1
Organization of the Petroleum Exporting Countries
OPEC: Vision, Mission and Development
World Oil Outlook to 2025
Dr Maizar Rahman
Indonesian Governor for OPEC
Acting for the Secretary General
Indonesian National Committee, World Energy Council
Jakarta, Indonesia
29 July 2004
2
OPEC Member Countries
Islamic Republic of Iran
Iraq
Kuwait
Saudi Arabia
Venezuela
Qatar
Indonesia
Socialist People’s Libyan Arab Jamahiriya
United Arab Emirates
Algeria
Nigeria
1960
1960
1960
1960
1960
1961
1962
1962
1967
1969
1971
3
OPEC Statute
“The Organization shall devise ways and means of ensuring the
stabilisation of (oil) prices in international markets, with a view
to eliminating harmful and unnecessary fluctuations
“Due regard shall be given at all times to the interests of the
producing nations and to the necessity of securing: a steady
income to the producing countries; an efficient, economic and
regular supply of petroleum to consuming nations; and a fair
return on their capital to those investing in the petroleum
industry”
4
OPEC’s landmark declarations
Declaratory Statement of Petroleum Policy in Member Countries
Vienna, 1968
Inalienable right, as expressed by the UN, of all countries to exercise permanent
sovereignty over their natural resources in the interests of their national development
Conference of Sovereigns and Heads of State of OPEC Member Countries
(First Summit) Algiers, 1975
First “Solemn Declaration”. Led to establishment of:
OPEC Fund for International Development
US $7.0 billion committed*
US $4.7 billion disbursed*
*Since 1976
Second Summit of Heads of State and Government of OPEC Member Countries
Caracas, 2000
Second “Solemn Declaration”
5
OPEC’s development
1960
Five Founder Members
OPEC formed to safeguard legitimate national interests, when petroleum industry
dominated by established industrial powers
Intervening years
New Members
OPEC faced formidable challenges, impacting across spread of pricing spectrum
and compounded by factors far removed from simple market economics
Today
Vast experience of petroleum issues
Acute awareness of realities and sensitivities of performing on world stage
Production agreements make major contribution to market stability
6
Cooperation within OPEC
OPEC founded on premise of cooperation
“The principal aim of the Organization shall be
the unification of petroleum policies for the
Member Countries and the determination of
the best means for safeguarding the interests
of Member Countries, individually and
collectively”
7
OPEC/non-OPEC cooperation
Big advances since mid-1980s
Support for OPEC’s market-stabilisation measures
Many other benefits for oil industry
8
Producer-consumer dialogue
Big advances since 1990
International Energy Forum
OPEC’s prominent role in development
Saudi Arabia hosts 7th Forum
Secretariat in Riyadh
OPEC Member of Executive Board
Joint Oil Data Initiative
International Energy Agency
Closer working relationship between OPEC and IEA
First joint press conference in 2002
Two Joint Workshops on Investment
Informal discussions calmed oil market in early 2003
9
Cooperation will better prepare the
industry to meet the challenges that
lie before it in the early 21st century
10
Today’s oil market
OPEC concerned about high oil prices
Market well-supplied with crude, but
higher-than-expected demand
geopolitical tensions
downstream bottlenecks
speculation
OPEC seeking to restore order and stability
2-stage OPEC-10 output ceiling rise
25.5 mb/d from 1 July
26.0 mb/d from 1 August
Support needed from non-OPEC and other parties
11
G-7 Economic Growth Rates
(Y-o-Y % change)
6
4
USA
JAPAN
GERMANY
G7
2
0
-2
-4
World economic growth
rates (%):
2001
2.4
2002
2.8
2003
3.8
2004
4.8
2005
4.3
1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05
12
Regional economic growth rates
(percentage change from previous year)
Estimate
Forecast
Revisions
from Jun '04*
2003
2004
2001
2002
2003
2004
2005
OECD
N.America
Europe
Pacific
Japan
DCs
1.0
0.6
1.4
1.2
0.4
2.7
1.7
2.2
1.3
1.2
-0.3
2.7
2.2
2.9
1.2
2.8
2.7
4.4
3.5
4.3
2.4
4.2
4.0
5.3
3.0
3.6
2.5
2.7
2.0
5.1
0.0
0.0
0.0
0.0
0.0
-0.1
0.0
-0.1
0.0
0.0
0.2
0.1
OPEC
2.7
2.4
3.2
5.4
5.2
-0.3
0.3
China
Russia
7.5
5.1
8.0
4.7
9.1
7.3
8.8
7.0
7.7
5.7
0.0
0.0
0.0
0.0
World
2.4
2.8
3.8
4.8
4.3
0.0
0.0
Source: OPEC Secretariat
*/ As presented to the 131
st
(Extraordinary) Conference in June, 2004.
13
Range of quarterly oil demand estimations
(year-on-year change, mb/d)
5
5
OPEC
4
3
Max
Min
Mean (exc. OPEC)
4
3
2.1
2
2
1.7
1
1
0
1q04
2q04
3q04
4q04
1q05
2q05
3q05
4q05
0
1q04
2q04
3q04
4q04
1q05
2q05
3q05
4q05
14
Regional oil demand growth
(year-on-year change, mb/d)
3.0
3.0
Others
Asia
Total
0.90
0.6
0.70
1.2
0.98
1.2
0.96
1.8
0.95
1.8
0.76
2.4
0.94
2.4
0.6
0.0
0.0
-0.6
-0.6
-1.2
-1.2
94
95
96
97
98
99
00
01
02
03
04
05
15
Growth in global oil demand and non-OPEC supply in 2005
mb/d
3
3
Range of forecasts
Mean (exc. OPEC)
2
OPEC
2
1
1
0
0
-1
-1
Demand
Non-OPEC Supply
Demand - Non-OPEC
Supply
16
World oil demand & supply balance (adjusted)
(mb/d)
2003 1Q04 2Q04 3Q04 4Q04
2004 04/03
Demand (a)
78.8
81.0 79.0 80.6 82.9
80.9
2.1
82.6
1.7
Supply
79.3
81.7 81.9
Non-OPEC (b)
48.7
49.7 49.6 49.9 50.9
50.0
1.4
51.2
1.2
OPEC NGL (c)
3.7
3.8
3.9
0.2
4.0
0.1
27.0
28.1 28.4
a-(b+c)
26.4
27.4 25.5 26.9 28.2
27.0
0.6
27.4
Balance
0.5
OPEC Crude oil
3.9
3.9
0.7
2.9
-0.5
1.0
3.8
Seasonal stock chg
(1999-2003)
0.3
-0.6
2005 05/04
17
OPEC production versus capacity
mb/d
34
32
Capacity
30
Production
28
26
st
*/ 2004 production reflects the 1 half '04, while the ranges for '04 & '05 are based
on required OPEC crude production for the balance from the survey of forecasts.
24
1998
1999
2000
2001
2002
2003
2004*
2005*
18
Real oil price assumption, $(2003)/b
70
60
50
40
30
20
10
2020
2015
2010
2005
2000
1995
1990
1985
1980
1975
1970
1965
1960
0
19
Oil Outlook to 2025
Underlying assumptions:
Prices:
initial years see the OPEC basket price at $ 25/b,
long-term real oil price $20/b (2003 prices).
Imply fundamental perceptions:
sufficient oil resources
sustainable price level (does not generate boom-bust supply cycles)
sufficient to mobilise necessary resources
would be supportive of the prospects for robust economic growth (both for
producers & consumers)
GDP growth rates:
average world economic growth of 3.6% pa over the period 2003-2025,
uncertainties over OECD productivity growth and the Chinese economy.
20
Average annual real GDP growth rates (PPP), % pa
Reference
OECD
DCs
China
FSU
World
2003-05
2.6
5.6
8.0
5.2
3.9
2006-10
2.6
5.3
6.8
3.8
3.8
2011-15
2.5
5.1
6.4
3.4
3.7
2016-20
2.4
4.9
6.0
3.2
3.6
2021-25
2.3
4.5
5.5
3.0
3.4
2003-25
2.5
5.0
6.4
3.6
3.6
Average growth in the OECD economies of 2.5% pa over the period 2003–2025
For developing countries, with low capital stock bases and considerable technological
catch-up potential, GDP growth rates are expected to be higher, but large uncertainties
exist
China is a significant uncertainty but expected to remain fastest growing region
Developing countries expand at an average 5% pa
Economies in transition have considerable scope for productivity “catch-up”
Thus, economic growth in the reference case is relatively optimistic regarding the
long-term health of the world economy
21
World oil demand outlook in the reference case
million barrels a day
2002
2010
2020
2025
OECD
47.7
51.2
54.5
55.8
DCs
24.7
32.3
45.3
52.5
4.5
5.3
6.0
6.3
77.0
88.7
105.8
114.6
Transition economies
World
22
Growth in oil demand – 2002-25
million barrels a day
DCs incl. China
OECD
Transition economies
0
5
10
15
20
25
30
23
Annual global growth in oil demand by sector
million barrels of oil equivalent a day
1
0.8
0.6
0.4
0.2
0
-0.2
Transport
HH/Comm
-0.4
Industry
Elec. Gen.
-0.6
1971-1980
1980-1990
1990-2000
2000-2010
2010-2025
24
World oil production outlook in the reference case
million barrels a day
2002
2010
2020
2025
Non-OPEC
47.8
54.6
56.9
56.3
OPEC (incl. NGLs)
29.2
34.1
48.9
58.3
World
77.0
88.7
105.8
114.6
OPEC market share %
37.9
38.4
46.2
50.9
25
OPEC and non-OPEC oil production
million barrels a day
70
History
60
Projection
non-OPEC
50
OPEC
mb/d
40
nonOECD
30
20
OECD
10
0
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
26
More investment in production capacity needed:
to meet forecast rise in demand
to replace exhausted reserves
to cover sudden, unexpected shortages
27
Uncertainties over future economic growth,
government policies and technological progress
raise questions over scale of investment
28
Cumulative OPEC investment requirements:
how much is needed to provide market stability?
450
400
350
$(2003) billion
300
250
200
$258-382 billion
¾If OPEC balances the market, the uncertain
volume requirements translate into huge ranges
of anticipated capital outlay needs
¾Already by 2010 an estimated gap of $25 billion
exists between the reference case and the low
economic growth case
Reference
¾This a central concern: where lies the onus of
maintaining sufficient spare capacity?
Low economic
growth
150
100
$122-173 billion
50
0
2000
$70-95 billion
2005
2010
2015
2020
2025
29
Estimated annual upstream
investment requirements 2000-2025, $bn (2003)
2005-2010
2010-2015
2015-2020
2020-2025
100
90
80
70
60
50
40
30
20
10
0
OPEC
non-OPEC
World
30
Starting-point for sound investment strategy
is market order and stability today,
with reasonable, predictable prices
31
Collective responsibility
OPEC’s agreement are necessary for healthy market
— present and future
Non-OPEC must actively support OPEC’s measures
All parties benefit from cooperation
32
World’s oil resource base sufficient
to meet forecast rise in demand
in early 21st century
Increasing reliance upon OPEC oil
OPEC committed to meeting demand
in orderly manner
stable markets
reasonable prices
steady revenues
secure supply
fair returns for investors
33
34
BACK UP SLIDES
35
Commercial oil stock levels in the USA
week-ending, mb
Crude Oil
Products
800
370
Min-Max range: '94-'03
Min-Max range: '94-'03
740
340
Avg. 99-03
310
680
Avg. 99-03
2004
2003
2004
620
280
2003
560
250
J
F
M
A
M
J
J
S
O
N
D
J
F
M
A
M
J
J
S
O
N
D
36
Comparisons of world oil balance:
supply – demand, (mb/d)
4
4
3
3
2
2
1
1
0
0
Min-Max range
-1
uncertainty range
-2
1q04
2q04
Mean (exc. OPEC)
-1
OPEC
-2
3q04
4q04