Mission to Doha: Diary of a Journalist (P10)

This month’s cover ... shows Ngoni, a six year old HIV-positive Zimbab- wean boy, resting after eating his morning meal at a hospice in Harare (see feature on pp28–31). Photo: Reuters/Howard Burditt

Vol XXXIV, No 3 ISSN 0474-6279 May/June 2003

02 Editorial Information

03 Commentary A balanced perspective

04 Noticeboard

OPEC Conference meets in Doha (p6) 06 Conference Notes OPEC maintains production ceiling steady at 25.4m b/d at Extraordinary Meeting in Qatari capital Doha Mission to Doha: diary of a journalist (p10)

14 Forum The international oil industry: how OPEC sees its present and its future

OPEC Fund helps in The outcome of the Seminar on the application of the the battle against

Photo: Photo: M Ladurner UN Framework Classification on Energy HIV/AIDS (p28) Photo: Statoil Reserves/Resources to OPEC Member Countries (p17)

24 OPEC Fund Interview: The OPEC Fund — continuing to assist the development of poorer countries HIV/AIDS tackled in developing countries as OPEC Fund tops up grant account to $30m (p28)

32 Newsline Photo: Photo: Reuters/Ian Jones Algeria’s President Bouteflika Oil and gas news from OPEC visits Austria (p34) 42 Market Review Obasanjo inaugurated for second term (p67) Covering March/April

66 Member Country Focus Development and economic news from OPEC

72 OPEC Fund News Photo: Photo: Reuters/George Esiri Photo: WFP/Richard Lee WFP/Richard Photo: 78 Secretariat Notes

May/June 2003 1 Publishers Editorial policy

OPEC The OPEC Bulletin is published by the Pub- Organization of the Petroleum Exporting lic Relations & Information Department. Countries, Obere Donaustrasse 93, The contents do not necessarily reflect 1020 Vienna, Austria the official views of OPEC or its Member Telephone: +43 1 211 12/0 Countries. Names and boundaries on any Telefax: +43 1 216 4320 maps should not be regarded as authorita- Public Relations & Information tive. No responsibility is taken for claims Department fax: +43 1 214 9827 or contents of advertisements. Editorial E-mail: [email protected] material may be freely reproduced (unless E-mail: OPEC News Agency: [email protected] copyrighted), crediting the OPEC Bulletin Web site: http://www.opec.org as the source. A copy to the Editor-in-Chief Hard copy subscription: $70/year would be appreciated. Secretariat officials Membership and aims Editorial staff Secretary General OPEC is a permanent, intergovernmental Or- Dr Alvaro Silva-Calderón Editor-in-Chief ganization, established in Baghdad, September Dr Omar Farouk Ibrahim 10–14, 1960, by IR Iran, Iraq, Kuwait, Saudi Director, Research Division Editor Arabia and Venezuela. Its objective is to co-ordi- Dr Adnan Shihab-Eldin Graham Patterson nate and unify petroleum policies among Mem- Deputy Editor ber Countries, in order to secure fair and stable Head, Petroleum Market Analysis Philippa Webb-Muegge (maternity leave) prices for petroleum producers; an efficient, Department Lizette Kilian economic and regular supply of petroleum to Javad Yarjani Production consuming nations; and a fair return on capital Diana Lavnick to those investing in the industry. Head, Data Services Department Design The Organization comprises the five Dr Muhammad A Al Tayyeb Elfi Plakolm Founding Members and six other Full Mem- bers: Qatar (joined in 1961); Indonesia (1962); Head, Administration & Web site: www.opec.org SP Libyan AJ (1962); United Arab Emirates Human Resources Department (Abu Dhabi, 1967); Algeria (1969); and Senussi J Senussi Visit the OPEC Web site for the latest news Nigeria (1971). Ecuador joined the Organiza- and information about the Organization and its tion in 1973 and left in 1992; Gabon joined Head, Energy Studies Department Member Countries. Recent and back issues of in 1975 and left in 1995. Mohamed Hamel the OPEC Bulletin are available free of charge on the site in PDF format. Contributions Head, PR & Information Department Dr Omar Farouk Ibrahim The OPEC Bulletin welcomes original contributions on the technical, financial and envi- Legal Officer ronmental aspects of all stages of the energy Dolores Dobarro industry, including letters for publication, research reports and project descriptions with Head, Office of the Secretary General Indexed and abstracted in PAIS International supporting illustrations and photographs. Karin Chacin Printed in Austria by Ueberreuter Print and Digimedia

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2 OPEC Bulletin May/June 2003 3 COMMENTARY A balanced perspective The efforts of OPEC’s Members to aid other developing countries through our sister Organization, the OPEC Fund, deserve greater recognition

OPEC is rarely out of the urgently. We look at the international media spot- Fund’s contribution to the light. Whenever the Organi- battle against HIV/AIDS zation holds a Conference, through its $30 million hundreds of journalists special grant account. We representing just about all also examine a different the major TV channels and kind of success story — a newspapers descend on the sugar factory in the Sudan Secretariat, eager to hear the — and interview the Fund’s

latest decision on output, Photo: Vision/Senzani World Centre Director General, HE Dr Y and to postulate on what it Seyyid Abdulai. might mean for the oil mar- There have been many ket and the world economy. changes in the global media Even when no Conference over the past decade or so. is looming, the pronounce- Perhaps the most striking ments of the OPEC Minis- has been the rise of the ters and officials are closely World Wide Web, mean- followed. ing that anyone with access By contrast, our sister to a computer has access to Organization, the OPEC the many thousands of on- Fund for International line newspapers around the Development, rarely seems world, each with their own to grab the headlines. Most point of view. But the tradi- likely this is due to the national media have not been ture of the Fund’s mandate idle either. New TV chan- — providing financial assist- nels like Al-Jazeera offer a ance to poorer nations for perspective that is radically projects that will assist their different from both that of development. The western the western media, and the media, it often seems, are In Africa, AIDS is having a devastating effect on families. staid, state-run TV channels rarely concerned with things In some countries, one-fifth of all children are AIDS orphans. in the Middle East. that do not impact directly So perhaps the next time on their own countries. This the world’s media — both is a shame, because the sterling work done by the Fund is old and new — are planning their coverage of the next OPEC — in its own way — just as important as that done by Conference, they might think of our sister Organization as OPEC in stabilizing oil markets. well. Too often, the OPEC Member Countries are portrayed In this issue of the OPEC Bulletin, we attempt to redress in the media as caring only about oil prices. They do care the balance by examining some of the Fund’s efforts to help about oil prices, of course, but that is far from being the the developing world. The scourge of HIV/AIDS has taken whole story. They care deeply about other developing na- a terrible toll in recent years, and nowhere more so than tions too, as the activities of the Fund so amply demonstrate. in Africa, where some countries face economic ruin if the Media recognition of this simple fact would offer a fresher decimation of their workforces by the disease is not tackled and more balanced perspective.

2 OPEC Bulletin May/June 2003 3 NOTICEBOARD

Forthcoming events Singapore, August 25–26, 2003, Negoti- annual India oil & gas review symposium & ating gas contracts. Details: Sandy Leong, international exhibition. Details: Manish Mo- Event Manager, 80 Marine Parade Road, han, Event Co-ordinator, India Oil and Gas London, UK, July 22–23, 2003, Asset #13-02 Parkway Parade, Singapore 449269. Review Symposium 2003. Tel: +91 22 2632 acquisition and divestiture in oil and gas. Tel: +65 6345 7322; fax: +65 6345 5928; 5787/2632 7177; e-mail: [email protected]; Details: IQPC Ltd, Anchor House, 15–19 e-mail: [email protected]; Web site: Web site: www.oilasia.com/iors2003. Britten Street, London SW3 3QL, UK. Tel: www.cmtevents.com. +44 (0)20 7368 9300; fax: +44 (0)20 7368 Dubai, UAE, September 8–9, 2003, Port 9301; e-mail: [email protected]; Web London, UK, September 1–5, 2003, state control conference. Details: Conference site: www.oilandgasiq.com/2032a. Fundamentals of upstream economics and Connection Administrators Pte Ltd, 105 risk analysis. Details: Petroleum Economist Cecil Street #07–02, The Octagon, Singa- Singapore, July 23, 2003, Asia LNG contracts. Ltd, 15/17 St. Cross Street, London EC1N pore 069534. Tel: +65 6222 0230; fax: +65 Details: Sandy Leong, Event Manager, 80 8UW, UK. Tel: +44 (0)20 7831 5588; fax: 6222 0121; e-mail: [email protected]; Marine Parade Road, #13-02 Parkway Parade, +44 (0)20 7831 4567 or 7831 5313; e-mail: Web site: www.cconnection.org. Singapore 449269. Tel: +65 6345 7322; fax: [email protected]; Web site: +65 6345 5928; e-mail: [email protected]; www.petroleum-economist.com. Houston, TX, USA, September 8–9, 2003, Web site: www.cmtevents.com. Offshore pipeline technology USA. Details: IBC Energy Conferences, Informa House, 30-32 Singapore, July 23–25, 2003, International Dubai, UAE Mortimer Street, London W1W 7RE, UK. Tel: oil trading and price risk management. Details: September 7–9, 2003 +44 (0)20 7017 4027; fax: +44 (0)20 7436 Conference Connection Administrators Pte 8377; e-mail: [email protected]; Ltd, 105 Cecil Street #07–02, The Octagon, Middle East petroleum Web site: www.ibcenergy.com. Singapore 069534. Tel: +65 6222 0230; fax: +65 6222 0121; e-mail: [email protected]; and gas conference 2003 Dubai, UAE, September 10–11, 2003, Mid- Web site: www.cconnection.org. dle East gas and LNG forum 2003. Details: Con- Details: Conference Connection ference Connection Administrators Pte Ltd, Miami, FL, USA, July 28–29, 2003, 4th Administrators Pte Ltd 105 Cecil Street #07–02, The Octagon, Sin- annual financing Latin American power: 105 Cecil Street #07–02 gapore 069534. Tel: +65 6222 0230; fax: +65 restructuring, refinancing and securing funds The Octagon 6222 0121; e-mail: [email protected]; for acquisition and greenfield development. Singapore 069534 Web site: www.cconnection.org. Details: Registration Dept, The Centre for Tel: +65 6222 0230 Business Intelligence, 500 West Cummings Fax: +65 6222 0121 Dubai, UAE, September 10–11, 2003, Out- Park, Suite 5100, Woburn, MA 01801, E-mail: [email protected] look for the East of Suez lubricants/base oils. De- USA. Tel: +1 781 939 2438; fax: +1 781 www.cconnection.org tails: Conference Connection Administrators 939 2490; e-mail: [email protected]; Web Pte Ltd, 105 Cecil Street #07–02, The Octagon, site: www.cbinet.com. Singapore 069534. Tel: +65 6222 0230; fax: Aberdeen, Scotland, September 2–5, 2003, +65 6222 0121; e-mail: [email protected]; Singapore, August 5–6, 2003, Commercial Offshore Europe 2003. Spearhead Exhibitions Web site: www.cconnection.org. perspectives on petroleum marine transpor- Ltd, Bob Munton, Chief Executive, Apex tation. Details: Conference Connection Tower, New Malden, Surrey KT3 4DQ, Singapore, September 10–11, 2003, 7th an- Administrators Pte Ltd, 105 Cecil Street UK. Tel: +44 (0)20 8949 9222; fax: +44 (0)20 nual Asia upstream. Global Pacific & Partners, #07–02, The Octagon, Singapore 069534. 8949 8146; e-mail: enquiries@spearhead. 2nd Fl, Regent Pl, Cradock Av, Rosebank, 2196, Tel: +65 6222 0230; fax: +65 6222 0121; co.uk; Web site: www.spearhead.co.uk. Private Bag X61, Saxonwold, 2132, South e-mail: [email protected]; Web site: Africa. Tel: +27 11 778 4368; fax: +27 11 www.cconnection.org. Dubai, UAE, September 6–7, 2003, Middle 880 3391; e-mail: [email protected]; East petroleum strategy briefing 2003. Details: www.petro21.com. Perth, Australia, August 11–12, 2003, Fun- Conference Connection Administrators Pte damentals on LNG 2003. Details: Conference Ltd, 105 Cecil Street #07–02, The Octagon, London, UK, September 10–11, 2003, Connection Administrators Pte Ltd, 105 Singapore 069534. Tel: +65 6222 0230; fax: Gas-to-liquids. Details: The SMi Group, Cecil Street #07–02, The Octagon, Singa- +65 6222 0121; e-mail: [email protected]; 1 New Concordia Wharf, Mill Street, pore 069534. Tel: +65 62220230; fax: +65 Web site: www.cconnection.org. London, SE1 2BB, UK. Tel: +44 (0) 20 62220121; e-mail: [email protected]; 7827 6000; fax: +44 (0) 20 7827 6001; e- Web site: www.cconnection.org. Houston, TX, USA, September 8, 2003, mail: [email protected]; Web site: Offshore pipeline technology USA. Details: IBC www.smi-online.co.uk. Bangkok or Kuala Lumpur, August 14–15, Energy Conferences, Informa House, 30-32 2003, Fundamentals on LNG 2003. Details: Mortimer Street, London W1W 7RE, UK. Tel: Houston, TX, USA, September 10–11, Conference Connection Administrators Pte +44 (0)20 7017 4027; fax: +44 (0)20 7436 2003, Government petroleum contracts. Details: Ltd, 105 Cecil Street #07–02, The Octagon, 8377; e-mail: [email protected]; Conference Connection Administrators, 105 Singapore 069534. Tel: +65 6222 0230; fax: Web site: www.ibcenergy.com. Cecil Street #07–02, The Octagon, Singapore +65 6222 0121; e-mail: [email protected]; 069534. Tel: +65 6222 0230; fax: +65 6222 Web site: www.cconnection.org. Mumbai, India, September 8–9, 2003, 10th 0121; e-mail: [email protected].

4 OPEC Bulletin NOTICEBOARD

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4 OPEC Bulletin CONFERENCE NOTES CONFERENCE NOTES

OPEC maintains production ceiling steady at 25.4m b/d at Extraordinary Meeting in Qatari capital Doha

The Emir of Qatar, His Highness Sheikh Hamad Bin Khalifa Al-Thani, gave a powerful speech.

oha — OPEC decided to leave its tributed, through their co-operation, to commodate the country’s future produc- production ceiling unchanged at the stability of the market. OPEC alone tion, noting that Iraqi output would be D25.4 million barrels/day when it cannot carry out the responsibility of absorbed by OPEC on a pro-rata basis. met in the Qatari capital on June 11. maintaining market stability ... we need “We believe that Iraq will be produc- Speaking at a press conference in the co-operation of other producers,” he ing two million b/d by the end of this Doha following the 125th (Extraordinary) stressed. year,” he said, adding that OPEC would Meeting, the Qatari Minister of Energy A number of non-OPEC oil-exporting continue to study the market situation & Industry and President of the OPEC nations who have co-operated with the closely, and the position with regard to Conference, HE Abdullah bin Hamad Al Organization in recent years — Angola, Iraq’s re-entry into the market would Attiyah, praised non-OPEC producers for Mexico, Oman, Russia and Syria — at- again be assessed at the next Meeting of their co-operation with OPEC Member tended the Doha Meeting as observers. the Organization on July 31 in Vienna. Countries in striving to maintain oil mar- On the subject of Iraq, Al Attiyah Al Attiyah also said that OPEC would ket stability. said that OPEC would continue to con- continue to price its oil in dollars, despite “Non-OPEC producers have contact Iraqi officials to discuss how to ac- the recent fall in the value of the US cur-

6 OPEC Bulletin May/June 2003 7 CONFERENCE NOTES CONFERENCE NOTES

rency, explaining that any other chosen currency would be subject to similar fluctuations. Speaking earlier at the opening of the Conference, the Minister thanked the Emir of Qatar, His Highness Sheikh Hamad Bin Khalifa Al-Thani, who was in attendance, for his strong commitment to OPEC over the years. In his own address, the Emir outlined the history of OPEC, noting that the Or- ganization had successfully confronted a number of challenges during its lifetime. In recent years, said the Emir, a number of positive developments had been witnessed, both within OPEC itself and in its relations with all the major players in the oil market, particularly the big non-OPEC oil-exporting nations, international oil companies, and the consum- Qatar’s Minister of Energy and Industry and President of the Conference, HE Abdullah bin ing countries. Hamad Al Attiyah (right), talks to Libya’s Secretary of the People’s Committee of the NOC, This was in contrast to the HE Dr Abdulhafid Mahmoud Zlitni (left). situation during the 1970s and 1980s, when OPEC’s efforts to sustain prices at a reason- Indonesia’s Minister of Energy and Mineral Resources, HE Dr Purnomo Yusgiantoro (right), able level were not supported in animated discussion with Kuwait’s Minister of Information and Acting Minister of Oil, by non-OPEC countries, who HE Sheikh Ahmad Fahad Al-Ahmad Al-Sabah (left). were seeking to increase their share in the world oil market, he observed. This resulted in a decrease in demand for OPEC oil to about half its former level between 1979 and 1985, causing great losses to OPEC Member Countries, whose economies and budgets de- pended — as they still do — largely on oil revenues. However, although the two major oil price collaps- es — once in 1986, when the price dropped to about $6/b, and again during 1998–99, when it fell to about $10/b — had caused serious economic hardship, they had also led to the improvement of relations between OPEC and non-OPEC producers.

6 OPEC Bulletin May/June 2003 7 CONFERENCE NOTES CONFERENCE NOTES

Algeria’s Minister of Energy & Mines, HE Dr Chakib Khe- lil (left), is seen here with Venezuela’s Minister of Energy and Mines, HE Ra- fael Ramirez (right).

Due to these two price slumps, some market and sustain oil prices at fair and reinforced, because the interest of both major non-OPEC producers had come to reasonable levels. parties requires maintaining market realize that the interests of both OPEC “Today we witness dialogue, co-op- stability and securing the supply of the and non-OPEC producers were the same, eration and exchange of views, with the oil needs of consuming countries at ac- and that OPEC alone could not take the aim of understanding the position of each ceptable and reasonable prices,” he con- necessary measures to maintain market party and its legitimate aspirations,” said tinued. stability. the Emir. “Constructive dialogue and under- Hence, a new era had begun in rela- “The efforts aimed at further mutual standing the mutual viewpoints consti- tions between the major producers both confidence and co-operation between the tute the solid base for the positive rela- inside and outside OPEC, on the basis two parties to realize the balanced com- tions targeted by all active parties in the of co-operation in efforts to stabilize the mon interests must be supported and market,” noted the Emir.

Saudi Arabia’s Min- ister of Petroleum and Mineral Resourc- es, HE Ali I Naimi (left) makes a point to Iran’s Minister of Petroleum, HE Bijan Namdar Zangeneh (right).

8 OPEC Bulletin May/June 2003 9 CONFERENCE NOTES CONFERENCE NOTES

The United Arab Emirates’ Minister of Petroleum and Mineral Resources, HE Obaid bin Saif Al-Nasseri, talks to the press.

Nigeria’s Presidential Adviser on Petrole- um & Energy, HE Dr Rilwanu Lukman, looks thoughtful.

At the closing press conference are (left to right) OPEC Secretary General, HE Dr Alvaro Silva-Calderón; HE Al Attiyah; the Director of OPEC’s Research Divi- sion, Dr Adnan Shihab-Eldin; and the Head of PR & Information Department, Dr Omar Farouk Ibrahim.

8 OPEC Bulletin May/June 2003 9 CONFERENCE NOTES CONFERENCE NOTES

Mission to Doha: diary

of a journalist by Dr Omar Farouk Ibrahim, Head, PR & Information Department

reparation for the mission had begun immediately OPEC resolved to Phold an Extraordinary Meeting of its Conference in Doha, Qatar on June 11, 2003, midway between the regular bi-annual spring and autumn Meetings. War on Iraq, a Founding Member of the Organization, was imminent. The con- sequences could not be easily predicted. What was certain was that even before a shot had been fired, the price of oil had started climbing steeply. OPEC had as- sured major consumers that supplies of oil would be sustained even in the event of war breaking out. The Doha Meeting was called to evaluate the situation after the war and collectively decide on the next line of action in order to meet producers’ obligations to consumers. opments, among others, translated into ing the bottom of the OPEC price band. The war on Iraq was shorter than a sharp decline in the price of oil in the An anxious OPEC President, HE Abdul- many had predicted. The collateral dam- days following the capture of Baghdad by lah bin Hamad Al Attiyah, on a visit to age to oil facilities was equally much less the American and British forces. The slide Paris, announced that OPEC could not than many predicted. These two devel- in the price of oil was rapidly approach- wait until Doha to tackle the problem of

Swimming was a popular way of relaxing during the boat trip.

10 OPEC Bulletin May/June 2003 11 CONFERENCE NOTES CONFERENCE NOTES

from 24.5m b/d to 25.4m b/d (a decision which assumed that Iraqi production of about 2.0m b/d was going to be off the market for the foreseeable future), it translated, within a few hours, into a fall in the price of oil. However, in the following days, the price began a rebound towards more reasonable levels. Saturday June 7 Arrived Doha International Airport about 9.30 pm. A small place, compared to Munich or Frankfurt where we had made brief stop-overs. The immigration officials were friendly and business-like. Twenty minutes later we were at the Carl- ton Ritz hotel, venue of the Conference. The Carlton Ritz hotel, I came to learn, was one of many 5-star hotels that had The Conference participants listen to a presentation at QatarGas. sprung up in the Qatari capital in the last decade. Its architecture, as with many as- the sliding oil price. An emergency Con- pects of Qatari national life is a blend of sultative Meeting was to be held on April modernity and tradition, the West and the 24 in Vienna. East. Briefed by PR Co-ordinator Siham The Vienna Meeting resolved to cut Alawami about preparations for the Con- actual OPEC oil output by 2.0 million ference so far. barrels/day to a new production ceiling Opposite page: HE Al Attiyah (left) with of 25.4m b/d with effect from June 1, Sunday June 8 Dr Ibrahim (centre) and PR Co-ordinator, 2003. It also reaffirmed the earlier deci- Had a meeting with the organizers of Siham Alawami. sion to hold an Extraordinary Meeting the Conference, Qatar Petroleum. Really of the Conference in Doha in June. Per- wonderful people determined to make Qa- Below: HE Al Attiyah (second right) and haps because of market expectations, or tar proud, by making the Conference a Dr Silva-Calderón (right) examine the day’s because the final decision of the Vienna huge success. Abdulaziz Ahmed Al-Malki, fish catch. Meeting also raised the OPEC-10 ceiling a Director in the office of the Minister of Energy and Industry, left no-one in doubt about their determination to make the event a great success. Journalists and members of some delegations begin to arrive in Doha. Monday June 9 Accreditation of delegates and journalists begins. Met with the managers of two TV stations, Qatar Television and Al- Jazeera, to discuss coverage of the Con- ference. Met with fellow journalists who had come to cover the Conference. Tuesday June 10 More Ministers arrive for the Meet- ing. Held final meeting on the logistics of the venue with the organizers. HE Ab- dulla H Salatt, the Qatari Governor for OPEC, presided. Reviewed preparations and programme for the event. Ministe- rial Monitoring Sub-Committee Meeting takes place at night.

10 OPEC Bulletin May/June 2003 11 CONFERENCE NOTES CONFERENCE NOTES

Wednesday June 11 monitored in June and July. Questions at stamina to do all he is doing, Al Attiyah His Highness Sheikh Hamad Bin the press conference centred mainly on says he gets fulfillment any time great ideas Khalifa Al-Thani, the Emir of the State Iraq. Is OPEC worried that Iraq would are translated into realities. He attributes of Qatar, declared the Conference open leave the Organization? How would that his hard work to three factors: the need to about 9.00 am. Made an impressive affect the Organization? When will Iraq lead by example, the satisfaction of mak- speech, tracing the history of the Or- be invited to take its seat at the Confer- ing a difference and most importantly, ganization and the turbulent times it ence, etc, etc. The Conference President, the support of the Emir. According to Al has weathered. Sheikh Hamad is royalty Abdullah bin Hamad Al Attiyah, chose his Attiyah, when you work under the Emir, personified. Speaks softly, measuredly, and words carefully in answering each ques- Sheikh Hamad Bin Khalifa Al-Thani, you never a word of English or any foreign tion. cannot strive for anything less than excel- language. Recalled seeing the Emir on At 7.00 pm, interviewed the Confer- lence. The Emir follows up whatever as- American TV addressing President Bush ence President and Minister of Energy and signment he gives his lieutenants, moni- in Arabic. While President Bush relied on Industry of Qatar, inarguably the most toring progress made and giving them all an interpreter, Sheikh Hamad did the moral support they need to not need one to understand what succeed. the American President was saying, even though he would not Thursday June 12 respond in English. The Emir is a Spent all day touring Ras custodian of the Arabic language, Laffan Industrial City, 80 kilo- and he would not make it second metres north-east of Doha and to any other. then boating and fishing. Ras Laf- The Emir had, with charac- fan is the pride of all Qataris. It teristic Arab hospitality, extend- should be the pride of OPEC too. ed a lunch invitation to the del- For there, on that sprawling 106 egates today. The organizers of square km of land, is tangible evi- the Conference, perhaps for se- dence of how a Member Coun- curity reasons, decided that only try of OPEC is investing its oil five members of each delegation money for present and future could go to the palace. Leaders generations of Qataris. of some delegations were put in a difficult position, trying to Friday June 13 identify who to drop. Then the Work-free day in Qatar, as in good news came. The Emir had most of the Middle East. Moham- directed, in apparent compliance med Awal of Qatar Petroleum vis- with the command of the Proph- its. Took a drive round Doha city, et of Islam, that whoever believes the old and the new. Hundreds of in Allah and the last day should immigrant workers, mostly from honour his guests, and that the Pakistan, Bangladesh and India, palace was big enough to accom- line up waiting for their turn to modate all. No delegate should be remit money home. There were left behind. Luxury buses were three lines. The longest line was provided for the trip to the pal- for transfers not exceeding fifty ace. It was a sight to marvel at. Dr Silva-Calderón signs the guest book at QatarGas. Qatari riyals, or about $15. En- When it was time for lunch, His gaged a Bangladeshi in conversa- Highness stood in the main hall leading powerful member of the Qatari Cabinet. tion, who told me that from their earn- to the dining area. Each delegation went Al Attiyah is in charge of the backbone of ings in Doha, they feed their extended with its head and had a royal handshake. the Qatari economy: oil, gas, electricity families back home. He was full of praise Lunch was a variety of Arab delicacies. and industries, and it shows in his daily for Qatar and its people. He was thank- No speeches, no statements, it was a si- routine. A practical man who believes in ful to God for Qatar’s oil wealth, saying lent lunch. results, Al Attiyah is not satisfied sitting that his family in faraway Bangladesh is Back at the hotel, the Conference in any of his many cosy offices overlook- sustained by it. continued for another 30 minutes. Even ing the Corniche at Qatar Petroleum, or Ahmad, the Bangladeshi, left a great before the press conference, where the the electricity board or the gas company impression on me. Even the common communiqué of the Meeting is usually of which he is Chairman, taking deci- man from the distant non-oil producing read, journalists had known the decision sions. He goes into the field to see what country knows that oil wealth benefits of the Meeting. No output cut. No in- is actually taking place. not just those in whose lands God has crease either. Situation would be closely Asked where he gets the strength and buried it, but others too.

12 OPEC Bulletin May/June 2003 13 CONFERENCE NOTES CONFERENCE NOTES

Saturday June 14 ferred station for news about the Middle the faculty of QT, except as graduate as- At TV station Al-Jazeera to see head East. Went round the studios, met with sistants. Today in 2003, QT has 230 Qa- office of the pace setter in broadcast jour- editors and management. Al-Jazeera may tari faculty members with PhDs, about nalism in the Middle East. Amazed to see be small, but its impact is great. half of them women. Although QU ad- how small the whole edifice housing the Then to Qatar Television. Met by mits both males and females, classes are station that is fast changing the course of Salah Al Emadi, Ahmad Al-Hajri. Con- segregated, with female lecture halls sited broadcast journalism in the Middle East ducted round the huge complex that at some distance from those of the males. is. It is no bigger than one of the small houses QT, as it is popularly called. Un- QU strives to take the best of the West sections at Qatar Television, yet its impact like Al-Jazeera, QT is purely public and while not undermining its traditional Is- is felt world-wide. Jihad Ali Ballout and subject to routine restrictions from gov- lamic base, the V-P said. Ahmed Mustafa briefed us about the op- ernment bureaucrats. erations and philosophy of Al-Jazeera. It is Visited Qatar University, or QU. Met Sunday June 15 a public trust company, we were told. It with Dr Abdul Rahman Al-Ibrahim, Vice- It’s time to go back to Vienna. A

The Emir, the OPEC and non-OPEC Ministers and the Secretary General get together for the traditional group photo. Photo: Photo: Alsharq

should pursue the path of truth and social President for Academic Affairs. Studious- summary of my impressions of Qatar: a justice. Government does not interfere in looking person. Briefed us about QU and small, beautiful place with forward-look- its day-to-day operations. Asked if govern- the progress made since founding 30 years ing leaders, determined to leave behind ment is under pressure from within or out- ago. Education for Qataris at all levels is a legacy worth remembering. Qataris do side Qatar to censor the station, we were free, he said. Indeed, at the university, stu- not pay for electricity or water used in told that even if there is such pressure, dents are paid allowances to study. Sev- their homes. They do not pay for educa- it does not translate into clear directives enty per cent of QU students are females. tion or medical treatment. And taxation to the management of the company. For Most males go abroad for university de- is not in their vocabulary. What a coun- many, Al-Jazeera is fast becoming the pre- grees. In 1973, there were no Qataris in try to be a citizen of!

12 OPEC Bulletin May/June 2003 13 FORUM FORUM

The international oil industry: how OPEC sees its present and its future

Although the war in Iraq may have introduced some short- term uncertainty, the medium- and long-term prospects for the global oil industry are bright, writes OPEC Secretary General, Dr Alvaro Silva-Calderón,* in this article.

Photo: Reuters/Leonhard Foeger

* Based on Dr Silva-Calderón’s address to iven the fluidity of the present the future will hold over the medium the 4th International Oil Summit, Paris, international situation, it might and long term. France, April 10, 2003. Gappear to be a difficult task First and foremost among these is not to say something concrete about the really a trend at all, but a commitment. It future of the global oil industry. How- is the commitment of the OPEC Member ever, even amid such short-term uncer- Countries to work together to ensure the tainties, some fundamental trends remain security of the oil market by maintaining that provide a clearer outline of what stability of supply and stability of prices.

14 OPEC Bulletin May/June 2003 15 FORUM FORUM

This commitment has played — and will This action clearly showed the flexibility In response, consumer nations — such continue to play — a pivotal role in the of the Organization, as well as the sin- as Japan, the EU countries, and the USA oil market, now and in the future. cerity of its commitment to maintaining — as well as consumer groups such as The key means the Organization uses prices within the $22-28/b price band. the IEA, expressed their confidence that to fulfill its commitment to market stabil- OPEC’s efforts at the beginning of this OPEC would be able to manage any sup- ity is the OPEC price band. Three years year show that the Organization is com- ply shortfall. In this way, OPEC was able ago, OPEC identified an oil price range mitted to supporting both sides of the to calm and reassure the market. Although of $22–28/barrel as being fair and reason- band to ensure fair prices for producers prices remained high, it is certain that, able to both consumers and producers. and consumers. without OPEC’s assurances, they would Since its adoption, the OPEC price In this respect, another clear demon- have risen even higher. And in April, the band has provided a workable solution stration of OPEC’s commitment to mar- Organization once again demonstrated its that allows sufficient flexibility in prices ket stability is its maintenance of several commitment to market stability when it to allow the market to breathe, while at million barrels/day of spare oil production agreed to reduce actual output by 2.0m the same time, keeping prices at levels that capacity. It is this spare capacity which b/d, starting from June 1 this year. are considered to be fair and reasonable. A short review of OPEC actions in recent Spare output capacity times will show how the Organization has As these examples demonstrate, OPEC used the band to promote market stabil- “Fossil fuels has played an important role in ensuring ity in times of great flux. market stability over the last months, both One striking example was in the fourth in terms of price as well as in supply. It is quarter of 2001, when prices dropped to will continue a role that the Organization will continue around $17/b, well below the band’s lower to play well into the future. Should any limit, one of the reasons being the knock- to account for disruptions or emergencies threaten the on effects of September 11 on the world stability of the market, then OPEC will economy and thus on oil demand. Using a vast majority be ready to use its influence, and its spare the price band as a rallying point, OPEC capacity, to maintain prices in a reason- was able to co-ordinate efforts with several of the future able range for both consumers and pro- important non-OPEC producers — Nor- ducers. way, Russia, Mexico, Oman and Angola increases in However, OPEC Member Countries — to stabilize the market by agreeing to should not be expected to shoulder this make production or export cuts. The com- burden alone. Price stability can only be bined effort had the desired effect, bring- energy demand.” effectively maintained with the co-opera- ing prices back into the price band range tion of non-OPEC producers as well. The by the end of the following quarter. success of OPEC and non-OPEC efforts provides a cushion against price shocks at the end of 2001 proves this. For its Defusing market pressures caused by temporary disruptions to oil part, OPEC is committed to broadening Another example occurred in the supplies. relations with non-OPEC producers. One fourth quarter of last year, when prices Despite OPEC’s best efforts and the example of this effort is the recent inau- rose on market concern over the Venezue- collapse of the Venezuelan strike, the oil guration of an informal breakfast meeting lan oil industry strike. During the strike, price continued to sit stubbornly above of Ministers from OPEC and non-OPEC the country’s oil production dropped from the price band range throughout the first countries, to be held on the morning of around 3.0 million b/d to only 200,000 quarter of this year. The main cause of every OPEC Conference. This ensures a b/d, causing more than 2.8m b/d to be these high prices was not market fun- high level of dialogue among producer withdrawn from the market. In response, damentals, but the war premium, which countries, which can only help to im- prices climbed to two-year highs, and by was a consequence of speculation on the prove the stability of the market. January this year were hovering well above effects a possible conflict in Iraq would Let us now take a closer look at how the upper limit of the price band. OPEC have on the oil market. Adding to these the Organization views the medium- to responded rapidly to the situation and upward pressures were persistently low long-term outlook. The World Summit on organized an Extraordinary Meeting of refinery stocks in the USA. This was the Sustainable Development, held in Johan- the Conference to help defuse some of situation facing OPEC Member Coun- nesburg in 2002, highlighted the impor- the pressures facing the market. tries when the 124th Conference was held tant role that energy plays in economic During a short and informal Confer- in March. development. Although a great deal of ence, the Member Countries decided to In its communiqué following the con- attention was focused on the promise of raise the OPEC-10 ceiling by 1.5m b/d, clusion of the Conference, OPEC pro- renewable resources, most participants rec- from 23.0m b/d to 24.5m b/d, in order vided assurances to the market that its ognized that fossil fuels will continue to to restore balance to the market, while Member Countries had sufficient capac- account for a vast majority of the future ensuring adequate supplies to consumers. ity to cover any shortfall in oil supplies. increases in energy demand in the de-

14 OPEC Bulletin May/June 2003 15 FORUM FORUM

veloping and the developed world. Our problems such as deforestation, local pol- with non-OPEC’s more modest increase projections bear this out. lution and relatively high carbon dioxide of 21 per cent. Non-OPEC production According to the OPEC World En- emissions. In this way, clean fossil fuels will continue to grow over the current ergy Model reference case, world demand provide the most feasible path for achiev- decade, although at a lower rate than dur- for primary energy over the period 2000- ing sustainable development. ing the 1990s. From 46m b/d in 2000, it 2020 is expected to increase from just Turning now to the supply side, the will reach 51m b/d in 2005 and stabilize over 180m barrels of oil equivalent/day world’s proven oil reserves are over one tril- at a level of 53–55m b/d beyond 2010. in 2000, to roughly 220m boe/d in 2010 lion barrels, or approximately forty years and almost 270m boe/d in 2020, which of consumption at today’s rate. Given the Huge investments represents an average rise of approximate- size of the reserve base, there is thus no However, meeting the expected in- ly 2 per cent per annum. Fossil fuels will crease in demand will require enormous continue to dominate the world energy investments, mostly from the private sec- balance, accounting for 90 per cent of tor. As such, care must be taken to ensure commercial primary energy demand. Nat- that these investments are properly accom- ural gas will enjoy the highest growth rate, “Achieving modated. Excessive competition among mainly due to its advantages in electricity producers for foreign capital could sub- generation, increasing to 28 per cent of a win-win stantially reduce the level of rents producer the total mix in 2020, up 5 percentage countries receive for the exploitation of points from 2000. situation for their finite natural reserves. The different parties — natural resource owners, inves- Oil demand increase all sides is tors, and ultimately consumers — should The demand for oil is expected to in- look for arrangements that will allow them crease from 76m b/d in 2000, to 89m b/d to prosper together. Achieving a win-win in 2010 and then to 107m b/d in 2020. imperative if situation for all sides is imperative if we This evolution corresponds to an average are to ensure a stable market for years to growth of 1.7 per cent per year, higher we are to ensure come. than that observed during the 1980s and Taking all things into consideration, 1990s. Three-quarters of this additional a stable market although it is true that the current situa- demand will come from the developing tion has added uncertainty to the market, countries, especially India and China, for years to the way ahead is clear and co-operation which are expected to more than dou- is the key. Co-operation between OPEC ble their consumption over the next two come.” and non-OPEC producers is necessary to decades, mostly due to the boom in the ensure fair and stable prices; co-operation transport sector. Demand in the OECD between OPEC and consumer nations is countries, in spite of a low average an- needed to maintain a secure and steady nual growth rate of approximately 0.6 per problem meeting world oil demand in the supply of oil; and co-operation between cent, will still contribute one-fifth of the coming decades, provided that the invest- OPEC and international investors is es- additional demand, again mostly in the ments in maintenance and expansion of sential to securing the necessary invest- transport sector. upstream capacity and the downstream ments to meet future oil demand. For the poorer nations, there is the infrastructure are carried out. In the last few years, a consensus seems hope that these countries will have greater OPEC Member Country production, to have formed within the oil industry access to cleaner fossil fuels and the asso- after remaining relatively stable for a while, that it is in the best interests of all of us ciated technology. This will allow them to will gradually begin to increase after 2005 to work together. If this continues, and move away from firewood and charcoal, to reach 36m b/d by 2010 and 52m b/d we believe that it will, then by combining which constitute a major health problem. in 2020. This represents an increase of 73 our efforts, we shall be able to approach It will also help them to tackle related per cent over the 2000 level, compared the future with hope.

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The outcome of the Seminar on the application of the UN Framework Classification on Energy Reserves/Resources to OPEC Member Countries

This article was written for the OPEC Bulletin by the Head of OPEC’s Data Services Department (DSD), Dr Muhammad A Al-Tayyeb (left), and DSD Statistical Systems Analyst, Dr Atmane Dahmani.

he issue of the classification and and ‘possible reserves’. Representatives of lishing an international UN Framework harmonization of definitions of en- the OPEC Secretariat discussed the pro- Classification (UNFC) of energy reserves/ Tergy reserves and resources has al- posals and took note of the fact that most resources to provide a more comprehen- ways been of great interest to the OPEC of the suggested definitions were in line sive explanation may be considered as a Secretariat and its Member Countries. with their definitions, in spite of which logical consequence in the upgrading of In this regard, the Seminar on the some pertinent comments were made and the old system of classification. harmonization of definitions of reserves/ conveyed to Member Countries for fur- The proposed system of classifica- resources terminology was, for the Secre- ther consideration and comments. As a tion is currently being implemented tariat, a continuation of a process in which result of this co-operation, most of the worldwide. For example, China, India, OPEC has been involved for quite some OPEC Member Countries are currently Iran and Indonesia, among others, have time, and in which context the OPEC reporting data on reserves based on the already adopted it for their coal reserves. Secretariat hosted a meeting with the rep- above definitions. Therefore, we are of the opinion that spe- resentatives of the Society of Petroleum However, due to the constant evolu- cial attention has to be paid to this new Engineers (SPE) and the World Petro- tion in our industry, the world economy system. We are also of the opinion that leum Congress (WPC) on definitions of and the market, we understand that the more effort should be put into this mat- petroleum reserves in August 1997. definitions provided during that time can- ter, since the UNFC is more elaborate and The main point of discussion of that not be considered sufficient. We need to comprehensive, as it applies not only to meeting was to seek the acceptance of respond to the new challenges and update petroleum, but also to other extractable OPEC Member Countries and to get their the relevant definitions and terminologies energy commodities, including coal and comments on the definitions, presented by to describe the level of reserves more effi- uranium. the representatives of these organizations, ciently. In this regard, the current initiative It was in this spirit that the OPEC which were grouped into three main cate- of the United Nations Economic Com- Secretariat hosted a one-day Seminar, of- gories: ‘proved reserves’, ‘probable reserves’ mission on Europe (UNECE) in estab- fered by the UNECE, to extend the im-

16 OPEC Bulletin May/June 2003 17 FORUM FORUM

plementation of the UNFC to OPEC Following this, a presentation was given Historical background and the Member Countries. The purpose of the on the proposed UNFC for petroleum, status of the initiative Seminar was to enhance OPEC Member which consists of the incorporation of Sigurd Heiberg [6] presented the Countries’ awareness of the framework the SPE/WPC/American Association development of the UNFC on Energy and to see how it could be of service to of Petroleum Geologists (AAPG) sys- Reserves/Resources and gave an update them. This was the second such Seminar tem into the UNFC, followed by one on its current status. The UNECE Com- on the framework organized by the UN- on the application of the UNFC to ura- mittee on Sustainable Energy decided to ECE, aimed at gathering a broad range of nium. establish the Ad Hoc Group in November inputs, especially from producer nations, The second session focused on presen- 2001 after considering the output of the prior to its finalization. tations related to the objectives of the ap- UN Task Force on the UNFC. The pur- The aim of this paper is to inform plication of the UNFC as a tool for strate- pose of the UNFC was to translate exist- readers about the main outcome of this gic resource management (governments), ing commodity classifications and defini- Seminar. In this re- tions to the UNFC gard, reference will and thereby achieve be made to presen- a harmonization be- tations on the top- tween the energy ics tackled during commodities coal, the Seminar and to petroleum (oil and some other existing gas) and uranium, publications related and between these to the subject. Ref- commodities and erences, which are other mineral com- listed at the end, modities. are ordered alpha- The Ad Hoc betically by author Group was formed and identified by a at its first session number in square on June 12–13 brackets, thus: [1]. last year. Its bureau These presentations was also elected. are available on the Sub-groups were UNECE website formed for coal, pe- at www.unece.org. troleum and urani- Background papers um. The petroleum for these presenta- group was charged tions have also been with harmoniz- published in various ing the petroleum energy reviews. The papers referred to in this article can be found on the UNECE website at classification issued The Seminar www.unece.org/ie/se/pp/opecunfc.html. jointly by the SPE, featured two main the WPC and the sessions, which were structured as fol- business process management (companies) AAPG with other classifications by the lows: during the first session, after the and financial reporting (owners/ inves- use of the UNFC. official opening addresses, an introduc- tors). And finally, since the UNFC system A workshop was arranged in Tyumen, tion to the Seminar, reflecting OPEC’s was initiated to provide the World Energy Siberia on September 9–10 to examine is- views on the issue of harmonization of Council (WEC) with a periodic survey of sues related to a possible reformation of reserves/resources terminology, was given reliable data on reserves, a presentation the Russian petroleum classification. The by Dr Muhammad A Al-Tayyeb [1]. This on the reconciliation of the UNFC and petroleum group met in Stavanger, Nor- was followed by an overview of the steps WEC terminology was given. way on September 23–24 immediately taken by the UNECE on the matter, in The UNFC is at the end of its one- prior to an open meeting of the SPE at order to brief delegates from OPEC Mem- year trial programme and the organizers the same venue. A report on the UNFC ber Countries and the Secretariat on the are therefore seeking to get as many views was given in public and the relevant is- status of the initiative, an introduction and remarks as possible from major pro- sues discussed. The uranium group met in to the UNFC and a presentation on its ducers to be incorporated into the new Beijing, China on September 24–25 with principles. system before its finalization. In this re- representatives of all the major uranium- As the UNFC is applicable to cer- gard, the conclusion of the Seminar fo- producing countries (with very few excep- tain other extractable mineral and en- cused on discussions aimed at establish- tions). The Task Force had completed the ergy commodities, this presentation was ing further steps and actions to be taken work of the coal group prior to the estab- combined with its application to coal. involving OPEC Member Countries. lishment of the Ad Hoc Group. The role

18 OPEC Bulletin May/June 2003 19 FORUM FORUM

of the coal group has thus been to moni- different terms and definitions, and that nars to introduce UNFC principles, de- tor the activities in the other groups. harmonization was needed to provide a velop guidelines and circulate them to the At its meeting in November last year, methodology for evaluating resources on related bodies, select a number of coun- the Ad Hoc Group reviewed the efforts a common basis. To meet this need, the try deposits for testing the classification, made and reported them to the Com- Ad Hoc Group designed an internation- provide an extensive training programme mittee on Sustainable Energy Develop- ally acceptable, three-dimensional umbrel- country-wide and introduce the UNFC ment. The Committee adopted the rela system that would provide an efficient for Energy Reserves/Resources to techni- port, strengthened the conclusions and link between classification systems used cal universities. requested the Ad Hoc Group to proceed in market economy countries and those actively. Consequently, the necessary ac- in countries in transition. The UNFC and its applications tions agreed upon have been taken: co- One of the benefits of the UNFC Andrej Subelj [10] presented the prin- operation with the WEC, organization for Energy Reserves/Resources is that it ciples of the UNFC in more detail, us- of regional Seminars, and presentations is easy to apply and allows for the reten- ing the example of coal deposits (see also of the UNFC in international events. A tion of national terms, as most can be in- [11] for more details on the UNFC). The third Ad Hoc Group meeting is planned corporated within the UNFC itself. The UNFC for Reserves/Resources is a combi- on October 30–31, 2003. This meeting is UNFC has already been fully or partial- nation of the so-called ‘western’ and ‘east- to consider case studies and comments on ly implemented in the coal and miner- ern’ systems. The ‘western’ system has two the suitability of the UNFC for Energy al sectors in many European and Asian components: an E axis, which stands for Reserves/Resources, with a view to maxi- countries, including Indonesia and Iran. economic, and an F axis, which represents mizing the effectiveness of the proposed It was recommended that participating feasibility. In contrast, the ‘eastern’ system framework classification and developing a countries should set up a national expert uses the F axis but does not have an E-axis. consensus among all interested parties. group that represents all relevant bodies, Instead, the eastern system has a G axis, Introducing the UNFC, Slav Slavov with a view to elaborating an implementa- which represents geological. To combine [9] explained the need for a UNFC for tion programme before commencing im- these two systems, the UNFC for Energy Energy Reserves/Resources. It was pointed plementation of a national system based Reserves/Resources uses a three-dimension- out that there were more than 150 reserve/ on UNFC principles. The latter should al, or cube, model that contains all three resource classifications worldwide, using include the organization of national semi- axes — EFG — as shown in Figure 1.

Figure 1: UNFC for solid fuels and mineral commodities

� ��

��

�� Source: Subelj [10]. �

18 OPEC Bulletin May/June 2003 19 FORUM FORUM

Figure 2: the SPE/WPC/AAPG classification proven or explored and delineated geology on the geological axis. Proved reserves will need to be commercial at standard commercial conditions on � � � � � � � � � � the economic axis (a sub-set of com- � �

� mercial) and have proven geology on � � � � � � � � � �

� the geological axis. � � �

� — Contingent resources will always be � ��

� produced by contingent projects on � � �� the F axis. They may fall into any of � ��

� �� the categories on the E axis and into � �

� any of the discovered categories on the � � � � � G axis. This demonstrates the strength � � � � � � of the cubic nature of the UNFC. �

� � � � � � � � � � � � � � � � � � � � � � � � � � � — Prospective resources will always be � � � � � � � under exploration projects on the F �

� ��

� axis, and as undiscovered on the G � � ��

� axis. On the E axis they will normally � � � � be contingent (at least on confirming � �

� ��

� their presence) or non-commercial. The proposed UNFC for petro- � �

� � � � � � � � � � � � � � � � � � � � � leum and case study for Norway � � � �

� As the UNFC is applicable to various � � � � commodities, there are slight modifica- � ��

� tions to each of its applications. In the pro-

� ��

� posed classification version for petroleum � � �

� presented by Per Blystad [3], the UNFC �� makes a clear distinction between in-place and produced quantities on the one hand, � � � � � � � � � � � � � � � � � � and recoverable quantities on the other. In adapting the EFG system to petrole- Source: Heiberg [5]. um, the E and G axes continue to stand for economic and geological, respectively. However, for the F axis, the term feasibil- The UNFC also adopted a numerical Reserves/Resources. Heiberg [5] demon- ity is replaced by the term field project. code system, in which every square within strated how the SPE/WPC/AAPG clas- The reason for this is that in petroleum the cube has its own individual number, sification of oil and gas resources could activity, there is a need to keep track of which overcomes semantic problems and be fully incorporated into the UNFC. He quantities that are normally more mature allows every nation to use its own lan- indicated that adjustments in both sys- than those addressed in feasibility stud- guage. Therefore, the square in position tems are desirable in preparation for in- ies. Field projects reflect the maturity of

E1, F1, G1 is numbered 111. Some squares ternational financial reporting standards the quantities with regard to the process are invalid, while others are usually not for extractive industries. and decisions to develop and produce the relevant. The UNFC also distinguished As can be seen in Figure 2, the UNFC quantities. There is a sub-division within (or made a distinction) between total re- — as outlined above — conforms closely each axis as well as definitions for each serves and reserves and resources. Total with the SPE/WPC/AAPG classification. term. Unrecoverable in-place quantities

reserves are the combination of reserves In considering Figure 2, we can make (I1-4) are located outside the cube, as are and remaining/additional resources. the following remarks related to the com- produced quantities. Some combinations patibility of the compared systems, where in the cube are invalid, while others are Relationship between the the field project axis is in line with the not normally used, leaving approximately UNFC and the SPE/WPC/ project status approach of the SPE/WPC/ 12 combinations as being used in prac- AAPG classification AAPG classification. tice. Taking into consideration the exist- — Production is found in both classifi- The results of the case study for ing system of classification, there is a cations. Norway on the application of the UNFC need for the incorporation of the SPE/ — Reserves conform to committed for petroleum carried out by Blystad are WPC/AAPG oil and gas resources clas- projects. Reserves will be commer- presented in Figure 3 (for more details sification into the UNFC for Energy cial on the economic axis and have see [3]).

20 OPEC Bulletin May/June 2003 21 FORUM FORUM

Figure 3: the UNFC for petroleum in Norway — value chain management requires a view of the complete resource base

��

E 1: Commercial E� 2:�� Contingent�� commerciality�� E� 3:�� Not�� commercial�� G 1: Proven geology G� 2:�� Explored�� delineated�� geology G� 3:�� Discovered�� accumulations�� G 4: Prospective accumulations Source: Blystad [3]. � �� Correlation between the IAEA/ reliability of uranium resource estimates. During these meetings, related activi- NEA classification of uranium Lack of harmony in the definition of the ties on the subject of resource classifica- reserves and the UNFC different classes of uranium resources and tion organized by the UNECE were also Jean René Blaise [2] spoke on the reserves between countries makes the com- taken into consideration. It was found harmonization of the UNFC and Inter- pilation and analysis of such information that the classification system used in the national Atomic Energy Agency (IAEA)/ difficult. The problem was accentuated in Red Book was generally consistent with Nuclear Energy Agency (NEA) classifica- the early 1990s with the entry of urani- the UN international classification system, tion for uranium. Since the mid-1960s, um-producing countries from the former which in addition emphasizes the impor- the IAEA has strived to develop a compre- Soviet Union, Eastern Europe and China tance of the economic axis. A correlation hensive inventory of recoverable uranium into the world uranium supply market. between the UNFC and the IAEA/NEA resources to fuel the world nuclear power The need for an internationally acceptable classification was established, and it was programme. To achieve this objective, it reserves/resources classification system and proposed that this should be reported in has carried out many activities, including terminology using market-based criteria the Red Book, in parallel to other coun- co-operating with the OECD’s NEA. was therefore obvious. try classifications. Today, the UNFC is An important part of this co-operation For these reasons, the IAEA organ- used for uranium resources reporting in was the development of a classification ized several meetings from 1992 to 1996, Russia, Ukraine and Hungary. system that would be used in preparing to harmonize the terms and definitions the inventory of uranium resources pub- used in uranium resources and reserves The UNFC as a tool for strategic lished in the world report on uranium — classification. While these meetings did resource management, business Uranium resources, production and de- not achieve all of their objectives, it process management and inter- mand — otherwise known as the Red appeared that they helped to clarify some of national financial reporting Book. the uncertainties associated with uranium James G Ross [8] demonstrated the Projections of the future availability of resources estimates and contributed to the need to support new international ac- uranium to meet present and future nu- development of more uniform uranium re- counting and financial reporting stand- clear power requirements depend on the sources reporting by several countries. ards. The Securities and Exchange Com-

20 OPEC Bulletin May/June 2003 21 FORUM FORUM

mission (SEC) requirements dominate the cal definition. In doing so, the UNFC for ison and harmonisation, as can be seen industry, despite the fact that there are Energy Reserves/Resources supports the in Table 1. The worldwide survey of the many other definitions to choose from. efforts of resource managers to achieve WEC aims to provide an overall picture This has led to an over-emphasis on maximum economic recovery. of energy resources availability. For this proved reserves, without consideration purpose, the individual classes are sum- of probable reserves. The SPE/WPC/ The UNECE contribution to marized in three main reserve/resource AAPG approach is an improvement, as WEC Survey of Energy Resources categories. A reconciliation of SER and it allows for probable reserves to be in- Dietmar Kelter [7] described how the UNFC resource terminology by means cluded. It does this by using a classifica- UNFC had been reconciled with WEC of codification is proposed in the table tion system that is able to characterize all terminology and discussed the specific ex- in [7]. This proposal slightly modifies the assets consistently on the basis of the level periences of Germany with regard to coal. one given by the WEC in its comment of risk (project maturity) and the range In recent years, considerable progress has dated November 7, 2002. It appears that of uncertainty (in recoverable volumes). been made in finalizing uniform classifica- a reconciliation of both terminologies is Additionally, the SPE/WPC/AAPG ap- tion systems for fossil fuel resources of coal, achievable by means of codification. One proach also allows for price values to be uranium and petroleum, covering the spe- issue of concern is the term ‘proved’, which determined according to current econom- cific aspects of each fuel resource and thus is used with differing content in the clas- ic conditions, which might be an average having differing terms and definitions. sifications. All details of terms and defi- over time, rather than the existing eco- The Ad Hoc Group of experts endeav- nitions as used in the classifications of nomic conditions required by the SEC, oured to harmonize these three energy re- uranium, coal and petroleum, as well as the oil price on the day the report is is- source classifications — the UN/Council a description of UNFC codification, are sued, usually December 31. of Mining and Metallurgical Institutions specified. These details are of interest to The application of the UNFC to pe- (CMMI) for coal, the SPE/WPC/AAPG WEC national committees. troleum resources managed by interna- for petroleum and the IAEA/NEA for ura- tional organizations, governments and in- nium — in terms of the UNFC, with the Concluding remarks and dustry was also demonstrated by Heiberg intention of assisting in the revision of the recommendations and Blystad [4]. This presentation focused Survey of Energy Resources (SER) ques- The need to test the UNFC on in- on the common needs of government and tionnaire to be used for the 2004 survey dividual deposits in countries before the

Table 1: UNFC codification Codes Joint class coal petroleum uranium

111,121, 111,121, Reserves/economically extractable quantities 111,112 122 122

121,122,123, 211,221,222, Contingent resources/potentially economically extractable quantities 211,222 221,222,223 311,321,322

331,332, 234,321,322, 331,332, Prospective quantities in place/intrinsically economic in place quantities 333,334 323,334 333,334

Source: Kelter [7]. industry. It was stressed that efficient re- by the WEC. This allows for improve- Ad Hoc Group’s next meeting on Octo- source and industry management requires ments in the coverage, clarity and use- ber 30–31 this year was stressed. OPEC an accurate understanding of the natu- fulness of the SER, while maintaining Member Countries were also encour- ral petroleum endowment — the in-place continuity with the SER 2001. aged to organize, in co-operation with quantities — and future production based The codification of the UNFC is ap- the OPEC Secretariat, sub-regional and on the three UNFC axes: economic po- plied to the individual classes of the fossil national seminars on the UNFC for En- tential, field project maturity, and geologi- fuel resources. This allows direct compar- ergy Reserves/Resources.

22 OPEC Bulletin May/June 2003 23 FORUM FORUM

Participants at the Seminar on the UNFC at the OPEC Secretariat in May.

The Seminar focused on demonstrat- and stressed the need for volunteers to SPE/WPC/AAPG oil and gas resources ing the main advantages of the UNFC test the UNFC on individual deposits in classification into the UNFC. as a uniform instrument for harmoniz- their countries before the Ad Hoc Group’s [6] Heiberg, Sigurd: Status of the initia- ing the definitions of energy commodi- next meeting in Geneva. tive on harmonization of definitions ties (oil, natural gas, coal and uranium); of reserves/resources terminology. making them internationally comparable References [7] Kelter, Dietmar: Reconciliation of and compatible; easing their assessment UNFC and WEC terminology. on a common basis and principles; sup- [1] Al-Tayyeb, Muhammad: Introduction [8] Ross, James G: Supporting new in- porting international accounting and fi- to the Seminar and OPEC views. ternational accounting and financial nancial reporting standards and enforcing [2] Blaise, Jean René: UNFC for urani- reporting standards. regulations related to sustainable manage- um. [9] Slavov, Slav: Introduction to the UNFC. ment of energy resources. [3] Blystad, Per: Proposed UNFC for pe- [10] Subelj, Andrej: UNFC principles; The The OPEC representatives, both from troleum. proposed UNFC for coal. the participating Member Countries and [4] Blystad, Per and Heiberg, Sigurd: The [11] UN Economic and Social Council/ the OPEC Secretariat gave a very positive application of the UNFC in petroleum ECE/Committee on Sustainable En- appraisal of the UNFC. resources management by international ergy: UNFC for reserves/resources of In conclusion, the Seminar put special organizations, governments and indus- solid fuels and mineral commodities emphasis on encouraging OPEC Mem- try. (Energy/WP1/R77, Geneva, Septem- ber Countries to adhere to the initiative [5] Heiberg, Sigurd: Incorporation of the ber 1997).

22 OPEC Bulletin May/June 2003 23 INTERVIEW INTERVIEW

The OPEC Fund: continuing to assist the development of poorer countries

OPEC’s sister organization, the OPEC Fund for International Development, has a long and proud tradition of assisting developing countries. In this interview, the Fund’s Director General, HE Dr Y Seyyid Abdulai, examines the Organization’s track record and looks forward to the future, as the scope of the Fund’s work continues to expand. He spoke with OPEC News Agency Editor, Umar Aminu.

Question: The OPEC Fund has come a their ongoing support that has allowed us Therefore, we were allowed to plough long way from its humble beginnings in to expand and gradually apply what we back what we received in repayments into the 1970s to its present position as a highly have learned to ever-wider fields of activ- new lending, and it was at that point — respected international financial aid insti- ity. We are very grateful to the Member in 1980 to be exact — that the Fund was tution. Can you give us some insight into Countries for their support and the con- converted into a permanent multilateral this success story? fidence they have placed in us. In fact, institution. Our mandate didn’t change, we were originally only supposed to be a and we continue to pursue it to this day. Answer: Like many institutions, we temporary facility, but after three replen- All that really happened was that we restarted small and have grown steadily. ishments of our resources, we had achieved structured to more closely resemble our Of course, none of our achievements some measure of success and it was felt partner institutions, many of which were would have been possible without the that we had enough capital to be able to and still are bigger than us. If we have backing of our Member Countries. It is continue indefinitely. been successful, then that is to the credit

24 OPEC Bulletin May/June 2003 25 INTERVIEW INTERVIEW

of all those involved, including our Fi- from our point of view, and if there are, ability to advise when we think they are nance Ministers, the Governing Board we try to fill them. We do not involve trying to do the wrong thing, and will and, of course, our staff. ourselves with the type of basic economic end up losing money. The mission of the OPEC Fund is studies that are carried out by the World This is a tremendous effort, because to promote solidarity among countries Bank, the International Monetary Fund, you can never be sure how many people of the South, encourage co-operation the African Development Bank and var- the message reaches, but we do believe that between OPEC Member Countries and ious other institutions in Asia and Lat- they value our advice and listen when we other developing nations and make what- in America. There is no reason why we suggest that, for example, a certain course ever small contribution we can toward the should go and ask exactly the same ques- of action is not the most effective, or that development efforts that these nations are tions of those countries that these other a project should be restructured in a par- already making. They tell us what their institutions have already asked. It is far ticular way. priorities are, and we try to help address better to utilise existing reports, especially Unlike the public sector, in the pri- them. Our main focus is on the poor- those parts that we believe are most rele- vate sector we risk losing our money. We est countries, and the neediest segments vant to our projects. If we need additional do not require any sort of guarantee. We within these countries. We work to alle- information, we try to get it ourselves. believe that our guarantee will come in viate their poverty — to the extent that We place considerable emphasis on the form of the quality of the projects we we can — and to contribute to their so- collaboration with other institutions. help finance. If a project makes money, cio-economic development. Only two weeks ago, I was in Rome to then we will also be able to make money, attend a high-level harmonization meet- whether the investment is a loan or an eq- Q: Your loans and grants for both the pub- ing where we examined how interna- uity stake. It is very important, however, lic and private sectors show a cumulative tional finance institutions (IFIs) can that whatever we gain, in terms of divi- figure of over $6 billion to date. Can you best co-ordinate so that we complement dends, we plough back. We do not pay break this down for us? one another, rather than pursuing con- any dividends to our Member Countries. trary policies, conditions, implementation Everything we do is done to help other A: As you may know, most of that $6bn modalities and so on. We believe that such countries. is accounted for by the public sector. We meetings are very useful; they assist us in We may have to wait for a few years to only set up our private sector facility three building on, and further establishing, our see whether our involvement in the private years ago and we devoted most of the first principles. sector is a success. If a project does well year or two to establishing the necessary and other private entrepreneurs want to mechanisms, policies and procedures. It is Q: How do you assess the success or failure get into a business that has already suc- only now that we are actually getting into of projects that come under the umbrella of ceeded, we are prepared to sell our stake the financing of projects, and we believe your private sector initiative, taking into to them. Then we can use the money to that in the next three to four years our account the risks involved? finance a new project. This is really how activities will increase significantly. we see our role in these countries, and In the public sector, we are guided by A: In some cases the level of success is in fact we are already doing it. The very the priorities laid down by our beneficiary difficult for us to measure. What we do first business we financed was for a leas- countries, and we operate in exactly the know, however, is that we are beginning ing company in Mauritania, which was same way that other similar development to help in areas where these countries about 2-3 years ago. We are happy with finance institutions operate. After we have need our help. Like everything we do, that experience, because we are already been asked to provide funding, we then we did not go into the private sector be- receiving dividends, which means we are do the technical work in order to make cause it was the latest fashion. The ben- generating money for re-investment and sure that the projects we are being asked eficiary countries approached us, saying the Mauritanians are also pleased. to support will actually help the requesting that the private sector was a new area countries. In fact, in many cases we co- where they believed that we could help Q: How do you envisage the future pros- finance development projects with other them in exactly the same way we were pects for this private sector approach to de- lending institutions. This is how we were doing in the public sector. We respond- velopment finance? structured and in retrospect it has turned ed positively, and what we are now do- out to be a very wise decision. The idea ing in the private sector is again similar A: It is not something that I believe the is to avoid duplication of effort by pool- to what other institutions are doing: we Fund should take any particular credit ing resources, knowledge and expertise, receive requests directly, we assess them for, because we are not doing anything rather than re-doing work that others and we act accordingly. that other institutions, such as the Inter- have already done. What I have told a number of coun- national Finance Corporation (an arm of This policy of co-operation means that tries is this: we believe that if we suc- the World Bank) are not already doing. when other lending institutions have al- ceed, the help we give them should not The regional development banks, too, in ready carried out relevant studies, all we be measured only by the amount of dol- Africa, Asia and Latin America, have their need to do is to simply go through them lars we are able to transfer to them. One dedicated private sector windows. Anoth- and try to identify if there are any gaps of the areas where we can help is in our er example is the European Bank for Re-

24 OPEC Bulletin May/June 2003 25 INTERVIEW INTERVIEW

construction and Development (EBRD), ality we all face. Even if there are those how the setting of oil prices would be which is working in the emerging mar- in a weak position who do not want to done in the future. We told them that kets of the former Soviet Union. What participate, in time they will find them- we too are part of the developing world the EBRD and others want to do in these selves more and more isolated as others — we just happen to produce one com- countries is to promote the private sec- join the globalization train. modity that is crucial for the world econ- tor — in fact that is their main activ- Naturally, nobody wants to give up omy. While we were certainly prepared to ity. The Fund has co-operative arrange- the advantages they already have. So even talk about the oil issue, we did not want ments or agreements with all of them, when governments are prepared to take to talk about it in isolation. Some of our so we are only making a contribution in steps to make things fairer, they often Member Countries produce not only oil, an area where there is an acknowledged end up giving in to pressure groups in but other basic commodities like rubber and considerable potential for increasing order to avoid upsetting some members and cocoa, and our neighbours (who are productivity and generating employment of their constituencies. Governments do also developing countries) have a stake opportunities. not want to risk making waves when they in this too. know they will be up for re-election in, One of the things that came out of Q: People around the world understand glo- say, a few months or a year’s time. those meetings in Paris was the suggestion balization in many different ways. What is With regard to free trade, you might to set up an institution that would pro- the significance of globalization for the Fund find that if a government wants to give tect the interests of those countries that as a multilateral financial institution? aid of $1 million, it will impose some are producers of primary commodities. restrictions on trade, as a pre-condition, Such an institution would be devoted A: It is certainly true that globalization is which will deprive the countries that are solely to increasing agricultural produc- seen differently by different people. How- receiving the aid of perhaps $5m in the tivity in these countries so that they would ever, globalization is not something that long run. The net effect is that you give be able not only to feed their own peo- has only just started. I believe that glo- $4m less, not $1m more. Or you might ple, but also have a surplus to sell. The balization dates back to the time when find that people who live thousands of OPEC Fund, which at that time had only early man left one village and went to miles away want to patent the use of cer- just been set up, was the institution the trade arrowheads in another. Now we have tain plants in your own country. These OPEC Members designated to speak for, reached the point where we all live in a are the kind of problems that we are fac- and negotiate on behalf of, all of them. global village, and the world is so closely ing every day in this globalized world. Together, they were prepared to put up interconnected and inter-dependent that Globalization ought to take into ac- the bulk of the resources required to set it has become, in my opinion, necessary count the fact that while individual coun- up the institution. Not only that, but their to write global trade rules that will enable tries may lose in one area and gain in contribution to IFAD was paid to the things to be done in a way that is order- another, the net effect should be that in OPEC Fund and the Fund then trans- ly and fair to everyone. That is what the the end, everybody is better off. Unfor- ferred this money as necessary to IFAD. World Trade Organization — and GATT tunately that is not happening right now. For the first replenishment, the amounts before it — is trying to do. However, there are people, even in the pledged by the OPEC Member States fell One of the reasons why there is so more powerful countries, who are pre- about $20m short of what OPEC had much discontent surrounding the issue pared to stand up for the rights of the agreed to pay, so the OPEC Fund took of globalization is that in any situation weak. Globalization is not going away. that amount from its own resources and where rules are being written, the power- It has always been with us, even in the paid it to IFAD in order to ensure that ful will try to write those rules in a way colonial era, when many poor countries the payments were not missed. that favours themselves. Those who are in had no choice and no say in matters. I Today the OPEC Fund continues to a weaker position quite rightly point out do believe, however, that eventually glo- support IFAD strongly, and we remain a that since we are all living in the same balization will begin to work more fairly major co-financer of their projects. Less global village, the rules should be written than it does at present, and everybody than a month ago, I was in Rome for the in such a way that everyone benefits. We will benefit. 25th anniversary of IFAD to participate in shouldn’t deprive people of the possibility discussions on the future of the organiza- of taking advantage of their own resources, Q: The Fund’s contribution to the Interna- tion. which economists call comparative advan- tional Fund for Agricultural Development Another result of the Paris meetings tage. Of course people will protest if you (IFAD) is substantial compared to your to- was the idea of setting up another insti- ask them to practice free trade, then fail tal financial commitments. Why is this so? tution to help offset the negative effects to practice the same thing yourself. on developing countries of fluctuations in There are those who have argued that A: IFAD could be described as the brain- the prices of the agricultural commodities developing countries should jump off the child of the OPEC Member Countries. that many of them export. That was what globalization train. Personally, I do not When oil prices were adjusted in the led to the establishment of the Common agree, because nobody can shut themselves 1970s, many of the industrialized coun- Fund for Commodities (CFC), which is off from the world. Globalization is not tries wanted to have a meeting with the based in Amsterdam, and to which the something you can choose, it is the re- OPEC Member Countries to determine OPEC Fund is the largest contributor.

26 OPEC Bulletin May/June 2003 27 INTERVIEW INTERVIEW

However, the CFC has not worked as well cies like UNICEF, the UNDP, UNHCR where, until recently, people did not re- as IFAD, because by the time it was finally or the International Federation of Red alize how devastating it was for the world. established, some countries felt that they Cross and Red Crescent Societies. More than that, we have discovered that could not be part of an institution that Let me give you a couple of examples. HIV/AIDS is destroying the gains — both was involved in controlling prices. This In 1981, as everyone recalls, there was social and economic — that we and oth- has resulted in a situation where some key prolonged drought and famine in many ers have made, even in the programmes countries are unfortunately not members parts of Africa. The OPEC Fund felt it we are financing that are doing well. Our of the CFC. could not stand by and watch millions authorities feel that this is another battle of people die of starvation, and stepped which we must fight and win. They were Q: Finally, could we talk about some of in with a contribution of $25m to the very generous in approving a $15m ac- your humanitarian programmes, like those International Food Reserve. When fam- count as a first contribution. Already we related to famine relief and the problem of ine struck again in 1984, many coun- have virtually exhausted that, and OPEC HIV/AIDS? tries donated food, but the problem this Fund initiatives against the spread of HIV/ time was a shortage of transport to dis- AIDS are now in place in the developing A: That is an area where there has been a tribute it. On this occasion, the OPEC regions of the globe. The next step will slight shift from our main mandate. Al- Fund provided $5m for the purchase of be to ask our Ministerial Council (our though the Fund was not originally set vehicles to speed up the delivery of food highest policy-making body) to decide up to provide this kind of aid, it became supplies to the affected areas. whether or not we should continue to clear after we started helping countries We are currently seeing similar prob- provide this kind of assistance. My feel- through soft loans, that if we were to show lems in parts of Africa, and again we have ing is that they very likely will agree that solidarity with other developing nations, responded, by agreeing to establish anoth- we should.* there would occasionally be circumstances er account endowed with $20m to buy where loans were not the most appropriate food and other necessary materials to be Dr Abdulai, thank you very much. way to help. So, since around 1980 we distributed throughout the affected coun- have been giving outright grants. tries. This programme has just got under * In June 2003, the Fund’s Ministerial Coun- In our programmes, we regularly find way, and we have not even made the first cil agreed to replenish the special grant ac- areas where such grants are needed, some- delivery yet, because it takes time for the count for HIV/AIDS operations with $15m times to support intellectual activity, or to World Food Program and others to obtain in new cash, taking the total to $30m, to continue to assist countries and communi- provide assistance to very poor commu- and deliver supplies. However, I imagine ties in HIV/AIDS prevention, care, support, nities, or even to bring relief to victims that we will very shortly be distributing and reduction of vulnerability. See pp28–31 of natural or man-made disasters. Often supplies bought from this account. for the full story on the Fund’s commitment these grants are channelled through agen- The problem of HIV/AIDS is one to tackle HIV/AIDS around the globe.

26 OPEC Bulletin May/June 2003 27 O P E C F U N D O P E C F U N D

HIV/AIDS tackled in developing countries as OPEC Fund tops up grant account to $30m

by Philippa Webb-Muegge

It is more than two decades since AIDS was first identified and the spread of the virus is on the increase. Many experts view it as one of the major threats to humanity, with the world only having seen the tip of the iceberg in calculating its cost to society, productivity, the family and, indeed, on the 14 million children who have been orphaned due to the virus. According to UNAIDS, the umbrella organization co-or- dinating the global battle against the disease, more than 56m people have been infected with the HIV virus over the past 20 years. Of those, some 22m have died of AIDS-related illnesses, 4.3m of them children. Equally shocking is the estimate that between 2002 and 2010 an additional 45m people will become infected with HIV in 126 low- and middle-income countries — unless the world succeeds in mounting a drastically expanded global prevention drive against the virus. Africa remains the worst-affected continent, with its death toll from the virus estimated at 2m last year — representing well over 80 per cent of worldwide deaths, according to UN- AIDS. To make matters worse, the disease is making serious inroads in Asia, Latin America and the Middle East. This indictment, coupled with the OPEC Fund for Interna- tional Development’s long involvement with poorer, developing countries, prompted the Fund to consider HIV/AIDS as being an urgent case for priority funding. Ministerial Council gives another $15m Accordingly, the OPEC Fund’s special grant account for HIV/AIDS operations was first opened in 2001, with a $15m grant. In June this year, an additional $15m was given towards the global campaign against HIV/AIDS. The Fund’s Ministerial Council approved the $15m replenishment recently on the recommendation of its Director General, Dr Y Seyyid Abdulai, who expressed satisfaction with the existing projects being run under the HIV/AIDS programme. Photo: Photo: Reuters/Howard Burditt Abdulai said the grant, now a cumulative $30m, was “a humanitarian contribution of OPEC Member States, (which Ngoni, a six year old HIV-positive Zimbabwean boy, is fed by his are) concerned over the toll the disease is taking on innocent mother at a hospice in Harare. Zimbabwe has one of the high- human lives.” est per capita HIV/AIDS infection rates in the world and this He added that the money was “given in solidarity and in good situation is made worse by drought, food shortages and potential faith,” and it would back individual and collective efforts world- famine facing the country. wide “to arrest the spread of the scourge against humanity.”

28 OPEC Bulletin May/June 2003 29 O P E C F U N D O P E C F U N D Photo: Photo: Reuters/Mike Hutchings Photo: Photo: Reuters/Howard Burditt Nurse Monica Soko, who is supported by the International HIV/ A South African AIDS activist holds capsules of a generic medicine AIDS Alliance, visits a victim in Livingstone, Zambia. smuggled into the country to treat the disease.

The Fund’s HIV/AIDS programme currently finances friendly services for information, education and communication projects, programmes and an initiative to assist countries and on HIV/AIDS; services for voluntary counselling and testing; communities across Africa, Asia, the Pacific, the Caribbean, prevention of mother-to-child transmission of HIV; prevention Latin America and the Arab world. and treatment of sexually-transmitted infections; provision of These projects are being implemented in close co-operation care and support to those infected and affected by HIV/AIDS; with leading international agencies in the battle against the dis- continued supply of safe blood; and monitoring and surveillance ease: UNAIDS, the World Health Organization (WHO), the of the epidemic at country and district levels. United Nations Population Fund (UNFPA) and the International Specifically, the funding agencies see their role as being able Federation of Red Cross and Red Crescent Societies (IFRC). to help the participating countries finalize or update policies To date, $14.1m of the Fund’s endowment of the now $30m and create standard guidelines for intervention practices. has been earmarked in conjunction with the above-mentioned Secondly, to build national and local capacities by training agencies to help the countries worst affected by the pandemic staff, developing appropriate management and supervision tools and those which, contrary to previous expectations, face a new and ensuring access to, and sustainability of, clinical and dispensary threat from the spread of the virus. care, producing safe blood supply, selecting equipment, consumables and drugs, and improving the health sector infrastructure. Sub-Saharan Africa a major recipient Thirdly, to scale up intervention practices by increasing the The Fund’s first grant of $8.11m was pledged in June amount of care and prevention work at district and provin- last year in conjunction with the WHO. The initiative was cial levels and by increasing the response of the health sector launched with the stated objective of preventing and control- which will help prevent the spread of HIV transmission, while ling the spread of HIV/AIDS in 12 severely afflicted countries providing support and care for those living with HIV/AIDS. of sub-Saharan Africa — Burkina Faso, Burundi, the Central African Republic, Ethiopia, Kenya, Malawi, Mozambique, Central America, Caribbean priority areas Rwanda, Togo, Uganda, Tanzania and Zambia. In September last year, the Fund awarded grants totalling After the designated countries had, themselves, outlined $4.2m in support of two projects — the first being for Central the priorities of the project, the major areas of intervention to America and the Caribbean ($3.2m) and the second for selected prevent the spread of the virus were identified, namely: youth- Arab countries ($1m) — in partnership with the UNFPA.

28 OPEC Bulletin May/June 2003 29 O P E C F U N D O P E C F U N D

The first project is designed to assist Belize, Costa Rica, Gua- temala, Guyana, Honduras and St Lucia in strengthening their national capacities to address the needs of youth, especially those living in difficult circumstances and who are at risk of HIV infection. The countries that have been selected are among the most affected by HIV/AIDS in the Central American and Caribbean sub-regions, where the epidemic is showing no signs of slowing down. Central America and the Caribbean have the highest A sex worker watches prevalence rates in the western a street play for AIDS hemisphere. The Caribbean, awareness on the eve of

in particular, suffers from the Photo: Reuters/Roy Madhur World AIDS day in Bombay, India. highest HIV incidence outside of sub-Saharan Africa and is thus in need of urgent prevention toral activity, in other words, activities which are not limited efforts to avoid an aggravation of the existing situation. to public health institutions. The project will analyze data and information on HIV/AIDS The project will attempt to increase awareness and under- and youth to provide a basis for the selection of the specific standing and enhance the response of the public sector, NGOs project sites; provide technical assistance to support national and community-based/civil society organizations. strategy formulation for the prevention of HIV/AIDS; work to strengthen existing sexual and reproductive health services; and train teachers and social sector workers. Furthermore, it is anticipated that the activities will create an awareness of, and support for, HIV/AIDS prevention structures among youth, and document as well as disseminate, experience for adaptation and replication of projects at a national, regional and global level.

Arab countries should not be complacent Photo: Reuters/Alexander Demianchuk Also in co-operation with the UNFPA, the second project seeks to support capacity-building efforts in Lebanon, Morocco, Palestine, Somalia, the Sudan, Syria and Yemen. While the Middle East and North Africa still report low infection rates, international experts are advising that countries which still have these low levels should work to avert the epidemic’s potential advance, rather than take comfort from current infection rates. The OPEC Fund’s intervention in this region is, therefore, timely. The direct beneficiaries are the public at large, with special emphasis on the people at high risk and those who are of a reproductive age, namely migrant youth, long-distance drivers, armed forces personnel, street children, prisoners, reform custody inmates and young people in industrial areas, refugees, internally displaced and others. Meanwhile, peer educators, Russian children who live teachers, policy/decision makers, community/religious leaders in a special orphanage for and people living with HIV/AIDS will equally benefit. HIV/AIDS victims look It is hoped that the project will strengthen these countries’ into the camera in national abilities to respond to HIV/AIDS and other sexually St Petersburg. transmitted infections by supporting country-based multi-sec-

30 OPEC Bulletin May/June 2003 31 O P E C F U N D O P E C F U N D

Stigma issues addressed in Asia, the Pacific year all have different timeframes for implementation. During In association with the International Federation of this process, the funding agencies have ensured that adequate Red Cross and Red Crescent Societies, the OPEC Fund procedures for monitoring and evaluation exist to make sure has also approved a $2m grant aimed at reducing household the money is being spent well. vulnerability to HIV/AIDS in a number of countries in Asia This process is intended to ensure that the projects are and the Pacific. indeed benefiting the local populations in tackling the diverse, Under this project, financial resources have been allocated and often-difficult issues associated with the disease. to support programmes in Nepal, Sri Lanka, Cambodia, Laos, During this process, technical support has been lent to Vietnam and Papua New Guinea. Twenty-two additional coun- the various countries, and visits have been conducted by the tries in the region will also benefit from components of these funding agencies. project activities. Helpful to the monitoring process is the data that is collated The overall goal of the project is to decrease household and analyzed to provide an end-evaluation of the initiatives, vulnerability to HIV/AIDS, and assistance will be given to which, ultimately, will help both donor countries and lending the countries in the sub-regions to buttress ongoing efforts at institutions assess the direction of future projects. the country level. Essentially, it is hoped that the stigma and discrimination AIDS still a major concern for society associated with living with HIV/AIDS is lessened and that Clearly, the HIV/AIDS virus remains a major obstacle for further infections are reduced by attitudinal and behavioural world leaders to tackle, especially concerning the increasing change. Equally important is that there is adequate provision infection rates within the developing world. of care, treatment and support for those who are HIV-positive, The virus is still killing the most productive members of or have AIDS. societies, worldwide. Schools are losing teachers, while doctors This will be done through strengthening the capacity of the and nurses, private businesses, managers and others have also national societies to scale up HIV/AIDS intervention methods been affected. and increase the links between national societies and public Not only are infection rates growing, but prevalence rates authorities, groups of people living with HIV/AIDS and other as well, which have not stabilized at a natural limit. In some civil society organizations. locations, predicted stabilization has turned out to be illusory, The projects which have been undertaken over the last with the epidemic taking off again. The latest UNAIDS global report refutes the comfortable assumption that parts of Asia and the

Photo: Photo: Reuters Middle East were somehow immune to HIV/AIDS. On the contrary, these areas are beginning to face a growing pandemic. Although efforts are being made to check the increasing impact on development projects and programmes worldwide, the threat remains real, and more human loss will be experienced. OPEC Fund intervention so far in the global campaign against the virus has been welcomed by recipients and co-operating agencies alike. Certainly, the Fund’s contribution to the special grant account for HIV/AIDS operations has made a differ- A Vietnamese woman walks past posters warn- ence to the lives of those who ing of the danger of HIV/AIDS in the capital, have received its assistance so Hanoi. Vietnam’s Health Ministry warned ahead far, and the many who will of World AIDS Day that 46,000 Vietnamese definitely benefit from ongo- could die of AIDS by 2005. ing operations.

30 OPEC Bulletin May/June 2003 31 NEWSLINE NEWSLINE

Reconstruction of Iraq can begin as sanctions are lifted and oil exports gradually restart

New York — The United Nations Secu- olution, which was co-sponsored by the Among the latter’s duties will be rity Council adopted a new resolution on USA, the UK and Spain, are the lifting of “working intensively with the authority, Iraq in May, lifting the economic sanctions economic sanctions, a full resumption of the people of Iraq, and others concerned on the country and preparing the way for oil sales, the establishment of a provisional to advance efforts to restore and estab- the resumption of oil exports. authority, the setting up of government lish national and local institutions for The 15 members of the Security infrastructure and the appointment of a representative governance, including by Council passed resolution 1483 by 14 UN special representative to work with working together to facilitate a process votes to nil, in contrast to the deep di- the provisional authority. leading to an internationally recognized, visions seen within the Council in the UN Secretary General Kofi Annan representative government of Iraq,” noted run-up to the US-led war against Iraq. moved swiftly to appoint his special rep- the resolution. Only Syria did not participate in the resentative, naming the UN High Com- Introducing Vieira de Mello at a press vote. missioner for Human Rights, Sergio Vieira conference, Annan said it had been a dif- Among the key provisions of the res- de Mello of Brazil, to the post. ficult decision for him to take the Brazil- Photo: Photo: Reuters/Andrea Comas Two Iraqi brothers arrive with a donkey at a pipeline in southern Iraq to siphon oil to sell it. Following the fall of Saddam Hussein, many Iraqis have been forced to resort to such activities to survive.

This section draws on the output of 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 interested in oil, energy and economic development issues, more details on OPECNA can be found in the advert on p5.

32 OPEC Bulletin May/June 2003 33 NEWSLINE NEWSLINE

ian diplomat away from his human rights United Na- job, even on a temporary basis. tions Secretary “Human rights has been on top of General, Kofi my own agenda and it is absolutely im- Annan (r) in- portant to this organization. It was not troduces UN an easy decision, but it also reflects the High Commis- important challenge that we need to take sioner for Hu- on,” said Annan. man Rights, In his own comments to the press, Sergio Viei- Vieira de Mello also stressed the need for ra de Mello, human rights and the restoration of Iraqi as his special sovereignty. representative “The people of Iraq, as we know only for Iraq at the too well, have suffered and have suffered UN in New enough. It is time that we all — the Ira- York. qis first, the coalition authority and the UN — come together to ensure that this suffering comes to an end and that the Iraqi people take their destiny into their own hands, as the Security Council resolution calls for as quickly as possible,” he said. The UN Secretary General is also to appoint a representative to an international advisory and monitoring board that will audit a development fund for Iraq. Oil and other revenues paid into this trust fund will be disbursed at the discretion of the provisional authority for humanitarian needs, economic reconstruction and other costs. The fund will be advised by a board

including representatives from the UN, Photo: Reuters/Chip East the International Monetary Fund, the World Bank and the Arab Fund for So- and experts capable of driving the econ- the agreements with Russia’s Lukoil to cial and Economic Development. omy forward,” he said. develop the West Qurna field, and with Resolution 1483 also extends the UN In line with the provisions of reso- the China National Oil and Gas Explo- oil-for-food programme for another six lution 1483, Iraq’s State Oil Marketing ration and Development Corp to develop months, during which period it will be Organization announced the commence- the Al-Ahdbad field. gradually phased out. Under the accord, ment of the country’s first post-war oil Commenting on the latest develop- which began at the end of 1996, Bagh- exports in June. ments in Iraq, the OPEC Secretary Gen- dad is allowed to use oil sales to buy the Contracts for the oil, which came from eral, Dr Alvaro Silva-Calderón, told the food and humanitarian supplies on which storage tanks at the Turkish port of Cey- OPEC News Agency that the lifting of many Iraqis depend. The six-month ex- han, were awarded to ChevronTexaco of sanctions was a welcome development, tension allows Annan to prioritise billions the USA, Spanish firms Repsol and Ce- and one that the Organization was keep- of dollars worth of aid shipments under psa, Tupras of Turkey, France’s Total (for- ing a close eye on. already-signed contracts. merly TotalFinaElf) and Italy’s ENI. Asked how the move would impact on The Executive Director of the oil-for- Earlier, the US Energy Information the international oil market, the Secretary food programme, Benon Sevan, welcomed Administration had said that Iraq’s two General noted that it was too early to say, the adoption of the resolution, saying that main export terminals, Ceyhan and Mina but the Organization and its Members the lifting of sanctions represented long- Al-Bakr in the south, were operational were closely watching developments. awaited relief for the Iraqi people. and ready to resume exports. “We have to wait and see how the “Iraq is blessed with natural and hu- In another oil industry development, situation in Iraq unfolds, especially with man resources, not the least of those being senior Iraqi Oil Ministry officials said that regard to its future potential for produc- oil and a well-educated and extraordinar- some of the contracts signed by the previ- ing and exporting crude oil,” he said. ily resilient population and an extremely ous regime with international oil compa- However, despite the relatively swift competent cadre of industrial managers nies would be cancelled. These included end to the war and the lifting of sanc-

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tions, several top UN officials have said 3,400 national staff, who continued to that the security situation in Iraq remains deliver essential supplies to hospitals, dis- In brief precarious. The breakdown of law and or- placed populations, and other vulnerable Russian merger creates new oil major der was severely undercutting the abilities groups throughout the period of conflict,” BRUSSELS — The recently-announced merger of various UN agencies to bring humani- she added. of two of Russia’s biggest oil companies, tarian aid to the civilian population, they Meanwhile, the Administrator of the Yukos and Sibneft, will create the world’s said. UN Development Programme, Mark Mal- fourth-largest oil producer, according to UN Deputy Secretary General, Louise loch Brown, expressed deep concern about European oil analysts. Russia’s number two Frechette, told a Security Council briefing the difficult security environment in the producer Yukos is to buy fifth-largest Sibneft, which leapt up the rankings last year when it that the civilian population, particularly country, especially in Baghdad, which snapped up Russia’s last major state-owned oil children, remained at risk if the security continued to severely hinder humanitar- concern, Slavneft. The new firm, to be called situation did not improve substantially ian assessments and deliveries. YukosSibneft, will control reserves totalling in the near future. Another top UN official, the Execu- 20 billion barrels, not including the contri- She noted that UN agencies were at tive Director of the World Food Programme bution from Slavneft. The deal is believed to work throughout the country, providing (WFP), James T Morris, also emphasized be the biggest merger in Russian corporate food, water, medicine and other emer- the precarious security situation, although history and follows a similar attempt at combining the two five years ago. However, that gency assistance, helping repair water and he said he was confident serious hunger deal fell apart amid tumbling oil prices and sanitation facilities, assisting in the resto- among the Iraqi people could be avoided. disagreements between the two companies. ration of electricity, and providing relief The WFP had so far delivered over The Yukos-Sibneft merger is expected to be to internally displaced persons and mal- 200,000 tons of food to Iraq, averting a completed by the end of this year. nourished children. severe crisis, and was already gearing up “I would like to pay special tribute for the largest humanitarian operation it OAPEC puts 1Q demand at 76m b/d to the courage and commitment of our had ever attempted, said Morris. KUWAIT — The Organization of Arab Petro- leum Exporting Countries (OAPEC) has said that world demand for oil stood at 76 million barrels/day during the first quarter of 2003, President Bouteflika of Algeria makes down from 76.8m b/d during the same period last year. World demand for oil in the whole two-day official visit to Austria of 2002 edged up to 76.6m b/d, showing an increase of 300,000 b/d over the 2001 figure, and up by 900,000 b/d from 2000, OAPEC Vienna — The President of Algeria, HE Abdelaziz Bouteflika, paid a two-day of- was quoted as saying by the Kuwaiti News ficial visit to the Austrian capital Vienna in June. Agency. World oil supply in 2002 stood at The visit, which followed an invitation from Austrian President Thomas Klestil, 76.9m b/d, compared with 77.1m b/d in was part of moves to expand economic co-operation and other ties between the two 2001. The fourth quarter of 2002 witnessed countries. the highest oil supply, touching 78.2m b/d, Bouteflika met with top Austrian government officials including President Klestil up by 1.5m b/d from the last three months of 2001, said OAPEC. and the Mayor of Vienna, Michael Häupl, as well as the OPEC Secretary General, Dr Alvaro Silva-Calderón. Irish gas drilling set to surge BRUSSELS — This year could be Ireland’s busi- est gas drilling season for 25 years, according to the Chairman of the Irish Offshore Op- erators Association, Fergus Cahill. As many as eight wells could be drilled this year, the most since 1978, said Cahill. International oil companies prospecting in Ireland expected to spend about $100 million on their exploration activities, he added. The companies active in Ireland include Ramco, which is working on developing the Seven Heads gas field in the Celtic Sea, and plans to drill five new wells. First gas is expected later this year and the field is expected to fulfil 10–15 per cent of Ireland’s requirements for the next 15 years. Also in the Celtic Sea, Marathon will develop its fifth sub-sea gas well tie-back. To the north-west, Statoil Exploration Ireland will drill an exploration well as part of its license commitment, while Enterprise Energy Ireland, a unit of Royal Dutch/Shell, will return to its Dooish prospect off Donegal.

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The Algerian President, who was accompanied by Finance Minister Abdelatif Benchenhou, also gave a joint press briefing with Klestil and attended the opening of the Austro-Algerian economic forum. In brief Addressing the forum, Bouteflika noted that his country could play a major role Refinery margins jump in Singapore in helping Austria secure its energy supplies. Austria’s geographical position meant SINGAPORE — The uncertainty in interna- that it could be supplied with Algerian gas through pipelines linking the North Af- tional oil markets in the first quarter of this rican country to Europe, the Algerian Press Service quoted him as saying. year resulted in refining margins soaring to President Bouteflika also urged Algerian and Austrian businesses to identify more unprecedented levels, according to the Sin- investment and partnership opportunities, which would, he said, benefit the econo- gapore Petroleum Company (SPC). Refining margins averaged above $3/barrel for 1Q03 mies of both countries. compared with less than $1/b for the first He highlighted his country’s plans to modernize its economy and promote in- quarter of last year, said SPC. As a result of vestments, and urged Austrian enterprises to take part in this investment expansion the high refining margins and after account- process. Their experience in dealing with the countries of central and eastern Europe ing for the write-down in inventory values, would be very valuable to Algeria, he noted. SPC said it was able to record an operating During the President’s visit, accords were also signed covering double taxation profit of 20.2 million Singapore dollars in and the reciprocal protection of investments. Bouteflika said that the agreements the first quarter compared with S$23.5m for the same quarter a year ago. The firm’s constituted a significant step forward in the development of economic relations be- turnover surged by 72.2 per cent to S$876m tween the two countries. during the quarter, up from S$508m in the Bilateral co-operation, which was previously devoted to ties in the rail sector, corresponding period of last year, mainly due was revitalized in 2000 with the visit to Algeria by the then President (now Second to a 20.2 per cent increase in the volumes of President) of Austria’s National Council, Heinz Fischer. crude and products handled. This was followed by visits to Algeria by several economic delegations, including Malaysia earns $3bn from LNG exports Austrian bankers interested in boosting foreign investment in Algeria. KUALA LUMPUR — Malaysia earned $3.0 billion from exports of liquefied natural gas last year, making up 5.6 per cent of the country’s gross national product, according to the Presi- dent and Chief Executive Officer of state oil and gas firm Petronas, Mohd Hassan Mari- can. The firm’s total investment in its LNG business over the last 20 years, including upstream gas production facilities, downstream gas liquefaction facilities, and LNG transport and port facilities, amounted to $9.0bn, he said. “Last year alone, LNG exports accounted for three per cent of Malaysia’s total exports, which is quite a significant amount considering that it comes from one single producer and one single location,” the Petronas boss said in a statement. Opposite page: US drilling activity up in 1Q03 Algerian Presi- NEW YORK — Estimated completions of dent Abdelaziz US oil wells, natural gas wells and dry holes Bouteflika (r) increased by four per cent in the first quarter with OPEC of 2003, compared with the same period of Secretary Gen- 2002, according to the latest figures from the eral, Dr Alvaro American Petroleum Institute (API). Oil well completions rose seven per cent, and natural Silva-Calderón gas completions increased one per cent for the quarter, said the API’s Quarterly well completion report for 1Q03. An estimated 7,255 oil wells, natural gas wells and dry holes were completed during the period, compared with an estimated 6,950 completions for the same period the previous year. For the first quarter of 2003, gas completions were up one per cent to 4,491; oil well completions rose seven per cent to 1,767, and dry holes were up 18 Right: Boutef- per cent to 997. Total exploratory comple- lika with Aus- tions were down four per cent in 1Q03 and trian President development completions were up five per Thomas Klestil cent compared to 1Q02.

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going to privatize it tomorrow, but that the oil industry will be open for more in- In brief vestment by foreign companies. Gradually, New steel could improve gas economics it will also involve the full participation TOKYO — The ExxonMobil Upstream Re- of the Libyan people themselves, through search Company has announced the signing buying shares in stock companies.” of an accord with two Japanese firms, Nip- Ghanem went to say that the work pon Steel Corporation (NSC) and Mitsui, done to strengthen the Libyan economy to commercialize a new type of steel, which in the last few years, during which he was is 20–50 per cent stronger than alternative pipeline steels used by companies in gas pro- Minister for Economy and Trade, may duction today. The formula for the steel was have informed his appointment, and that first developed in ExxonMobil’s laboratories reforms which supported and encouraged and is part of the US firm’s focus on pro- the liberalization of the country’s economy prietary research and development. Further would be continued. work to make commercial production viable “We tried to liberalize, we opened up was done jointly with NSC, said ExxonMobil the economy more, to encourage indi- in a statement. One application for the high- strength steel is in natural gas pipelines that vidual participation, unified the foreign can be constructed over longer distances at exchange market, and liberalized it,” he lower cost, it said. explained, adding that apart from com- pletely abolishing the unofficial currency UK oil industry welcomes tax cut market, all forms of quantitative restric- BRUSSELS — The UK’s North Sea oil in- Liberalization, boosting tions on trade were also removed. dustry could get a major investment boost following the government’s decision to scrap private sector are key Ghanem said that there was now clear- petroleum revenue tax (PRT). The move to ly a remarkable improvement being wit- abolish PRT from January 1 next year, which factors, says Libyan PM nessed in the economy. Commenting on was announced in the recent budget, offers the impact of the longstanding economic oil producers an incentive to tap some of the Vienna — Liberalization and boosting and trade embargo imposed on Libya, he North Sea’s less-profitable fields. A spokesman the role of the private sector will be key noted that now some of the sanctions had for the UK Offshore Operators Association (UKOOA) welcomed the move, saying: elements of the Libyan government’s eco- been lifted, this would help facilitate the “Abolishing PRT on new tariff business nomic reforms, according to the country’s economic integration of the country with could potentially unlock a further 500–700 new Prime Minister, Dr Shokri Ghanem the rest of the world. million barrels of oil equivalent from the de- (pictured above). “The embargo has affected us a lot. velopment of currently uneconomic North In a telephone interview from Tripoli The removal of the embargo has allowed Sea discoveries, representing new investment with OPEC News Agency Editor, Umar us to integrate once again into the world in the region of $3–4 billion.” Currently, the economy and, of course, we are going to various UK offshore developments are taxed Aminu, Ghanem said that achieving the at different rates, depending on the age of government’s aims of economic liberali- pursue this integration and try to open the development. The UKOOA has said that zation and promoting private sector par- our doors for more co-operation and, these differing rates create what it describes ticipation would require the introduction hopefully, for better reforms,” he said. as “tax distortions.” of far-reaching policies that would create Ghanem also added that Libya was the necessary environment to support, en- planning to seek membership of the World API favours EPA diesel proposals courage and promote inflows of interna- Trade Organization and would start ne- NEW YORK — The US Environmental Protec- tion Agency’s proposal to cut emissions from tional and private capital. gotiations on entry soon. diesel-powered construction, agricultural and “Libya, for a long time, has been de- Commenting on the current oil mar- industrial equipment should substantially pending more on the public sector. Now ket situation, he reaffirmed his country’s improve air quality while minimizing ad- the private sector will be playing a bigger full support and commitment to the goals ditional costs to consumers, the American role. But that does not mean that we are and objectives of OPEC as an Organiza- Petroleum Institute (API) has said. The going to remove in one day the public tion. proposal significantly reduces diesel engine emissions levels and substantially reduces sector. First, they will complement each “The oil market situation, as you sulphur levels in off-road diesel fuel. “Less other,” he elaborated. know, has dramatically changed. It looks sulphur in off-road diesel is crucial to cut- Ghanem, a former Director of the like the fundamentals are okay, but there ting emissions and improving air quality,” OPEC Secretariat’s Research Division, are a lot of challenges ahead,” he main- said API fuels specialist, Marc Meteyer. noted that the oil industry was key to tained. “These are substantial reductions that will Libya’s economic development, and would Challenges facing the oil sector in- require substantial investments from refiners. cluded the return of Iraqi oil to the mar- The phased-in approach makes it possible. It be a central focus of the country’s drive to- promises to give the industry more flexibility, wards privatization in the coming years. ket and other developments in the Middle and it’s a win-win for consumers who will get However, he added: “Talking about East, for example, the Palestinian-Israe- cleaner air at less cost,” he added. the oil industry does not mean that we are li situation, as well as moves by many

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countries, including Libya, to open up Research Division from 1993 to 2001, their doors to foreign investment. All was appointed Secretary of the Gener- of these factors would influence and al People’s Congress, or Libyan parlia- In brief reshape the oil industry in the coming ment, in June. Under the Libyan po- Korean shipyards get more orders years, he said. litical system, he fills the role of Prime SEOUL — New building orders at South Ghanem, who was Director of OPEC’s Minister. Korean shipyards have shot up by 340 per cent to 4.03 million compensated gross tons in the first quarter of this year, due to a surge Saudi Minister announces discovery of new oil field in demand for new vessels, after the oil tanker Prestige sank off Spain in November last year. in eastern region of the country After the Prestige sank, a host of countries began to place tough regulations on outdated Riyadh — Saudi Arabia’s state oil firm, Saudi Aramco, has discovered a new oil ships, in order to prevent a recurrence, spark- field in the eastern region of the Kingdom, according to the Minister of Petroleum ing a hike in fresh shipbuilding orders, said and Mineral Resources, Ali I Naimi (pictured below). the Korean Ministry of Commerce, Industry The Minister noted that the field, called Yebrin, was located about 260 kilome- and Energy, in a report on the industry. How- ever, the record order, valued at $5.36 billion, tres south-east of the capital Riyadh and 50 km south of Haradh, on the southern suggested that the volume of exports would edge of the giant Al-Ghawar oil field, the world’s largest. taper off in the coming months, following Drilling on Yebrin-1 started in May 2002, Naimi said, adding that the well was the current peak, said the report. producing 5,100 barrels/day of very light oil and 4.7 million cubic metres/day of natural gas. Airlines urged to cut emissions Earlier, the Minster had also announced the setting up of a new oil services firm. JAKARTA — The aviation industry has been The establishment of the Manufacturing and Energy Services Company, with a capi- urged to cut its carbon dioxide emissions to help reduce the effects of global warming and tal of $142 million, followed approval of the move by the Saudi cabinet. protect the environment. “We think the aviation industry should take responsibility for its global warming contribution. But instead, there is not really any improvement in terms of efficiency in airplane engines,” Indonesian newspaper the Jakarta Post quoted Climate Action Network Australia Co-ordinator, Danny Kennedy, as saying. Speaking on the sidelines of a travel industry conference in Bali, Kennedy noted that a return trip from New York to London created 440 tons of carbon dioxide. “That’s equivalent to 80 big trucks travelling around all year, which is still a lot of pollution to control,” he said. According to industry estimates, the airline industry generates less than two per cent of

global CO2 emissions. Turkmenistan exports more gas to Iran ASHKHABAD — Turkmenistan exported over 2.0 billion cubic metres of gas to Iran during the first quarter of 2003, a 18.3 per cent rise compared with the same period last year, according to local media reports. Gas is exported to Iran via a 200-km pipeline between Korpedzhe in Turkmenistan and Kord-Kouy in Iran, with some exports also going to Russia. Turkmen gas exports to Iran totalled over 5.0bn cu m in 2002, a figure which is expected to increase to 6.5bn cu m this year, reported the Russian paper Vremya Novosti. Turkmenistan and Iran inaugurated a key gas pipeline in December, in the hope that it would soon become part of a much larger regional network transporting gas all the way to Europe. Iran has paid 80 per cent of the $195 million required for the pipeline’s construction, while Turkmenistan plans to pay back its share in natural gas supplies Photo: Photo: Reuters/Heinz-Peter Bader within three years.

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As a joint stock firm, the Manufac- of South Korea, has a storage capacity turing and Energy Services Company of 2.2m b of oil with a settling tank of In brief will provide services supporting the oil 200,000 b. US House okays new energy plan industry, petrochemicals, water desalina- It is designed to handle up to 230,000 NEW YORK — The United States House of tion, electricity generation, and other in- b/d and has the capacity to export crude Representatives has approved the Energy dustries. oil at up to 50,000 b/hour to loading tank- Policy Act of 2003 by a bipartisan vote of The Saudi Press Agency quoted Naimi ers that will be moored either in tandem 247 to 175. “During this time of energy as saying that in addition to providing with the FSO, or at the separate loading instability, it is more critical than ever that services, the new firm would also man- buoy designed to receive large crude car- we update our energy infrastructure to keep America safe and our power supply strong. ufacture some materials and equipment riers. The sweeping energy bill that we have passed that were currently imported, thus boost- will ensure that all Americans have access to ing the domestic economy. more efficient, affordable, and environmen- The state-owned General Investment Indonesia’s Pertamina to tally friendly energy for generations to come,” Fund will have a 40 per cent stake in the said the House Energy and Commerce Com- new company, while the remaining 60 per unload profitable non- mittee Chairman, Billy Tauzin. Measures in cent will be held by the private sector. the package include boosting domestic oil core assets — report and gas exploration, expanding the Strategic Petroleum Reserve’s capacity to 1.0bn barrels, Jakarta — Indonesian state oil and gas encouraging more nuclear and hydropower Elf Nigeria commences company Pertamina will soon have to di- production, and making hydrogen fuel cell- vest its ownership of a number of profit- powered cars competitive by 2020. drilling in Nigeria’s able, non-core assets as required by new government regulations, according to a Oil industry powers Norway’s economy Amenam/Kpono field report in the newspaper. BRUSSELS — The oil and gas industry con- Jakarta Post tinues to be a major force behind Norway’s Abuja — Elf Petroleum Nigeria, a sub- Both the Indonesian government and economic development, according to a new sidiary of French oil giant Total (former- Pertamina have agreed on the contents of survey by the Norwegian School of Manage- ly TotalFinaElf), has announced the start the regulations, which have been approved ment. The survey found that the industry of what it described as “massive drilling by President Megawati Soekarnoputri. accounted for around 25 per cent of all activities” in the offshore Amenam/Kpo- The regulations would form the legal economic activity in the country. Offshore companies are found in nearly one-third of no field. basis for Pertamina’s transformation into all municipalities, and altogether the sector Two drilling rigs were working side- a limited liability company, a move that employs 5.4 per cent of all who are engaged by-side on the Amenam/Kpono drilling would help the company boost its com- in Norwegian industry. The school’s Head of platforms, AMD1 and AMD2, said Elf petitiveness when the oil and gas sector Research, Erik Jacobsen, noted that the oil in its journal Focus Nigeria. The jack-up was liberalized, said the report. and gas industry also played an important role rigs belonging to Global Santa Fe, Baltic Pertamina had also agreed it would in the development of technology in Norway. 1 and Adriatic 1, had arrived in Nigeria unload its non-core assets worth some In a separate development, Norway and the UK have agreed to draft an accord promoting and were currently drilling in the field, 4.0 trillion rupiahs ($450 million), such closer ties in the development of the North it said. as a hospital, an air transport company, Sea, but progress has been slow as the two The two rigs will drill a total of 31 hotels and property, the paper quoted the sides are unable to agree on the details. wells, said the firm. The project, which Head of Public Relations at the Minis- is expected to add 125,000 barrels/day to try of Energy and Mineral Resources, T US summer gasoline prices seen firm Nigeria’s production capacity, is scheduled A Winakun, as saying. NEW YORK — United States retail gasoline prices are expected to average $1.56/gallon to come onstream by July 2004. Proceeds from the sale of the non-core for regular grade during the summer, ac- Elf added that the Amenam/Kpono assets would be used to upgrade Pertami- cording to forecasts released by the Energy project was the single largest scheme in na’s core operations, said the Post. Law no Information Administration (EIA). In its the world in the traditional shallow water 22 of 2001 specified the abolition of Per- latest Short-term energy outlook, the EIA environment, and was expected to cost tamina’s monopoly in the upstream oil and noted that the projected price was 17 cents about $1.5 billion on completion. natural gas industry (exploration, produc- per gallon above last summer’s average, but close to average summer prices seen in 2000 Hydrocarbon reserves in the field, tion and refining) by this year, and in the and 2001. However, it fell well short of the which straddles Oil Mining Leases 99 distribution of oil products by 2005. all-time summer high set in 1980 of $2.77/g and 70, have been estimated at over The law was expected to help boost (adjusted for inflation). High crude oil costs, 1.0bn b. The current phase of the project investment in the country’s oil and gas low motor gasoline inventories, and growing is targeting the recovery of about 500 sector, which was essential to avoid the gasoline demand were factors contributing to million b. country from becoming a net oil im- high gasoline prices this year, said the EIA. Elf took delivery of the floating stor- porter by 2010, as many experts have Gasoline inventories totalled 200 million barrels at the end of March, about 13m b below age and offloading (FSO) vessel for the predicted. the same time last year, and 6.0m b above the project last year. The vessel, which was Last year, the government set up the recent low seen in 2001, it added. constructed by Hyundai Heavy Industries Upstream Oil and Gas Implementing

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Body (BP Migas) to take over Pertami- construction of a new natural bitumen na’s regulatory role in the upstream sec- producing and emulsifying complex in tor, while a second body, the Downstream Venezuela’s Orinoco oil belt, where the In brief Regulatory Agency, will take charge of the fuel is manufactured. USA, Russia sign energy protocols downstream sector. PDVSA said in a statement that the NEW YORK — United States Deputy Secretary location of the Porto Tolle thermo-elec- of Energy, Kyle McSlarrow, and his counter- tric plant, in the Po River Delta natural part at the Russian Ministry of Energy, Oleg Bitor, South Korean park, underlined Orimulsion’s status as an Gordeev, have signed a new protocol cover- environmentally-friendly fuel compatible ing various energy-related issues. The accords firm sign Orimulsion were signed at a meeting of the US-Russia with sustainable development. energy working group, which was co-chaired supply agreement “The new fuel will allow the plant by the two officials. US President George W to continue operating for an additional Bush and Russian President Vladimir Putin Caracas — Venezuela and South Korea period of 15 years, complying with the launched the working group at a meeting in have signed a contract for the supply of strictest environmental regulations at a May last year, as a means to strengthen the 300,000 tonnes/year of Venezuela’s power world level,” noted PDVSA. overall relationship between the two coun- plant fuel Orimulsion. The company added that the construc- tries, and enhance global energy security, international strategic stability, and regional The contract, which runs through tion of the new Orimulsion plant would co-operation. “President Bush’s national en- 2006, was signed by Bitor, the subsidi- be a joint effort between Bitor and Italian ergy policy calls for enhanced international ary of state oil firm Petroleos de Venezuela energy firm Enel, which would initially co-operation to improve our energy security which handles Orimulsion, and the Korea invest some $300m in the project. through the development of new energy Southern Power Company (KOSPO). Bitor will have a 51 per cent stake in sources,” commented McSlarrow. The official signing ceremony was held the new unit, which it is estimated will India invited to join gas scheme at PDVSA’s headquarters in Caracas and generate around 1,000 new jobs in the MANILA — The oil and gas ministers of was attended by PDVSA Vice-President, economically depressed areas of Anzoat- Turkmenistan, Afghanistan and Pakistan have Aires Barreto; Bitor President, Alfredo Ri- egui and Monagas states. signed a joint letter formally inviting India to era; and Bitor General Director, Hercil- participate in the 1,600-km Turkmenistan- io Rivas. KOSPO was represented by its Afghanistan-Pakistan gas pipeline project. President, Rimtang Lee; and its General Qatar, ExxonMobil unit The proposed $2.5 billion gas pipeline will Manager for Strategic Planning, Mooky- transport up to 30bn cubic metres/year of announce start of work natural gas from the Dauletabad fields in ung Kim and other senior officials. south-east Turkmenistan to consumers in The KOSPO President said that if on Al-Khaleej project Afghanistan, Pakistan and possibly India, all went well, Venezuela could increase according to a statement released by the Asian its Orimulsion exports to South Korea Doha — Qatar Petroleum (QP) and US Development Bank (ADB), which hosted the up to a level of about 2.0 million t/y. major ExxonMobil have announced that meeting between the three ministers. India He added that Korea was interested in work has commenced on phase one of Al- could participate both as an investor and as a major purchaser of the gas, according to expanding co-operation with Venezuela Khaleej gas project (AKG-1). the ADB. The letter also requests India to and possibilities existed for greater South The AKG-1 project is being imple- invite the ADB to make a presentation on the Korean investments in the South Ameri- mented under a development and pro- project and related issues, including the ap- can country. duction-sharing agreement signed in 2000 proach towards mitigating risks and security He noted that Venezuela currently im- between Qatar and ExxonMobil subsidi- concerns related to the scheme. ported some $160m worth of products ary ExxonMobil Middle East Gas Mar- Oman shortlists firms forLNG deal from South Korea annually, while its ex- keting. MUSCAT — Oman has short listed three inter- ports to Korea totalled about $20m. The plant will produce gas from Qa- national shipbuilders to supply two liquefied South Korea first decided to im- tar’s North field, recover associated con- natural gas tankers for the transport of Omani port Orimulsion after a prolonged win- densate and NGLs for sale, and market 1.75 LNG, according to a report in the Dubai-based ter caused a deficit of liquefied natural billion cubic feet/day of pipeline gas for Khaleej Times newspaper. The shortlisted of- gas. Japan is also experiencing increased domestic and export customers. Total in- fers were a joint bid by Japan’s Mitsubishi Heavy Industries and Kawasaki Shipbuild- demand for fossil fuels, due to the safe- vestment in AKG-1 is put at over $1.1 ing Corporation, and two bids from South ty-related closures of some of its nuclear billion. Korean firms, Samsung Heavy Industries and power plants. The project will be developed in phases Hyundai Heavy Industries. The delivery of Meanwhile in Italy, the authorities to meet the gas sales commitments, with the first vessel is expected in December 2005, have given the go-ahead for the thermo- AKG-1 to supply 744 million cu ft/d to to coincide with the completion of a third LNG electric power plant at Porto Tolle, in the the Oryx GTL plant (a joint venture be- train in Oman, which is scheduled to start Veneto region, to be converted to Orimul- tween QP and South Africa’s Sasol), the production in the first quarter of 2006. Oman LNG, which is currently producing 6.6 million sion use. Ras Laffan power plant and other domes- tonnes/year, has awarded a $600m contract Porto Tolle will consume some 5.5m tic customers, with first gas targeted for to US-Japanese joint venture Chiyoda Foster t/y of Orimulsion, which will entail the the fourth quarter of 2005. Wheeler to build the third train.

38 OPEC Bulletin May/June 2003 39 NEWSLINE NEWSLINE

“The signing of this agreement with our construction of the export pipeline from long time partners ExxonMobil reflects the Ras Laffan to the receiving facilities in In brief strong confidence in the stable economic the UAE. Angola makes two offshore oil finds development of the state of Qatar,” the The four shortlisted bidders are the BRUSSELS — The Angolan state oil company, country’s Minister of Energy & Industry UAE’s National Petroleum Construction Sonangol, has announced the discovery of and Chairman of QP, Abdullah Bin Ha- Company (NPCC), J Ray McDermott another two deep-water oil deposits. The new mad Al Attiyah, said in a statement. Middle East, SMOE of Singapore, and finds, known as Acacia-1 and Hortensia-1, “With its strategic geographical loca- Hyundai Heavy Industries of South Ko- were made in block 17, which lies off the tion and its enormous reserves of natural rea. The contract specifically covers the coast of Luanda, and in which 13 deposits have already been discovered. In production resources of gas in the North gas field, construction and installation of two off- tests, the two new deposits produced 13,712 Qatar will continue to develop as a dy- shore complexes. barrels/day and 5,092 b/d of oil, respectively. namic base for major world class indus- The five bidders approved for the sub- Further geological surveys are to be carried trial projects,” he added. sea line deal are the NPCC, J Ray Mc- out to determine their capacity. Block 17 is The President of ExxonMobil Mid- Dermott, Saipem of Italy, Stolt Offshore jointly operated by France’s Total (formerly dle East Gas Marketing, Wayne Harms, of the UK, and Hyundai. TotalFinaElf) with a 40 per cent stake, Esso commented: “Qatar’s approval of the de- This contract specifies the laying of Angola (20 per cent), BP (16.6 per cent), Norway’s Statoil (13.3 per cent), and Norsk velopment plan represents another signifi- two sub-sea 34/36 inch concrete-coated Hydro (10 per cent). Angola is sub-Saharan cant step forward in the development of pipelines stretching 78 kilometres, which Africa’s second largest oil producer after natural gas from Qatar’s North field for will transport the gas from the North field Nigeria. The country’s crude oil production domestic and regional markets.” wellheads to the Dolphin processing plant averaged 742,000 b/d in 2001 and 897,000 The gas development project, he said, at Ras Laffan. b/d in the first eight months of last year. It is was a basic component of the Qatar’s strat- Six bidders have been approved for the expected to top 1.0 million b/d in 2003. egy to develop its industrial base and en- export pipeline contract. They comprise the Iraqi reserves underestimated, says EIA hance its role as a hub for regional and NPCC, J Ray McDermott, Saipem, Hy- NEW YORK — The United States Energy In- international gas markets. undai, Stolt Offshore, and Allseas Marine formation Administration (EIA) has said that AKG-1 will be operated by Qatari gas Contractors of Switzerland. Iraq’s true oil resource potential may be far firm RasGas in conjunction with the Ras This contract will cover the laying of greater than the 112 billion barrels of proven Laffan LNG projects, in order to optimize the sub-sea 48-inch concrete-coated ex- oil reserves estimated previously. In its latest update on the country, the EIA estimated facility investment and project execution port pipeline between the gas processing that Iraq was 90 per cent unexplored, due to costs by leveraging synergies between the plant at Ras Laffan and the receiving ter- years of war and economic sanctions. Deep projects. minal in the UAE. oil-bearing formations, located mainly in A Dolphin spokesman stated that the the vast Western Desert region, could yield bid documents for the sub-sea lines and large additional oil resources of up to another UAE’s Dolphin Energy the export pipeline were issued in March. 100bn b, but had not yet been explored, the The bid documents for the platform EIA said. It also noted that Iraq’s oil pro- shortlists bidders for duction costs were amongst the lowest in will be issued soon, and the company the world, making it a highly attractive oil three offshore deals expects to award the contracts during prospect. However, only 15 of 73 discovered the summer. fields have been developed, while few deep Abu Dhabi — Dolphin Energy of the The Dolphin scheme is the first cross- wells have been drilled, compared with United Arab Emirates (UAE) has an- border gas pipeline project in the Middle neighbouring countries. nounced the shortlist of qualified bid- East and lays the foundations for greater CNOOC announces $1.1bn profit for 2002 ders for the three engineering, procure- economic co-operation between Qatar SINGAPORE — The China National Offshore ment and construction packages which and the UAE. Oil Corporation (CNOOC) has announced make up the offshore element of the Dol- that its oil and gas revenues totalled $2.9 bil- phin gas project. lion for 2002, an increase of $751 million, The Dolphin scheme is a regional en- Kuwait to boost its or 35.4 per cent, from 2001. The revenue ergy initiative involving the development growth was mainly attributable to a 32.6 per refinery output to 1.0m cent year-on-year production increase, the of gas reserves from Qatar’s offshore North highest in the company’s history. Net profit field, processing onshore at Ras Laffan, barrels/day by 2010 totalled $1.1bn, an increase of $154m, or 16 and transportation by pipeline of up to per cent, from 2001. Output hit 346,639 bar- 3.2 billion cubic feet/day of gas to the Kuwait — A senior Kuwaiti oil indus- rels of oil equivalent/day, said CNOOC in UAE, beginning in 2006. try official has said that his country is its latest annual report. Annual production The three offshore packages cover working towards its target of increasing reached 126.5m boe, with costs averaging the construction and installation of the the country’s refinery production to 1.0 $8.48/boe from offshore fields. CNOOC also announced that it had made 13 new offshore platforms in the North field, million barrels/day by 2010. discoveries during the year, and brought the laying of two sub-sea lines from the The official Kuwaiti News Agency three new fields on stream. production complexes to Ras Laffan, and (KUNA) quoted Oil Ministry Under-

40 OPEC Bulletin May/June 2003 41 NEWSLINE NEWSLINE

Secretary, Essa Al-Oun, as saying that ity to 3.0m b/d by 2005, to help meet the combined production of the coun- global demand for oil, added the KUNA try’s refineries currently stood at 900,000 report. In brief b/d. Kuwait has three oil refineries, which BP launches Magnus EOR project Al-Oun also said Kuwait was seeking are located at Al-Ahmadi, Shuaiba and BRUSSELS — The United Kingdom Energy to boost its crude oil production capabil- Mina Abdullah. Secretary, Brian Wilson, has inaugurated a large-scale enhanced oil recovery (EOR) project by BP in the North Sea. The scheme involves reinjecting gas in order to recover Khelil urges Canadian oil and gas companies over 60 million extra barrels of oil from the Schiehallion, Foinaven and Magnus fields. to invest in Algeria The whole project will cost £310 million. The concept of an EOR project for Magnus was Algiers — The Algerian Energy and Mines Minister, Dr Chakib Khelil (pictured raised as early as 1998, and work began the below), has urged Canadian firms to participate in the expansion of his country’s following year. In June 2002, first gas from energy and mining sector. Schiehallion and Foinaven came ashore at In a meeting with a visiting Canadian delegation headed by Canada’s State Sec- Sullom Voe, and gas was re-injected into the Magnus reservoir in October last year. The retary for African and Latin American Affairs, Denis Paradis, Khelil noted that the Magnus field is located in the northern sec- new Algerian mining law opened the sector up to foreign investments. tor of the North Sea, around 160 kilometres The bill will permit firms to develop partnership projects in a domain where the north-east of Shetland. Canadians had considerable experience. Two Canadian oil firms, PetroCanada and First Calgary, were already in advanced discussions with the Algerian national oil OMV buys Avanti service stations and gas company Sonatrach, noted Khelil. BRUSSELS — Austrian oil and gas company OMV has announced the purchase of 141 Last October, the Canadian Export and Development Agency granted Sonatrach filling stations from the privately-owned a $50 million line of credit to finance the purchase of goods and services supplied firm Avanti in Austria, the Czech Republic, by Canadian firms. Slovakia and Bulgaria, boosting its total retail network to 1,756 stations. The group said that since the Avanti stations lay within the supply area of OMV’s main refinery at Schwechat, just outside Vienna, the extra sales volume would improve the refinery’s supply position. In the Czech Republic, OMV now has a market share of some 11 per cent with 138 filling stations, 18 per cent in Slovakia with 101 sites, and 10 per cent in Bulgaria with 65 sites. In January, OMV bought the exploration and production assets of TUI’s Preussag Energie for around $300 million, and recently agreed to buy 313 central Eu- ropean service stations and a stake in three oil refineries from BP for $377m.

Unocal to develop Bangladeshi gas field DHAKA — United States firm Unocal is planning to develop the Moulavi Bazar natural gas field, which could provide up to 100 million cubic feet/day of gas to the domestic Bangladeshi market. “We could begin commercial production of natural gas from the field within a year after we sign a gas purchase and sales agreement with (state oil firm) Petrobangla,” said the President and Managing Director of Unocal Bangladesh, Andrew L Fawthrop. Natural gas production from the field would be delivered into the existing Bangladesh national gas network, noted Unocal in a statement. The total cost of the project, including two development wells, has been estimated at $42m. “This re- inforces our commitment to meet the nation’s energy needs and our partnership with the government and the people of Bangladesh,” Photo: Reuters/Haruyoshi Yamaguchi added Fawthrop.

40 OPEC Bulletin May/June 2003 41 MARKET REVIEW MARKET REVIEW

ket during the first half of March, crude oil statement ensuring the adequate supply of prices remained stubbornly high, with the oil, while expressing appreciation of the March/ Atlantic Basin’s benchmark WTI trading steps taken by producers to prevent short- within a $36–38/b range (for the front- falls, it also reiterated that it stood ready to month contract), while its European coun- act if the need arose. In the third week of terpart, Brent, moved within a $32–34/b March, the perception of stock levels shifted April band. The market volatility was attributed from half-empty in week two to half-full This section is based on the OPEC Monthly to the anticipation of a US-led war on Iraq, in week three, and crude prices then fell. Oil Market Report prepared by the Research and the tremendous uncertainty it placed The WTI front-month contract went from Division of the Secretariat — published on the market. Signals that the war in $36/b to below $27/b; while Brent moved mid-month and containing up-to-date Iraq was imminent became clear after the from $33/b to just above $24/b. Percep- analysis, additional information, graphs US President, George W Bush, said in a tions that the military campaign in Iraq and tables. The publication may be down- televised address that the USA would act would be swift and short magnified more loaded in PDF format from our Web site with or without a UN resolution. Traders fundamental issues like approaching low (www.opec.org), provided OPEC is credited were only left with the uncertainty of the 2Q demand, considerable volumes of Saudi as the source for any usage. timing of the military campaign, but the Arabian cargoes set to reach the US market tug-of-war on the diplomatic front between in the second half of the month, as well as the UN Security Council members led by plentiful sour Venezuelan crude competing France and Germany gave the impression for outlets on the US Gulf Coast. Towards that the US-led attack on Iraq might the end of the month, prices took a turn be delayed, sending WTI prices lower. on signals that the war in Iraq might take Crude oil price movements Meanwhile, dangerously low US crude longer than was predicted a week before oil stocks and fears that the gasoline mar- and by the closure of almost one-third of March ket would have to struggle to cope with Nigerian gasoline-rich crude oil produc- ril the approaching rising seasonal demand tion, which would be extremely difficult, OPEC’s Reference Basket1 of seven crudes provided support to crude oil prices. At its if not impossible, to offset. descended from the 20-year record level 124th Meeting of the Conference, OPEC reached in February of this year, losing reiterated its commitment to ensure order US and European markets $1.76/barrel, or 5.6 per cent, to average and stability in the international market There are now indications of what $29.78/b, to achieve yet another 20-year through secure oil supplies at appropriate might lie ahead for the crude oil market record high for March. Thus, it is not prices, balancing the needs of producers in the immediate future after the war in surprising that the cumulative year-to- and consumers and bringing additional as- Iraq. The uncertainty that the war has date average for 1Q03 stood at a record surance to the market. Later, on March 20, caused may cease to be the main market level above the $30/b mark, and almost 55 following the commencement of hostilities, driver, and will be outweighed by the fact per cent higher when compared with the OPEC issued a statement guaranteeing to that refiners in the USA are awash with previous year’s 1Q (see Table A). meet any supply shortfall that might arise. sour crude grades. While Venezuela con- On a weekly basis, the Basket began Immediately after the IEA had released its tinues to restore output, after lifting the the month of March with a marginal drop of less than one per cent, followed by a Table A: Monthly average spot quotations for OPEC’s Reference Basket rebound in the second week of almost and selected crudes including differentials $/b 1.5 per cent. Nonetheless, the start of the Year-to-date average war in Iraq during the third week, and the Mar 03 Apr 03 2002 2003 change in market perceptions, resulted in a Reference Basket 29.78 25.34 21.23 29.02 severe downward correction, which caused Arabian Light 28.98 24.70 21.68 28.25 the Basket to lose more than 13 per cent Dubai 27.76 23.59 21.30 27.10 of its value in just one week, followed by Bonny Light 30.83 25.27 22.41 29.53 another 8.8 per cent decrease during the Saharan Blend 31.21 25.19 21.96 29.74 last week of the month. However, in the Minas 30.70 29.66 21.70 31.05 week ending April 10, the Basket fell to Tia Juana Light 29.04 23.97 18.71 28.32 $25.32/b, mainly due to the diminished geopolitical/war premium, which had af- Isthmus 29.96 24.99 20.88 29.14 fected the price before the start of the war Other crudes in Iraq. Brent 30.98 25.07 22.33 29.69 Despite the ups and downs in the mar- WTI 33.88 28.40 22.79 32.49 Differentials 1. An average of Saharan Blend, Minas, Bonny WTI/Brent 2.90 3.33 0.46 2.80 Light, Arabian Light, Dubai, Tia Juana Light and Isthmus. Brent/Dubai 3.22 1.48 1.03 2.59

42 OPEC Bulletin May/June 2003 43 MARKET REVIEW MARKET REVIEW

force majeure early in March, extra Saudi after peaking in February with an average of some Nigerian ports and the rise in OPEC Arabian oil is already showing up in the over $31/b. The Basket posted a steep de- production — mainly sour volumes — to US market. To make matters even worse, cline from its March mean, losing $4.44/b, compensate for lost production from Iraq Mexico has announced that it has recently or almost 15 per cent of its value, to stand and Nigeria. OPEC attempted to bring achieved a production record. The natural at $25.34/b. Nonetheless, it remained well stability to the market by convening a outcome, thus, is the widening of the sweet- within OPEC price-band boundaries, and Consultative Meeting of the Confer- sour differential, which has reached more the y-o-y comparison shows that, despite ence in Vienna on April 24, resulting in than $6/b, and the steep backwardation the sharp falls in March and April, the the decision to reduce the group’s actual is acting as a dam preventing crude from Basket’s cumulative 2003 average exceeded production by 2m b/d and to set a new being bought and being accounted for as that of 2002 by almost 37 per cent, or production ceiling at 25.4m b/d, effective stocks, while giving the impression that $7.79/b (see Table A). June 1, 2003. The main drivers behind the supply is tight. The reality might well be Despite tremendous challenges to the accentuated price drop in the second half that there is excess supply and refiners do oil market in the first four months of the of April, which saw the US benchmark not want to buy expensive oil now, but year, OPEC’s market management suc- crude WTI lose more than $3/b in a single rather wait for lower future prices. Light cessfully neutralized any price spikes that session, were the US-led forces’ ability to sweet crudes remain buoyant as offers to could have resulted from the disruption to rapidly gain control of most of Iraq (which the USA tightened after Asian buyers Venezuelan supplies early in the year, and dissipated fears of supply disruptions and unexpectedly acquired several cargoes of more recently from the loss of Nigerian a drawn-out war), the gradual recovery of West African crudes, combined with the crude production and the war in Iraq (the Nigeria’s light sweet crude production, partial closure of Nigerian production. The latter two occurring simultaneously). On a and the collapse of refining margins in arbitrage for light sweet West African and weekly basis, the Basket made several turns Europe. Anticipating a possible cut in North Sea grades stayed open, with WTI in April, starting with a gain of 2.55 per OPEC production, Asian consumers at a premium of more than $2/b to Brent. cent, or 66¢/b, during the first week, which bought heavily, which provided support In Europe, delays in the Black Sea due to was followed by a drop of 4.60 per cent, or for regional grades. Although sustained logistical problems, high refinery margins $1.22/b, in the next. The Basket then made nuclear reactor maintenance has forced and fears of supply disruptions over the war a minor recovery, rising just over one per Japan to continue burning crude and fuel firmed prices, especially of Russian Urals. cent during the third week of the month, oil for power generation, the outbreak Delays of medium sour Russian grades to only to retreat marginally by 0.31 per cent, of the SARS epidemic has put a cap on the Mediterranean have encouraged refin- or 8¢/b, in the fourth week. The Basket prospects for continued healthy crude oil ers to look for alternative crudes outside suffered a considerable setback in the week demand in the Asia-Pacific region. Jet fuel the region, attracting as much as 5m b of ending on May 1, losing almost seven per demand is expected to fall even further Venezuelan sour Mesa crude, which was cent of its value, or $1.74/b, but regained in the near future as the World Health displaced from the US market. some ground in the following week when Organization has issued travel advisories it recovered almost one per cent or 22¢/b for several countries in the region and the Far East market to average $24.01/b. epidemic continues to spread. Early in the month, uncertainty domi- As was the case in previous weeks, crude nated the market with refiners and traders oil markets in April responded largely to US and European markets not appearing to have emerged in the spot headline news from the war in Iraq. Real- In the USA, crude oil stocks underwent market as they waited for developments time news coverage became the main driver a mild recovery from the depressed levels on Iraq, as well as on OPEC’s next move. of crude prices, which responded quickly to seen in March, yet remained well below The bearish mode was exacerbated later in each new development on the battlefield. last year’s level. The recovery was attributed the month as end users were confirmed to The market and crude prices started out to the high import levels which, accord- have received full term supplies from Saudi bullish at first, with analysts and the media ing to American Petroleum Institute (API) Arabia and Iran, combined with the end of contemplating the possibility of a lengthy figures, reached more than 10m b/d in the winter demand. Towards the end of March, and complicated war, but turned bearish third week of April. Nonetheless, there was most grades firmed, underpinned by strong as US-led forces began to speed up their no evidence of the predicted armada of demand and supply fears, especially regard- advance towards Baghdad. The disruption cargoes expected to flood the US shores ing light sweet grades, as Nigeria shut in of Nigerian supplies, which occurred al- with oil and bring about a price collapse. 800,000 b/d, combined with a week-long most simultaneously with the outbreak of Crude runs jumped considerably during decline of approximately 100,000 b/d of hostilities in Iraq, provided some support the month as refiners struggled to build Malaysian Tapis output due to operational to crude oil prices, especially to the light gasoline inventories ahead of the driving problems. sweet US grades. The loss of 800,000 b/d of season, which partly explains the meagre light sweet Nigerian crude left the already rise in oil stocks despite the month’s record- April tight US crude oil market in a precarious high import levels. Production hikes by situation ahead of the gasoline season. The some OPEC Members — especially Saudi The OPEC Reference Basket continued to sweet-sour spread widened due to the com- Arabia — and higher arrivals of cargoes at slip for the second month in a row in April bined effect of the force majeure declared in the US Gulf Coast depressed the value of

42 OPEC Bulletin May/June 2003 43 MARKET REVIEW MARKET REVIEW

sour crudes, while social unrest in Nigeria, Table B: Selected refined product prices $/b which crippled one-third of the country’s production, strengthened light sweet grades Change and widened the sour-sweet spread. The Feb 03 Mar 03 Apr 03 Apr/Mar fall in Nigerian exports left the US market struggling to find gasoline-rich crudes, US Gulf forcing refiners to turn to alternative grades Regular gasoline (unleaded) 42.61 40.63 34.24 –6.39 such as medium-sulphur Colombian Vas- Gasoil (0.2% S) 44.38 37.13 30.47 –6.66 conia and Brazilian heavy-sweet Marlin. Fuel oil (3.0% S) 27.76 22.78 19.59 –3.19 The gradual recovery of Nigeria’s production eased the light sweet market later in Rotterdam the month. In Europe, ample availability Premium gasoline (unleaded) 39.15 36.06 34.38 –1.68 of North Sea grades and abundant Russian Gasoil (0.2% S) 41.16 39.61 29.59 –10.02 crude depressed prices in the second part of Fuel oil (3.5% S) 25.93 21.91 18.61 –3.30 the month. Refining margins collapsed in mid-month as product prices fell faster than Singapore crude oil, leading refiners to cut runs. Premium gasoline (unleaded) 40.14 37.51 28.74 –8.77 Gasoil (0.5% S) 39.35 37.87 30.03 –7.84 Far East market Fuel oil (380 cst) 29.33 26.65 23.12 –3.53 Early in the month, the influx of alternative grades displaced Russian Urals from the Mediterranean to the Asia Pacific north-east region and Asian precaution- place prior to the commencement of the market. Depressed prices, combined with ary product stockpiling. These product more stringent summer gasoline specifi- falling freight rates and concern by Asian price gains, however, were erased in the cations, which contributed to draws on end-users about possible disruptions in second half of March, as crude oil prices gasoline stocks in March. Meanwhile, the flow of crudes from the Middle fell sharply and were exacerbated further following last month’s decline, gasoline East, induced the eastbound movement by milder weather. Consequently, product demand rebounded, as it rose by 2.9 per of several grades. More than 1m b/d of price losses outpaced those of their crude cent and 1.7 per cent above the previous West African crudes was traded during oil counterparts, thereby causing refining month’s and last year’s levels, respectively. April as Brent’s premium to benchmark margins to decline, although they remained In contrast, distillate demand plunged by crude Dubai collapsed in the past weeks. well in positive territory (see Table B). six per cent throughout the month as the Expectations about the results of OPEC’s weather turned mild in the second half of Meeting prompted regional refiners to US Gulf market March, but it was still 8.5 per cent higher ramp up demand for Middle Eastern crude, US product prices fell across the y-o-y. The decline in fuel oil output was thereby closing the spread between Brent barrel. The average prices of gasoil and largely compensated by rising fuel oil im- and regional grades and opening a widow high sulphur fuel oil (HSFO) plunged by ports due to a slight increase in incremental for arbitrage. Japanese demand remained 16 per cent and 18 per cent, respectively, demand and, thus, the fuel oil price lost strong in light of continued nuclear reactor in March, falling below both the marker heavily throughout the period. maintenance, which has forced TEPCO crude WTI and gasoline values, which After their peaks in the preceding to burn fuel oil and crude for power gen- declined by five per cent for the same month, refining margins slipped in the US eration. But all was not bright for Asian period in the US Gulf market (see Table Gulf Coast during March, but remained demand, as the SARS epidemic and WHO B). Nonetheless, by examining the four- strongly in positive territory. travel advisories will inevitably lead to a week moving average (representing most US refinery throughput rose by 480,000 reduction in jet fuel consumption. US March refinery and product activities) b/d to 15.14m b/d in March, in tandem published by the US Energy Information with refinery restarts following the end of Administration (EIA), it can be seen that the maintenance programme. Therefore, Product markets and US refinery throughput rose, although the US refinery utilization rate also rose refinery operations its main refined product, gasoline, was to just above 91 per cent, registering 4.5 reduced, reflecting two factors. One was per cent above the corresponding level last March higher cracks for distillate than for gaso- year (see Table C). line in the first half of the month amid Product price trends in March were colder weather, which tempted refiners to Rotterdam market largely shaped by developments in crude enhance the distillate slate over gasoline. Average product prices fell in Rotter- oil markets. Most product prices enjoyed The second factor was that refiners were dam in March. Compared with a five per rises during the first half of the month, reluctant to boost gasoline production cent decline of the underlying crude, Brent, supported mainly by crude oil price while they ran down their winter grade gasoline plunged by eight per cent, while gains, colder weather lingering in the US stocks, a phenomenon that usually takes gasoil’s fall was limited to four per cent, and

44 OPEC Bulletin May/June 2003 45 MARKET REVIEW MARKET REVIEW

Table C: Refinery operations in selected OECD countries export regions of the world, and China, the largest regional buyer, still declined to Refinery throughput(m b/d) Refinery utilization(%) 1 buy in response to what were perceived as Feb 03 Mar 03 Apr 03 Feb 03 Mar 03 Apr 03 high prices. However, demand for its sister product, low sulphur fuel oil, is expected USA 14.66 15.14 15.59 88.2 91.1 93.8 to rise on the announcement by Japan’s France 1.75R 1.62R 1.51 92.0R 85.4R 79.3 TEPCO that it will shut down all nuclear Germany 2.22 2.19R 2.24 99.9R 96.6R 98.8 reactors by mid-April, switching to other Italy 1.67R 1.78R 1.92 72.8R 77.3R 83.5 substitute fuels for electricity generation. UK 1.64R 1.57 1.61 91.6R 87.6 89.8 Refining margins for Dubai were Eur-16 11.98R 11.96R 12.17 87.3R 87.1R 88.7 roughly unchanged from the previous Japan 4.65 4.54R 4.04 97.6 95.3R 84.8 month’s levels, demonstrating healthy values. 1. Refinery capacities used are in barrels per calendar day. R Revised since last issue. In Japan, refinery throughput stood 2. European Union plus Norway. Sources: OPEC statistics, Argus, Euroilstock Inventory Report/IEA. at 4.38m b/d, a decline of 270,000 b/d, reflecting receding product-related heating demand as winter had drawn to a close. the HSFO price decreased by an enormous nance. The equivalent refinery utilization The corresponding utilization rate was 16 per cent over the previous month (see rate was around 85 per cent, representing nearly 92 per cent, more than five per Table B). However, an analysis of Euro- a slight fraction above the previous year’s cent higher than the previous year’s runs pean product fundamentals shed light on level (see Table C). (see Table C). these factors. In the case of the gasoline market, for instance, there were three main Singapore market April developments. Firstly, naphtha registered The average product prices for March an unusual premium over its final product, exhibited losses in Singapore. The decline Product prices were driven lower for the gasoline, which was erased in the second in the average gasoline value was roughly second consecutive month by the continu- half of the month, theoretically paved the equal to the seven per cent decrease of its ous fall in crude oil markets in April. US way for boosting gasoline output. However, underlying crude, Dubai. Gasoil’s fall was products suffered on a regional basis from dwindling refinery throughput, linked to restricted to four per cent, while the HSFO ebbing demand, which hit product values the beginning of seasonal maintenance, sti- price plunged by nine per cent below the and resulted in lower refinery margins. In fled gasoline production. Secondly, there previous month’s level (see Table B). Ac- Europe, the significant drop in the Brent was higher activity than in the previous cordingly, Asian product fundamentals price eclipsed weaker product prices, which month’s arbitrage trading to the USA and were mixed. helped boost refinery economics. Refinery Nigeria, owing to bullish NYMEX futures Gasoline was generally assisted by in- throughputs, however, converged in both in the former and tight supply in the lat- creased demand, as Indonesia purchased centres, but not in Japan where refinery ter. And thirdly, there was disproportion- higher quantities than in the previous throughput moved lower, reflecting the ate selling of winter grade and the start months, together with a decent tender start of the maintenance season (see of the stockpiling of summer grade ready from Vietnam for 2Q. In addition, there Table B). for export to the USA during the driving were several arbitrages to the US West season. The continuous shipping of Rus- Coast and rising demand from the Mid- US Gulf market sian distillate cargoes to the US East Coast dle East. For most of the month, both Product prices continued to fall in instead of their typical European destina- the middle and the heavy ends of the the US Gulf market during April, with tion, together with heavy diesel buying by barrel were characterised by tight supply, the drop in the average gasoline price a major during most of the month, were though stemming from different origins. equalling the 16 per cent plunge in its the main reasons for the lessening of the For instance, distillate spot availability was underlying crude, WTI. The average gasoil price fall. The numerous arrivals of reduced as Middle Eastern distillate cargoes gasoil price lost even more, falling 18 per weather-delayed Russian HSFO cargoes was a continued to move to the highly-priced cent, while its counterpart, HSFO, decreased factor behind plentiful supply. Meanwhile, European markets and the start of Asia’s by only 14 per cent from the preceding arbitrage to the Far East continued to be seasonal refinery maintenance programmes month’s level (see Table B). Nevertheless, hindered by higher freight costs. after the concern of the war-related supply the four-week moving average published Average European refining margins shortfalls had dissipated. by the US EIA makes it clear that US re- declined sharply as the fall in the gross At the same time, regional distillate finery throughput continued to rise, with product worth was steeper than crude oil demand was decent, including buying from an operational mode shifting toward the price losses. Indonesia, Vietnam and Thailand. On the production of higher-yield gasoline at the Refinery throughput in the Eur-16 other hand, HSFO was in tight supply as expense of boosting distillate output, which (EU plus Norway) fell by 320,000 b/d, higher freight rates continued to hamper prevailed throughout 1Q of this year. In in tandem with regional refinery mainte- foreign cargo movements from other addition, gasoline imports remained ro-

44 OPEC Bulletin May/June 2003 45 MARKET REVIEW MARKET REVIEW

bust, surpassing 1.0m b/d, although con- to a five per cent drop, while gasoil fell 25 volume, the lowest level ever, as Russian ventional gasoline comprised the bulk of per cent and HSFO decreased 15 per cent fuel oil shipments dried up at a time when these imports, rather than the seasonally (see Table B). Nevertheless, an overview of bunker demand was robust. more appropriate reformulated grades, due the European product market reveals the After two consecutive months of to the lack of Venezuelan exports. Thus, following factors: gasoline values, despite healthy gains, Dubai’s average refining total US gasoline stocks increased a further substantially weaker transatlantic arbitrage margins fell sharply, still holding around 6.7m b above last month’s level and that of activity from the previous month, were $1/b. The weakness in refining margins the year before, while reformulated gaso- supported by firm barge markets linked was the result of product price losses, line inventories dropped around 10m b to heavy shipping to Nigeria as two of the particularly for gasoline and gasoil which or nearly 23 per cent below a year ago. country’s four refineries were shut down. outpaced falling crude costs. Meanwhile, gasoline fundamentals were Gasoil was in thin trading at the end of the In Japan, refinery throughput plunged hit by retreating demand, which fell one cold weather season. Seasonal trends were 500,000 b/d in April to 4.04m b/d, reflect- per cent below the previous month and further exacerbated by weak fundamentals ing the seasonal start of the maintenance 2.5 per cent below last year’s levels, despite which included record-high Russian gasoil season. Refinery utilization, however, was the continuous fall in retail gasoline prices shipments, flooding Europe with distillate almost 85 per cent, which represented a throughout the month. The US distillate products without any destination, falling three per cent increase over last year (see supply was a mirror image of its gasoline jet fuel demand on decreasing air travel, Table C). counterpart, as US refiners reduced output and rising Middle Eastern distillate exports and imports fell sharply. That prevented a to Europe. The HSFO supply was abundant build-up of inventories, which continued during the first half of the month, as Rus- The oil futures market to rest at 96m b for most of the month, sian cargoes were plentiful. However, as the their lowest recorded level, despite an month progressed, the available Russian March almost seven per cent drop in distillate volumes became scarce, which tightened demand for the same period. Weakening the fuel oil market in north-west Europe As stated in the previous report, the unusual demand was mainly due to receding heat- at a time of renewed active arbitrage move- divergence seen during February between ing oil deliveries, which usually coincides ments to Asian markets. the first-month WTI price curve and the with the end of the winter season. The A considerable fall in the Brent price, non-commercial long/short positions was price of the heavy end of the barrel, HSFO, coupled with alleviated gasoline value a prelude to the sharp drop in prices that also suffered from falling demand, but was declines, were the main reasons for the was witnessed in March. Now there is evi- assisted by increased arbitrage shipping to rebound in average European refining dence that the above-mentioned reasoning the Far East market. margins. was correct, with WTI prices showing a As a result of bearish product prices, Induced by improving economics, 20 per cent decline between late February refining margins in the US Gulf slipped the refinery throughput in the Eur-16 and late March. Despite all the fuss that further for the second consecutive month, rose 210,000 b/d to 12.17m b/d in April. preceded the war in Iraq, non-commercials’ even though average WTI margins were This led the refinery utilization rate up 1.6 perception of the market became increas- around $1.50/b. per cent to 88.7 per cent, its highest level ingly bearish. Despite this continuous slide in this year and a 3.6 per cent increase above According to the Commodity Futures margins, US refinery throughput rose a the preceding year’s level (see Table C). Trading Commission’s (CFTC) Commit- further 450,000 b/d to hit 15.59m b/d, as ments of Traders report for the week of refiners replenished gasoline stocks prior Singapore market March 11, speculators reduced their long to peak demand in the driving season. The The average monthly price losses for positions by 18,088 lots, while at the same equivalent refinery utilization rate was close both gasoline and gasoil dropped slightly time they increased their short positions by to 94 per cent, representing a 1.4 per cent more than 20 per cent in April, representing 8,163. Interestingly enough, the divergence increase on the corresponding period last a steeper loss than that experienced by their between the front-month WTI prices and year and even slightly above the April 2001 underlying crude, Dubai, which fell 15 per the net short curve continued to widen runs, when gasoline prices hit record levels cent, and HSFO, which decreased 13 per cent during the week. It was in the week prior to (see Table C). in the same period (see Table B). However, the outbreak of the war that the expected the gasoline market saw only thin trading. big correction took place, with WTI falling Rotterdam market Gasoil demand receded, which weighed on by almost 14 per cent. Average product prices experienced the market as the SARS epidemic prompted The extremely difficult times imme- another fall in April, reflecting the rela- refiners to increase gasoil output over jet diately preceding the start of the conflict tive weakness of Brent against other marker fuel production, and regional exports, to- had confused speculators. This is evident crudes, coupled with additional fundamen- gether with Middle Eastern Gulf distillate by the figures in the Commitments of tals that shaped the magnitude of each prod- cargoes, were pushed aggressively on the Traders report for the week of March 18 uct price loss. Compared with the 19 per market. In contrast, Asian fuel oil supply when there was a big liquidation on both cent plunge in the average underlying crude was squeezed during the last part of the long (25,119 lots) and shorts (34,744 lots) price, gasoline faired best, as it was limited month, as indicated by its 5.5m b stock by non-commercials. Meantime, open

46 OPEC Bulletin May/June 2003 47 MARKET REVIEW MARKET REVIEW

interest declined severely by 74,791 lots their net short positions significantly while where some oil companies have chartered to 547,236. only disposing of a few long positions. up to five weeks ahead of their stem date. The week that followed saw more liq- In the week immediately preceding The Middle East eastbound share of total uidation of long positions and the bear- the Consultative Meeting of the OPEC OPEC fixtures increased by 2.44 per cent ish mode took over speculators’ minds as Conference on April 24, the net short to 35.48 per cent m-o-m, while the Middle prospects of a quick and decisive victory by positions decreased further from 48,920 East westbound share fell by 6.47 per cent the US-led forces became evident. Front- lots to 35,194 lots, as speculators were to 15.43 per cent. Together, they accounted month WTI prices shed another $2.50/b counting on a firm move by the Organi- for 50.91 per cent of total chartering in during the week. zation to curb production. Oddly enough, the OPEC area, which was 3.49 per cent Crude oil speculators on NYMEX WTI prices failed to rise during the week. below the level observed last month. built up their net short positions during OPEC’s subsequent decision on April 24 Estimated sailings from the OPEC area the week ending April 1. According to the caught the market by surprise. Speculators in March showed a further rise of 1.2m b/d CFTC’s Commitment of Traders report for hiked short positions while WTI prices to 23.76m b/d. Out of this incremental that week, non-commercials increased their fell roughly $3/b. The Commitments of volume, sailings from the Middle East short positions by 7,587 lots while reducing Traders report for the week of May 6 accounted for 16.23m b/d, or an increase their net shorts by 3,928 lots. Expectations showed non-commercials boosting their of 360,000 b/d compared with the Febru- that the US-led war against Iraq would end net short positions again, as the bearish ary figure. Middle East sailings stood at quicker than anticipated, without significant side prevailed.ary 68.31 per cent of total sailings from the disruption to Middle Eastern exports and OPEC area, or 2.04 per cent lower than news of the resumption of oil production the level registered last month. According in Nigeria, led the market down. The tanker market to preliminary estimates, long-haul arrivals in the Atlantic basin continued to move April March up, increasing by 660,000 b/d to 10.80m b/d in the US and the Caribbean and by Non-commercials, or speculators, have OPEC area spot-chartering showed a fur- 770,000 b/d to an average of 7.46m b/d remained bearish since the beginning ther increase on the back of higher crude in North-West Europe. Arrivals in the Eu- of February this year. Week after week, oil production, particularly from OPEC romed rose also by 1.84m b/d to 5.81m non-commercials have registered a net Middle Eastern producers in order to b/d. The exception was in Japan, where short position, implying the expectation meet increasing demand, especially from arrivals lost the previous month’s gains, of falling prices and a weak market ahead. the USA and to compensate for the loss of declining by 290,000 b/d to 4.50m b/d. According to the CFTC’s Commitments of Venezuelan barrels. Consequently, it rose The tanker market for crude oil cargoes Traders report, non-commercials increased by 1.03m b/d to 13.67m b/d in March. was strongly affected by geopolitical factors their short positions by 7,587 lots to 84,266 This level was 600,000 b/d, or about five rather than fundamentals in March, where in early April, while trimming their longs per cent, higher than that observed a year the war in Iraq played the main role, fol- (an expectation of rising prices) by 3,928 ago. OPEC’s share of global fixtures im- lowed by the interruption in Nigeria’s oil lots. This came on the back of expectations proved by 1.53 per cent to stand at 61.80 production due to political unrest, while that the war in Iraq would end quicker than per cent. developments in Venezuela’s oil output still predicted, without significant disruptions Non-OPEC spot-chartering also in- affected freight rates, especially in the Car- to Middle Eastern supplies or major dam- creased slightly by 110,000 b/d to average ibbean area. During March, freight rates age to Iraqi oil fields and facilities. 8.45m b/d in March which represented a enjoyed very high levels, except for the As market fundamentals began to market share of 38.20 per cent, or 1.53 per Suezmax freight rates on the NW Europe/ replace war headlines and OPEC seemed cent less than the previous month’s level. US East Coast route and Aframax freight poised to make a production cut at its Therefore, global spot-chartering displayed rates on the Mediterranean/NW Europe Consultative Meeting of the Conference an increase of 1.13m b/d to 22.12m b/d in route. on April 24, speculators disposed of some of March. Compared with the figure of the VLCC freight rates reversed last their short positions in the weeks preceding same period last year, it was 830,000 b/d month’s downward direction, increasing the Meeting. According to the Commit- higher. The bulk of incremental chartering by 28 points to Worldscale 127 on the ments of Traders report for the week of volume in the OPEC area came from the Middle East/Far East route and by 21 points April 8, non-commercials trimmed their Middle East, especially from the eastbound to W115 on the Middle East/West route. short positions by 3,195 contracts while route, where it moved up by 670,000 b/d to This rise came mainly on the back of the increasing their longs by 3,617 contracts. 4.85m b/d as the war in Iraq, which began very high level of fixtures, as fears of a pos- This trend persisted in the week of April on March 19, had only a slight effect on sible interruption in oil production from 15, as speculators continued to dispose of the shipping operations in the region. On Middle Eastern producers if the war in Iraq their shorts by 788 contracts while rais- the westbound route, there was a decline spread to neighbouring countries, forced ing longs by 537 lots. Meanwhile, WTI of 660,000 b/d to 2.11m b/d in the spot- oil companies to fix tankers weeks ahead prices showed a recovery after a month of chartering volume due to the fact that most for their stems to avoid higher costs later. continued declines. Large speculators cut of the chartering took place in February At the end of the month, the 30-day avail-

46 OPEC Bulletin May/June 2003 47 MARKET REVIEW MARKET REVIEW

ability of tonnage was 24, declining from and distillate cargoes. From NW Europe reduced the share of total OPEC fixtures 49 at the beginning of the month. Suezmax to the US East Coast, they moved up by by 6.82 per cent to 9.46 per cent, while freight rates showed different directions as 47 points to W360 due to the advantage the eastbound long-haul share rose 1.63 they declined by nine points to W179 on of open arbitrage and healthy demand in per cent to 36.68 per cent compared with the NW Europe/US East Coast route due the US market. last month’s level. Together these routes to less activity, while they gained 17 points accounted for 46.15 per cent of total fix- to an average of W185 on the West Africa/ April tures in the OPEC area, or 5.19 per cent US Gulf Coast route, benefiting from high less than that witnessed in March. April’s levels earlier in the month. This was espe- OPEC area spot-chartering lost the estimated sailings from the OPEC area lost cially evident in the second week, before previous month’s gain, declining 1.08m the previous month’s gain, dropping 1.18m these high levels started to erode on the b/d to stand at 12.49m b/d, still a 1.91m b/d to 23.23m b/d. Middle East OPEC back of the interruption in Nigeria’s oil b/d improvement over last year’s figures. sailings ignored the OPEC area’s general production, where around 800,000 b/d The decline in OPEC area spot fixtures downward trend, increasing 660,000 b/d were missing from the market in the last in March is attributed to seasonably-low to stand at 17.50m b/d compared with ten days of the month. demand, which coincided with high freight the month before. This figure represents The halt in Iraqi exports from the rates during the month. Rates were sup- 75.35 per cent of total OPEC sailings, up Mediterranean terminal of Ceyhan ported by increasing insurance costs due 6.34 per cent over a month ago. affected Aframax freight rates on the to military operations in the Middle East Preliminary estimates show that long- Mediterranean/NW Europe route, push- region and by charterers’ reluctance to fix haul arrivals in the Atlantic basin maintained ing them down by 15 points to W279, expensive vessels for their April cargoes. last month’s upward trend, rising 600,000 while increasing activity within the Medi- The war’s interruption of Iraqi exports b/d to 11.07m b/d in the USA and the terranean basin as oil companies rushed to also added to the decline. OPEC’s share Caribbean, and 470,000 b/d to 7.89m substitute Iraqi barrels with other regional of global fixtures fell a considerable 5.25 b/d in NW Europe. In contrast, the Euro- alternatives helped to lift Aframax freight per cent to stand at 56.55 per cent as non- Med arrivals fell 810,000 b/d to 4.63m rates within the Mediterranean to W339, OPEC fixtures rose in April on increasing b/d, mainly on interrupted Iraqi exports. which was 69 points higher than last oil production from non-OPEC countries Japan contributed to last month’s decline, month’s average. In the Caribbean, freight as well as on the downturn of OPEC’s oil decreasing by 410,000 b/d to 4.17m b/d. rates for Aframax cargoes rose by 26 points exports, especially from the Middle East Freight rates were pressed considerably to W330 as Venezuelan barrels returned region, due to the war in Iraq. Non-OPEC downward by decreased activity reflected to the market, while the slow chartering fixtures increased 870,000 b/d to 9.60m in low chartering volumes, mainly due to activity pushed freight rates down strongly b/d, representing a market share of 43.45 the war in Iraq and the outage of part of at the end of the month. Aframax freight per cent. Nigeria’s oil production, coupled with rates on the Indonesia/US Gulf Coast route Global spot-chartering showed only a ample tonnage availability. VLCC freight also showed a rise of 45 points to W194 marginal decline of 220,000 b/d to 22.08m rates on the Middle East eastbound and due to increasing demand. b/d as the fall in OPEC spot-chartering westbound long-haul routes fell 34 points The product tanker market benefited was mostly compensated by higher non- each to stand at an average of W93 and from the very high level of activity across OPEC spot fixtures, which rose 790,000 W81, respectively, while the build of all routes, especially before the war in Iraq b/d higher than a year ago. The Middle East unfixed VLCCs rose from 45 vessels to broke out. Tighter prompt positions helped westbound long-haul route was responsible roughly 65 tankers just before the end of freight rates for 30–50,000 dwt tankers on for most of OPEC spot fixture declines. the month. the Middle East/Far East route to stand This route showed a drop of 1.03m b/d Suezmax freight rate losses were much at an average of W260, 14 points higher to 1.18m b/d as military operations in higher than those for VLCCs, dropping than the previous month’s level. From the Middle East halted Iraqi exports and 75 points to a monthly average of W110 Singapore to eastern destinations, freight pushed freight rates skyward, thereby forc- on the West Africa to the US Gulf Coast rates increased by 62 points to W347. ing western customers to reduce charter- route. This fall resulted mainly from the The highest rise was observed on the ing, even for other Middle Eastern grades. plunge in rates that took place early in the Caribbean/US Gulf Coast route, where Seasonably-low demand in 2Q of the year month when they touched the W90 level rates climbed by 100 points to W347 also contributed to this strong downward before rising to end the month in the mid- on the back of tight tonnage availability trend. 120s. Aframax freight rates suffered further as Venezuelan suppliers geared up their From the Middle East to the Far East, huge losses as Iraqi exports from Turkey’s exports of refined products to the region. the decline was far less than on the west- Ceyhan terminal came to a complete halt. In Europe, freight rates for clean tankers bound route, registering only a slight dip Aframax rates plummeted 119 points to were above the average of W350, where of 180,000 b/d to 4.58m b/d, which can average W220 within the Mediterranean they rose by 51 points to W355 within be attributed to relatively healthy demand basin and 151 points to W128 from the the Mediterranean Basin and by 81 points by major Asian oil consumers Japan, India Mediterranean to NW Europe. The same to W362 from the Mediterranean to NW and China. The significant fall in spot char- trend was seen on the Caribbean/US Europe on increased fixtures for naphtha tering on the westbound long-haul route Gulf route, where rates fell 71 points to

48 OPEC Bulletin May/June 2003 49 MARKET REVIEW MARKET REVIEW

W259. The Indonesia/US West Coast b/d or 0.46 per cent rise in consumption is consumption indicates an impressive gain route showed very little losses, but barely estimated in 2002, following a significant of 860,000 b/d. Demand picked up in maintained the previous month’s level of 290,000 b/d growth in 2001. North America by a robust 550,000 b/d, W190s. On a quarterly basis, compared with the or 2.34 per cent, and by 530,000 b/d or With one notable exception, freight corresponding 2001 figures, world demand 6.03 per cent in the OECD Pacific. On rates for medium range (MR) tankers declined by 0.68 per cent or 520,000 b/d to the other hand, demand continued to be showed moderate losses on weak demand, average 76.55m b/d in 1Q of 2002, mostly weaker in Western Europe by 230,000 b/d the result of low activity exasperated by due to the milder-than-normal weather. 2Q or 1.46 per cent. a feeble world economic growth. Freight consumption is estimated to have dropped On a product basis, 2002 saw residual rates for MR tankers on the Middle East/ even further by 0.70 per cent or 530,000 fuel oil lead the decline in consumption Far East route proved the exception, rising b/d to 74.71m b/d, mostly due to lacklustre by 390,000 b/d or 12.29 per cent, mostly 25 points to W285 due to availability early economic performance during that period. due to the shift to natural gas demand in in the month which turned into a build However, compared with the exceptionally North America. The weakness in aviation of tonnage by the month’s end. The worst weak 2001 consumption, partly due to the fuel consumption also continued with an drop affected tankers on the routes from tragic events of September 11, demand is average 2.41 per cent decline y-o-y, as NW Europe to the US East and US Gulf estimated to have risen significantly during subdued air travel persisted everywhere. Coasts, which lost 55 points to W305. the 3Q and 4Q of 2002. The estimated The leading rises in volume were attrib- Within the Mediterranean basin and from growth rates are 440,000 b/d or 0.58 per uted to gasoline and LPG consumption, with the Mediterranean to NW Europe, rates cent and 1.24m b/d or 1.61 per cent, gains of 200,000 b/d or 1.38 per cent and fell 49 and 37 points, respectively. From respectively. 100,000 b/d or 2.23 per cent, respectively, Singapore to the East, freight rates moved mostly due to a substantial consumption down 13 points to W334, while from the OECD growth of 2.68 per cent or 4.72 per cent Caribbean to the US Gulf, losses almost Actual data indicates that the OECD in North America. doubled, falling 30 points to W325, due registered a substantial 860,000 b/d decline to a lack of product cargoes heading to the in 1Q 2002 consumption, making it the Developing countries US market, especially from Venezuela. single contributor to the fall in world Oil demand for developing countries demand. The 180,000 b/d and 160,000 is estimated to have grown by a marginal b/d rises in the demand of developing 90,000 b/d or 0.46 per cent to 19.45m World oil demand countries and former CPEs partly offset b/d. Demand in Latin America continued the decline in consumption of the OECD. to be significantly weaker — declining by March Within the OECD, the highest decline 120,000 b/d or 2.50 per cent — than in rate of 3.56 per cent was experienced by the previous year due to the region’s per- Estimates for 2002 the OECD Pacific, followed by 1.99 per sistent economic and financial problems. cent in North America and a minor 0.31 Other Asia is estimated to have registered World per cent in Western Europe. the highest volume and percentage growth 1Q and 2Q consumption estimates Data on the actual consumption in 2Q of 120,000 b/d or 1.64 per cent, followed have both been revised down by 140,000 2002 also points to a drop of 340,000 b/d, by the Middle East and Africa with rises b/d, while the 4Q figure has been revised or 0.72 per cent, in the OECD consump- of 50,000 b/d and 30,000 b/d, respec- up by 100,000 b/d, leading to an overall tion, due to a steep 310,000 b/d decline tively. minor downward revision of 40,000 b/d in OECD Pacific demand. This was com- to the 2002 average oil consumption. The bined with a moderate 130,000 b/d drop Other regions 2002 annual average now stands at 76.54m in Western Europe’s consumption, partly Apparent demand in the ‘other regions’ b/d, against the 76.58m b/d given in the offset by a slight rise of 110,000 b/d in the group of countries is estimated to have previous report. The world demand incre- demand in North America. grown at a healthy 190,000 b/d, or 2.0 per ment, ie, the difference between the 2001 The latest available data on the actual cent. Within the group, the FSU registered and the 2002 averages, has likewise been 3Q 2002 consumption points to a mod- a considerable decline in consumption of reduced to 160,000 b/d, compared with eration of the downward trend seen in the 180,000 b/d or 4.64 per cent. China, on the previously estimated 210,000 b/d. 1Q and 2Q. Total OECD consumption is the other hand, experienced the highest On a regional basis, following a smaller estimated to have dropped by a marginal consumption growth rate in the world, a decline of 70,000 b/d in 2001, demand is 130,000 b/d or 0.27 per cent. Within the significant 350,000 b/d, or 7.40 per cent. estimated to have decreased by 110,000 b/d OECD, the 180,000 b/d rise in North This remarkable estimated growth rate is in the OECD. The former CPEs’ consump- American consumption and that of 10,000 more than twice the estimated average tion, on the other hand, is estimated to b/d in the OECD Pacific are estimated rise in world demand. Apparent demand have grown considerably by 190,000 b/d, to have been more than offset by the in Other Europe also underwent a minor or two per cent higher than the 150,000 320,000 b/d decline in Western Europe’s 20,000 b/d volume rise, representing b/d growth witnessed in 2001. In the de- demand. a relatively high 3.12 per cent growth veloping countries, only a moderate 90,000 Actual data on the OECD’s 4Q 2002 rate.

48 OPEC Bulletin May/June 2003 49 MARKET REVIEW MARKET REVIEW

Table D: FSU net oil exports m b/d Table E: OPEC crude oil production, based on secondary sources 1,000 b/d

1Q 2Q 3Q 4Q Year Apr/ 2001 4Q02 2002* Mar 03* Apr 03* 1Q03* Mar 03 1999 3.12 3.62 3.52 3.49 3.44 2000 3.97 4.13 4.47 4.01 4.14 Algeria 820 952 864 1,109 1,121 1,069 12 2001 4.30 4.71 4.89 4.47 4.59 Indonesia 1,214 1,102 1,120 1,058 1,033 1,073 –25 20021 5.14 5.84 5.85 5.49 5.58 IR Iran 3,665 3,535 3,420 3,722 3,710 3,681 –12 20032 6.05 6.57 6.60 6.14 6.34 Iraq 2,381 2,394 2,006 1,368 143 2,109 –1,225 Kuwait 2,025 1,925 1,887 2,284 2,339 2,111 55 1. Estimate. 2. Forecast. SP Libyan AJ 1,361 1,349 1,314 1,408 1,433 1,394 25 Nigeria 2,097 2,014 1,969 1,919 1,799 2,091 –120 Qatar 683 704 648 757 756 742 –1 Projections for 2003 Saudi Arabia 7,939 7,904 7,537 9,317 9,333 8,874 16 UAE 2,163 2,021 1,988 2,297 2,314 2,200 17 World Venezuela 2,862 2,231 2,591 2,241 2,499 1,442 259 The world demand forecast for the year 2003 has been slightly revised down, Total OPEC 27,211 26,129 25,343 27,479 26,480 26,785 –999 by 80,000 b/d, to an average 77.35m b/d, compared with the 77.43m b/d given in the * Not all sources available. previous report. The increment has also been Totals may not add, due to independent rounding. revised down by 40,000 b/d to 810,000 b/d, equivalent to 1.06 per cent, from the previous of nuclear reactors in Japan has created a have both been revised up by 40,000 850,000 b/d, equivalent to 1.11 per cent. higher demand for oil. The progress is going b/d, 3Q figures up 20,000 b/d, while 4Q The outbreak of SARS is reducing travel and to moderate further in 3Q when a 560,000 remains unchanged, leading to an overall tourism and is feared to undermine economic b/d rise is foreseen. 4Q is expected to be minor upward revision of 20,000 b/d to growth in the affected regions. In addition, marked by the return of a higher growth the average oil consumption for 2002. the war in Iraq has had an adverse effect on rate of 710,000 b/d. The year’s average now stands at 76.56m air travel. The resulting decline in aviation b/d, compared to the 76.54m b/d given fuel consumption is expected to continue OECD in the previous report. The world demand throughout the 2Q03. Preliminary OECD data for January increment, which represents the difference The rise in fuel consumption by the 2003 indicates that while marine bunkers, between the 2001 and the 2002 averages, military due to the war in Iraq is estimated refinery own use and backflows declined, has likewise been increased to 190,000 b/d, to have been offset by the loss in consump- total inland consumption grew by a healthy compared with the previous estimate of tion as a result of SARS and subdued air 1.07m b/d or 2.40 per cent y-o-y. This 160,000 b/d. travel. Hence, 1Q and 2Q demand forecasts was partly due to the colder-than-normal On a regional basis, following a de- have been revised down. weather in most regions of the OECD. cline of 70,000 b/d in 2001, demand in All of the three major groups of coun- Gasoil/diesel registered the biggest gain in the OECD is estimated to have decreased tries are forecast to register healthy demand volume of 490,000 b/d, or 4.04 per cent. 90,000 b/d in 2002. Consumption in the growth during 2003. The OECD is forecast Naphtha led the percentage gain with 5.85 former CPEs, however, is estimated to have to rank first in demand volume growth per cent, or 170,000 b/d, due to spiking grown a considerable 180,000 b/d, or 1.97 with 460,000 b/d or 0.97 per cent. With natural gas prices in the USA, which en- per cent, up 150,000 b/d over 2001. De- 210,000 b/d, or 2.17 per cent, the rise in couraged petrochemical producers to uti- veloping countries are estimated to have demand in the former CPEs is expected to lize more naphtha. Furthermore, healthy experienced a moderate 100,000 b/d, or be the second-highest in volume but the margins in the downstream industries, 0.52 per cent, rise in consumption for first in percentage. Developing countries ie, ethylene production, induced higher the year, following significant 290,000 are forecast to follow with a 150,000 b/d, naphtha intake percentages in Europe b/d growth in 2001. or 0.75 per cent, demand increase. and Asia. All other major products such On a quarterly basis, world demand Every single quarter in 2003 is forecast as LPG, gasoline, kerosene and residual fuel declined by 470,000 b/d, or 0.61 per to register gains y-o-y. 1Q and 2Q are ex- oil experienced healthy gains. cent, compared with the corresponding pected to experience the highest growth of 2001 figures to average 76.59m b/d in 1.07m b/d and 910,000 b/d, respectively. April 1Q, mostly due to milder-than-normal One should bear in mind that 1Q and 2Q weather. 2Q consumption is estimated 2002 both registered exceptionally weak Estimates for 2002 to have dropped even further by 490,000 consumption, that the weather in 1Q b/d, or 0.65 per cent, to 74.75m b/d, 2003 has been much colder than normal World mostly due to the lacklustre performance in many regions, and that the maintenance 1Q and 2Q consumption estimates of the global economy. Compared with

50 OPEC Bulletin May/June 2003 51 MARKET REVIEW MARKET REVIEW

the exceptionally weak 2001 consumption also persisted with an average 2.41 of total world consumption. The outbreak tion, partly due to the tragic events of per cent decline compared to 2001, as air of the SARS epidemic, which has reduced September 11, demand is estimated to travel remained subdued worldwide. The travel and tourism in the affected regions, have risen at a significantly accelerating leading volume gainers were gasoline and is also feared to be undermining economic pace during the third and fourth quarters, LPG consumption, with rises of 200,000 growth leading to a downward revision in with estimated growth rates of 460,000 b/d or 1.38 per cent and 100,000 b/d or 2Q demand forecasts. b/d, or 0.61 per cent, and 1.24m b/d, or 2.30 per cent, respectively, mostly due to All the three major country groups 1.61 per cent, respectively. substantial growth in consumption in are forecast to register positive demand North America, which stood at 2.68 per growth. OECD is forecast to rank first in OECD cent and 4.83 per cent, respectively. demand volume growth with 540,000 b/d The actual data indicates that OECD or 1.13 per cent. The rise in former CPEs’ consumption registered a substantial Developing countries demand at 190,000 b/d, or 2.03 per cent, 850,000 b/d decline in 1Q, making it the Oil demand for developing countries is expected to be the second highest in single contributor to the drop in world is estimated to have grown marginally by volume but the first in percentage terms. consumption. The rise in demand in the 100,000 b/d, or 0.52 per cent, to 19.45m Developing countries are forecast to fol- developing countries and former CPEs, at b/d. The demand performance in Latin low with a 80,000 b/d, or 0.43 per cent, 210,000 b/d and 160,000 b/d, respectively, America continued to be significantly demand increase. partly offset this fall. Within the OECD, weaker, declining 110,000 b/d or 2.26 per Each quarter of 2003 is forecast to the highest drop rate of 3.56 per cent was cent compared to the previous year, on per- register gains in consumption over the experienced by OECD Pacific, followed by sistent economic and financial problems. corresponding quarter of 2002. 1Q and North America at 1.9 per cent and Western Other Asia is estimated to have registered 4Q are expected to experience the high- Europe, which registered a minor 0.32 per the highest volume and percentage growth est growth, at 1.46m b/d and 800,000 cent. at 120,000 b/d, or 1.64 per cent, followed b/d, respectively, although it is impor- Data on actual consumption in 2Q by the Middle East and Africa, with 50,000 tant to note that 1Q of 2002 registered also points to a drop of 310,000 b/d, or b/d and 30,000 b/d, respectively. exceptionally weak consumption due to 0.67 per cent, in the OECD consumption, a milder-than-usual winter. In contrast, due to a steep decline of 310,000 b/d in Other regions consumption in 1Q of 2003 is expected OECD Pacific demand. Western Europe’s Apparent demand in the ‘other regions’ to have been pushed higher by colder- drop in consumption was neatly balanced group of countries is estimated to have than-usual weather in many regions and by the 130,000 b/d rise in North American risen a healthy 180,000 b/d, or a 1.97 per the continued shut-down of Japan’s nuclear demand. cent growth rate. Within this group, the reactors on account of safety concerns. The latest available data on actual FSU registered a considerable decline in The SARS epidemic appears to be sti- 3Q consumption points to a slowing of consumption of 190,000 b/d, or 4.71 per fling 2Q consumption, leaving expected the downward trend seen in 1Q and 2Q. cent. China, however, was the consumption levels below the 490,000 b/d forecast previ- Total OECD consumption is estimated growth rate leader, registering a remarkable ously. Demand is anticipated to pick up to have dropped by a marginal 120,000 increase of 350,000 b/d, or 7.40 per cent, slightly in 3Q with an expected 520,000 b/d, or 0.25 per cent. Within the OECD, which alone counts for almost twice the b/d rise. Western Europe’s 320,000 b/d decline in estimated average rise in world demand. demand is expected to be more than offset Apparent demand in ‘other Europe’ also OECD by the 190,000 b/d rise in North American underwent a minor 20,000 b/d volume Preliminary OECD oil consumption consumption and the OECD Pacific’s gain rise, representing a relatively high 3.12 per data up to February 2003 indicate that, of 10,000 b/d. cent growth rate. despite declines in marine bunkers, refin- Actual data on OECD 4Q consump- ery own-use and back-flows, total inland tion indicates an impressive gain of Projections for 2003 consumption grew a healthy 1.76m b/d, 880,000 b/d. Demand jumped a robust or 3.95 per cent, compared to the first two 580,000 b/d, or 2.46 per cent, in North World months of 2002. This was partly due to America and 530,000 b/d, or 6.03 per The world demand forecast for the year the colder-than-normal weather in most cent, in the OECD Pacific. In contrast, 2003 has been revised up slightly by 30,000 regions of the OECD. demand continued to be sluggish in West- b/d to an average 77.38m b/d, compared The leading volume and percentage ern Europe, down 230,000 b/d or 1.45 per with the 77.35m b/d given in the previ- gainer was gasoil/diesel which registered cent. ous report. The increment has also been a 950,000 b/d, or 7.82 per cent, rise. The On a product basis, residual fuel oil revised up by 10,000 b/d to 820,000 b/d, second percentage gainer was naphtha with continued to be the loss leader for 2002 in equivalent to 1.07 per cent, from the previ- a 6.67 per cent, or 190,000 b/d, growth, both volume (390,000 b/d) and percentage ous 810,000 b/d, equivalent to 1.06 per as spiking natural gas prices in the USA (12.33 per cent), mostly due to a shift to cent. The incorporation of the actual 1Q encouraged petrochemical producers natural gas consumption in North America. OECD consumption figures has resulted to utilize more of the product. Healthy The weakness in aviation fuel consump- in an upward revision to the 1Q average margins in the downstream industries, such

50 OPEC Bulletin May/June 2003 51 MARKET REVIEW MARKET REVIEW

as in ethylene production, also induced the revised February figure of 27.15m OPEC natural gas liquids higher naphtha intake percentages in b/d. Table E shows OPEC production, as OPEC NGL data for the years 1999– Europe and Asia. Robust gains were also reported by selected secondary sources. 2001 remain unchanged at 3.16m b/d, experienced by all other major products, 3.34m b/d and 3.58m b/d, respectively, especially LPG, gasoline, kerosene and compared with last report’s figures. Both residual fuel oil. OPEC NGL production, 1999–03 the 2002 and 2003 figures have been revised m b/d up by 10,000 b/d to 3.65m b/d and 3.64m 1999 3.16 b/d, respectively. Revisions made to the World oil supply 2000 3.34 2002 figure are due to adjustments in 4Q 2001 3.58 estimates for some Member Countries. March 1Q02 3.64 2Q02 3.64 OPEC NGL production, 1999–03 Non-OPEC 3Q02 3.67 4Q02 3.61 m b/d Estimate for 2002 2002 3.64 1999 3.16 The 2002 non-OPEC supply figure has Change 2002/2001 0.06 2000 3.34 been revised up by 10,000 b/d to 47.99m 2003 3.62 2001 3.58 b/d. 4Q was revised down by 30,000 b/d Change 2003/2002 –0.02 1Q02 3.65 to 48.51m b/d, while minor upward revi- 2Q02 3.65 sions have been made to the other quarters 3Q02 3.68 of 20,000 b/d to 47.71m b/d, 30,000 b/d 4Q02 3.63 to 48.08m b/d and 20,000 b/d to 47.64m April 2002 3.65 b/d, respectively, compared with the last Change 2002/2001 0.07 report’s figures. The yearly average increase Non-OPEC 2003 3.64 for 2002 is estimated at 1.50m b/d, com- Change 2003/2002 –0.02 pared with the 2001 figure. Estimate for 2002 The 2002 non-OPEC supply figure Forecast for 2003 has been revised down by roughly 60,000 OPEC crude oil production OPEC forecasts a rise in non-OPEC b/d to 47.93m b/d. 4Q was revised down Available secondary sources place supply of 1.05m b/d in 2003. The major significantly by 90,000 b/d to 48.42m b/d. OPEC output for April at 26.48m b/d, contributors to the forecast rise in output Minor downward revisions of 40,000 b/d which was 1.00m b/d lower than the re- are the FSU and North America. The 2003 on the last report figures have been made to vised March figure of 27.48m b/d. Table quarterly distribution forecast has been re- the first three quarters, dropping them to E shows OPEC production as reported by vised down significantly by 120,000 b/d, 47.67m b/d, 48.04m b/d and 47.59m b/d, selected secondary sources. 100,000 b/d, 100,00 b/d and 150,000 b/d respectively. The yearly average increase is to 49.00m b/d, 49.09m b/d, 48.77m b/d estimated at 1.48m b/d, compared with and 49.31m b/d, respectively, compared the 2001 figure. Rig country with figures last published in the report, resulting in a yearly average of around Forecast for 2003 March 49.04m b/d. Non-OPEC supply for 2003 is an- The FSU net oil export forecast for ticipated to rise 970,000 b/d. The major Non-OPEC 2003 was revised up by 40,000 b/d to contributors to this increase are the FSU Rig activity declined in March. North 6.22m b/d, while the 2002 figure re- and North America. The 2003 quarterly America saw a decrease of 74 rigs, compared mained unchanged at 5.50m b/d. Figures distribution forecasts for all but 3Q have with the February figure. In Canada, the for 1999–2001 remain unchanged com- been revised down significantly 210,000 rig count declined by 105 rigs to 449. The pared with the last report (see Table D). b/d, 280,000 b/d and 160,000 b/d to USA witnessed an increase of 34 rigs to 48.79m b/d, 48.80m b/d and 49.15m b/d, 941, while Mexico’s rig activity declined OPEC natural gas liquids respectively, while 3Q has been revised up by three to 79 rigs. Western Europe’s rig OPEC NGL data remain almost un- by 90,000 b/d to 48.86m b/d, compared activity decreased by 4 rigs to 74. Latin changed at 3.16m b/d, 3.34m b/d, 3.58m with last report’s figures, resulting in a America rig activity rose by six rigs to 118, b/d, 3.64m b/d and 3.62m b/d, respectively yearly average of around 48.90m b/d. mainly contributed by Argentina. Angola’s compared with last report’s figures. The FSU’s net oil export forecast for rig activity increased also by five rigs. 2003 was revised up 120,000 b/d to 6.34m OPEC crude oil production b/d, as was the 2002 figure, up 80,000 OPEC Available secondary sources indicate b/d to 5.58m b/d. Figures for 1999–2001 OPEC’s rig count stood at 208 in that, in March, OPEC output was 27.49m remain unchanged from the last report (see March, almost unchanged compared b/d, which was 340,000 b/d higher than Table D). with the February figure. Venezuela

52 OPEC Bulletin May/June 2003 53 MARKET REVIEW MARKET REVIEW

restored some of its rig activity, as the rig Gasoline stocks showed a draw of b/d. This build raised crude oil stocks by count there increased by eight rigs to 29, 5.4m b to 200.7m b, as an improvement 4.3m b, or one per cent, compared to last compared with last month’s figures. This in apparent demand and stagnant output year’s figures (seeTable G). rise was totally offset by the declines in was witnessed. However, the closing week Gasoline stocks increased slightly by Algeria and IR Iran of five and four rigs of March registered a build, due to a rise 300,000 b to 149.8m b when compared to 17 and 32, respectively. in production, as refineries usually build to the substantial build observed in the gasoline stocks at this time of the year in last four months. This small build was April preparation for the peak seasonal demand. due to lower demand and a continued Gasoline stocks were around five per cent flow of exports to the USA, putting the Non-OPEC below last year’s figure. Distillate stocks y-o-y deficit at about six per cent. Middle Rig activity declined in April. North reversed their huge loss in March over Feb- distillates continued to fall to a level not America saw a decrease of 254 rigs with ruary as they rose by 1.4m b to 97.9m b. seen since November 2001 as they dropped Canada losing a substantial 298 rigs to The increase in output, combined with the by 600,000 b to 329.4m b, widening the drop to 151. This was offset slightly by decrease in apparent demand, was behind y-o-y deficit to 14.7m b as Russian cargoes increases in the USA, up 42 rigs to 983, this build. moved to the USA instead of Europe due and Mexico, up two rigs to 81. Rig activity During the week ending April 4, 2003, to the cold weather in the States. Fuel oil in Western Europe increased four rigs to total oil stocks in the USA showed a fur- stocks fell slightly by 600,000 b to 112.5m 78, while Latin America saw an increase ther draw of 7.6m b to 884.7m b, 12 per b and remained 1.9m b higher than last of two rigs to 120. The Middle East’s rig cent below the level reported in the same year’s figure. The bad weather observed in activity declined by five rigs, mainly in month last year. With the decline in crude February, which interrupted the exports Syria and Yemen. oil imports and an increase in refinery in- from Russia, combined with healthy put, US commercial crude oil stocks fell demand, were behind this decrease in fuel OPEC by 3.6m b to 277.1m b. Distillate fuel oil stocks. OPEC’s rig count rose to 219 in April, inventories also decreased by 1.8m b to adding 11 rigs since March. Venezuela 96.1m b due to surprisingly cold weather Japan gained eight rigs to reach 37, while Al- in the US north-east which boosted heat- Commercial onland oil stocks in Japan geria restored five rigs to reach 22 for the ing oil demand. Gasoline stocks, however, continued to decline further by 1.3m b, month. rose by 1.5m b to 202.2m b as refineries or at a rate of 50,000 b/d, to 164.2m b boosted gasoline stocks at the start of the in February 2003, almost the same y-o-y upcoming summer driving season, as well deficit. Distillate stocks led this draw, de- Stock movements as reflecting the recovery of exports from creasing by 4.8m b on the back of strong Venezuela. Amid this build, the y-o-y kerosene demand used as heating fuel and March deficit narrowed to about 5.4 per cent. lower output. Gasoline stocks and fuel oil During the same period, the Strategic registered marginal builds of 500,000 b USA Petroleum Reserve (SPR) remained un- to 13.8m b and 100,000 b to 18.6m b, US commercial onland oil stocks dis- changed at the previous month’s level of respectively. Crude oil stocks showed a played a further draw when they moved 599.2m b. moderate build of 2.8m b to 105.4m b, down by 2.7m b, or at a rate of 90,000 b/d, widening the y-o-y surplus to about 8.7 per to 892.3m b during the period February Western Europe cent. This build was caused mainly by the 28–March 28, 2003. This draw left the Total oil stocks in the Eur-16 coun- rise in crude oil imports from the Middle y-o-y deficit at about 10 per cent compared tries continued the upward trend seen last East, despite the increase in refinery crude to 12 per cent given in the previous report. month as they rose by 4.2m b, or at a rate runs (see Table F). Crude oil stocks registered a considerable of 140,000 b/d, to 1,057.8m b. This build build of 7.1m b to 280.7m b, however, still left total stocks 19.3 per cent lower April they switched into an upward direction than last year’s figure and at their lowest only in the last two weeks of the month end-March level since 1996. This build USA as crude oil imports jumped to an average in total oil stocks was mainly due to the US commercial onland stocks reversed record, mainly from Venezuela and Saudi increase, by almost the same amount, in the trend observed in the last months and Arabia. Indeed, crude oil imports rose to crude oil stocks, while the rises in gasoline rose by a seasonable 12.9m b during the 10.4m b/d, 1.7m b/d higher than the level and naphtha stocks were offset by the draw period March 28–May 2, 2003 at a rate of registered last month. This increase in crude on middle distillate and fuel oil inventories. 400,000 b/d to 905.2m b. Gasoline and oil imports offset the rise of 900,000 b/d to Crude oil stocks registered a build of 4.3m crude oil were the main contributors to 15.1m b/d in refinery runs and enabled the b to 443.3m b on the back of increasing this build, which left the y-o-y deficit at yearly deficit of crude oil stocks to lessen volumes of imports from the Middle East about 11.5 per cent. to about 14 per cent, from 16 per cent, which started to reach the refineries in Crude oil stocks moved up 6.5m b to as reported in the previous report (see the Mediterranean, combined with lower 287.2m b, mainly on a hike in imports, Table F). crude runs, which decreased by 320,000 which averaged 9.7m b/d. Regionally,

52 OPEC Bulletin May/June 2003 53 MARKET REVIEW MARKET REVIEW

the largest build occurred in the US surplus remained at 7.8m b or 1.8 per last report, with a quarterly distribution of Gulf Coast (PADD3), which Saudi cent (see Table G). 25.20m b/d, 22.99m b/d, 25.21m b/d imports pushed to a record high. The Distillate and fuel oil were the prime and 26.22m b/d, respectively. build narrowed the y-o-y deficit to 11.6 contributors to the build in major product The balance for 1Q and 2Q was per cent compared to 14 per cent in the inventories, which rose 4.7m b to 327.8m revised up significantly by 160,000 b/d and previous month. Gasoline stocks climbed b and 4.2m b to 113.8m b, respectively. 170,000 b/d to –60,000 b/d and 1.63m 7.1m b to 207.8m b, as refiners boosted Gasoline stocks registered a decline of 2.3m b/d, respectively, and 3Q was revised up gasoline yield to prepare for the upcom- b to 144.9m b, 2.4 per cent below last year’s slightly by 10,000 b/d to 260,000 b/d, ing summer driving season and Venezuelan figure, despite a rise in refinery output. while a significant 130,000 b/d downward exports climbed. This cut the y-o-y deficit The increase in middle distillate pro- revision has been made to 4Q, now esti- to only 4.2 per cent, compared to six duction, resulting from higher refinery mated at –90,000 b/d. The average 2002 per cent observed last month. Distillate runs, and a steady flow of Russian cargoes yearly balance is estimated at 430,000 b/d, inventories registered a moderate draw of were behind the build in middle distillate up by 50,000 b/d compared with the last 600,000 b to 97.3m b, although the y-o-y and fuel oil stocks. Even with this rise in report’s figure. shortage remained strong at 20.8 per cent middle distillates, the y-o-y deficit stood Table J for 2003 shows a downward (see Table F). at 5.1 per cent, while fuel oil registered a revision to both the world oil demand The SPR witnessed an increase of y-o-y excess of 5.3 per cent. The overall forecast of 80,000 b/d to 77.35m b/d 400,000 b to 599.6m b during the period minor decline in total oil stocks in Eur-16 and total non-OPEC supply of 110,000 March 28–May 2, as the US government was about 0.8 per cent below the year-ago b/d to 52.66m b/d, resulting in an expected restarted the ‘royalty-in-kind’ programme, level. difference of around 24.69m b/d, with a after a stagnant period following a Depart- quarterly distribution of 25.20m b/d, ment of Energy decision to delay oil deliv- Japan 22.99m b/d, 24.56m b/d and 25.99m eries to the SPR in the wake of depleted Commercial onland oil stocks in Japan b/d, respectively. The balance for 1Q03, commercial stocks. experienced a draw for the second consecu- which is introduced for the first time, is In the week ending May 9, US com- tive month in March, declining 3.4m b at estimated at 1.54m b/d. mercial onland oil stocks did not display a rate of 110,000 b/d to 160.6m b. This any major change, down a mere 500,000 b widened the y-o-y deficit to about six per April to 904.8m b, maintaining the y-o-y deficit cent. Middle distillates were mostly respon- at 11.9 per cent. Crude oil stocks fell 2.7m sible for this draw, moving down 3.2m b Table J for 2002 shows an upward revision b to 284.5m b, remaining 12.5 per cent due to higher demand brought on by the to estimated world oil demand of 20,000 below last year’s level, pushed down by colder-than-expected weather. b/d to 76.56m b/d. Total non-OPEC sup- lower crude imports and strong refinery This draw on middle distillates expand- ply was revised downward by 40,000 b/d to runs. Gasoline stocks rose 800,000 b to ed the y-o-y deficit to about 21 per cent. 51.59m b/d. This resulted in an estimated 208.6m b, largely due to an increase in Gasoline stocks fell a marginal 200,000 b to annual difference of around 24.97m b/d, refinery output, narrowing the y-o-y defi- 13.6m b and were 14.1 per cent below last up 70,000 b/d over the last report’s figure, cit to about four per cent. Distillate fuel year’s figure, while residual fuel increased a with a quarterly distribution of 25.27m inventories also showed a build of 2.6m slight 300,000 b to 18.6m b to retain the b/d, 23.06m b/d, 25.26m b/d and 26.29m b to 99.9m b, mainly on weak demand. y-o-y level. Despite an increase in crude oil b/d, respectively. However, the y-o-y deficit remained a imports from the Middle East, crude oil The quarterly balance was re- considerable 19.4 per cent. registered a marginal decline of 400,000 vised down 70,000 b/d, 70,000 b/d, The SPR continued its upward trend b to 105.1m b, or 1.7 per cent below last 50,000 b/d and 70,000 b/d to –130,000 b/ displaying a further increase of 800,000 b year’s level. d, 1.56m b/d, 210,000 b/d and –170,000 to 600.4m b and leaving the y-o-y surplus b/d, respectively. The average 2002 yearly at 32.5m b or 5.7 per cent. balance is estimated at 370,000 b/d, down Balance of supply/demand 70,000 b/d compared with the last report’s Western Europe figure. Total onland oil stocks in the Eur-16 March Table J for 2003 shows an upward extended their previous month’s build, revision to the forecast world oil demand rising 2.3m b, at a rate of 70,000 b/d, to Table J for 2002 shows a downward of 30,000 b/d to 77.38m b/d. Total non- 1,059.6m b. Total products contributed revision to the estimated world oil OPEC supply was revised downward by to this build with crude oil capping the demand of 40,000 b/d to 76.54m b/d, 120,000 b/d to 52.54m b/d, resulting increase. Crude stocks fell 5.7m b to and total non-OPEC supply was re- in an expected difference of around 447.6m b as arrivals dropped with the vised up by 10,000 b/d to 51.63m b/d, 24.84m b/d, with a quarterly distribution loss of Iraqi exports and throughputs resulting in an estimated annual differ- of 25.82m b/d, 22.85m b/d, 24.44m b/d increased on improved refinery margins. ence of around 24.91m b/d, down by and 26.23m b/d, respectively. The balance Despite the draw on crude oil, its y-o-y 50,000 b/d compared with the figure in the for 1Q is estimated at 960,000 b/d.

54 OPEC Bulletin May/June 2003 55 MARKET REVIEW MARKET REVIEW

Table F: US onland commercial petroleum stocks1 m b

Change Feb 28, 03 Mar 28, 03 May 2, 03 May/Apr May 2, 02 May 9, 032

Crude oil (excl. SPR) 273.6 280.7 287.2 6.5 325.0 284.5 Gasoline 206.1 200.7 207.8 7.1 216.9 208.6 Distillate fuel 96.5 97.9 97.3 –0.6 122.8 99.9 Residual fuel oil 31.4 30.1 31.3 1.2 34.6 31.4 Jet fuel 39.4 35.8 35.8 0.0 40.4 37.1 Unfinished oils 83.1 84.9 88.0 3.1 94.6 84.1 Other oils 165.0 162.2 157.8 –4.4 188.8 159.2 Total 895.0 892.3 905.2 12.9 1023.1 904.8 SPR 599.2 599.2 599.6 0.4 566.9 600.4

1. At end of month, unless otherwise stated. 2. Latest available data at time of publication. Source: US/DoE-EIA.

Table G: Western Europe onland commercial petroleum stocks1 m b

Change Feb 03 Mar 03 Apr 03 Apr/Mar Apr 02

Crude oil 430.3 453.3 447.6 –5.7 439.8 Mogas 146.4 147.2 144.9 –2.3 148.5 Naphtha 23.3 24.2 25.52 1.3 25.91 Middle distillates 317.2 323.0 327.8 4.7 345.3 Fuel oils 108.8 109.6 113.8 4.2 108.1 Total products 595.8 604.0 612.0 8.0 627.8 Overall total 1,026.0 1,057.3 1,059.6 2.3 1,067.6

1. At end of month, and includes Eur-16. Source: Argus Euroilstock.

Table H: Japan’s commercial oil stocks1 m b

Change Jan 03 Feb 03 Mar 03 Mar/Feb Mar 02

Crude oil 102.6 105.4 105.1 –0.4 106.8 Gasoline 13.3 13.8 13.6 –0.2 15.8 Middle distillates 31.3 26.6 23.3 –3.2 29.5 Residual fuel oil 18.4 18.3 18.6 0.3 18.7 Total products 63.0 58.6 55.6 –3.0 64.0 Overall total2 165.6 164.1 160.6 –3.4 170.9

1. At end of month. 2. Includes crude oil and main products only. Source: MITI, Japan.

54 OPEC Bulletin May/June 2003 55 MARKET REVIEW MARKET REVIEW

Table I: World crude oil demand/supply balance m b/d

1999 2000 2001 1Q02 2Q02 3Q02 4Q02 2002 1Q03 2Q03 3Q03 4Q03 2003 World demand OECD 47.7 47.7 47.7 48.0 46.1 47.4 48.9 47.6 49.1 46.5 47.5 49.4 48.1 North America 23.8 24.0 23.9 23.7 23.8 24.1 24.2 24.0 24.5 24.0 24.3 24.4 24.3 Western Europe 15.2 15.1 15.3 15.2 14.6 15.2 15.4 15.1 15.1 14.7 15.2 15.6 15.1 Pacific 8.7 8.6 8.6 9.1 7.7 8.1 9.3 8.5 9.5 7.8 8.1 9.4 8.7 Developing countries 18.7 19.0 19.4 19.3 19.4 19.5 19.5 19.5 19.4 19.5 19.6 19.6 19.5 FSU 4.0 3.8 3.9 3.8 3.3 3.6 4.3 3.7 3.8 3.4 3.7 4.3 3.8 Other Europe 0.8 0.7 0.7 0.8 0.7 0.7 0.7 0.7 0.8 0.7 0.8 0.8 0.8 China 4.2 4.7 4.7 4.7 5.1 5.3 5.0 5.0 4.9 5.1 5.4 5.1 5.1 (a) Total world demand 75.4 76.0 76.4 76.6 74.7 76.5 78.3 76.6 78.1 75.2 77.1 79.1 77.4 Non-OPEC supply OECD 21.3 21.8 21.8 22.1 22.2 21.5 22.1 22.0 22.3 22.1 22.0 22.1 22.1 North America 14.1 14.2 14.4 14.6 14.7 14.4 14.6 14.6 14.8 14.8 14.6 14.7 14.7 Western Europe 6.6 6.7 6.7 6.7 6.8 6.3 6.8 6.6 6.8 6.7 6.6 6.7 6.7 Pacific 0.7 0.8 0.8 0.8 0.8 0.8 0.7 0.8 0.7 0.7 0.7 0.7 0.7 Developing countries 10.8 10.9 10.9 11.4 11.4 11.3 11.2 11.3 11.3 11.3 11.2 11.2 11.2 FSU 7.5 7.9 8.5 8.9 9.2 9.5 9.7 9.3 9.9 10.0 10.3 10.4 10.1 Other Europe 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 China 3.2 3.2 3.3 3.3 3.4 3.4 3.4 3.4 3.4 3.4 3.5 3.4 3.4 Processing gains 1.6 1.7 1.7 1.7 1.7 1.7 1.8 1.7 1.8 1.8 1.8 1.8 1.8 Total non-OPEC supply 44.6 45.7 46.5 47.7 48.0 47.6 48.4 47.9 48.8 48.8 48.9 49.1 48.9 OPEC NGLs 3.2 3.3 3.6 3.7 3.7 3.7 3.6 3.7 3.4 3.6 3.8 3.8 3.6 (b) Total non-OPEC supply 47.7 49.1 50.0 51.3 51.7 51.3 52.0 51.6 52.2 52.4 52.6 52.9 52.5 and OPEC NGLs OPEC crude supply and balance OPEC crude oil production1 26.5 28.0 27.2 25.1 24.6 25.5 26.1 25.3 26.8 Total supply 74.2 77.0 77.2 76.5 76.3 76.8 78.2 76.9 79.0 Balance2 -1.1 1.1 0.9 -0.1 1.6 0.2 -0.2 0.4 1.0 Stocks Closing stock level (outside FCPEs) m b OECD onland commercial 2446 2530 2622 2599 2643 2564 2467 2467 OECD SPR 1228 1210 1222 1237 1247 1250 1271 1271 OECD total 3674 3740 3843 3836 3890 3814 3738 3738 Other onland 983 1000 1028 1026 1040 1020 1000 1000 Oil on water 808 876 829 808 817 820 827 827 Total stock 5465 5617 5700 5669 5747 5654 5565 5565 Days of forward consumption in OECD Commercial onland stocks 51 53 55 56 56 52 50 51 SPR 26 25 26 27 26 26 26 26 Total 77 78 81 83 82 78 76 78 Memo items FSU net exports 3.4 4.1 4.6 5.1 5.8 5.9 5.5 5.6 6.1 6.6 6.6 6.1 6.3 [(a) — (b)] 27.7 26.9 26.3 25.3 23.1 25.3 26.3 25.0 25.8 22.9 24.4 26.2 24.8 1. Secondary sources. Note: Totals may not add up due to independent rounding. 2. Stock change and miscellaneous. Table J 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 58, while Graphs One and Two (on pages 57 and 59) show the evolution on a weekly basis. Tables Three to Eight, and the corresponding graphs on pages 60–65, 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).

56 OPEC Bulletin May/June 2003 57 MARKET REVIEW MARKET REVIEW

Graph 1: Evolution of spot prices for selected OPEC crudes January to April 2003

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56 OPEC Bulletin May/June 2003 57 MARKET REVIEW MARKET REVIEW

Table 1: OPEC spot crude oil prices, 2002/03 ($/b)

Member 2002 2003 Country/ Sept Oct Nov Dec Jan Feb March April Crude (API°) 4Wav 5Wav 4Wav 5Wav 4Wav 4Wav 1W 2W 3W 4W 4Wav 1W 2W 3W 4W 5W 5Wav

Algeria Saharan Blend (44.1) 28.17 27.78 24.19 29.34 31.29 32.43 34.09 34.60 29.50 26.64 31.21 27.48 25.38 25.20 24.97 22.91 25.19 Indonesia Minas (33.9) 27.58 29.69 28.11 32.80 32.32 31.89 32.56 33.09 29.60 27.53 30.70 29.25 30.31 31.01 29.81 27.93 29.66 IR Iran Light (33.9) 26.87 26.05 22.24 26.40 29.13 29.89 30.09 31.18 26.59 23.89 27.94 24.35 22.64 22.72 22.85 21.70 22.85 Iraq Kirkuk (36.1) — — — — — — — — — — — — — — — — — Kuwait Export (31.4) 26.64 26.23 22.97 25.65 28.08 30.02 29.86 30.33 26.89 24.17 27.81 24.46 23.32 23.63 24.37 23.13 23.78 SP Libyan AJ Brega (40.4) 28.28 27.63 24.09 29.02 31.86 32.89 34.51 34.41 29.33 26.60 31.21 27.72 25.20 0.00 25.13 23.35 25.35 Nigeria Bonny Light (36.7) 28.46 27.90 24.07 29.27 30.78 32.33 33.59 34.25 29.13 26.36 30.83 27.18 25.22 25.06 25.08 23.80 25.27 Saudi Arabia Light (34.2) 27.10 26.95 23.87 26.56 29.10 31.11 30.96 31.53 28.08 25.36 28.98 25.65 24.51 24.37 25.10 23.86 24.70 Heavy (28.0) 26.33 25.85 22.42 25.42 27.78 29.86 29.76 29.73 26.28 23.56 27.33 23.85 22.71 23.57 24.30 23.06 23.50 UAE Dubai (32.5) 26.72 26.41 23.28 25.81 28.02 29.94 29.80 30.28 26.81 24.13 27.76 24.33 23.15 23.46 24.11 22.88 23.59 Venezuela Tia Juana Light1 (32.4) 26.31 25.40 22.92 27.09 30.14 31.21 31.68 31.98 27.35 25.14 29.04 25.38 23.79 24.44 24.16 22.10 23.97

OPEC Basket2 27.38 27.32 24.29 28.39 30.34 31.54 32.19 32.67 28.38 25.87 29.78 26.53 25.31 25.57 25.49 23.79 25.34

Table 2: Selected non-OPEC spot crude oil prices, 2002/03 ($/b)

2002 2003 Country/ Sept Oct Nov Dec Jan Feb March April Crude (API°) 4Wav 5Wav 4Wav 5Wav 4Wav 4Wav 1W 2W 3W 4W 4Wav 1W 2W 3W 4W 5W 5Wav

Gulf Area Oman Blend (34.0) 26.75 26.55 23.37 26.21 28.54 30.31 30.11 30.57 27.15 24.39 28.06 24.77 23.66 23.97 24.79 23.53 24.14 Mediterranean Suez Mix (Egypt, 33.0) 25.69 25.00 21.57 26.64 27.67 29.04 30.74 31.27 26.13 23.11 27.81 23.72 21.62 21.66 21.74 20.62 21.87 North Sea Brent (UK, 38.0) 28.28 27.69 23.99 28.83 31.31 32.54 34.16 34.34 29.08 26.35 30.98 27.47 24.95 24.61 24.88 23.45 25.07 Ekofisk(Norway, 43.0) 28.25 27.63 24.08 28.92 31.43 32.80 34.34 34.62 29.31 26.34 31.15 27.44 25.32 24.79 24.89 23.40 25.17 Latin America Isthmus (Mexico, 32.8) 27.33 27.08 23.63 27.82 30.74 31.90 32.69 33.00 28.22 25.94 29.96 26.45 24.80 25.47 25.18 23.03 24.99 North America WTI (US, 40.0) 29.52 29.00 26.31 29.66 33.08 35.63 36.67 37.12 32.04 29.69 33.88 29.73 28.18 29.24 29.06 25.78 28.40 Others Urals (Russia, 36.1) 26.77 26.16 22.68 27.75 29.56 30.76 31.90 32.12 26.44 23.06 28.38 23.98 22.15 22.55 22.47 21.26 22.48

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.

58 OPEC Bulletin May/June 2003 59 MARKET REVIEW MARKET REVIEW

Graph 2: Evolution of spot prices for selected non-OPEC crudes January to April 2003

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58 OPEC Bulletin May/June 2003 59 MARKET REVIEW MARKET REVIEW

Table 3: North European market — bulk barges, fob Rotterdam ($/b)

regular gas premium gas fuel oil naphtha gasoil jet kero fuel oil 1%S unleaded 76 unleaded 95 3.5%S 2001 April 27.86 36.47 37.57 30.37 32.45 20.49 17.05 May 29.71 37.93 39.09 31.18 34.17 20.48 18.21 June 27.21 30.27 31.73 31.06 33.69 19.23 17.97 July 22.28 27.06 27.82 29.33 31.55 17.97 17.19 August 22.51 27.93 29.36 30.18 31.58 18.18 18.40 September 23.19 28.49 29.88 30.87 32.18 19.84 19.23 October 19.72 22.36 23.27 27.41 28.53 16.50 16.07 November 16.88 19.27 20.20 23.03 24.38 15.49 14.68 December 17.48 18.41 19.16 21.35 23.11 14.98 14.95

2002 January 21.42 20.87 20.93 21.55 23.46 16.20 15.25 February 23.77 21.18 21.17 21.69 23.43 14.70 15.52 March 28.27 25.63 25.74 25.05 26.73 17.25 17.86 April 29.29 29.77 29.94 26.53 28.01 19.51 19.93 May 27.68 29.14 28.94 26.54 28.99 19.93 21.02 June 24.33 28.90 29.02 25.97 28.04 19.32 19.94 July 28.20 30.61 30.77 27.80 29.11 21.18 21.02 August 30.23 30.95 31.14 28.95 30.46 21.49 21.68 September 33.46 32.40 32.63 31.54 34.19 24.33 24.02 October 31.55 32.04 32.16 31.23 33.36 27.20 22.44 November 28.67 27.75 27.88 28.52 30.48 23.59 18.40 December 34.20 31.17 31.34 32.63 33.21 26.11 19.99

2003 January 40.35 35.19 35.31 35.22 36.66 26.83 25.97 February 43.96 39.13 39.15 41.16 43.08 30.77 25.93 March 40.60 35.98 36.06 39.61 42.75 26.86 21.91 April 29.40 34.09 34.38 29.59 31.66 23.10 18.61

Source: Reuters. Prices are average of available days.

Graph 3: North European market — bulk barges, fob Rotterdam

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60 OPEC Bulletin May/June 2003 61 MARKET REVIEW MARKET REVIEW

Table 4: South European market — bulk cargoes, fob Italy ($/b)

gasoline premium naphtha gasoil jet kero fuel oil 1%S fuel oil 3.5%S unleaded 95 2001 April 27.07 36.43 29.00 28.28 19.23 14.96 May 29.54 39.45 29.37 29.72 19.39 15.84 June 27.15 32.21 30.98 29.40 17.71 15.89 July 21.95 25.55 27.77 27.15 17.73 15.59 August 22.26 26.60 na 27.74 18.20 16.93 September 23.46 29.93 na 29.36 18.99 17.44 October 19.14 23.55 na 23.61 15.61 15.07 November 16.22 19.41 na 20.54 13.61 12.48 December 16.91 19.11 na 19.16 15.15 13.15

2002 January 17.55 19.89 na 21.50 17.26 14.18 February 19.42 20.06 na 21.88 15.37 14.77 March 23.43 24.07 24.07 25.07 17.99 16.33 April 24.48 28.27 25.51 26.22 20.31 18.39 May 22.88 27.80 25.48 26.29 20.01 19.18 June 22.05 26.23 25.48 25.59 20.21 18.56 July 23.79 28.45 26.92 26.85 20.43 19.27 August 24.92 29.21 28.23 28.46 21.45 20.04 September 27.95 31.79 30.56 32.48 25.07 22.53 October 26.18 31.13 29.86 31.50 24.28 20.58 November 23.45 26.78 27.91 28.01 21.26 16.99 December 27.71 30.57 32.02 29.94 24.07 18.32

2003 January 33.02 34.20 35.05 33.12 29.15 23.71 February 35.86 38.05 40.11 39.94 31.05 24.65 March 32.05 33.75 39.45 36.43 28.10 20.94 April 22.88 29.69 27.14 26.54 21.14 18.18

Source: Reuters. Prices are average of available days. na = not available.

Graph 4: South European market — bulk cargoes, fob Italy

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60 OPEC Bulletin May/June 2003 61 MARKET REVIEW MARKET REVIEW

Table 5: US East Coast market — New York ($/b, duties and fees included)

gasoline premium fuel oil gasoil jet kero fuel oil 1%S fuel oil 2.2%S unleaded 95 0.3%S LP 2001 April 39.78 32.83 33.92 27.82 22.80 17.47 May 39.06 32.48 35.60 27.84 23.09 18.58 June 30.07 31.74 32.92 24.89 20.22 17.64 July 28.69 29.31 30.10 23.71 19.33 16.72 August 32.56 30.80 32.88 23.69 20.14 18.23 September 31.61 30.71 31.77 24.02 20.24 19.80 October 25.15 26.40 26.84 20.70 17.91 16.97 November 21.68 22.97 23.63 20.28 15.98 14.97 December 21.73 21.90 22.52 20.01 16.52 15.28

2002 January 22.53 22.23 23.35 19.23 16.08 15.30 February 23.01 22.51 23.96 18.09 14.83 14.42 March 28.94 26.48 27.00 21.79 19.43 19.05 April 31.00 27.78 28.61 25.24 22.24 21.59 May 29.18 27.70 28.70 25.62 23.37 21.73 June 29.78 26.89 28.34 24.63 22.70 21.54 July 31.90 28.26 29.84 25.79 22.55 21.60 August 31.96 29.22 31.31 26.63 25.43 23.51 September 32.61 32.25 34.11 27.52 26.02 25.35 October 34.44 31.98 33.97 28.33 26.39 24.43 November 31.43 29.98 30.79 26.94 23.86 21.46 December 33.59 34.21 34.67 32.62 26.68 24.30

2003 January 36.60 37.78 38.17 37.87 31.53 30.04 February 41.65 47.11 48.11 46.52 35.06 30.61 March 39.86 40.82 40.92 38.71 31.71 27.13 April 33.37 32.66 32.88 27.29 23.98 20.51

Source: Reuters. Prices are average of available days.

Graph 5: US East Coast market — New York

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62 OPEC Bulletin May/June 2003 63 MARKET REVIEW MARKET REVIEW

Table 6: Caribbean cargoes — fob ($/b)

fuel oil fuel oil naphtha gasoil jet kero 2%S 2.8%S 2001 April 33.60 30.51 31.37 15.81 15.03 May 29.65 32.07 34.46 17.50 17.10 June 25.85 31.58 32.13 16.64 16.27 July 25.06 28.84 29.57 15.54 14.45 August 29.04 30.49 31.68 17.20 17.11 September 26.30 30.10 30.28 18.70 18.71 October 19.86 25.47 25.83 16.28 16.23 November 18.74 22.07 22.44 14.26 14.11 December 19.32 21.10 21.26 14.35 13.88

2002 January 19.63 21.49 22.24 14.50 13.89 February 21.30 21.80 23.41 13.62 13.54 March 25.86 25.77 26.72 18.25 18.09 April 28.55 27.31 28.33 20.79 20.59 May 27.14 27.28 28.31 20.95 20.65 June 26.85 26.49 27.66 20.79 20.36 July 27.98 28.11 29.43 20.88 20.67 August 28.73 28.83 30.53 22.78 22.52 September 32.16 31.91 33.67 24.55 24.77 October 32.54 32.04 33.23 23.70 23.86 November 24.39 29.65 29.51 20.73 19.97 December 31.43 33.64 34.27 23.58 23.18

2003 January 37.00 37.44 37.87 29.31 28.51 February 40.53 45.21 44.77 29.89 28.43 March 36.78 37.87 37.94 26.05 24.18 April 29.03 30.65 31.62 19.01 18.45

Source: Reuters. Prices are average of available days.

Graph 6: Caribbean cargoes — fob

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62 OPEC Bulletin May/June 2003 63 MARKET REVIEW MARKET REVIEW

Table 7: Singapore cargoes ($/b)

gasoline premium fuel oil fuel oil fuel oil naphtha gasoil jet kero unleaded 95 0.3%S 180C 380C 2001 April 28.14 32.76 29.80 30.25 22.60 20.48 20.47 May 28.89 32.64 30.79 30.74 23.72 22.02 22.07 June 27.57 26.89 30.00 30.84 25.11 20.26 20.16 July 24.38 24.36 28.54 28.93 24.08 19.03 19.19 August 24.33 26.68 28.71 29.37 21.03 20.70 20.94 September 24.67 29.47 29.44 31.05 20.38 21.74 21.85 October 20.58 22.23 25.53 25.92 19.10 18.53 18.72 November 18.15 20.75 21.87 22.40 15.84 15.47 15.46 December 18.36 22.61 20.11 21.77 15.78 16.15 16.44

2002 January 18.97 21.00 21.66 22.93 16.30 16.07 16.24 February 21.04 24.16 22.54 22.54 16.83 17.04 17.37 March 24.92 27.93 25.71 25.16 17.28 19.37 19.73 April 26.11 30.11 28.64 27.27 19.23 21.45 21.75 May 24.90 29.73 28.76 27.85 19.45 22.60 22.98 June 23.84 28.54 27.82 26.49 19.95 21.66 21.99 July 24.64 28.19 28.19 27.56 21.37 22.47 22.88 August 25.52 28.17 28.79 29.28 21.67 23.39 24.10 September 27.52 30.49 31.43 32.92 21.35 24.70 25.34 October 26.87 29.62 33.10 32.43 32.43 23.13 23.46 November 25.06 27.80 29.37 29.38 na 21.77 21.83 December 29.57 30.25 31.88 32.10 na 23.95 24.24

2003 January 32.21 34.34 34.23 34.37 na 26.51 26.97 February 37.34 40.14 39.35 39.27 na 29.05 29.33 March 33.78 37.51 37.87 35.33 na 26.19 26.65 April 23.58 28.74 30.03 28.35 na 22.55 23.12

Source: Reuters. Prices are average of available days. na = not available.

Graph 7: Singapore cargoes

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64 OPEC Bulletin May/June 2003 65 MARKET REVIEW MARKET REVIEW

Table 8: Middle East — fob ($/b)

fuel oil naphtha gasoil jet kero 180C 2001 April 27.42 28.05 28.49 18.83 May 28.57 29.11 29.02 20.74 June 26.95 28.08 28.93 18.92 July 23.53 26.77 27.16 17.65 August 23.49 27.15 27.78 19.28 September 24.07 28.00 29.64 20.57 October 20.47 24.05 24.42 17.51 November 18.24 20.91 21.44 14.55 December 17.61 19.33 20.48 14.61

2002 January 18.55 19.50 21.62 14.95 February 20.11 20.21 21.12 16.00 March 24.27 23.28 23.65 18.41 April 26.03 26.30 25.92 20.52 May 24.98 26.63 26.56 21.60 June 23.82 25.89 25.09 20.64 July 24.37 26.06 26.08 21.46 August 25.15 26.37 27.58 22.30 September 27.13 28.90 31.19 23.66 October 26.53 30.81 30.84 22.05 November 24.50 27.03 27.63 20.31 December 28.14 28.53 29.77 21.95

2003 January 30.36 30.66 31.79 24.57 February 34.85 35.81 36.77 27.31 March 32.26 34.22 32.74 23.73 April 22.57 26.24 25.52 20.35

Source: Reuters. Prices are average of available days.

Graph 8: Middle East — fob

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64 OPEC Bulletin May/June 2003 65 MEMBER COUNTRY FOCUS MEMBER COUNTRY FOCUS

IMF praises three OPEC Members for sound economic management

New York — The International Monetary Fund (IMF) has “Further progress in implementing legal and judicial re- praised three OPEC Member Countries — Algeria, Indone- form is critical to strengthening governance and improving sia and the United Arab Emirates (UAE) — for their sound the investment climate,” Krueger said. economic policies. She noted that key steps would include setting up the The IMF’s Executive Board recently completed its eighth Anti-Corruption Commission, strengthening the Commercial review of Indonesia’s performance under a $5 billion extended Court, and adopting amendments to the bankruptcy law. fund facility arrangement. In a separate development, the IMF also praised the The IMF’s First Deputy Managing Director and Acting government of the UAE for its management of the country’s Chair, Anne Krueger (pictured), said economy. at the board’s discussions on Indone- In a report, the Fund’s executive sia’s economic and structural reform directors noted that the UAE’s programme that the arrangement open, market-oriented economic paved the way for the release of a system, and the authorities’ sound further $469 million to the coun- economic management had helped try, bringing the total amount drawn sustain robust economic growth, low under the arrangement to $3.6bn. inflation, and a comfortable external “Indonesia has continued to position, notwithstanding the wide make good progress in implement- fluctuations of global crude oil prices ing economic reforms under the over the years. programme,” she said. They welcomed the UAE’s con- “Economic growth has been tinuing progress in diversifying sustained, inflation has declined, the economy, as evidenced by the the banking system has been rapid expansion of a broad range of strengthened and asset recoveries economic activities and services. have advanced. Several directors encouraged the “Nevertheless, weaknesses in the authorities to avail themselves of investment climate continued to hold IMF technical assistance for tax back a more robust economic recovery. reform and institution building. Sustained efforts for further reform The directors commended the would be necessary in the context of authorities for the priority they the 2003 programme, to lay the basis had accorded to maintaining a for more rapid economic growth. sound and well-supervised banking

“Indonesia achieved a significant IMF Photo: system, which, they maintained, fiscal consolidation in 2002, with the should play an important role as a budget deficit outturn well below the target of 2.5 per cent of regional financial centre for the Middle East. the gross domestic product,” she said. They welcomed progress made in further strengthening The 2003 budget built on this accomplishment, and was the financial sector, through the adoption of a broad system expected to contribute to a further decline in public debt levels, of risk management in the banking sector. while preserving key development expenditures. They encouraged the authorities to focus in the period ahead “Inflation has declined steadily in recent months and the on reforming the insurance sector, improving securities sector rupiah has remained stable, allowing monetary policy to be supervision and monitoring, and enforcing existing regulations more supportive of economic recovery,” said Krueger. for companies to adopt international accounting standards. She added that, looking ahead, monetary policy would need The directors welcomed the authorities’ ongoing efforts to to continue to strike an appropriate balance between support- foster the further development of the non-hydrocarbons sector ing the economy and contributing to a further reduction in and to promote the role of the private sector and foreign direct inflation risks. investment. The board noted that strengthening the financial sector They also encouraged the authorities to gradually eliminate was a central element of the programme. With the launch of remaining foreign investment restrictions outside the free trade the sale of Bank Danamon, further progress continued to be zones. made towards the goal of returning to private ownership those The directors welcomed the reform of the power and banks that were taken over during the crisis. water sectors in recent years, and called for further efforts in

66 OPEC Bulletin May/June 2003 67 MEMBER COUNTRY FOCUS MEMBER COUNTRY FOCUS

this direction, including steps to restructure companies in the employment, and improving living standards on a sustained transmission and distribution sector. basis. They also endorsed the authorities’ commitment to the Algeria’s economic recovery plan entails a substantial fiscal exchange rate peg, which had promoted economic stability stimulus. However, this fiscal expansion will not endanger the by serving as a nominal anchor in the UAE’s open economic external and treasury positions as long as oil prices remain firm, system. and that an increase in human capital and infrastructure invest- The UAE’s open border foreign labour policy enabled ments is made possible by Algeria’s prudent policy record. employment growth to contribute significantly to non-hy- Algeria’s resolve to face a number of challenges and to de- drocarbons sector growth and diversification. vote monetary policy to preserving price stability, and for the The directors endorsed the authorities’ long-term labour introduction of a new instrument to absorb excess liquidity, was market strategy to increase employment opportunities for UAE welcomed by the directors. They encouraged Algeria to take nationals, which would help absorb the rapidly rising local further steps to strengthen the financial markets by offering a labour force and strengthen the prospects for robust economic broader spectrum of savings instruments, the statement said. growth. They welcomed Algeria’s commitment to manage the ex- In addition to praising Indonesia and the UAE, the IMF’s change rate float in a flexible way to dampen external shocks. executive directors also commended the Algerian government The directors praised the authorities for reducing the external for its impressive economic policies. The remarks followed an debt over the years and encouraged them to engage in more assessment by the IMF board after consultations with Algeria. active debt management aimed at reducing cost and lengthening The policies preserved the macroeconomic stability achieved the maturity of external liabilities, and to continue to work in recent years, and facilitated progress in a number of structural towards the resolution of bilateral debt issues. reform areas, in particular in trade liberalisation, the IMF said Algeria’s commitment to undertake the completion of two in a statement. sizable privatisation transactions in 2001 and the approval of a Aided by higher oil prices, these policies have contributed list of 40 public enterprises to be privatised was welcomed, and to a marked strengthening of the balance of payments, an the Fund urged the authorities to move ahead with the remain- increase in official reserves, and a sharp decline in inflation. ing privatisation agenda in a timely and measured fashion. The directors agreed that its favourable macroeconomic The IMF welcomed Algeria’s participation in the Finan- position provides Algeria with a timely opportunity to address cial Sector Assessment Program, which will form the basis of its main challenges of raising economic growth, reducing un- modernising and strengthening the financial sector.

Re-elected Obasanjo pledges to provide quality leadership for Nigeria

Abuja — Olusegun Obasanjo has been sworn in for another the President on Petroleum Matters, Funsho Kupolokun, the four-year term as Nigerian President, after having won the government had managed to pay arrears of cash calls owed to recent presidential elections. its joint-venture oil partners, incurred before 1999. Obasanjo was re-elected for a second term in April with This achievement was attributed to the “rejuvenation of the around 62 per cent of the vote. His closest challenger, Muham- sector occasioned by the government’s drive for foreign capital madu Buhari, got some 32 per cent. inflow and commitment to full funding of its own obligations Speaking at the 40-minute inauguration ceremony, President to the joint-venture partners,” he stated. Obasanjo pledged “to provide quality leadership for Nigeria and The government, through the state-run Nigerian National for all Nigerians, regardless of their political persuasions. Any- Petroleum Corporation (NNPC), holds an average 57 per cent thing less would be unconstitutional, morally inadequate, and stake in the six joint-ventures with oil majors Royal Dutch/Shell, contrary to the will of God, whose wishes are my command.” ExxonMobil, ChevronTexaco, Total, Agip and Pan Ocean. He promised to focus on key areas such as infrastructure, Kupolokun said the development led to a steady rise in healthcare, education, agriculture, industry, and to revive the investment funds in the industry, such that the capital invest- energy sector so that it can play a crucial role in the country’s ment level rose from $4.65 billion in 1998 to some $9.47bn economic growth. Nigeria is currently generating less than in 2002. 1,400 megawatts from an expected 10,000 mw by 2007. Following the improved funding, he said, the joint-venture Despite facing a series of problems in the energy sector, partners had embarked on several projects that had contributed stakeholders are optimistic and keen to improve the power substantially to Nigeria’s oil production capacity. supply and the regular supply of petroleum products. Kupolokun said he believed the strategy for achieving The Nigerian oil industry has witnessed a flurry of activity Nigeria’s goal of raising its crude reserves in 2002 to about in the past four years. According to the Special Assistant to 32bn barrels included the provision of an enabling environ-

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Olusegun Obasanjo has been sworn in for another four-year term as Nigerian President. Photo: Reuters/George Esiri Reuters/George Photo: ment for capital inflow, encouragement of indigenous capacity The third train began operation on schedule in Novem- development, as well as putting in place appropriate incentives ber 2002, increasing the plant’s LNG output capacity to 9m to motivate participants. tonnes/year, from 6m t/y. In addition, the government had addressed the challenges Efforts at reducing gas flaring in Nigeria also yielded some related to joint venture funding and embarked on periodic dividends, with flaring reportedly reduced from 71 per cent licensing rounds. in 1999, to 51 per cent last year. The phenomenal achievements of Nigerian industry in the In the downstream sector of the oil industry, notable upstream and downstream sectors of the oil and gas industry achievements were also recorded. The NNPC realised its by the Obasanjo-led government were obvious, he stressed. mission of being an integrated oil and gas company with the In an effort to boost investors’ confidence, the government inauguration of two large service stations in Lagos and Abuja, offered marginal fields to local firms, and some 142 companies and with a pledge to open more in other major towns across submitted some 398 bid packages. the country. In the gas sector, Nigeria LNG continued with its expan- In addition, the government awarded 18 licences for the sion project, as the NNPC, Shell, Elf and Agip signed the establishment of private refineries in Nigeria in order to boost final investment decision to construct the fourth and fifth product supply. It also initiated moves to establish or buy into production trains at a cost of about $2bn. offshore refineries.

price of $17/b compared to $16/b last year. Despite the low Qatar expects lower budget price, total revenues are forecast to increase as Qatar is looking deficit of $474m in 2003-04 to secure an increase in its liquefied natural gas exports from 14m tonnes/year to 40m t/y over the next 10 years. Doha — Qatar expects a deficit of $474 million in its 2003- Last year, it nearly tripled its proven recoverable gas deposits 04 budget, 4.8 per cent less than the previous fiscal year, when in the world’s largest gas field to more than 900 trillion cubic the deficit stood at $498m. This year’s budget, which came feet. The country has the world’s third-largest gas reserves. into effect on April 1, 2003, includes spending of $6.40 billion Qatar has run budget deficits since the late 1980s and has and projected revenues of $5.93bn. heavily invested in infrastructure improvements. However, the The current budget is based on a conservative average oil government is determined to continue its efforts to develop the

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country’s infrastructure and some $1.69bn has been allocated and to improve the investment climate for the private sec- for major public projects this year, 40 per cent higher than tor. In order to boost confidence in the Qatari economy, the the $1.2bn earmarked the previous year. government plans to relax its foreign investment regulations. The government listed among its key objectives to privatise The improvement of the healthcare and education sector part of the petrochemical, fertiliser, steel and iron industries, was also cited among the key objectives of the budget.

OPEC Fund gives emergency assistance of $500,000 to Algerian earthquake relief efforts Algiers — The OPEC Fund for International Development Committee and the Algerian Red Crescent Society (ARC) had has donated $500,000 in the form of an emergency assistance been mobilised at disaster sites. grant to help purchase relief supplies for the victims of the Following an appeal to the international community for earthquake that struck northern Algeria in May. assistance, the International Federation of Red Cross and Red Measuring 6.7 on the Richter scale, the quake left at least Crescent Societies (IFRC) sent a Field Assessment and Co- 2,200 people dead, more that 9,000 injured, and an estimated ordination Team to assist the ARC in quantifying emergency 20,000 homeless. Areas hardest hit were the capital Algiers, requirements. the district of Boumerdes, and the cities Rwaba City and Abu The OPEC Fund’s contribution, channelled through the Mardas. IFRC, was used to procure essential relief supplies and finance President Abdelaziz Bouteflika chaired the Disaster Crisis emergency operations undertaken by the ARC.

President Abdelaziz Bouteflika tours Boumerdes, one of the areas badly hit by the earthquake in Algeria Photo: Reuters TV Reuters Photo:

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The European Commission Humanitarian Aid Office and the UN Office for the Co-ordination of Humanitarian Affairs EU and Iran enter third round sent emergency cash relief and assessment teams. of trade, co-operation talks A series of powerful aftershocks extensively damaged telecom- munication lines, hospitals and public buildings. According to Brussels — European Union (EU) and Iranian negotiators an official from the Algerian electricity and gas distribution entered a third round of trade and co-operation agreement company Sonelgaz, the firm reportedly incurred damages of talks, it was announced in the Belgian capital recently. about $15 million as a result of the earthquake. Issues on the agenda included co-operation on preventing Meanwhile, the electricity and gas distribution network drug trafficking, money laundering, illegal migration, as well affected during the earthquake has been about 85 per cent as boosting ties in science and technology and cultural links restored, he noted. between the 15-member European bloc and Iran. The earthquake was the most devastating to hit Algeria European Commission Chief Negotiator, Christian Leffler, since a quake with a magnitude of 7.1 on the Richter scale headed the EU negotiating team, while the Director General struck west of the capital on October 10, 1980, killing at least of Economy at the Iranian Foreign Ministry, Kia Tabatabai, 2,500 people. led the Iranian delegation. The first round of talks between the EU and Iran was held in Brussels in December last year, followed by the second round in Tehran in February. Saudi Basic Industries Corp The previous rounds of talks covered the general outlines records healthy profit increase of negotiations, while the latest round entered into more substantive detail. Riyadh — The Saudi Basic Industries Corporation (SABIC) The talks are aimed at establishing a contractual base to has announced a net profit of $372.3 million in the first quar- govern trade between the EU and Iran and develop closer co- ter of this year. The figure is a 360 per cent increase over the operation between the two sides in economic and other areas $81m posted in the first three months of 2002, SABIC said such as energy, transport, drugs control, and culture. in a statement. SABIC Vice-Chairman and Managing Director, Mohamed Al-Mady, said the increase was “due to a rise in the company’s sales and in the prices of most products.” Algeria, Nigeria sign seven accords But Al-Mady added that prices could now be hurt by the and agree on action plan global economic situation, including an expected drop in oil prices and an anticipated slowdown owing to the Severe Acute Algiers — The second session of the Algeria/Nigeria Bi-Na- Respiratory Syndrome (SARS) outbreak in Asia. tional High Commission has ended with the signing of seven Overall production increased 19.5 per cent in the first co-operation accords and a plan of action for 2003. quarter to 10.4 million tonnes from 8.7m t, and sales were up The Commission, co-chaired by the Presidents of Algeria 8.8 per cent to 7.4m t from 6.8m t, the company reported. and Nigeria, Abdelaziz Bouteflika and Olusegun Obasanjo, was In a related development, Al-Mady also announced that concluded by the signing of several agreements related to the SABIC’s fertiliser affiliate, the Saudi Arabian Fertiliser Company completion of the Algiers-Lagos trans-Saharan road, and the (SAFCO) recorded a $26.6m net profit for the first quarter of realisation of a gas pipeline and fibre-optic telecommunications 2003, compared with $6.24m in the same period last year. line linking the two countries. Al-Mady said that the profit was due to increases in sales The two parties also signed accords on mutual assistance prices and volume, with the price per ton of ammonia rising between customs services, legal metrology, extradition agree- by 56 per cent, while urea rose by 38 per cent. ments, and agreed to remove visas for diplomatic and service During this period, SAFCO increased its output by two per passport holders. cent and its sales by 24 per cent, compared with the previous According to a joint communiqué, the plan of action for year, the Saudi Press Agency reported. 2003 covered all domains of co-operation, including energy, Al-Mady added that to further strengthen shareholders’ water resources, agriculture, public works and scientific research equity, the company’s board of directors had approved a fourth sectors. expansion project, which would increase output by 1.0m t of Speaking at the signing ceremony, Bouteflika noted that ammonia and 100,000 t of urea. the accords would extend the fields of bilateral co-operation, “This will come on stream in early 2006, and will further while diversifying ties. He added that new instruments able to enhance SAFCO’s competitiveness in international markets,” promote exchanges between the two countries had enriched he added. the provisions of the accord. In April last year, SABIC acquired the petrochemicals op- While supporting these views, Obasanjo noted that the erations of the Dutch chemicals group DSM in a deal worth Commission had highlighted ways and means of boosting the $2 billion. The company has been renamed SABIC Europe. mutual understanding between Algeria and Nigeria, which would SABIC’s market capitalisation exceeds $4bn. permit the two parties to enjoy a very fruitful partnership.

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In 2002, the country’s hydrocarbons export revenues New terminal opened in amounted to $18.1bn, while other exports fetched $700 mil- Dubai’s Jebel Ali Free Zone lion, almost the same level as the two previous years. In a separate development, the Chief Economic Adviser to Dubai — Dubai Shell Chemicals has opened an expanded Nigerian President Olusegun Obasanjo, Dr Magnus Kpakol, terminal at the Jebel Ali Free Zone (JAFZ). The terminal, announced at a press conference that Nigeria’s inflation rate originally opened in 1994, is set to be the operational unit of has dropped to 11.4 per cent, compared with 12.3 per cent Shell in the Middle East, has doubled its capacity. for the same period last year. Inaugurating the new terminal, the Executive Chairman Kpakol said that the current inflation rate was attained in of Dubai Ports, Customs and Free Zone Corporation, Sultan February and had since remained at that level. He added that Ahmed Bin Sulayem, said that the decision to expand the a fixed basket of consumer goods, which sold for 100 naira in facility was a vote of confidence for the Jebel Ali Free Zone the 12-month period ending in February 2002, sold for 111.4 Authority (JAFZA). naira in February this year. “(Shell’s) decision to make JAFZ their Middle Eastern base Kpakol noted that the composite consumer price index reflects on JAFZA’s policies, which offers a unique investment stood at 4971.0 in February, which represented a decline of environment for its clients,” he was quoted as saying by the 1.5 per cent over the 5046.2 recorded in January. Khaleej Times. He explained that the index fall was attributed to a slight Shell Chemicals Commercial and Operations Manager for price fall for food items, clothes, tailoring charges, footwear, the Middle East and Pakistan, Ghassan Ashqar, said that the household goods, medicaments, and other services. The com- expansion of the terminal had cost $1.2m. posite food index dropped by 2 per cent in February, a fall “This project is part of a recent spate of heavy investments that was the result of a decrease in the price of edible oil and made globally by Shell Chemicals to meet growing demand and proteins. strengthen its position in the polyol industry,” he said, adding Kpakol noted that the level of the composite food index that the expansion of the terminal was part of the company’s had increased by 3.5 per cent in comparison to the previous strategy for the development of Shell’s chemical business in year, while the average annual growth rate stood at 9.7 per the region. cent for the 12-month period ending in February this year. The expansion included new storage tanks for polyols and a Meanwhile, the Central Bank of Venezuela (BCV) announced manufacturing unit for processing a wide variety of polymeric that the country’s inflation rate for March closed at 0.8 per polyol blends on site. The manufacturing unit, which had been cent, significantly below the level of 5.5 per cent recorded in installed, used state-of-the-art technology that had been adopted February. from the Shell Chemicals plant at Pernis, in Holland. According to the BCV, the March inflation rate brought “This technology had been tried and tested and had been the accumulated consumer price index for the year so far to well proven over the years in Holland,” said Ashqar, adding 9.4 per cent. The Central Bank observed that the March in- that this latest version of the technology, with Shell proprietary flation rate “was determined by the measures of control and software, was the first of its kind in the Middle East. regulation of prices decreed by the National Executive since “The plant is fully computerised and at the touch of a but- last February for an ample range of goods and services of mass ton we can produce the highest quality of whichever polymeric consumption.” polyol grades customers want,” Ashqar said. Algeria, Libya sign agreements on Several OPEC Members trade, socio-economic co-operation see falls in inflation rate Algiers — Algeria and Libya have signed 3 co-operation agree- Algiers — Three OPEC Members, Algeria, Nigeria and ments to enhance the level of bilateral relations and co-operation Venezuela, have witnessed falls in their inflation rates. between the two countries, it was recently announced. Algeria’s central bank reported a dramatic drop in inflation The signing of the agreement followed the end of the 11th to 1.4 per cent compared with 4.2 per cent in 2001. According Meeting of the joint Algeria-Libyan Executive Commission, to the bank’s statement, the performance also resulted in an co-chaired by the Algerian Premier, Ali Benflis, and the former improvement in the external balance of payments, which saw Libyan Secretary of the General People’s Committee, M’Barek a surplus of $5.4 billion in 2002. Abdellah Echamekh. The country’s external reserves stood at $23.1bn at the end Areas of co-operation covered the agreement between the of last year, in comparison with $21.1bn in June 2002 and two countries are the promotion of investments, training and $17.9bn on December 31, 2001. education. In a joint communiqué issued at the end of the The report noted that action taken to increase the country’s talks in Algiers, the two countries pledged to create an environ- foreign reserves had contributed to anchoring the convertibility ment that will encourage investment through the provision of of the Algerian dinar. necessary facilities.

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Sudan’s impossible dream Kenana Sugar Company expands with OPEC Fund financing

ceptics described it as an impossible dream and one White Nile, the first modest crop was harvested in 1980. By of the most ambitious “greening” projects of all time 1985, the estate was operating at full capacity and a major — the transformation of a swathe of Sudanese desert milestone had been reached — the Sudan was self-sufficient into a verdant oasis of rich farmland. Twenty years on, in sugar. theS critics have been silenced and the Kenana Sugar Company Today, the company is a major exporter of sugar to regional (KSC) jostles for position as one of the largest and most efficient African and Middle Eastern markets, as well as more recently integrated producers of white sugar in the world. to Europe and the Indian subcontinent, an achievement that saves the country upwards of $10 million/year on imports and by Audrey Haylins generates a steady flow of foreign currency. It is the success story to cap all success stories. Combin- New boiler unit will increase production ing the benefits of Arab financing, Western technology and The continuous replacement and rehabilitation of facilities the Sudan’s natural resources of sun, fertile soil and plentiful and equipment has recently enabled KSC to embark on a $61m water, Kenana was launched in 1975 as a joint venture between capacity expansion programme designed to raise sugar produc- the government of Sudan and Arab governmental and inter- tion from 300,000 tons to a targeted 450,000 t annually. A governmental bodies. Using irrigation water drawn from the $10m loan from the OPEC Fund is helping to finance phase

Kenana Sugar Company in the Sudan received a private sector loan from the Fund to increase its cane-crushing capacity. Photo: Photo: M Ladurner

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five of this programme and represents the Fund’s first private Kenana is the second-largest employer in the Sudan, with a sector investment in the Sudan. Loan proceeds will directly total of some 150,000 people in surrounding towns and vil- support the installation of an eighth boiler unit to help increase lages wholly dependent on the estate. sugarcane-crushing capacity during the harvesting season. As the lynchpin upon which all operations depend, Care for the environment Kenana’s boiler capacity is central to the output of the sugar KSC has taken great pains to limit the environmental plant. Acquiring the additional unit will enable the factory to impact of its operations, as evidenced by its by-products improve its processing efficiency, minimize factory down time diversification programme, and is continually taking steps and provide additional safety and security assurances for the to protect and enhance its surroundings. Irrigation water, for crop operations. During the off-crop period, the boiler will example, is recycled and a forestry belt of eucalyptus trees has furnish supplementary energy for new projects planned under been planted around the estate on a target area of 8,000 ha. KSC’s diversification programme. These support the company’s This, together with the 40,000 ha in crops, acts as an effective ‘green’ ethos and involve utilizing by-products of the main block on desertification in the area. production line, such as molasses as a basis for animal feed Additionally, all seven of Kenana’s existing boilers have large and surplus bagasse* to make charcoal briquettes. air pre-heaters, combustion controls and mechanical cyclone dust collectors to ensure good combustion and minimize par- Fund delegation visits Kenana estate ticulate boiler stack emissions. The new boiler will conform An OPEC Fund delegation headed by Director-General, Dr to these standards, keeping anticipated emissions for all eight Y Seyyid Abdulai, travelled to Khartoum last year to conclude boilers at a level three times lower than that allowed by the the loan agreement with KSC. Following the loan signature US Environmental Protection Agency. ceremony in the Sudanese capital, the delegation travelled the 250 km south to tour KSC’s sprawling estate on the eastern Regional centre of excellence bank of the White Nile. Today, Kenana is striving to become a regional centre of Spread over some 70,000 hectares, the estate comprises a excellence for the sugar industry. Its six-year-old Engineer- 43,000 ha sugar plantation and a factory/refining complex, as ing and Technical Services Unit prepares feasibility studies, well as a working farm and a self-contained township, which is comprehensive drawings and engineering designs, undertakes Photo: Photo: M Ladurner Photo: Photo: M Ladurner Kenana employees and their dependents live in an adjacent Using modern harvesting and refining technology, Kenana Sugar community, complete with company-provided schools, a 120-bed now produces 3.65 million tons/year of sugar. hospital and a mosque.

home to around 8,500 employees. Amenities provided by KSC installations and the supervision of plant construction, and to its staff include schools, a 60-bed hospital, health centres, plans and implements training programmes in a number of social clubs and sports facilities. Cows, sheep and poultry are sub-Saharan countries. raised on the farm and a non-profit co-operative grows fruit and vegetables, making the estate largely self-sufficient in terms of food production. Including permanent employees and the * Bagasse is the dry pulp remaining after the extraction of juice from additional 7,000 seasonal workers engaged at harvesting time, sugar cane. It is frequently used as a fuel.

72 OPEC Bulletin May/June 2003 73 O P E C F U N D Oil demand in North America: 1980–2020 — Salman Saif Ghouri The price of natural gas — A M Samsam For an in-depth look Bakhtiari at the oil market Energy economics and related issues September 2001 and related issues What have we learned from the experience Vol. XXVII, No. 1 March 2003 of low oil prices? — A F Alhajji The estimation of risk-premium implicit in oil prices — Jorge Barros Luís the OPEC Review The economics of an efficient reliance Price elasticity of demand for crude John C. B. Cooper on biomass, carbon capture and carbon contains research papers oil: estimates for 23 countries sequestration in a Kyoto-style emissions Ownership of associated and Andrew L. Chukwuemerie by experts from across discovered gas in Nigeria control environment — Gary W Yohe under the old joint venture contracts The geopolitics of natural gas in Asia An introduction to the economics of Ferdinand E. Banks — Gawdat Bahgat the world natural gas OPEC production agreements: OPEC Secretariat a detailed listing June 2001 Has the accuracy of energy projections in Now in its 27th annual volume, the OECD countries improved since the 1970s? — Jan Bentzen and Hans Linderoth OPEC Review is published quarterly. Oil product consumption in OPEC Its content covers the international oil Member Countries: a comparison of trends and structures — Atmane Dahmani market, energy generally, economic Oil and macroeconomic fluctuations in development and the environment. Ecuador — François Boye People wishing to submit a paper for Energy indicators — OPEC Secretariat publication should contact the Editor-in- Subscription enquiries to: Blackwell Chief of the OPEC Review, Dr Omar Fa- March 2001 Estimating oil product demand in Indonesia rouk Ibrahim, at the Public Relations and Publishing Journals, 9600 Garsington using a cointegrating error correction model Information Department, OPEC Secre- Road, Oxford OX4 2DQ, UK. Free — Carol Dahl and Kurtubi tariat, Obere Donaustrasse 93, A-1020 The gas dimension in the Iraqi oil industry sample copies sent on request. Vienna, Austria. — Thamir Abbas Ghadhban and Saadallah Al-Fathi The Russian coal industry in transition: A simple economic analysis of electricity a linear programming application — Bo Recent issues deregulation failure — Ferdinand E Banks Jonsson and Patrik Söderholm The future of gaseous fuels in Hong Kong December 2002 March 2002 — Larry Chuen-ho Chow New energy technologies: trends in the Short-term forecasting of non-OPEC supply: a development of clean and efficient energy test of seasonality and seasonal decomposition December 2000 technologies — Adnan Shihab-Eldin — S M R Tayyebi Jazayeri and A Yahyai Global energy outlook: an oil price scenario Oil and macroeconomic fluctuations in Evidence that the terms of petroleum contracts analysis — Shokri Ghanem, Rezki Lounnas Mexico — François Boye influence the rate of development of oil fields and Garry Brennand Energy indicators — OPEC Secretariat — Mustafa Bakar Mahmud and Alex Russell The hybrid permit cum price ceiling policy OPEC official statements —OPEC Secretariat Stimulation of investment in international proposal: intuition from the prices versus energy through Nigerian tax exemption laws quantities literature — Gary W Yohe September 2002 — Uche Jack Osimiri World oil reserves: problems in definition Risk measurement for oil and gas explora- Energy indicators — OPEC Secretariat and estimation — Ghazi M Haider tion: the marriage of geological and financial A vector autoregressive analysis of an oil-depen- techniques — Thomas Stauffer December 2001 dent emerging economy — Nigeria — O Felix The prospects for the oil sector in the Iraqi Oil outlook to 2020 — Adnan Shihab-Eldin, Ayadi, Amitava Chatterjee and C Pat Obi economy after sanctions — Imad Jabir Rezki Lounnas and Garry Brennand The closure of European nuclear power plants: Energy use and GDP growth, 1950–97 OPEC oil production and market funda- a commercial opportunity for the gas-pro- — Rögnvaldur Hannesson mentals: a causality relationship — Atmane ducing countries — Jean Pierre Pauwels and Oil price movements and globalisation: is Dahmani and Mahmoud H Al-Osaimy Carine Swartenbroekx there a connection? — Robert Looney

June 2002 Oil outlook to 2020 — Rezki Lounnas and “The principal objective of the OPEC Review is to Garry Brennand Short-term forecasting of non-OPEC supply broaden awareness of (energy and related) issues, — a statistical analysis — S M R Tayyebi Jazayeri and A Yahyai enhancing scholarship in universities, research Using non-time-series to determine supply elasticity: how far do prices change the Hub- institutes and other centres of learning.” bert curve? — Douglas B Reynolds

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OPEC Fund Governing Board Fund signs investment nd protection agreement with holds 102 Session Bosnia & Herzegovina he Governing Board of the OPEC Fund for International Development convened An agreement for the encouragement and its 102nd Session at the Fund’s headquarters on April 16, 2003, in Vienna, Austria. T protection of investment has been signed Following adoption of the meeting’s agenda, the Director-General of the Fund, HE Dr between the OPEC Fund and Bosnia and Y Seyyid Abdulai, reporting to the Board on the Fund’s activities, indicated that on a Herzegovina (BiH). Drawn up within the cumulative basis, and as of the end of March 2003, $5,146 million had been approved framework of the Fund’s Private Sector in loans to the public sector and $3,329m disbursed. These loans, which were extended Facility, the convention was initialed by for project and program financing and balance of payments support, as well as within the the Minister of Foreign Trade and Economic framework of the HIPC Initiative, number 953. All major economic and social sectors Relations of BiH, HE Dr Mila Gadžic, and have benefited from the Fund’s assistance, including agriculture, transportation, health, by the Director-General of the OPEC Fund, education, water supply and sewerage, industry, energy, etc. HE Dr Y Seyyid Abdulai. The Director-General further indicated that a total of 41 operations had been ap- The Fund’s Private Sector Facility is a proved under the Fund’s Private Sector Facility. As of the end of March 2003, cumulative financing window, endowed with its own commitments through this window totaled $190.1m. resources, through which the Fund chan- In addition, the Fund has approved a total of 613 grants in support of various activities nels support directly to the private sector in the areas of technical assistance, food aid, emergency relief and research. Cumulative in developing countries. The objectives grant commitments, as of the end of March 2003, amounted to $292.2m, of which of the Facility are to promote economic $188.5m has been disbursed. Moreover, the Fund has contributed, in grant form, substantial development by encouraging the growth amounts to the resources of other international development institutions benefiting the of productive private enterprise and sup- South; these contributions total $971.8m, most of which has been disbursed. To date, porting the development of local capital the Fund has provided financial assistance to 110 countries in Africa, Asia, Latin America markets. Under the Facility, loans are made and the Caribbean, the Middle East and Europe. to financial institutions for on-lending to In its April session, the Board approved seven public sector project loans worth a total small, medium and micro-enterprises, as of $52.14m and detailed can be seen in the table. well as directly to specific projects. - Eq Country Project $ million uity participation in private enterprises is also undertaken, either directly or through Botswana Middlepits-Bokspits road 10.00 country or regional investment funds. As Cambodia Road improvement 10.00 a pre-condition to such investment, the Guinea North lower Guinea small farmers development – II 1.82 Fund requires signature of a standard Lebanon Pan Arab highway 15.00 agreement with the country concerned Lesotho Maseru water supply 4.00 for the encouragement and protection of Namibia Entrepreneurship and skills development 6.62 investment. The agreement accords the Seychelles Baie St Anne school construction 4.70 OPEC Fund the same privileges as those normally given to international develop- Total 52.14 ment institutions in which the country holds membership. All of the loans have a maturity of 20 years, including a grace period of five years, Since 1996, BiH has seen a remarkable and carry interest at rates ranging from one per cent to 1.25 per cent for low-income transformation: the economy grew at an countries Cambodia, Guinea and Lesotho, while the remaining loans to the middle-income annual average rate of 25 per cent, criti- countries bear interest rates ranging from 2.5 per cent to four per cent. cal infrastructure was rebuilt, and modern The projects will be cofinanced with the governments of the beneficiary countries political and economic institutions and and with other donors including four OPEC aid institutions — the Arab Bank for Eco- processes were born. In 2001, real GDP nomic Development in Africa, the Arab Fund for Economic and Social Development, growth reached six per cent, and BiH’s the Kuwait Fund for Arab Economic Development and the Saudi Fund for Development. gross national income (GNI) amounted to Other contributors include the Asian Development Bank and the Nigerian Trust Fund $5 billion. GNI per capita was estimated at (administered by the African Development Bank). $1,240 the same year. The government Five grants were also approved by the Board and were directed at financing activities is implementing a number of economic in the agriculture, multi-sectoral, health and education sectors. They total $2.75m (see reforms that will foster private sector-led grant section on pp76–77). growth, create an enabling business envi- The Board also discussed the Fund’s Private Sector Facility: four new private sector ronment and promote small and medium- investment proposals were approved; a number of pipeline proposals considered and a sized enterprises. This and other measures note on the implementation of the facility examined. have greatly enhanced openness and Also in this session: the Board reviewed financial and budget matters; considered a competitiveness, and have helped create draft of the Fund’s 2002 Annual Report; examined progress reports on ongoing grants a hospitable, enabling environment for the and on the implementation of the HIV/AIDS Special Account; looked at a note on the promotion of enterprises in the country’s status of the Fund’s participation in the HIPC Debt Initiative; and assessed public sector private sector, which is regarded by the operations under active consideration by the Fund. government as critical to the economic The next Governing Board Session will take place in Abu Dhabi, United Arab Emir- development of the country. ates on June 11, 2003.

74 OPEC Bulletin May/June 2003 75 O P E C F U N D O P E C F U N D

News from the OPEC Fund

April 2003 Total cost: $110m who are heads of household and earn less Co-financier: Islamic Development Bank than $2/day. Under the current project, (IsDB). a three-story extension totalling around The grant supports an ongoing project 1,200 sq m will be constructed to house Grants approved established by the IsDB to repair and extra workshops, an audio-visual room, a rebuild homes and public buildings that multipurpose hall, dining area, conference Fund approves grant towards have been damaged or destroyed by Israeli room and teachers’ offices. All related equip- foot and mouth disease control military incursions into Palestine. The IsDB ment, furniture and teaching supplies will programme in the Arab region project, rehabilitation and reconstruction of also be provided. Additionally, within the damaged houses and private properties in framework of the existing curriculum, new Arab region. $300,000. Palestine, began in February 2001. To date, classes and short term courses will be created. Project: Control of foot and mouth disease around 29,000 homes have been renovated. Once completed, the school will be able to in the Arab region, phase one. Now in its second phase, the project has continue providing hundreds of women liv- Total cost: $11.55m. intensified its efforts and widened its scope ing under deprived circumstances the chance Co-financiers: Arab Organization for to include the repair of damaged roads. It to learn valuable skills, and in turn, secure Agricultural Development (AOAD); Is- is also co-operating with other humanitar- better paying, steady jobs. lamic Development Bank; governments ian organizations to provide assistance to of beneficiary countries. Palestinians who have been left homeless. Fund approves grant towards biosaline The grant supports the first phase of an The Fund grant will be drawn from its agriculture research project initiative to control the spread of foot and Special Grant Account for Palestine, which mouth disease (FMD) in the Arab region. was set up to help finance relief operations Arid developing countries. $200,000. Spearheaded by AOAD, the project will in the occupied territories. Project: Development of salinity-tolerant establish control efforts to prevent future sorghum and pearl millet varieties for outbreaks, with the long-term goal of Fund extends grant to support woman’s saline lands. eradicating the disease in the area en- vocational training centre in Paraguay Total cost: $1.925m. tirely. Phase one, which began in January Co-financiers: Arab Fund for Economic 2003, comprises the following activities: Paraguay. $150,000. and Social Development; International establishment of a reference laboratory Project: Expansion of the EFAES (Escuela Crop Research Institute for the Semi-Arid for FMD diagnosis and the production de Formación para Asistentes de Empre- Tropics (ICRISAT); Dubai Municipality, of suitable vaccines; provision of supplies sas de Servicio, school for the training of United Arab Emirates (UAE). and equipment for national laboratories service company assistants) in the suburbs The grant supports a three year-long research for control and surveillance; implementa- of Asunción, Paraguay. project developed by the International Cen- tion of training programmes on regional Total cost: $987,557. tre for Biosaline Agriculture (ICBA). To be and national levels for veterinarians and Co-financiers: Association for the Promo- launched in co-operation with ICRISAT, the technicians from affected counties; and, tion of Craftswomen and Women Work- initiative aims at identifying salt-tolerant, organization of awareness and extension ers (PROMU); Foundation for the Social high-yield genotypes of pearl millet and activities to farmers and technical staff, in- Promotion of Culture (FPSC). sorghum, two important staple crops grown cluding the dissemination of appropriate The grant will help finance the expansion in the arid and semi-arid tropics of Asia and information materials. Beneficiary countries of a women’s vocational training centre Africa. Over the past two years, ICBA and include Jordan, Syria, Iraq, Saudi Arabia, in Paraguay. Spearheaded by the FPSC, ICRISAT have been screening and evalu- Lebanon, Kuwait, Algeria, Oman, Bahrain, the project will enhance existing facilities ating these different genotypes, and have the United Arab Emirates, the SP Libyan to accommodate around 350 additional identified a number of improved varieties. AJ, Palestine, Morocco and the Sudan. women. Established in 1987, the FPSC Under the present scheme, more extensive is a non-profit NGO that is committed to research will be carried out to identify strains Fund extends grant to help rehabilitate improving socio-economic conditions and that possess the highest nutritional values damaged infrastructure in Palestine promoting self-sufficiency among inhabit- and saline-tolerance levels. Once this step ants of the suburbs, or barrios, of the city is completed, ICBA will conduct on-farm Palestine. $2m. of Asunción, Paraguay’s capital. Numbering evaluations of the plants’ performance in the Project: Rehabilitation and reconstruc- 35 in all, the barrios are home to more UAE, Oman, Yemen, Iran and the Sudan. tion of damaged houses and properties in than 100,000 poverty-stricken people. A ICRISAT will follow this up with trials at Palestine (phase two). large percentage of them comprise women test locations in India. Other objectives of

76 OPEC Bulletin May/June 2003 77 O P E C F U N D O P E C F U N D

the research include the transfer of tech- ties in the Barisal district in south-central gies; helping optimize SMEs’ marketing nology and crop production packages to Bangladesh. Under the present project, strategies; and fostering export, import national programmes and farmers in the which will be three years in duration, and investment activities. countries concerned. Beneficiary countries activities will include the formation of include India, Iran, the Sudan, Yemen, 500 community groups comprising both Fund supports conservation Oman, and the UAE. disabled and non-disabled individuals; congress with $100,000 grant training of group leaders; providing District hospital in Togo vocational training for the handicapped The grant will help finance the attendance receives support from Fund and educating their teachers and families; of participants from developing countries arranging for schooling for disabled chil- at the Fifth World Parks Congress (WPC) Togo. $100,000. dren; provision of educational materials to be held in Durban, South Africa from Project: Extension of a surgical unit to the and medical supplies such as wheelchairs, September 8–17, 2003. Organized by the district hospital of Elavagnon, Togo. white canes, crutches, and hearing aids, World Conservation Union (IUCN), the Total cost: $671,500. as well as offering free medical treatment; Congress, which meets every ten years, Co-financiers: Oeuvres Hospitalières and, the establishment of a revolving fund will provide a major global forum for set- Françaises de l’Ordre de Malta (OHFOM); for extending loans to small businesses ting an agenda for the world’s protected Agence Française de Développement. run by disabled individuals. areas. Under the patronage of Her Majesty The grant will help finance the expansion Queen Noor of Jordan and former South of a district hospital in Togo. Implemented Fund extends grant to help finance African President Nelson Mandela, the by the OHFOM, the project aims to en- information technology project Durban Congress will bear the theme hance healthcare services in Elavagnon, ‘benefits beyond boundaries’. Bringing a small village situated in the Atakpamé Colombo Plan Secretariat. $50,000. together heads of government, UN of- area some 250 km north of the capital The grant will help finance an initiative of ficials, natural resources management Lomé. OHFOM, the French branch of the Colombo Plan Secretariat to establish professionals and civil society leaders, the Order of Malta, is an independent a regional electronic-service (e-service) net- the event will address a wide range of humanitarian organization that provides work among its member countries. issues such as helping develop stronger support to 45 health centres throughout With the advent of information and alliances between protected areas and other Togo. OHFOM will expand the existing telecommunications technology (ICT), parts of the global economy; establishing hospital building by 205 sq m to house businesses in technology-friendly settings the Durban Accord, a collective vision two operating theaters, and construct two are able to achieve substantial competi- for the future of protected areas; and, new buildings totalling some 436 sq m. tive advantages over those less equipped, delivering and discussing the latest UN One will serve as a surgical unit with thereby widening the digital divide that list of protected areas. This is the first 12 beds, while the other will contain exists between developed and developing time a WPC Congress will take place radiotherapy, echocardiography and ad- countries. It is thus crucial to promote in Africa, and it is expected to influence ministrative departments. All surgical and ICT activities for businesses and small African decision-makers by acting as a medical supplies, equipment and furniture and medium-sized enterprises (SMEs) stimulus for providing increased support to will be provided. A training component in developing countries to help them protected areas, which play a central role for specialized staff such as surgeons, an- overcome these growing barriers. The in the livelihoods of the African people. esthesiologists, radiologists and surgical Colombo Plan is an intergovernmental Member countries of West and Central nurses is also envisaged. The enhanced body established in 1951 to promote de- Asia and North Africa (WESCANA) have facilities will not only enable the hospital velopment-oriented co-operation among formed a common platform for collective to carry out emergency surgical interven- countries of the Asia-Pacific region. In action in environmental conservation, and tions, but also allow for pre-scheduled, 1995, the Colombo Plan initiated a pro- have designated Saudi Arabia’s National routine operations. Low-income patients gramme for private sector development, Commission for Wildlife Conservation will be able to receive treatment for either as the promotion of this sector has long and Development to coordinate related a small fee or free of charge. been recognized as crucial for achieving programmes and provide input to the broader development goals such as poverty WPC. The Fund grant will help cover Scheme to help the disabled alleviation and employment generation. travel and other expenses for participants receives OPEC Fund grant Aims of the current scheme, therefore, are from poorer WESCANA countries. to establish an e-service network among Bangladesh. $20,000. member countries with regional links to The grant will help finance an initiative chambers of commerce and industries, OPEC Fund for International developed by the Blind Education and Re- business communities, private sector insti- Development, Parkring 8, PO Box habilitation Development Organization tutions and commercial banks. The project 995, 1011 Vienna, Austria. Tel: (BERDO). The scheme, a disability and is expected to contribute substantially to +43 1 515640; fax: +43 1 513 development project by the community, regional integration through enhancing 9238; cable: opecfund; e-mail: is designed to help 300 disabled people economic and trade co-operation; trans- [email protected]; Web site: www. selected from some 148 poor communi- ferring and disseminating new technolo- opecfund.org.

76 OPEC Bulletin May/June 2003 77 SECRETARIAT NOTES

OPEC Meetings The APPA — African Petroleum Producers Association Congress and Exhibition (APPACE 2003), organized by CWC, took place in The 99th Meeting of the Economic Commission Board (ECB) Tripoli, SP Libyan AJ, March 15–17, 2003. was held at the OPEC Secretariat in Vienna, Austria, March 3–5, 2003. The 4th European fuels conference was organized by the World Refining Association (WRA), and held in Rome, Italy, March 18–19, 2003. The 42nd Meeting of the Ministerial Monitoring Sub-Commit- tee (MMSC) was held at the OPEC Secretariat in Vienna, An UNCTAD/UNDP International Dialogue was held Geneva, Austria, March 11, 2003. Switzerland, March 28–29, 2003.

The 124th Meeting of the OPEC Conference was held in A Drivers of the energy scene study meeting was organized by the Vienna, Austria, March 11, 2003. World Energy Council (WEC) Studies Programme and held in London, UK, April 14–15, 2003. The 4th (Annual) Multi-Disciplinary Training Course for Member Countries’ Trainees was held at the OPEC Secre- A seminar on Energy information systems for Africa was organized

March/April tariat in Vienna, Austria, April 7–11, 2003. by the African Energy Commission (AFREC), and took place in Algiers, Algeria, April 23–24, 2003.

Secretary General’s diary A regional seminar on Practical application of United Nations framework classification for energy and mineral resources was organized by the The Europe’s energy choices conference was organized by UN Economic Commission for Europe (UN ECE), and held in Touchstone International and the European Parliament, Moscow, Russian Federation, April 24–25, 2003. and was held in Brussels, Belgium, March 5, 2003. A brainstorming meeting to examine Investment challenges in the A symposium on Crude oil and security was organized by energy sector was organized by International Energy Agency (IEA) the Diplomatic Academy, Vienna, and took place in Vienna, and took place in Paris, France, April 28, 2003. Austria, March 28, 2003.

The Fourth international oil summit was organized by the Forthcoming OPEC meetings Institut Français du Pétrole (IFP), and held in Paris, France, April 10, 2003. The 44rh Meeting of the MMSC will be held at the OPEC Secretariat in Vienna, Austria, on July 31, 2003. The United Nations Commission on Sustainable Devel- opment held its 11th Session in New York, USA, April The 126th (Extraordinary) Meeting of the OPEC Conference will be 28–May 9, 2003. held in Vienna, Austria, July 31, 2003

The 109th Meeting of the Board of Governors will be held at the OPEC Secretariat missions Secretariat in Vienna, Austria, on August 26, 2003.

A seminar on A new world oil market structure: developments The 100th Meeting of the ECB will be held at the OPEC Secretariat in Iraq, Venezuela and US oil policies was organized by the in Vienna, Austria, on September 16–19, 2003. Centre for Global Energy Studies (CGES), and took place in London, UK, March 14, 2003. The 45th Meeting of the MMSC will be held at the OPEC Secretariat in Vienna, Austria, on September 23, 2003. The First Working Group of the International Energy Forum was organized by the government of Norway, and held in The 127th Meeting of the OPEC Conference will be held at the OPEC Oslo, Norway, March 14, 2003. Secretariat in Vienna, Austria, on September 24, 2003.

Venezuela appoints Elie Habalián Dumat as new OPEC Governor

Venezuela has appointed Elie Habalián Dumat as the country’s new Governor for OPEC. Born in the Syrian city of Aleppo in 1948, Habalián Dumat studied mechanical engineering at the University of Carabobo in Venezuela, graduating in 1975, and received his Master of Technology degree in metallurgical quality control from Brunel University, in west London, in 1978. His work experience includes being President of Proyectos, Suministros y Servicios Industriales (Prosseinca) and Distribuidora Prosseinca Turmero (Disprotuca) from 1977 to 2000. Habalián Dumat was also a Professor in the Faculty of Engineering at Carabobo University before retiring last year, and was Adviser to the Ministry of Energy and Mines for matters relating to Arab and Islamic countries from 1999 to 2001. He is married with three children.

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