFTC report showed a small decline in the net-long positions of non-commercials. This minor decline was inspired by the continu-ation of cold weather in the US north-east and low crude oil stocks.
The tanker marketNovember
In November, OPEC area spot fixtures continued to register record high levels for the second consecutive month, stand-ing at 15.59m b/d, an increase of 980,000 b/d over last month and a 24 per cent rise over last year. The slight decrease in OPEC oil production during November noted by secondary sources does not justify the mar-ginal gain in OPEC spot chartering. This increase may be attributable to pre-seasonal holiday bookings where charterers prefer to secure tonnage ahead of Christmas and New Year’s holidays. Another factor which could explain the move upward was low oil inventories which forced refiners to fill their depleted tanks despite the high crude oil prices. Accordingly, OPEC’s share of global spot fixtures rose a further 3.31 per cent to stand at about 65 per cent compared to the October level and about 13 per cent over
last year. Most of the increment in OPEC spot-chartering came from the non-Mid-dle East region as fixtures on both Middle East long-haul routes were affected by the oil production cut effective November 1. Middle East eastbound and westbound long-haul spot fixtures declined slightly by 60,000 b/d to 5.38m b/d and 40,000 b/d to 2.31m b/d, respectively. Compared with the year-ago level, eastbound and westbound long-haul spot fixtures were up 1.16m b/d and 410,000 b/d higher, respec-tively. Together, these routes accounted for about 49 per cent of total fixtures in the OPEC area, or five per cent less than that registered last month. Non-OPEC spot-chartering headed in the opposite direction, declining by 690,000 b/d to 8.59m b/d, which was 2.21m b/d or about 20 per cent below last year’s figure. This drop pushed non-OPEC’s share down to 36 per cent, or about three per cent below last month’s level. Hence, global spot fixtures moved up a slight 290,000 b/d to 24.18m b/d which was 1.49m b/d above the year-ago level. Following a stagnant period, based on preliminary estimates, sailings from the OPEC area during the month of November rose a remarkable 2.06m b/d to 25.04m b/d. About one quarter of this rise came from the Middle East, where sailings rose 550,000 b/d to 16.56m b/d. However, this increase is not reflected in the region’s share of sailings which fell four per cent compared with last month’s level. Arrivals on most of the main routes continued to show lower figures than in the previous period, except in Japan which moved up slightly by 80,000 b/d to 3.57m b/d. A considerable drop was witnessed in NW Europe which fell by 860,000 b/d to 6.80m b/d, while sailings in the US Gulf Coast, US East Coast and the Caribbean decreased a marginal 30,000 b/d to 10.71m b/d. Sailings in Euro-Med also declined, decreasing by 150,000 b/d to 3.89m b/d. During November, low crude oil stocks in main consuming regions, com-bined with very tight tonnage availability, pushed crude freight rates — particularly VLCC rates — to an extreme high not seen since November 2000. Increased demand not only for November cargoes but also for early December cargoes fueled this rally as charterers were seeking to secure satisfactory coverage amid concerns that the tanker market might get very tight
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before the Christmas period. Freight rates for VLCC cargoes from the Middle East to the Far East were twice as high as last month, showing an extreme increase of 72 points or 114 per cent to stand at a monthly average of Worldscale 135. On the Middle East to the West route, VLCC freight rates followed the same upward trend, soaring by 65 points or 120 per cent to reach a monthly average of W119. Suezmax freight rates from West Africa to the US Gulf Coast benefited from the very tight VLCC market, displaying a rise of 38 points or 34 per cent to stand at a monthly average of W149. This average was affected by a short period of low levels in the middle of November, when rates fell from a high of W160s to W120s on sparse activity, but rates changed direction again returning to a high W160s near the end of the month. Aframax freight rates also rose higher, especially within the Mediter-ranean basin, driven by a bottleneck in the Bosporus. This helped rates to surge by 106 points or 66 per cent for a monthly average of W266. The rise on the Mediterranean to NW Europe route was not as high as within the Mediterranean basin as rates increased only 29 points or 17 per cent to W203. Very high activity in the Caribbean pushed prices up 56 points or 35 per cent to W218 for cargoes from the Caribbean to the US East Coast. Some improvement was also seen on the Indonesia to the US West Coast route where rates rose a slight 13 points or nine per cent to W152 on the back of a generally healthy Aframax market. Contrary to the previous month’s trend where product freight rates suffered from a lack of sufficient fixtures, rates were up on all main routes during November, benefit-ing from high regional demand particularly for the petrochemical sector. Clean freight rates for medium-range tankers on the Mid-dle East/Far East route gained two points for a monthly average of W156. From Singapore to the East, the increase was much higher as rates reached a monthly average of W216 or 32 points above last month’s level. The route benefiting most was the Mediterranean to NW Europe route where rates surged by 101 points to W273 due to very high activity especially for jet fuel cargoes. Within the Mediter-ranean basin, rates improved less than on other routes, increasing by only 17 points to W214. From NW Europe to the US East
and Gulf Coasts, rates managed to enjoy an 19 per cent increase or 38 points to W239 on the back of increasing demand from the US market where the cold weather and low product inventories encouraged end-users to seek higher quantities ahead of the holiday season. US heating oil demand helped freight rates along the Caribbean/ US Gulf route to gain 54 points or 23 per cent to register a monthly average of W294.
December
After two consecutive months of increases, a holiday-filled December pushed OPEC area spot fixtures down by nearly 40 per cent to a level of 10.71m b/d. This was 4.16m b/d below a month ago, but at about the same level as last year. Pre-bookings in October and November could be the reason behind the low seasonal level of chartering in December when most char-terers leave for year-end holidays. Hence, OPEC’s share of global spot fixtures fell by three per cent to 58 per cent compared with last month, but remained about two per cent higher than a year ago. Nearly half of the fall occurred on Middle East long-haul spot fixtures where Middle East eastbound and westbound fixtures declined by 1.40m b/d to 3.95m b/d and by 680,000 b/d to 1.74m b/d, respectively. Eastbound and westbound shares of total OPEC fixtures were 37 per cent and 16 per cent, respectively, which was one per cent higher for eastbound and flat for westbound from the month before and a drop of two per cent and three per cent from a year ago. Together they accounted for 53 per cent of total OPEC chartering in the OPEC area, which was one per cent higher than the level registered last month. Non-OPEC spot fixtures followed the same direction for similar reasons, declining by 1.75m b/d to stand at 7.62m b/d, a level that represents a 42 per cent share of total global chartering and a drop of 860,000 b/d below last year’s for a share loss of two per cent. As a result, global spot chartering displayed a massive fall of about 32 per cent or 5.91m b/d to stand at 18.33m b/d. This was the lowest level since August 2003, but just 760,000 b/d below the same period last year. According to preliminary esti-mates, sailings out of the OPEC area in December rose 1.24m b/d to a monthly average of 25.57m b/d. Sailings out of the
Middle East moved in a contrary direction, declining by 490,000 b/d to a monthly average of 15.66m b/d. This was about 61 per cent of total OPEC area sailings, or five per cent below the month-ago level. Preliminary estimates of arrivals in all main areas displayed relatively small increases, except in Euro-Med, which saw a minor decline of 30,000 b/d to 4.20m b/d. Ar-rivals in US Gulf, US East Coast and the Caribbean rose by 110,000 b/d to 10.56m b/d, while in NW Europe they increased by 330,000 b/d to 7.13m b/d. In Japan, arrivals remained almost at last month’s level, moving up slightly by 10,000 b/d to 3.64m b/d. In December, crude oil spot freight rates touched all-time highs, mostly on the back of very healthy demand for crude oil in nearly all consuming regions, but particularly in China, where oil imports increased rapidly in the last months of the year. The congestion in the Bosporus Straits bolstered crude oil freight rates as it led to a replacement of oil mostly from the Atlantic basin, which increased the voyage length. Rising demand for mod-ern tonnage also contributed to the rate boom. VLCC freight rates on the Middle East eastbound and westbound long-haul routes rose further by 12 per cent and eight per cent, respectively in December to stand at a monthly average of W153 and W129, or an increase of 18 and 10 points, respectively. Tight tonnage avail-ability especially at the beginning of the month, where 30-day VLCC availability in the Middle East was hovering at around 40 vessels, encouraged ship-owners to seek higher rates. A slight rise in 30-day VLCC availability by the end of the month also moved rates upwards. Suezmax was the sector that benefited the most from the bottleneck in the Bosporus Straits where delays kept many tankers away from the market for a longer than expected period. This situation helped Suezmax freight rates to gain considerably more than 50 per cent on some routes. Freight rates along the West Africa/US Gulf Coast route rose by about 21 per cent, increasing by 31 points to stand at a monthly average of W180. On the NW Europe/US East-Gulf Coast route, rates improved by 38 per cent as healthy US demand and price differen-tials attracted North Sea grades by making such high transportation costs worthwhile.
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Very high activity in the Caribbean pushed Aframax freight rates up by 18 per cent along the Caribbean/US Gulf route, lift-ing them by 40 points to W258. Within the Mediterranean and from there to NW Europe, rates improved by about three per cent and 16 per cent, respectively to stand at W273 and W235, an increase of 7 and 32 points. The already high and still ris-ing level of Aframax freight rates on the Mediterranean/NW Europe route resulted from higher Baltic exports as many export-ers avoided the congestion in the Bosporus. Along the Indonesia/US West Coast route, rates also showed some improvement, in-creasing by 19 points to W171. Product freight rates remained firm for the second consecutive month, benefiting from very high seasonal demand along all main routes during December. Freight rates for clean medium-range vessels on the Middle East/Far East route rose by 20 points or about 13 per cent to stand at W176 on relatively strong activity. From Singapore to the East, rates enjoyed a nearly similarly increase of 25 points or 12 per cent to stand at a monthly aver-age of W241. This rise was mainly due to high fixtures at the beginning of the month, which slowed as the month wore on, pushing rates down by a few points. Healthy demand mainly for gasoline helped vessel owners within the Atlantic basin to gain 29 points or about 12 per cent to W268 along the NW Europe/US East-Gulf Coast route. In the Caribbean, rates managed to get an increase of 33 points to W327 due to pre-Christmas fixtures. Within the Mediterranean basin and from there to NW Europe, freight rates gained 44 and 35 points to stand at W258 and W308, respectively. Strong demand and tight tonnage availability were the main reasons behind such buoyant levels.
World oil demandNovember
Estimates for 2003
World Further data on the actual demand in the current year points to higher than expected rises in 3Q consumption of 220,000 b/d in the OECD and 10,000
b/d in the FSU, partly offset by an 80,000 b/d reduction in the expected demand for developing countries. As a result, the 3Q average has been revised up by a substantial 150,000 b/d, while the forecast 2003 world oil demand volume average has been raised by 30,000 b/d to 78.36m b/d versus the 78.33m b/d in the last report. The yearly increment, which represents the difference between the 2002 and the 2003 averages, has likewise been adjusted upwards by 30,000 b/d to read 1.39m b/d. On a regional basis, 2003 demand is forecast to rise 750,000 b/d or 1.56 per cent in the OECD following a minor fall of 70,000 b/d in 2002. Only a moderate 100,000 b/d or 0.50 per cent increase in consumption is forecast in 2003 in devel-oping countries, following much higher growth of 180,000 b/d in 2002. Apparent demand in the former CPEs is forecast to grow by a considerable 540,000 b/d or 5.67 per cent, more than double the volume and growth rate of 2002, which saw increases of 210,000 b/d or 2.21 per cent. On a quarterly basis, compared with the exceptionally weak 1Q02, world demand is estimated to have grown by a significant 2.27m b/d or 2.96 per cent to average 79.08m b/d in 1Q03. This is the net effect of the colder than normal weather in most parts of the northern hemisphere, fuel substitution in Japan as a result of nuclear power reactor maintenance, stock-piling ahead of the anticipated Iraq war, and record high natural gas prices in the US. 2Q03 consumption is estimated to have risen by 1.08m b/d or 1.44 per cent compared to the exceptionally weak 2Q02 thanks to the robust economic growth in China and due to the continuation of fuel substitution in Japan. 3Q consumption is assumed to have grown a similar 1.04m b/d or 1.35 per cent, while 4Q is expected to display a somewhat higher growth of 1.17m b/d or 1.48 per cent.
OECD The OECD consumption forecast of 48.48m b/d constitutes 62 per cent of the total world demand in 2003 as indicated in the previous report. Out of the forecast 1.39m b/d increment in world oil con-sumption in 2003, about 750,000 b/d or nearly 54 per cent is expected to originate in the OECD. Within the group, North America ranks first in forecast demand
growth with 400,000 b/d, close to 54 per cent of the demand increment for the group. OECD Pacific ranks second with 200,000 b/d, equivalent to 27 per cent and Western Europe ranks third with 140,000 b/d, nearly 19 per cent.
Developing Countries Oil demand in developing countries is forecast to grow by 100,000 b/d or 0.50 per cent to 19.80m b/d. Consumption in Latin America is expected to contract by 80,000 b/d or 1.62 per cent to average 4.67m b/d, indicating a relative improve-ment over the last year when demand weakened by 120,000 b/d due to persist-ent economic and financial problems. Other Asia is forecast to register highest volume and percentage growth of 130,000 b/d or 1.74 per cent, followed by Africa with 20,000 b/d or 0.88 per cent and the Middle East with 20,000 b/d or 0.47 per cent, respectively.
Other regions Although apparent demand in the former CPEs in 2003 is now forecast at 10.09m b/d, marginally higher than the level mentioned in the last report, their share of world oil consumption remains unchanged at 13 per cent. Thanks to an upward revision to China’s demand forecast last month, the demand growth forecast currently stands at 39 per cent of the total world demand increment, equivalent to 540,000 b/d or 5.64 per cent and more than double that in 2002. Within the group, the apparent 5.48m b/d demand in China is forecast to register the highest volume and percentage growth of 440,000 b/d or 8.82 per cent, singly accounting for 32 per cent of the total world increment. The FSU, with an average 3.87m b/d, is expected to experience the second highest demand rise of 100,000 b/d or 2.61 per cent. Apparent demand in Other Europe is expected to experience a negligible change.
Forecast for 2004 Based on slightly higher prospects for economic growth, the average world oil demand forecast for 2004 has been revised up by 50,000 b/d to 79.61m b/d, compared with the 79.56m b/d presented in the last report. The anticipated oil demand growth in 2004, however, has been raised only by 10,000 b/d to 1.25m b/d to reflect the
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simultaneous upward revision in average 2003 oil demand forecast, compared with the 1.24m b/d reported in the last report. The 3Q forecast has been raised by 160,000 b/d mostly to reflect the similar upward re-vision in the corresponding 2003 period. The analysis of regional oil consumption remains similar to that presented in the last report. On a regional basis, oil demand is forecast to register solid growth in all of the three major groups of countries. Although the demand in the OECD is expected to grow at the lowest rate, ie 0.98 per cent, the group is forecast to rank first through a 470,000 b/d growth, equivalent to 38 per cent of the total world demand increment. Developing countries are expected to rank second in growth rate at 2.18 per cent, with an increment volume of 430,000 b/d, for a 35 per cent share of world oil demand growth. The highest percentage growth of 3.40 per cent is attributable to the former CPEs. Their volume and share of the world demand growth, however, ranks third at 340,000 b/d equivalent to 27 per cent of the world increment. Every single quarter of 2004 is forecast to experience oil demand growth. The 1Q is expected to account for the lowest growth rate at 900,000 b/d or 1.14 per cent. The 2Q and the 3Qs are forecast to enjoy much higher rises of 1.33m b/d and 1.27m b/d, while the highest growth of 1.49m b/d or 1.86 per cent is expected in 4Q.
December
Estimates for 2003
World Our 2003 demand estimates for 1Q, 2Q and 3Q which incorporate actual con-sumption data for the OECD up to the end of the 3Q, remain basically unchanged from the last report. Further evidence, how-ever, points to higher than expected 4Q consumption in China and the FSU of 200,000 b/d and 50,000 b/d, respectively, partly offset by a 100,000 b/d reduction in the estimated demand for the OECD Pacific. As a result, the 4Q average has been substantially revised up by 190,000 b/d, and the forecast average world oil demand volume for 2003 has been raised by 50,000 b/d to 78.41m b/d versus the 78.36m b/d presented in the last report. The yearly increment — the difference
between the 2002 and the 2003 averages — has likewise been adjusted upward by 40,000 b/d to read 1.42m b/d. On a regional basis, demand in 2003 is estimated to have risen by 720,000 b/d or 1.52 per cent in the OECD follow-ing a minor fall of 70,000 b/d in 2002. Developing countries are forecast to see only a moderate 100,000 b/d or 0.53 per cent rise in consumption in 2003, following a much higher 180,000 b/d growth in 2002. Apparent demand in the former CPEs is estimated to have grown considerably by 590,000 b/d or 6.23 per cent, close to triple the 2002 volume and growth rate of 210,000 b/d and 2.21 per cent, respectively. Since the first three quarterly averages have undergone very minor changes, our comments on the quarterly averages remain very similar to those presented in the last report. Compared with the exceptionally weak 1Q02, world demand is estimated to have grown significantly by 2.97 per cent or 2.28m b/d to average 79.08m b/d in 1Q03. 2Q03 consumption is estimated to have risen by 1.44 per cent or 1.08m b/d compared to the exceptionally weak 2Q02, thanks to robust economic growth in China and due to the continuation of fuel substitution in Japan. 3Q consumption is assumed to have grown similarly by 1.02m b/d or 1.32 per cent, but 4Q consumption is expected to have undergone much higher growth of 1.32m b/d or 1.68 per cent.
OECD As indicated in the previous report, OECD consumption assumed at 48.46m b/d constitutes 62 per cent of total world demand in 2003. Out of an estimated 1.42m b/d world oil consumption incre-ment in 2003, about 720,000 b/d or nearly 51 per cent is expected to initiate in the OECD. Within the group, North America ranks first in estimated demand growth with 390,000 b/d, close to 54 per cent of the group demand increment. OECD Pacific ranks second with 180,000 b/d, equivalent to 25 per cent, and Western Europe ranks third with 150,000 b/d, nearly 21 per cent. Actual consumption data suggests that OECD January-October oil requirements were 850,000 b/d higher compared to the corresponding 2002 period. During this period, similar to the January-September
period given in the last report, gasoil/diesel was the leading volume and percentage product gainer with a 410,000 b/d or 3.46 per cent rise in consumption due to fuel switching in the US and across Europe. The second volume and percentage prod-uct gainer was naphtha which experienced 100,000 b/d or 3.41 per cent growth thanks to healthy margins in the petrochemical sector. Direct use also experienced excep-tionally high growth of 115 per cent due to nuclear reactor maintenance in Japan.
Developing Countries In developing countries, oil demand is estimated to have grown by 100,000 b/d or 0.53 per cent to 19.80m b/d. Con-sumption in Latin America is estimated to have contracted by 80,000 b/d or 1.62 per cent to average 4.67m b/d, indicating a relative improvement over the last year when demand weakened by 120,000 b/d due to persistent economic and financial problems. Other Asia is estimated to have registered the highest volume and percent-age growth of 130,000 b/d or 1.80 per cent, followed by Africa and the Middle East with 20,000 b/d or 0.87 per cent and 20,000 b/d or 0.48 per cent, respectively.
Other regions Although apparent demand in the former CPEs in 2003 is now forecast at 10.15m b/d, or marginally higher than the level mentioned in the last report, their share of world oil consumption remains un-changed at 13 per cent. Due to the upward revision in China’s consumption prospects, the demand growth estimate now stands at 500,000 b/d or 9.85 per cent, equivalent to 35 per cent of the total world demand incre-ment, and more than double the country’s consumption growth in 2002. Within the group, the apparent 5.53m b/d demand in China is forecast to register the highest volume and percentage growth. The FSU, with an average of 3.88m b/d, is expected to experience the second highest demand rise of 100,000 b/d or 2.64 per cent, while apparent demand in Other Europe is ex-pected to see only a negligible change.
Forecast for 2004 Based on slightly higher prospects for economic growth, our 2004 average world oil demand forecast has been revised up by 50,000 b/d to 79.66m b/d, compared
Total OPEC 25,335 26,919 26,815 27,560 27,621 27,735 175
was revised down to 48.62m b/d. The 3Q saw a significant 120,000 b/d downward revision due to the longer maintenance schedule and the underperformance in the UK sector of the North Sea, while the other quarters received only minor revisions. The quarterly distribution now stands at 48.62m b/d, 47.96m b/d, 48.65m b/d and 49.22m b/d, respectively. The yearly average increase stands at 860,000 b/d, compared with the downwardly revised figure for 2002.
Expectations for 2004 Non-OPEC supply for 2004 is ex-pected to rise 1.13m b/d. Russia should be the main contributor with an expected 490,000 b/d, followed by Chad, Angola and Kazakhstan with 160,000 b/d, 110,000 b/d and 90,000 b/d, respectively. Colombia also contributed to the increase with 60,000 b/d, partially offset by a 50,000 b/d de-cline in Oman. The quarterly distribution now stands at 49.76m b/d, 49.14m b/d, 49.85m b/d and 50.24m b/d, respectively. The yearly average is forecast at 49.75m b/d. FSU net oil exports for 2004 are expected at 6.82m b/d, while figures for 2000–2003 remain almost unchanged from the last report. (see Table D)
OPEC natural gas liquids The OPEC NGL figure for 2004 is expected to be 3.81m b/d, an increase of 230,000 b/d over the 2003 figure of
3.58m b/d. Figures for 2000, 2001 and 2002 remain unchanged at 3.34m b/d, 3.58m b/d and 3.62m b/d, respectively, compared with those in the last report.
OPEC crude oil production Available secondary sources indi-cate that OPEC output for November was 27.39m b/d, a decline of 50,000 b/d from the revised October figure of 27.44m b/d. Table E shows OPEC pro-duction as reported by selected secondary sources.
December
Non-OPEC
Estimate for 2003 The non-OPEC supply figure for 2003
with the 79.61m b/d presented in the last report. However, anticipated oil demand growth in 2004 has been raised by only 10,000 b/d to 1.25m b/d to reflect the simultaneous upward revision in the 2003 average oil demand forecast for 2003. The 4Q forecast has been raised by 120,000 b/d, partly to reflect the upward revision in the corresponding 2003 period and also to account for higher consumption prospects in China and the FSU. On a regional basis, oil demand is fore-cast to register solid growth in all of the three major groups of countries. Demand in the OECD is now expected to grow at the lowest rate, 0.74 per cent or 360,000 b/d, due to lower consumption prospects in the OECD Pacific. Demand growth in the developing countries is forecast to rank first with a 480,000 b/d or 2.40 per cent growth, equivalent to 38 per cent of the total world demand increment. The former CPEs come in second in volume and share of world demand growth, but scored the highest percentage growth of 4.16 per cent at 420,000 b/d, equivalent to 34 per cent of the world increment. Every single quarter of 2004 is forecast to experience oil demand growth. The 1Q is expected to account for the lowest growth rate of 930,000 b/d or 1.18 per cent, while 2Q and 3Q are forecast to enjoy much higher rises of 1.36m b/d and 1.30m b/d, respectively. The 4Q should see the highest growth with 1.42m b/d or 1.77 per cent.
World oil supplyNovember
Non-OPEC
Forecast for 2003 The non-OPEC supply figure for 2003
* Not all sources available.Totals may not add, due to independent rounding.
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was revised up to 48.73m b/d, with the 4Q revised up a significant 390,000 b/d. This increase was mainly contributed by three new fields which were partially put on stream and the full recovery from the maintenance in the Norwegian sector of the North Sea. Russia and Kazakhstan also contributed to the rise which was partially offset by some significant delays in Chad and Angola. The other quarters saw only minor revisions. The quar-terly distribution now stands at 48.62m b/d, 47.98m b/d, 48.68m b/d and 49.61m b/d, respectively. The yearly average increase stands at 990,000 b/d, compared with the downwardly revised 2002 figure.
Forecast for 2004 Non-OPEC supply for 2004 is fore-cast to rise 1.14m b/d. Russia is expected to be the main contributor with around 490,000 b/d, followed by Chad with 200,000 b/d, Angola with 110,000 b/d and Kazakhstan with 70,000 b/d. Colombia is also expected to contribute to the rise with 60,000 b/d, while Mauritania may add some 50,000 b/d and Oman is going to lose roughly the same amount. The quarterly distribution now stands at 49.70m b/d, 49.11m b/d, 49.84m b/d and 50.79m b/d, respectively. The yearly average is forecast at 49.87m b/d. The FSU’s net oil exports for 2004 are expected to be 6.83m b/d. The 2003 figure was revised up by 50,000 b/d to 6.39m b/d, while figures for 2000–02 remained almost unchanged from the last report. The OPEC NGL figure for 2004 is fore-cast at 3.81m b/d, an increase of 230,000 b/d over the 2003 figure of 3.58m b/d. Figures for 2000–2002 remain unchanged at 3.34m b/d, 3.58m b/d and 3.62m b/d, respectively, compared with the figures in the last report. (see Table D)
OPEC crude oil production Available secondary sources indi-cate that OPEC output for Decem-ber was 27.73m b/d, an increase of 170,000 b/d from the revised November figure of 27.56m b/d. Table E shows OPEC production as reported by selected secondary sources. OPEC 4Q production averaged 27.62m b/d and the 2003 yearly average stood at 26.92m b/d.
OPEC OPEC’s rig count was 229 in Decem-ber, an increase of four rigs when compared with the November figure. Iran was the major contributor to the rise adding three rigs to 39.
Stock movementsNovember
USA Commercial oil stocks in the US regis-tered a massive draw of 12.7m b at a rate of 450,000 b/d to 953.8m b during the period October 31–November 28. Both crude oil and products contributed to the draw, decreasing by 7.6m b to 284.3 and 5.0m b to 669.5m b, respectively. Crude oil stocks began the period rising to 294.0m b in the week ending November 14 as crude oil imports reached 10.34m b/d. However, directions changed during the last two weeks with crude oil stock levels and imports declining. Indeed, US crude oil imports averaged 9.1m b/d in the week ending November 28, down 230,000 b/d from the previous week. For the last four weeks, crude oil imports averaged 9.64m b/d, more or less unchanged from the aver-age over the same period last year. Although it is still too early to determine the origin of the weekly crude oil imports, Iraqi crude oil exports appear to be the highest since the resumption of exports after the war. Another reason behind the draw on crude oil stocks could be associated with the in-crease in refinery inputs, which moved up 290,000 b/d to 15.5m b/d during the week ending November 28, corresponding to a utilisation rate of 93.5 per cent. Almost all of this increase was seen in the East Coast (PADD 1), where crude runs returned to levels seen a few weeks earlier. Crude oil inputs to refineries have averaged 15.28m b/d during the last four weeks, 150,000 b/d less than last year at the same time. On the product side, distillate fuel oil stocks registered a draw of 1.6m b to 131.1m b, mainly due to high demand, which was 4.9 per cent above last month’s. But the week ending November 28 saw a rise of 2.8m b in distillate stocks compared to the previous week, with most of the increase in low-sulphur (diesel) distillate fuel. At this level, distillate stocks are 5.6 per cent above
Rig countNovember
Non-OPEC Rig activity rose in November. North America gained 27 rigs, compared to Oc-tober. Canada added 18 rigs to reach 412 and the US saw an increase of ten rigs to 1,118, while Mexico dropped one rig to 107. Western Europe’s rig activity showed a continuing decline of three rigs to 72. Rig activity in Australia was also down by three rigs to 12, while Other Asia witnessed a loss of nine rigs to 113.
OPEC OPEC’s rig count was 225 in Novem-ber, an increase of 9 rigs compared with the October figure. Algeria added two rigs to 19 and Venezuela gained 3 rigs to 47 over the month before.
December
Non-OPEC Rig activity rose in December. North America gained seven rigs, compared with the November figure. Canada and US rig activities increased by five rigs to 417 and two to 1,114 rigs, respectively, while Mexico remained unchanged at 107 rigs. Western Europe’s rig activity increased by six rigs to 78, solely contributed by the UK which was up by eight rigs to 21 and partially offset by a decline in the rest of the group. Africa, Other Asia and Middle East witnessed an increase of six, five and four rigs to 56, 118 and 69 rigs, respectively.
last year at the same period, while heating oil stocks showed a year-on-year surplus of around 3.2 per cent. Gasoline stocks moved up 5.8m b to 197.1m b to follow a seasonal pattern, but still remained at a 3.7 per cent y-o-y deficit. This build was observed gradually over the last four weeks, with a surge of 4.3m b during the week ending November 28. Gasoline demand averaged 9.0m b/d over the last four weeks, a decline of 1.9 per cent compared to last month, but still 2.6 per cent above last year at the same time. Residual fuel and jet fuel oil stocks moved in different directions. Residual fuel oil stocks increased 1.7m b to 35.3m b on the back of a substantial rise in imports, while jet fuel inventories registered a draw of 2.0m b to 37.8m b on the declining imports. During the same period, the Strategic Petroleum Reserve (SPR) continued its build, increasing by 3.4m b, to reach a new record of 633.4m b, 38m b higher than last year’s level at the same time. During the week ending December 5, total commercial oil stocks showed a signifi-cant draw of 4.9m b to 948.9m b compared to the previous week, widening the y-o-y deficit to three per cent or around 30m b. The bulk of this draw came from crude oil stocks which declined 6.4m b to 277.9m b as refiners stepped up production. Crude oil refinery inputs averaged nearly 15.7m b/d, up 210,000 b/d, which cor-responded to a refinery utilisation rate of 94.2 per cent or 0.7 per cent above a week earlier. At the same time, crude oil imports rose 400,000 b/d to around 9.5m b/d, with virtually all the increase in the Gulf Coast region (PADD III). With the drop in crude oil stocks, the y-o-y shortage stood at about 3.1 per cent or 8.8m b. On the product side, data showed some improvement. Indeed, distillate stocks climbed by 1.0m b to 131.1m b, registering 5.5 per cent or 6.4m b above last year’s level. In the meantime, heating oil stocks registered a build of 200,000 b to 55.9m b, which was a comfortable 5.5m b increase over this time last year. The build in distillate stocks was mainly due to high production as refiners were concerned about heating oil supplies in winter. The build of 3.4m b to 200.5m b in gasoline stocks followed the usual seasonal pattern at this time of the year, but remained 5.8m b or 2.8 per cent below last year’s level. The apparent
demand for gasoline was 8.77m b/d, a drop of 200,000 b/d from the previous weeks. The SPR continued the upward trend, in-creasing by 800,000 b to 634.2m b, around 38m b above the same period last year.
Western Europe Total oil stocks in Eur-16 reversed the previous two months’ pattern of draw-downs, increasing by 1.3m b or 40,000 b/d to 1,057.1m b. A moderate rise of 5.9m b to 619.8m b in total products was nearly offset by a decrease of 4.6m b to 437.3m b in crude oil stocks. This build left total oil inventories a slight 0.2 per cent or 2.3m b below last year at the same period. The draw on crude oil stocks came as refiner-ies returned from a heavy turnaround of autumn maintenance. In fact, crude runs rose 250,000 b/d to 12.3m b/d, equivalent to a 93.9 per cent utilisation rate or 1.9 per cent above the October level. With this draw, the y-o-y deficit is also around 1.9 per cent or 8.5m b. Distillate stocks, which include heating oil, diesel and jet fuel, registered a slight draw of 200,000 b to 347.0m b. This small change occurred as high demand absorbed the increase in production and a steady flow of imports from Russia. At this level, distil-late stocks remained at a comfortable level of 2.4 per cent or 8m b above a year earlier. Gasoline stocks rose 2.9m b to 138.4m b, their highest level since May 2003. This was mainly due to high production combined with closed transatlantic gasoline arbitrage. Fuel oil inventories continued upward for the third successive month increasing by 2.3m b to 113.6m b. This build came due to an increase in refinery throughputs and a rise in Russia’s exports. However, despite this build, the y-o-y deficit remains at 5.5 per cent.
Japan In October, Japan’s commercial oil stocks experienced a large draw of 12m b at a rate of 400,000 b/d to 191.7m b. This draw, the first since March 2003, was attributed mainly to a decline of 10.7m b to 111.9m b in crude oil and, to a lesser extent, a decrease in total product stocks of 1.3m b to 79.8m b. Despite this draw, total commercial stocks remained at a comfort-able level of 8.3 per cent. The massive draw registered in crude oil stocks was a result of the decline in crude oil imports com-bined with the rise in crude throughput.
Indeed, crude oil imports fell by 1.5 per cent to 3.73m b/d from last month and around 2.7 per cent from last year, while crude oil throughput rose by seven per cent to 3.96m b/d compared to the previous month and by six per cent above a year ago. This is equivalent to refinery operations of 80 per cent compared with 75 per cent a year earlier. Despite the draw on crude oil stocks, the y-o-y surplus remained at a comfortable level of 6.4 per cent. Middle distillates registered a slight draw of 2.0m b to 45.9m b, but remained 9.9 per cent above last year’s level at the same time. The distil-late component kerosene, which is used for heating oil in Asia, declined by 2.2 per cent despite a high increase in imports as domestic oil companies boosted flows from overseas to help compensate for the loss in domestic capacity after the closure of the Idemitsu Kosan refinery ahead of the winter season. However, kerosene stocks stood at a comfortable level of 12.8 per cent. Another middle distillate component “fuel oil B.C.”, which is used by oil-fired thermal power stations, rose 9.4 per cent compared to the previous month or 38.1 per cent from a year ago as most of the Tokyo Electric Power Company’s (TEPCO) generators have been shut down and might remain so until the end of the year.
December
USA Commercial oil stocks registered a massive draw of 21.9m b or a rate of 680,000 b/d to 931.9m b at the end of December 2003 compared to the previous month. Both crude oil and “other oils” contributed to this draw, while gasoline, distillate and residual fuel stocks showed an increase. At the same time, the SPR continued its upward trend. Crude oil stocks hit their lowest level since 1975, dropping to 269.0m b, which was 8.5m b or 3.1 per cent below this time last year and 1.0m b below the minimum op-erational inventory level. Stocks have also fallen to historic lows in terms of days of refinery throughput, dropping to around 17.6 days compared to the previous low of 17.7 days seen in August 2003. Crude oil imports averaged 9.46m b/d, a loss of 160,000 b/d from the previous month, but 720,000 b/d above a year ago. Crude oil inputs stayed more or less unchanged at
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15.32m b/d, an increase of 420,000 b/d from last year’s figure. Neither of the previous two factors explains the large draw on crude oil stocks. However, the SPR registered a build of 4.8m b to 638.2m b, widening the y-on-y supply to 39m b. Gasoline stocks jumped by 9.2m b to 206.3m b, narrowing the y-o-y deficit to 2.9m b, a build which occurred despite the decline in apparent demand typically seen at this time of year. Distillate inventories also rose 4.4m b to 135.5m b, an increase of 2.1m b above the same time last year. The combination of the rise in output with the increase in imports was the reason behind the build. During the week ending January 9, total commercial oil stocks reg-istered a slight draw of 3.6m b to 928.3m b, leaving them at 9.2m b or one per cent below last year at the same time. Commercial crude oil stocks showed a surprising further draw of 5m b to 264.0 pushing them 12.4 or 4.5 per cent below a year earlier. The fall in crude oil imports of 550,000 b/d to 9.21m b/d was the main reason behind this draw, which was in contradiction to expectations that refineries would build their crude oil stocks after having drawn them at the end of the year for tax and ac-counting purposes. On the product side, distillate stocks registered an contra-seasonal build of 2.8m b to 138.3m b, putting them at a comfortable y-o-y level of 9.9m b or 7.7 per cent. Heating oil stocks rose 1m b to nearly 57m b, some 5.7m b more than the year-ago level. This assumes that tertiary inventory had been sufficiently filled earlier to cope with the upcoming winter. Gasoline stocks continued their seasonal build, increasing by 2.1 y-o-y to over 40m b.
Western Europe Total stocks in the EU-16 moved slightly down by 0.52m b or 20,000 b/d to 1,059.2m b, an increase of 13m b or 1.3 per cent above the previous year. Crude oil inventories rose 0.73m b to 440.19m b, reaching a comfortable level of 10.3m b or 2.4 per cent above the same time last year. This increase came as refinery crude runs dropped by 120,000 b/d after reach-ing a high rate of 12.4m b/d last month. However, refinery runs are still 140,000 b/d above a year ago. This corresponds to a utilisation rate of 93.8 per cent, or a loss of 0.9 per cent from the previous month, but a y-o-y rise of 1.5 per cent.
On the product side, middle distillates fell seasonally by 1.95m b to 345.8m b, but remained more than 7m b above last year. The decline in distillate stocks, which include heating oil, diesel and jet fuel, came amid strong demand, lower refinery output and a steady flow of Rus-sian imports, which remained close to an 18-month low. Gasoline stocks continued their seasonal build for the fourth successive month, rising by 1.3m b to 139.7m b, an increase of roughly 1m b or 0.5 per cent above last year’s level. Lack of demand and restrained exports to the US due to high freight costs were behind the build in gasoline inventories. Fuel oil stocks dropped just 0.58m b to 110.7m b, which was 5.3m b or 4.6 per cent below December last year. This draw mainly reflects the decline in re-finery output.
Japan Japan’s commercial oil stocks registered a considerable draw in November of 12.5m b or 420,000 b/d to 179.2m b, mainly on the massive decrease in crude oil stocks. However, Japanese stocks remained at a comfortable level of 12.2m b or 7.3 per cent above the same time last year. Crude oil stocks also showed a huge draw of 14.7m b, dropping to 97.2m b, their lowest level since February 2002, and are now around 2m b below year ago levels. This draw came as Japan’s crude oil imports marked the steepest y-o-y decline since March 2003. Indeed, crude oil imports fell 3.6 per cent compared to the previous month, but 13.4 per cent compared to last year at the same time. This year’s milder winter is one factor behind the decline, as well as the large volume of imports posted last year as demand rose with the shut-down of TEPCO’s nuclear reactors. Middle distillate stocks continued their upward trend increasing by 2.1m b to 48.0m b, widening the y-o-y surplus to 10.5m b or 28 per cent. Japanese kerosene inventories — the main component of middle distillate stocks — have remained at high levels for several months, and are now at 40 per cent above last year at the same time.
Balance of supply/demandNovember
Table I shows the supply/demand bal-
ance for 2003, with a downward revision to total non-OPEC supply of 20,000 b/d to 52.20m b/d and an upward revision to world oil demand of 30,000 b/d to 78.36m b/d, resulting in an estimated annual dif-ference of around 26.16m b/d. This represents a minor rise of 50,000 b/d from the last report’s figure, with a quar-terly distribution of 27.02m b/d, 24.75m b/d, 25.81m b/d and 27.08m b/d, respectively. Minor downward revisions were made to the balance in the 1Q and 2Q, while the 3Q has been revised down significantly by 280,000 b/d. The quarterly balance figures now stand at –250,000 b/d, 1.71m b/d and 990,000 b/d, respectively. The summarised supply/demand balance table for 2004 shows world oil demand expected at 79.61m b/d and total non-OPEC supply anticipated at 53.56m b/d. This has resulted in a dif-ference of around 26.05m b/d, with a quarterly distribution of 26.61m b/d, 24.65m b/d, 25.63m b/d and 27.30m b/d, respectively.
December
Table I shows the supply/demand bal-ance for 2003, with an upward revision to total non-OPEC supply of 110,000 b/d to 52.31m b/d and to world oil demand of 50,000 b/d to 78.41m b/d, resulting in an estimated annual difference of around 26.10m b/d. This represents a minor de-cline of 60,000 b/d from the last report figure, with a quarterly distribution of 27.02m b/d, 24.74m b/d, 25.79m b/d and 26.87m b/d, respectively. Minor revisions were made to the balance of the first three quarters, while the 4Q has been introduced for the first time in this report and is estimated at 750,000 b/d. The quarterly balance figures now stand at –250,000 b/d, 1.73m b/d, 1.03m b/d and 750,000 b/d, respec-tively. The balance for 2003 now averages 820,000 b/d. The summarised supply/demand balance table for 2004 shows world oil demand expected at 81.55m b/d and total non-OPEC supply expected at 53.67m b/d. This has resulted in a difference of around 25.99m b/d, with a quarterly distribution of 26.69m b/d, 24.72m b/d, 25.68m b/d and 26.86m b/d, respectively.
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Table F: US onland commercial petroleum stocks1 m b
Change Oct 31, 03 Nov 28, 03 Jan 2, 04 Dec/Nov Jan 2, 03 Jan 9, 042
1. At end of month.2. Includes crude oil and main products only. Source: MITI, Japan.
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Table I: World crude oil demand/supply balance m b/d
1. Secondary sources. 3. Korean government stocks are now included in Total OECD.2. Stock change and miscellaneous. Note: Totals may not add up due to independent rounding.Table I above, prepared by the Secretariat’s Energy Studies Department, shows OPEC’s current forecast of world supply and demand for oil 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 40, while Graphs One and Two (on pages 39 and 41) show the evolution on a weekly basis. Tables Three to Eight, and the corresponding graphs on pages 42–47, show the evolution of monthly average spot prices for important products in six major markets. (Data for Tables 1–8 is provided by courtesy of Platt’s Energy Services).
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; Reuters; Secretariat’s calculations.
Table 1: OPEC spot crude oil prices, 2003 ($/b)
Member 2003Country/ May Jun Jul Aug Sept Oct November DecemberCrude (API°) 4Wav 4Wav 5Wav 4Wav 5Wav 4Wav 1W 2W 3W 4W 4Wav 1W 2W 3W 4W 5W 5Wav
Saudi Arabia moves to cut income taxes on foreign investors
Saudi Arabia’s Majlis Al-Shura, or Consultative Council, decided early in January to lower the rate of income tax imposed on foreign investors, including those in the natural gas sector, from 30 per cent to 20 per cent. The council’s decision still needs to be approved by the Saudi Cabinet; however, the latter is expected to endorse it. The council had received a request from the Supreme Eco-nomic Council (SEC) chaired by HRH Crown Prince Abdallah bin Abdel Aziz, to reduce the tax rate on foreign investments by 10 per cent, instead of the 5 per cent previously endorsed by both the Council and the Finance Ministry. According to a report by the official Saudi Press Agency (SPA), the council approved the change by 61 votes to 46. As part of Saudi Arabia’s efforts to attract foreign investment, the Cabinet decided in 2000 to reduce income tax on foreign investments from 45 per cent to 30 per cent by introducing a clause whereby the state bears 15 per cent of the taxes imposed on corporate profits. The tax applies to annual profits in excess of 1 million Saudi riyals, or $266,000, said the SPA report. The Secretary General of the Consultative Council, Hamoud Al-Badr, was quoted as saying that the latest reduction comes “in response to the current investment climate and the obstacles to foreign investments.” Meanwhile, speaking during the inauguration of the Haradh natural gas and oil development project, the Minister of Pe-troleum and Mineral Resources, Ali I Naimi, said that to at-tract foreign investor in the gas sector, an investment friendly environment has been established by the Kingdom, according to the SPA report. The ‘Gas Supply and Pricing Regulation and its Rules for Implementation’, issued in September 2003, stipulate that the tax on gas investments will be based on the internal rate of return (IRR) for the annual accrued cash flows of the taxpayer, with a sliding scale starting at 30 per cent for an IRR of up to 8 per cent and ending at 85 per cent for an IRR of 20 per cent or more. In addition, the law stated that income tax of 30 per cent would be imposed on the investment’s taxable base, which would then be deducted from the investment tax due. Naimi also said that a dedicated tax code exclusively for natural gas investors has also been issued with the objective of encouraging natural gas investments in the Kingdom by allowing them to get fair returns on their investments. The Haradh natural gas and oil development project is the third mega-project completed by Saudi Aramco, which is now supplier of one-fourth of the Kingdom’s total gas consumption, the report said. Naimi said that the Haradh project will propel the King-dom’s industrialization and development drive and avoid de-pendence on crude oil exports. Haradh is just one outcome of the Kingdom’s integrated economic policy, which is designed to optimize utilization of available natural resources, taking into consideration the Kingdom’s relative advantage of having
abundant and relatively inexpensive energy available, Naimi added. The Haradh project consists of a gas plant capable of de-livering 1.5 billion cubic feet/day of sales gas to Saudi Arabia’s Master Gas System, and a gas oil separator plant capable of stabilizing 300,000 barrels/day of crude oil. Last year, Royal Dutch/Shell and France’s Total signed a deal to invest in the exploration and production of natural gas in Saudi Arabia. More companies followed this month, when bids were opened for three tracts located to the south of the Ghawar oil field. Separately, Saudi Arabia is close to finalising an agreement with a World Trade Organisation (WTO) working group on accession. In a statement, WTO Chief, Supachai Panitchpadki, said that Saudi Arabia has made surprisingly quick progress in talks on joining the WTO and should be a member by the end of the year. Remaining bilateral differences with the US and three other WTO members were “not insurmountable”, he added.
Abu Dhabi to launch two-yearprivatisation plan
As part of Abu Dhabi’s strategy to stimulate the local economy and attract investment in the industrial sector, the country has appointed HSBC Bank Middle East, as its financial manager to a two-year privatisation plan for some of its major industrial utilities, according to the Chairman of the Abu Dhabi Economy Department, Sheikh Hamed bin Zayed Al Nahyan. “We will gradually sell stakes in public utilities to the pri-vate sector as part of the Emirate’s strategy to forge a public-private partnership and stimulate the local financial markets,” he said. The enterprises to be privatised include several factories previously managed by the government-owned General Industry Corporation (GIC), which was liquidated in 2002. He said that he hoped that the sale would be completed by 2005. “This plan is not new as it is a result of long, comprehen-sive studies carried out by specialised companies, which have recommended the transfer of the ownership of those factories to the private sector to better serve industrial development, cut public costs and spur growth,” he announced. Valued at $27.2 million, the GIC group holdings include factories and plants in the cement, animal feed, flour mills, mineral water bottling, building blocks and steel sector.
Indonesia to promote use ofrenewables to generate electricity
Indonesia will promote the use of renewable sources of energy, using biomass techniques, geothermal, and hydro power to generate electricity and reduce dependence on expensive and diminishing fossil fuels, according to a report in the Jakarta Post.
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“Renewable sources are in line with the national energy policy, or the green policy, that we are currently developing,” said newly-appointed Director General of Electricity and Energy Usage at the Ministry of Energy and Mineral Resources, Yogo Pratomo. Eighty-five per cent of Indonesia’s national energy consump-tion comes from fossil-based oil and gas, which are expected to run out within the next 15 to 20 years. Biomass technology, with a potential to produce up to 50,000 megawatts (mw) of electricity nationwide, is considered one of the best alternatives to replace fossil fuels. “While the potential is there, currently only about 640 mw of electricity is being produced using biomass,” the Jakarta Post quoted Yogo as saying. “Most is the by-product of the forestry businesses,” he added. In addition, forestry waste, estate crops waste, such as palm fruit or sugarcane bagasse, agriculture crop waste, such as paddy husks or cassava stems, and city waste can be converted into energy by a combustion process. “Because such things are considered waste, they are practically free of charge,” Yogo said. “Diesel fuel is expensive, and in remote areas, there’s also
high transportation costs,” he went on. Another advantage of biomass is that it produces only clean gasses as excess. However, Indonesia lacks the technology to undertake such a process on a large scale. Japan, Finland and the United Kingdom, have shown interest in developing small-scale biomass power plants for Indonesia. Meanwhile, PT Navigat Innovative Ind, in co-operation with UK based Organics Ltd, is planning to build a facility to convert city waste from the Denpasar, Gianyar, Tabanan and Badung regencies in Bali into energy, the report said. “We are currently in negotiation with (state-owned electric-ity company) PLN on power pricing,” said Navigat’s Director, Sebastiaan Sauren. The planned $40 million power plant is expected to produce 20 mw of electricity from 800 tonnes of waste daily. The Indonesian government has also proposed an energy law, making it compulsory for all power producers to use renewable materials to produce at least five per cent of their total capacity. “We hope that it can be endorsed by the House of Representa-tives before the upcoming national elections,” Yogo stated.
Iranian soldiers load medicines from the Iranian Red Crescent at Kerman airport near Bam.
Quake relief efforts for Iran gain unprecedented support
The OPEC Fund for International Development has extended an emergency assistance grant of $750,000 to help procure relief items through the International Federation of Red Cross and Red Crescent Societies, for the victims of the earthquake that struck Iran’s Kerman Province on December 26. Measuring 6.5 on the Richter scale, the quake left at least 30,000 dead, more than 30,000 injured, and an estimated 75,000 people homeless. The area hardest hit in the Kerman Province was the Bam area, home to the world’s largest mud-brick edifice, a 2,000-year-old citadel. Following the quake, Iran gathered an unprecedented number of donors responding to a ‘Flash Appeal’ for funds to cover 90 days of humanitarian aid, according to the Head of the UN Office for the Coordination of Humanitarian Af-fairs (OCHA), Jan Egeland. In a news conference at UN headquarters, Egeland said that Iran had received pledges from 60 countries, with generous contributions coming from the Gulf Co-operation Council. The Flash Appeal, launched by nine UN agencies and programmes, seeks $31.3 million for shelter, food, water and sanitation. The long-term reconstruction is expected to cost between $700m and $1 billion. In addition, the United Nations Educational Scientific and Cultural Organization (UNESCO) and other UN agencies have pledged to help rebuild Iran’s 131 damaged schools and to provide affected children with an education, and assist in renovating Bam’s damaged cultural heritage cultural sites.
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A P P O I N T M E N T S
Britain’s Foreign Secretary Jack Straw and his Libyan counterpart Abdurrahman Shalgham attend a joint news conference in London.
Libya continues process of normalisation of relationswith the international community
Libyan Foreign Minister, Abdurrahman Shalgham, has visited the United Kingdom, where he met with Prime Minister Tony Blair and Foreign Secretary Jack Straw for talks on a range of issues. “We have, I believe, established a relationship of trust,” said Straw. Last month, Libya announced it was giving up any ambitions it had of acquiring weapons of mass destruction and that it would allow UN inspections to its nuclear sites after nine months of secret talks with London and Washington. “Over the last five years, we have built a relationship with Libya through active diplomacy which has enabled us together to take an important step towards enhancing international peace and security,” Straw said. Britain now has “corresponding responsibilities to enable Libya to come fully into the mainstream of the international com-munity,” he added. Meanwhile, the President of the European Commission, Romano Prodi, has welcomed the improvement in relations between France and Libya. The strengthening of diplomatic ties follows the recent compensation settlement Libya awarded relatives of 170 victims killed when the French UTA 772 flight was bombed over Niger in September, 1989. “I salute the efforts of the French and Libyan governments,” said Prodi. “This confirms that 2004 can mark a decisive turning point in relations between Europe and Libya,” he added.
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O B I T U A R Y
OPEC’s first Secretary General, Dr Fuad Rouhani, died on January 30 in London. He was 96 years old. Dr Rouhani was born on October 23, 1907 in Tehran, Iran. He obtained two degrees in law from the University of London. In 1926 he joined the Legal and Administrative Branches of the Anglo-American Oil Company. In 1951, he became the Chief Legal Adviser of the Iranian Oil Company, and in 1954 he was appointed Director. In 1961, he was appointed Secretary General of OPEC and Chairman of the Board of Governors. In 1964, he became Professor of Iranian Studies at Columbia University in New York, US. In 1965, he became Secretary General to the Organization of Regional Co-operation for De-velopment between Iran, Pakistan and Turkey. At the same time he served as an adviser to the Prime Minister of Iran and the Central Bank. Rouhani is the author of A Guide to the Contents of the Koran, as well as other books on religion. He also translated into Persian works by Plato and Jung, among others. He was an accomplished pianist and played the traditional Persian musical instrument, the tar. Rouhani was also the co-founder of the Philhar-monic Society of Tehran. After the Iranian revolution of 1979, he moved to Geneva, and later to London. He is survived by his wife of 76 years, Rohan; his daughters, Guitty Hosseinpour and Negar Diba, and three grandchildren.
First Secretary General of OPEC,Fuad Rouhani, dies at 96
Following the decision of the 128th Meeting of the OPEC Conference last December “… that from January 1, 2004, until such time as a Secretary General will be ap-pointed, the President of the Conference shall assume the responsibilities of the Secretary General and is authorized to make whatever arrangements he deems appropriate for the efficient direction of the Secretariat”, the President of the Conference, Dr Purnomo Yusgiantoro, last week announced the posting of Dr Maizar Rahman, Indonesia’s nominee-Governor for OPEC, to the Organization’s Secretariat in Vienna, to carry out the day-to-day work of the Secretariat under the President’s supervision. Dr Rahman was born on May 8, 1948. He graduated in chemistry from the University of Gajah Mada, Indonesia, in 1974. He obtained his diploma in Engineering from the Institut Français du Pétrole (IFP) in Paris in 1976, and his PhD in Engineering, also from the IFP, in 1983. From 1992 to 1998, he was Director, Division of Research for Refining and Petrochemicals at the National Research and Development Center for Oil & Gas Technology (LEMIGAS), Indonesia, and served as the President Director/CEO of this center from 1998 to 2002. From 2002 to February 2004 he was Executive Secretary of the Government’s Board of Commissioners for Pertamina, and Chairman of the British-Indonesian Gas Working Group. In February 2004 he was nominated Governor for OPEC and Chairman of the National Committee of OPEC for Indonesia.
O B I T U A R Y
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O P E C F U N D O P E C F U N D
News from the OPEC Fund
business sector, which is regarded as being the most promising in terms of employment creation and general economic benefits. The line of credit represents the Fund’s first lending operation in Swaziland, al-though the country has benefited from a technical assistance grant from the OPEC Fund that supported a rural resettlement programme.
OPEC Fund and WHO strengthen co-operationagainst HIV/AIDS
The OPEC Fund welcomed the World Health Organization (WHO) Assistant Directors General, Dr Jack C Chow and Dr Kazem Behbehani. They paid the in-stitution a courtesy call to discuss co-op-eration within the global campaign against HIV/AIDS. The two were received by the Director General of the OPEC Fund, Sulei-man Jasir Al-Herbish, who expressed satis-faction at the level and state of co-operation between the two organizations. The WHO was the first lead agency (within the United Nations System) with which the OPEC Fund entered into agree-ment, in 2002, on HIV/AIDS interven-tions. WHO and the OPEC Fund are
Fund Director General meets with Austrian President
The Director General of the OPEC Fund, Suleiman J Al-Herbish, met with Austri-an Federal President, Dr Thomas Klestil at Vienna’s Imperial Palace, the Hofburg. The purpose of the meeting was for Dr Klestil to officially welcome Al-Herbish to Austria and to discuss ways of strengthen-ing co-operation between the Fund and its host country. Dr Klestil congratulated Al-Herbish on his new position as Director General and conveyed his “deep appreciation” of the work of the OPEC Fund. He remarked also on the “solid ties” that had been built up over the years between the institution and the government and people of Austria. In response, Al-Herbish paid tribute to the Federal Republic: “Austria has been our host now for 28 years, and throughout this time, we have, without fail, enjoyed the practical and moral support of the govern-ment at every level.” The Director General reiterated his commitment to maintaining and enhancing this relationship, which he noted “extends well beyond official circles,” he said. Al-Herbish also visited the Austrian Min-ister for Foreign Affairs, Dr Benita Ferrero-Waldner to discuss development issues.
OPEC Fund welcomes UNFPAExecutive Director anddelegation
The OPEC Fund and the United Nations Population Fund (UNFPA) held a high-level meeting to discuss co-operation be-tween the two institutions. The Director General of the OPEC Fund, Suleiman J Al-Herbish, received UN Under-Secretary General and Executive Director of UNFPA, Thoraya Ahmed Obaid, who paid a cour-tesy call on the Fund. She was accompa-nied by the Senior External Relations Of-ficer, Erik Palstra. Obaid focused on current initiatives be-ing jointly pursued by the two institutions on HIV/AIDS. Al-Herbish showed keen inter-est in the work of UNFPA and assured his
guests that the long-standing partnership be-tween the institutions will continue. The OPEC Fund and UNFPA are in-volved in two separate HIV/AIDS projects to help with prevention, care and support of people living with HIV/AIDS and to help strengthen health systems in several countries of Latin America and Caribbean, as well as selected North African and Arab countries.
Fund supports development finance institution inSwaziland
An agreement for a $3m line of credit was signed between the OPEC Fund and FIN-CORP (Swaziland Development Finance Corporation), an institution that provides term lending to microfinance co-operatives and other micro and small businesses. Founded in 1995, FINCORP is seeking to expand, to offer new products and make a larger contribution to the development of Swaziland. Financing for businesses in rural areas, particularly for smallholders, is in rel-atively scarce supply, with financial institu-tions generally focusing on towns and larger businesses. Given the loan size and the op-erational focus of FINCORP, activities will concentrate on the microfinance and small
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O P E C F U N D O P E C F U N D
The OPEC Fund has approved a grant of $80,000 to co-founding an initiative to help disadvantaged youth from the East-land slums of Nairobi. Launched by the In-stitute for Co-operation in Development Projects (ICEP), the project, New Chances for Youth in Nairobi, Kenya, will provide some 1,700 children and adolescents with the chance to complete their education and learn job-training skills. ICEP is a non-profit, non-govern-mental organization (NGO) founded in Austria in 1996 with the mandate to as-sist youth from the poorest communities in developing countries in the form of capac-ity building projects. The present scheme, in collaboration with two other NGOs, the Strathmore Educational Trust and the Kianda Foundation, will providing youth with professional entrepreneurship train-ing courses in areas such as basic manage-ment, marketing, accounting and business skills; helping pupils in their final primary school year qualify for enrolment in sec-ondary school by offering individual tutor-ing and a place to study; and, establishing a computer training facility, which will be supervised by specialised tutors in informa-tion technology and will help needy female students from the Kianda Primary and Sec-ondary Schools.
February 2004
Grants approved
OPEC Fund and IACD signinitial grant agreement
The Director General of the OPEC Fund for International Development, Suleiman Jasir Al-Herbish, has welcomed Sheila Donovan, Director of Development Pro-grammes of the Inter-American Agency for Co-operation and Development (IACD), for the signing of a $100,000 grant agree-ment and to discuss other means of future collaboration, particularly in the private sec-tor. Also in attendance was HE Gustavo Marquez Marin, Ambassador of the Boli-varian Republic of Venezuela to Austria. The grant, which was approved by the Fund’s Governing Board on December 2, 2003, will co-founding an IACD initiative to introduce Information Communication Technology (ICT) to rural communities in Guatemala as a means of raising literacy, fostering the exchange of information and ultimately reducing poverty.
implementing a $8.11m Initiative against HIV/AIDS in Africa, meant to scale up in-terventions and strengthen healthcare deliv-ery in 12 sub-Saharan African countries seek-ing to curb the onslaught of the disease. Dr Chow is working for the WHO/ADG, HIV/AIDS, Tuberculosis & Ma-laria; while Dr Behbehani is working for the WHO/ADG, External Relations and Governing Bodies. They briefed the OPEC Fund about the new WHO 3-by-5 initia-tive, created to provide life-long anti-ret-roviral treatment (ART) to three million people by year-end 2005.
OPEC Fund extends debtrelief to Mozambique under the enhanced HIPC initiative
The OPEC Fund has signed a $3m financ-ing agreement with the Republic of Mo-zambique for the provision of debt relief within the framework of the Enhanced Heavily Indebted Poor Countries (HIPC II) Initiative. Endorsed by the Interim and Development Committees of the World Bank and the International Monetary Fund in September 1996, the Initiative represents a united effort by the interna-tional community to address the external debt problems of the world’s heavily in-debted poor countries. Specifically, it aims to reduce the debt of eligible countries to sustainable levels, subject to satisfactory policy performance, in order to ensure that adjustment and re-form efforts are not put at risk by contin-ued high debt and debt service burdens. As the Initiative requires participation by all relevant creditors, debt relief efforts entail co-ordinated actions by the international finance community, including multilateral institutions. Under the Initiative, the Fund has ap-proved debt relief to 23 countries, 18 of which are in Africa and five in Latin Amer-ica. Debt service payments in Mozambique are expected to be cut by almost one-half within the next eight years, creating room expenditures on poverty reduction pro-grammes.
January 2004
Grants approved
Fund helps disadvantagedyouth in Kenya
Guatemala’s rural poor, particularly those living in remote underserved areas, represent a significant percentage of the population. Educational and training op-portunities are limited, leaving many with-out a chance to improve their situation. One viable solution is to make a wide array of information available through the use of ICT such as the internet, videos, fax, radio and other media, which can reach even the most isolated communities. Guatemala’s Ministry of Education is already operating a successful Telesecond-ary Distance Education Programme at some 400 schools. Under the present scheme, the IACD, in collaboration with the Ministry, will establish three pilot school-based Tel-ecentres in rural Guatemala. They will serve as core models for an envisaged national programme that aims at offering ICT serv-ices to the general community as well.
Loans signed
Fund extends nine loans worth $62m
Nine agreements for public sector loans totalling $68.7m have been extended to Azerbaijan, Botswana, Burkina Faso, Cape Verde, Cameroon, Ghana, Lesotho, Tuni-sia and Yemen. The loans will help sup-port public sector projects in the educa-tion, health, multi-sectoral, transportation and water supply and sewerage sectors. In addition, through the Fund’s private sector window, an agreement for a line of cred-it worth $3m was concluded with FIN-CORP (Swaziland Development Finance Corporation). All nine public sector projects will be co-financed by the concerned govern-ments and by a number of international development institutions, including the Arab Bank for Economic Development in Africa, the Islamic Development Bank, the West African Development Bank and the Economic Community of West Afri-can States Regional Development Fund. The majority of the OPEC Fund project loans carry interest at rates ranging from one per cent to 1.5 per cent and have a ma-turity of 20 years, including a grace period of five years. As of the end of December 2003, cumulative public sector lending of the OPEC Fund, for project and programme financing, balance of payments support and HIPC debt relief, stood at $5.4bn. A further $238m had been extended
54 OPEC Bulletin January/February 2004 55
O P E C F U N D O P E C F U N D
in support of private sector operations. Total commitments, inclusive of grants and contributions to other international institutions, had reached $6.9bn and ben-efited 111 countries.
Azerbaijan.Amount: $6m.Project: Udjar-Yevlakh Road.Interest rate: 1.5 per cent per annum.Executing agency: Road Transport Serv-ices Department under the Ministry of Transport.Total cost: $31m.Co-finacier: Government of Azerbaijan.The loan agreement will help finance the rehabilitation of the Udjar-Yevlakh road. In line with government’s long-term aim to rehabilitate the entire east-west corri-dor, this project will upgrade 44.5 km of the Udjar-Yevlakh road to form half of a four-lane highway that will be completed under a future scheme. The remaining 8.5 km section will be converted into a four-lane dual carriageway. Additionally, drainage structures will be improved, culverts rehabilitated and bridges replaced or rebuilt. It is anticipated that the project will contribute substantially to pov-erty reduction through easier, cheaper and safer travel, and enhanced access to income-generating opportunities, markets and so-cial services.
Botswana.Amount: $10m.Project: Middlepits-Bokspits Road.Interest rate: 3.25 per cent per annum.Executing agency: Ministry of Works,Transport and Communication.Total cost: $35m.Co-financiers: BADEA and the Government of Botswana.The loan agreement will help co-founding the upgrading of the Middlepits-Bokspits Road. Once completed, the improved road will provide the area with less expensive and safer transport, and enable isolated commu-nities to access markets, social services and jobs. The 153 km-long, earth-surfaced Middlepits-Bokspits Road is situated in the Kgalagadi province, and passes through a number of small towns, cattle posts and farms. Under the project, the Middlepits-Bokspits stretch and approx-imately four km of village access roads will be upgraded to an all-weather paved surface. Traffic signs, drainage works and fencing will be installed, and throughout implementation, careful measures will be undertaken to insure the protection of
the surrounding environment. The project will also help create employment opportu-nities for local non-skilled workers during the construction phase.
Burkina Faso.Amount: $7m.Project: Kaya-Dori National Road.Interest rate: one per cent per annum.Executing agency: General Directorate of Roads, Ministry of Infrastructure,Transport and UrbanisationTotal cost: $34.28m.Co-financiers: ECOWAS RDF; the Islamic Development Bank; West African Development Bank; and the Government of Burkina Faso.The loan will help co-founding rehabilitation of the Kaya-Dori National Road. The 163 km-long stretch, situated in the northeast, makes up part of an important regional corridor that links Burkina Faso with Côte d’Ivoire and Niger. Classified as a “modern earth road” and surfaced with gravel, the stretch is now 13 years-old and in urgent need of rehabilitation. Under the project, the Kaya-Dori Road will be upgraded to double bitu-men standard, designed to accommo-date vehicles weighing up to 13 tons and speeds of 100 km/hour, and given a 20-year lifespan. Since the stretch passes over two earth dams that have deteriorated from constant flooding, the dams will also be fully reconstructed.
Cameroon.Amount: $6.7m.Project: Sangmelima District Hospital.Interest rate: 1.25 per cent per annum.Executing agency: Ministry of Public HealthTotal cost: $7.5m.Co-financier: Government of Cameroon.The loan will help finance the cons-truction of a 100-bed referral hospital in Sangmelima district. Healthcare services in Cameroon are of great concern, with high infant/maternal mortality rates and a rising incidence of malaria, HIV/AIDS, tuberculosis and other diseases. Only around 15 per cent of the population has access to medical services, and existing facilities are usually understaffed and lack up-to-date equipment and basic medication. Works will entail the construction of one-story modular hospital buildings that will provide services in areas such as emergency care and general medicine, as
well as a number of specialties including obstetrics, paediatrics, orthopaedics, oph-thalmology, dental care and radiology. Also included will be operating theaters and out-patient clinics, and it is estimated that the facility will be capable of handling 100 in-patients per day. All medical and administration equipment and furniture will be purchased, and an initial stock of essential drugs provided for the hospital’s first year of operation. The complex will also be designed to accommodate future expansion. In addition to serving the Sangmelima district, the new hospital is expected to attract patients from neigh-bouring countries Equatorial Guinea, Gabon and the Central African Republic, where health services are also limited.
Cap Verde.Amount: $5m.Project: Secondary Education.Interest rate: three per cent per annum.Executing agencies: Ministry of Education, Science, Youth and Sports,Ministry of Infrastructure and Transport.Total cost: $5.5m.Co-financier: Government of Cape Verde.The loan will help finance the rehabilitation and construction of selected secondary schools. As well as enhancing the overall quality of education, especially in rural areas, the project will also enable schools to accommodate some 4,000 additional pupils. Under this project, activities will be carried out in the densely-populated islands of Santiago, Fogo, Maio and Santo Antao, where four existing secondary schools will be rehabilitated and three new ones built. Each will contain science laboratories, computer rooms, library, sports facilities and a cafeteria, and provided with books, teaching materials, furniture and equipment. Pre- and in-service training will be given to secondary, vocational and higher education tutors, and a teachers’ training centre will be upgraded and suitably equipped.
Ghana.Amount: $5m.Project: Accra-Tema Rail Rehabilitation.Executing agency: Ghana Railways Company Ltd.Total cost: $5.5m.Co-financier: Government of Ghana.A $5m loan agreement has been signed to co-founding the re-commissioning of the Accra-Tema railway line. This project falls within the framework of government’s aim
54 OPEC Bulletin January/February 2004 55
O P E C F U N D O P E C F U N D
Interest rate: 1.25 per cent per annum.Executing agency: Social Fund for Development.Total cost: $15.2m.Co-financiers: Beneficiaries and the Government of Yemen.The loan will help support the activities of the Social Fund for Development (SFD). SFD is charged with raising incomes and living standards among the poorest segments of the population by creating employment opportunities and expanding access to social services. This third phase of the project will remain focused on sub-projects in the areas of education, water supply and environment, health and social protection and rural/feeder roads. As well as the construction/rehabilitation of infrastructure, institutional strengthening and capacity building measures will be implemented across all sectors. In addition, a social protection component will target special needs groups such as the handicapped, women, children and the mentally disabled. These activities will better educational prospects, improving health and sanitation services and boost household incomes.
Executing agency: Ministry of Higher Education, Scientific Research and TechnologyTotal cost: $15.07m.Co-financier: Government of Tunisia.The loan will help finance the construction of a Higher Institute of Technology (ISET) in the northern governorate of Beja. As part of government’s long-term plan to establish one ISET in each of the country’s 24 governorates, the aim is to boost the availability of higher education among the region’s 316,000-strong population. In addition to new universities, a number of ISETs have been created to provide specialty training in areas such as management, computer technology and industry. So far, 12 such institutes have been successfully set up across the country. The 12 still to be built will contain a Management Training Centre, to address the needs of small and medium-scale enterprises. The 22,246 sq m Beja institute will be able to accommodate 1,500 students per year, and will contain exhibition halls, an amphitheater, classrooms and laboratories. Fully-equipped support facilities will be built, including two dormitories with the capacity to house 600 students, and a restaurant. All infrastructure will be fitted out with first associated computer equipment, didactic materials and furniture.
Yemen.Amount: $13m.Project: Social Fund for Development (Phase III).
to provide a reliable and alternative system of transport and address the growing demand for mass rail services. The project will rehabilitate the abandoned Accra-Tema rail line, which totals 31.7 km in length. Works will include refurbishment of rails, sleepers and railway cars, and modernization of signaling and telecom-munication equipment. Nine railway stations will be renovated, and safety and security features such as fences and pedestrian crossings built. A stock of replacement parts and tools will also be procured. It is estimated that, on the average, 4.1 million passengers per year will use the rail line, which will free up roads, reduce travel time and result in fewer accidents and less pollution.
Lesotho.Amount: $4m.Project: Maseru Water Supply.Interest rate: 1.25 per cent per annum.Executing agency: Water and Sewerage Authority Total cost: $11.25m.Co-financiers: BADEA and the Government of LesothoThe loan will help finance the second phase of a project to expand the water distribution network in the capital Maseru. This project falls within the framework of a government strategy to provide a safe and reliable supply of potable water. In light of the growing demand for water that is presently exceeding available supply, the government has implemented the first phase of a project that involves the installation of pumping stations and transmission pipelines to bring water to Maseru’s peri-urban areas. Under phase II, a 150 km pipeline will be installed along with house connections and meters for around 3,000 homes. Two new reservoirs will be built with a total storage capacity of approximately 3,750 cubic metres, and two existing ones will be enlarged. Two pumping stations will be constructed, while another situated in the northwest zone will be completely upgraded. Additionally, some 13,000 m of ductile iron main pipeline will be installed connecting the pumping stations to nearby reservoirs.
Tunisia.Amount: $12m.Project: Beja Higher Institute of Technology.Interest rate: 2.75 per cent per annum.
OPEC Fund for International Development, Parkring 8, PO Box 995, 1011 Vienna, Austria. Tel: +43 1 515640; fax: +43 1 513 9238; cable: opecfund; e-mail: [email protected]; Web site: www. opecfund.org.
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56 OPEC Bulletin January/February 2004 57
N O T I C E B O A R D S E C R E T A R I A T N O T E S
Forthcoming events
Houston, TX, USA, February 18–19, 2004, Achieving operational effectiveness under sanctions and export controls. Details: IQPC. Tel: +44 (0)20 7368 9300; e-mail: [email protected]; Web site: www.iqpc.co.uk.
Singapore, February 18–20, 2004, Natural gas industry fundamentals. Details: Conference Connection Administrators Pte Ltd (CCA), 105 Cecil Street #07-02 The Octagon, Sin-gapore 069534. Tel: +65 6222 0230; fax: +65 6222 0121; e-mail: [email protected]; Web site: www.cconnection.org.
Kuala Lumpur, Malaysia, February 23–24, 2004, Contract risk management for upstream oil and gas. Details: IQPC. Tel: +44 (0)20 7368 9300; e-mail: [email protected]; Web site: www.iqpc.co.uk.
Aberdeen, Scotland, February 23–24, 2004, Real time field management. Details: IQPC. Tel: +44 (0)20 7368 9300; e-mail: [email protected]; Web site: www.iqpc.co.uk.
Perth, Australia, February 23–25, 2004, Production sharing contracts and international petroleum fiscal systems. Details: Conference Connection Administrators Pte Ltd (CCA), 105 Cecil Street #07-02 The Octagon, Sin-gapore 069534. Tel: +65 6222 0230; fax: +65 6222 0121; e-mail: [email protected]; Web site: www.cconnection.org.
London, UK, February 23–25, 2004, Fun-damentals of the oil and gas industry. Details: The Petroleum Economist Ltd, PO Box 105, Baird House, 15/17 St. Cross Street, London EC1N 8UW, UK. Tel: +44 (0)20 7831 5588; fax: +44 (0)20 7831 4567/5313; e-mail: [email protected]; Web site: www.petroleum-economist.com.
London, UK, February 24, 2004, Introduc-tion to gas and power. Details: Alphatania, EconoMatters Ltd, Rodwell House, 100 Middlesex St, London, E1 7HD, UK. Tel: +44 (0)20 7650 1405; fax: +44 (0)20 7650 1401; e-mail: [email protected]; Web site: www.economatters.com.
Houston, TX, USA, February 24–25, 2004, Portfolio optimization in oil and gas. Details: IQPC. Tel: +44 (0)20 7368 9300; e-mail: [email protected].
Kuala Lumpur, Malaysia, February 24–25, 2004, Corrosion management for upstream oil and gas. Details: IQPC. Tel: +44 (0)20 7368 9300; e-mail: [email protected]; Web site: www.iqpc.co.uk.
Perth, Australia, February 26–27, 2004, Upstream government petroleum contracts. Details: Conference Connection Admin-istrators Pte Ltd (CCA), 105 Cecil Street #07-02 The Octagon, Singapore 069534. Tel: +65 6222 0230; fax: +65 6222 0121; e-mail: [email protected]; Web site: www.cconnection.org.
Calgary, Alberta, Canada, March 1–2, 2004, CERI North American natural gas conference and Calgary Energy Show 2004. Details: Canadian Energy Research Institute, Conference Divi-sion, 150, 3512 – 33 St NW, Calgary, AB T2L 2A6, Canada. Tel: +1 403 220 2380; fax: +1 403 289 2344; e-mail: [email protected]; Web site: www.ceri.ca.
Kuala Lumpur, Malaysia, March 1–2, 2004, Petrochemical industry — economics and technology. Details: Centre for Manage-ment Technology, 80 Marine Parade Road #13-02, Parkway Parade, Singapore 449269. Tel: +65 6345 7322/6346 9132; fax: +65 6345 5928; e-mail: [email protected]; Web site: www.cmtevents.com.
Milan, Italy, March 1–2 2004, Italian energy. Details: SMi Conferences Ltd, 1, New Concordia Wharf, Mill Street, Lon-don, SE1 2BB, UK. Tel: +44 (0)20 7827 6000; fax: +44 (0)20 7827 6001; e-mail: [email protected]; Web site: www.smi-online.co.uk.
London, UK, March 1–5, 2004, Fundamen-tals of upstream economics and risk analysis. Details: The Petroleum Economist Ltd, PO Box 105, Baird House, 15/17 St. Cross Street, London EC1N 8UW, UK. Tel: +44 (0)20 7831 5588; fax: +44 (0)20 7831 4567/5313; e-mail: [email protected]; Web site: www.petroleum-economist.com.
Prague, Czech Republic, March 7–12, 2004, The gas chain — reservoir to burner tip. De-tails: Alphatania, EconoMatters Ltd, Rodwell House, 100 Middlesex St, London, E1 7HD, UK. Tel: +44 (0)20 7650 1405; fax: +44 (0)20 7650 1401; e-mail: [email protected]; Web site: www.economatters.com.
London, UKMarch 9–10, 2004
Finance and Investment in Qatar
Details: IBC Energy Conferences Informa House 30-32 Mortimer Street London, W1W 7RE, UK Tel: +44 (0)20 7017 4025 Fax: +44 (0)20 7017 4039 E-mail: [email protected] Web site: www.ibcenergy.com.
56 OPEC Bulletin January/February 2004 57
N O T I C E B O A R D S E C R E T A R I A T N O T E S
A Energy Charter Secretariat (ECT) Eurasian natural gas conference was held in Brussels, Belgium, November 12–13, 2003.
A course on Refining operations planning and linear programme was organized by the Institut Français du Pétrole and took place in Paris, France, November 17–26, 2003.
The 10th Session of the General Conference of the United Na-tions Industrial Development Organization (UNIDO), was held in Vienna, Austria, December 1–5, 2003.
A course on Mechanics and operations of oil trading was organized by the Energy Institute (IP) and took place in London, UK, December 2–5, 2003.
A conference on Using JI & CDM in the EU emissions trad-ing scheme was organized by the International Oil Pollution Compensation Funds (IOPC) and held in Milan, Italy, De-cember 3–5, 2003.
A visit was organized to the National Institute Forecasting System, London, UK, December 8–10, 2003.
The 2nd WPC regional meeting was held in Doha, Qatar, December 8–11, 2003.
A Regional meeting of the Petroleum Institutes and Similar Institutions (PISI) was organized by the UNECE and held in Doha, Qatar, December 8–12, 2003.
Event management training was organized by the Institute of Public Relations (IPR), and took place in Manchester, UK, December 9, 2003.
An inter-secretariat meeting, as a follow-up to the 4th Joint Oil Data Meeting was organized by IEA, Eurostat, APEC, OLADE, UN and OPEC, and held in Paris, France, De-cember 11, 2003.
Forthcoming OPEC Meetings
The 112th Meeting of the Board of Governors will be held in Vienna, Austria, March 2, 2004.
The 101st Meeting of the Economic Commission Board (ECB) will be held in Vienna, Austria, March 24, 2004.
The 130th Meeting of the OPEC Conference will be held in Vienna, Austria, March 31, 2004.
The 131st (Extraordinary) Meeting of the OPEC Conference will be held in Beirut, Lebanon, June 3, 2004.
November/December OPEC Meetings
A 9th Conference of the Parties (COP-9) Co-ordina-tion Meeting was held on November 28, 2003, and the United Nations Framework Convention on Climate Change (UNFCCC) COP-9 was held on December 1–12, 2003, in Milan, Italy.
The 46th Meeting of the Ministerial Monitoring Sub-Committee (MMSC), was held in Vienna, Austria, on December 4, 2003.
The 128th (Extraordinary) Meeting of the OPEC Conference was held in Vienna, Austria, on De-cember 4, 2003.
The 111th (Extraordinary) Board of Governors Meeting was held in Vienna, Austria, December 16–17, 2003.
Secretary General’s diary
A Workshop of the International Association of Oil and Gas Producers was held in Semmering, Austria, November 17, 2003.
The United Nations Economic Commission for Eu-rope (UNECE) Energy Security Forum organized the Committee on Sustainable Energy Special Events, Geneva, Switzerland, November 20, 2003.
A seminar on Oil: essential and reliable energy was organized by the Spanish Oil Downstream Industry Association and held in Santa Cruz de Tenerife, Tenerife, November 20–21, 2003.
Attended the UNFCCC COP 9 in Milan, Italy, December 1–12, 2003.
Secretariat missions
The 21st Sessions of the Intergovernmental Panel on Climate Change (IPCC) and Sessions of Working Groups I, II, III, organized by IPCC, were held in Vienna, Austria, November 3–7, 2003.
The Oil & Money 2003 conference was organized by the International Herald Tribune/Energy Intelligence and held in London, UK, November 4–5, 2003.
A conference on Investing in the Russian oil and gas sector was organized by The Energy Exchange Ltd and held in Moscow, Russian Federation, November 4–5, 2003.
58 OPEC Bulletin January/February 2004 59
O P E C P U B L I C A T I O N S
For an in-depth lookat the oil marketand related issues
the OPEC Reviewcontains research papersby experts from across
the world
Now in its 27th annual volume, the OPEC Review is published quarterly. Its content covers the international oil market, energy generally, economic development and the environment.
Subscription enquiries to: Blackwell Publishing Journals, 9600 Garsington Road, Oxford OX4 2DQ, UK. Free sample copies sent on request.
Energy economics and related issues
People wishing to submit a paper for publication should contact the Editor-in-Chief of the OPEC Review, Dr Omar Fa-rouk Ibrahim, at the Public Relations and Information Department, OPEC Secre-tariat, Obere Donaustrasse 93, A-1020 Vienna, Austria.
“The principal objective of the OPEC Review is to broaden awareness of (energy and related) issues, enhancing scholarship in universities, researchinstitutes and other centres of learning.”
Recent issuesSeptember 2003
Special issue — Joint OPEC/IEA Workshop on Oil Investment Prospects (proceedings)
June 2003Oil outlook to 2020 — Adnan Shihab-Eldin, Mohamed Hamel and Garry BrennandThe importance of weighted variables to OPEC’s production quota allocation — Mahmoud Al-Osaimy and Aziz YahyaiThe efficiency of natural gas futures markets — Ahmed El Hachemi MazighiElectric load forecasting for northern Vi-etnam, using an artificial neural network — Subhes C Bhattacharyya and Le Tien Thanh
March 2003Price elasticity of demand for crude oil: estimates for 23 countries — John C B CooperOwnership of associated and discovered gas in Nigeria under the old joint venture contracts — Andrew L ChukwuemerieAn introduction to the economics of natural gas — Ferdinand E Banks
OPEC production agreements: a detailed listing — OPEC Secretariat
December 2002New energy technologies: trends in the development of clean and efficient energy technologies — Adnan Shihab-EldinOil and macroeconomic fluctuations in Mexico — François BoyeEnergy indicators — OPEC SecretariatOPEC official statements — OPEC Secretariat
September 2002Risk measurement for oil and gas exploration: the marriage of geological and financial tech-niques — Thomas Stauffer
The prospects for the oil sector in the Iraqi economy after sanctions — Imad JabirEnergy use and GDP growth, 1950–97 — Rögnvaldur HannessonOil price movements and globalisation: is there a connection? — Robert Looney
June 2002Oil outlook to 2020 — Rezki Lounnas and Garry BrennandShort-term forecasting of non-OPEC sup-ply — a statistical analysis — S M R Tayyebi Jazayeri and A YahyaiUsing non-time-series to determine supply elasticity: how far do prices change the Hub-bert curve? — Douglas B ReynoldsA simple economic analysis of electricity deregulation failure — Ferdinand E Banks
March 2002Short-term forecasting of non-OPEC supply: a test of seasonality and seasonal decomposition — S M R Tayyebi Jazayeri and A YahyaiEvidence that the terms of petroleum contracts influence the rate of development of oil fields — Mustafa Bakar Mahmud and Alex Russell Stimulation of investment in international energy through Nigerian tax exemption laws — Uche Jack OsimiriEnergy indicators — OPEC Secretariat
December 2001Oil outlook to 2020 — Adnan Shihab-Eldin, Rezki Lounnas and Garry BrennandOPEC oil production and market fundamentals: a causality relationship — Atmane Dahmani and Mahmoud H Al-OsaimyOil demand in North America: 1980–2020 — Salman Saif GhouriThe price of natural gas — A M Samsam Bakhtiari
September 2001What have we learned from the experience of low oil prices? — A F AlhajjiThe estimation of risk-premium implicit in oil prices — Jorge Barros LuísThe economics of an efficient reliance on biomass, carbon capture and carbon sequestration in a Kyoto-style emissions control environment — Gary W YoheThe geopolitics of natural gas in Asia — Gawdat Bahgat
Vol. XXVII, No. 4 December 2003
An examination of the international natural
gas trade
The effect of inflation ongovernment revenue and
expenditure: the case of theIslamic Republic of Iran
Limiting global coolingafter global warming is over — differentiating
between short- and long-lived greenhouse gases
Energy indicators
Ahmed El Hachemi Mazighi
Abbas Alavirad
Axel Michaelowa
OPEC Secretariat
58 OPEC Bulletin January/February 2004 59
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