Publishers Organization of the Petroleum Exporting Countries, Obere Donau- strasse 93, 1020 Vienna, Austria. Telephone: +43 1 211 12/0; Telefax: +43 1 216 4320; Public Relations & Information Department fax: +43 1 214 9827. E-mail: [email protected] E-mail: OPEC News Agency: [email protected] Vol XXXIII, No 2 ISSN 0474-6279 February 2002 Web site: http://www.opec.org. Hard copy subscription: $70/12 issues.

Membership and aims OPEC is a permanent, intergovernmental Or- ganization, established in Baghdad, September 2 NOTICEBOARD 10–14, 1960, by IR Iran, Iraq, Kuwait, Saudi Forthcoming conferences and other events Arabia and Venezuela. Its objective is to co- ordinate and unify petroleum policies among Member Countries, in order to secure fair and 3 COMMENTARY stable prices for petroleum producers; an effi- A realistic alternative cient, economic and regular supply of petro- US President Bush’s long-awaited alternative to the Kyoto leum to consuming nations; and a fair return Protocol has positive implications for developing nations on capital to those investing in the industry. The Organization comprises the five Founding Members and six other Full Mem- 4 FORUM bers: Qatar (joined in 1961); Indonesia (1962); OPEC and the new-old realities of the international oil market SP Libyan AJ (1962); United Arab Emirates By Dr Alí Rodríguez Araque, OPEC Secretary General (Abu Dhabi, 1967); Algeria (1969); and Nigeria (1971). Ecuador joined the Organiza- tion in 1973 and left in 1992; Gabon joined in 28 BOARD OF GOVERNORS 1975 and left in 1995. OPEC Board of Governors holds its 105th Meeting

Secretariat officials Secretary General Dr Alí Rodríguez Araque 11 NEWSLINE Director, Energy stories concerning OPEC and developing countries Research Division Dr Adnan Shihab-Eldin Head, Energy Studies Department Dr Rezki Lounnas 19 MARKET REVIEW Head, Petroleum Market Analysis Department Javad Yarjani Oil market monitoring report for January 2002 Head, Data Services Department Dr Muhammad A Al Tayyeb 37 MEMBER COUNTRY FOCUS Head, PR & Information Department Farouk U Muhammed, mni Financial and development news about OPEC Countries Head, Administration & Human Resources Department Senussi J Senussi Head, Office of the 42 OPEC FUND NEWS Secretary General Karin Chacin Recent loans and grants made by the OPEC Fund Legal Officer Dolores Dobarro Web site 45 SECRETARIAT NOTES Visit the OPEC Web site for the latest news and OPEC Secretariat activities information about the Organization and its Member Countries. The URL is http://www.opec.org 47 ADVERTISING RATES How to advertise in this magazine This month’s cover ... shows LNG tankers at the Ras Laffan port in Qatar, which is building a third LNG train as part of its plans to boost exports (see Newsline beginning on page 11). 48 ORDER FORM Photo courtesy Qatar Petroleum. Publications: subscriptions and single orders

Indexed and abstracted in PAIS International 49 OPEC PUBLICATIONS Printed in Austria by Ueberreuter Print and Digimedia Information available on the Organization

February 2002 1 NOTICEBOARD

Forthcoming events 9090711; e-mail: [email protected]; Lisbon, Portugal, May 14–15, 2002, www.smi-online.co.uk/oilrefining.asp. Lusophone oil & gas 2002: exploration oppor- Prague, Czech Republic, March 17–22, 2002, tunities, development & energy investments. training course on The gas chain — from London, UK, March 25–28, 2002, training Details: Global Pacific & Partners. Tel: +27 reservoir to burner tip. Details: Kate Wright, course on Introduction to petroleum 11 778 4360; fax: +27 11 880 3391; e-mail: Alphatania, EconoMatters Ltd, Rodwell geoengineering. Details: NexT, Prof Patrick [email protected]; Web site: www.petro21. House, 100 Middlesex Street, London E1 Corbett, Heriot-Watt University, e-mail: com/events. 7HD, UK. Tel: +44 (0)207 650 1430/1402; [email protected]. fax: +44 (0)20 7650 1431/1401; e-mail: Paris, France, May 21–22, 2002, interna- [email protected]; Web site: tional conference on Sanctioned oil states 2002: www.alphatania.com. London, UK strategies, conflicts, legalities, investments & May 2–3, 2001 issues, sanctioned, marginalized & impacted Rio de Janeiro, Brazil, March 18–19, 2002, states. Details: Global Pacific & Partners. Tel: 2nd annual conference on Latin gas 2002: gas +27 11 778 4360; fax: +27 11 880 3391; e- business opportunities & LNG-GTL strategies up- Oil and gas investments in mail: [email protected]; Web site: www. stream & downstream. Details: Global Pacific petro21.com/events. & Partners. Tel: +27 11 778 4360; fax: +27 Nigeria 2002 11 880 3391; e-mail: [email protected]; Web Darussalam, Brunei, May 27–30, 2002, site: www.petro21.com/events. Details: CWC Associates Gasex 2002: powering sustainable growth. De- 3 Tyers Gate tails: RAI Group, 226/36-37 Bond Street, Cambridge, UK, March 18–22, 2002, train- London SE1 3HX, UK Riviera Tower 1, Muang Thong Thani, Bang- ing course on Economics of the oil supply chain. Tel: +44 (0)20 7089 4200 pood, Pakkred Nonthaburi, 11120 Thailand. Details: Kate Wright, Alphatania, Fax: +44 (0)20 7089 4201 Tel: +662 960 0141; fax: +662 960 0140; e- EconoMatters Ltd, Rodwell House, 100 Mid- mail: [email protected]; www.gasex2002. E-mail: bookings@ dlesex Street, London E1 7HD, UK. Tel: +44 com. (0)207 650 1430/1402; fax: +44 (0)20 7650 thecwcgroup.com 1431/1401; e-mail: [email protected]; www.thecwcgroup.com Web site: www.alphatania.com. www.ibcenergy.com/eq1090 Tehran, IR Iran May 18–19, 2002 Tbilisi, Georgia, March 19–21, 2002, GIOGIE 2002, 1 st Georgian international oil, Bahrain, April 9–10, 2002, Gulf investment gas, energy and infrastructure exhibition and forum. Details: Melinda Addison, Logistics 4th Iran conference. Details: Dan Coberman, ITE Manager. Tel: +44 (0)20 7779 8571; fax: +44 petrochemical forum Group PLC, 105 Salusbury Rd, London NW6 (0)20 7779 8795; e-mail: maddison@ 6RG, UK. Tel: +44 (0)207 596 5000; fax: euromoneyplc.com; www.euromoneyplc. com. +44 (0)207 596 5111; e-mail: dan. Details: IICIC Secretariat [email protected]; www.ite- London, UK, April 17–18, 2002, interna- Tel: +9821 2048859 exhibitions.com. tional conference on Top ten targets 2002. Fax: +9821 2044769 Details: Global Pacific & Partners. Tel: +27 E-mail: [email protected] Houston, Tx, USA, March 19–21, 2002, 11 778 4360; fax: +27 11 880 3391; e-mail: info Web sites: www.nipc.net training course on Aviation jet fuel. Details: @glopac.com; Web site: www.petro21. com. www.iicic.com QinetiQ Fuels and Lubricants Centre, Building 442, QinetiQ Pyestock, Cody Brussels, Belgium, April 18–19, 2002, inter- Technology Park, Ively Road, Farnborough, national conference on Electricity & gas 2002. Hants, GU14 0LX, UK. Tel: +44 (0)1252 Details: Global Business Network Ltd, 9 Baku, Azerbaijan, June 4–7, 2002, Caspian 374772; fax: +44 (0)1252 374791; e-mail: Wimpole St, London W1M 8LB, UK. Tel: oil & gas 2002 — new focus on opportunity for [email protected]; www.qinetiq.com. +44 (0)20 7291 1030; fax: +44 (0)20 7291 contracting and supply companies. Details: 1001; e-mail: [email protected]; Web Spearhead Exhibitions, Coombe Hill House, Amsterdam, the Netherlands, March 20–21, site: www.gbnuk.com. Beverley Way, London SW20 0AR, UK. Tel: 2002, 8th annual event, Flame 2002: Euro- +44 (0)20 8949 9222; fax: +44 (0)20 8949 pean gas — strategies for survival in a changing Moscow, Russia, April 23–25, 2002, G & O 9868; e-mail: [email protected]; energy market. Details: Flame 2002, Confer- 2002, international gas & oil exhibition. www.caspianoilgas.co.uk. ence Administrator, ICBI, 8th floor, 29 Details: SV Congrès, 28 rue Massena 06000 Bressenden Place, London SW1E 5DR, UK. nice, France. Tel: +33 493 870308; fax: +33 Monte Carlo, Monaco, June 6–7, 2002, Tel: +44 (0)20 7915 5103; fax: +44 (0)20 493 821537; e-mail: [email protected]. 2002 European oil refining conference & exhi- 7915 5101; e-mail: [email protected]; bition. Details: DRI WEFA, Wimbledon Web site: www.icbi-flame.com. London, UK, May 23–24, 2002, 4th annual Bridge House, 5th Floor, 1 Hartfield Road, conference on Angola oil and gas summit. London SW19 3RU, UK. Tel: +44 (0)20 London, UK, March 20–22, 2002, Pricing Details: IBC UK Conferences. Fax: +44 (0)20 8544 7904; fax: +44 (0)20 8544 7809; e- and capacity in oil refining conference. Details: 7436 8377; e-mail: sherri.wasmuth@informa. mail: [email protected]; Web SMi Customer Services. Tel: +44 (0)870 com. site: www.dri-wefa.com.

2 OPEC Bulletin Editorial policy OPEC Bulletin is published by the Public COMMENTARY Relations & Information Department. The contents do not necessarily reflect the official views of OPEC or its Member Countries. Names and boundaries on any maps should not be regarded as authoritative. No responsibility A realistic alternative is taken for claims or contents of advertise- ments. Editorial material may be freely repro- duced (unless copyrighted), crediting OPEC US President Bush’s long-awaited alternative to the Kyoto Bulletin as the source. A copy to the Editor-in- Chief would be appreciated. Protocol has positive implications for developing nations

Contributors lmost one year ago, in March 2001, lem. These two factors — economic growth OPEC Bulletin welcomes original contribu- US President George W Bush pro- and a cleaner environment — far from being tions on the technical, financial and environ- Avoked a storm of global outrage mutually exclusive, as some parties appear mental aspects of all stages of the energy indus- when he announced that his country would to believe, are in fact inextricably inter- not support the Kyoto Protocol. Citing such twined, not least because, as the President try, including letters for publication, research factors as the potential damage to US eco- noted, “a nation that grows its economy is reports and project descriptions with support- nomic competitiveness that signing the a nation that can afford investments and ing illustrations and photographs. Protocol could cause, President Bush turned new technologies.” his back on Kyoto, essentially reversing the One of OPEC’s principal objections to Editorial staff approach of the Clinton Administration. the Kyoto Protocol is that, if implemented Amid the howls of protest from Europe, as originally conceived, it could end up Editor-in-Chief Farouk U Muhammed, mni Japan and elsewhere, there was much talk denying developing countries (especially Editor Graham Patterson in the USA about the need to work out an those which, like the OPEC Member Coun- Assistant Editor Philippa Webb alternative approach to Kyoto, but nothing tries, are heavily reliant on oil export rev- Production Diana Lavnick much concrete actually emerged in the enues) their universally-acknowledged right months that followed. Then came Septem- to development. The financial losses that Design Elfi Plakolm ber 11, and environmental issues under- OPEC nations would suffer would run into Circulation Damir Ivankovic standably took a back seat for the time being. many billions of dollars — money that could Earlier this month, however, the Presi- otherwise be invested in helping to signifi- Advertisements dent’s long-awaited ‘alternative to Kyoto’ cantly uplift their peoples’ standard of living. OPEC Bulletin reaches the decision-makers was finally unveiled. In a wide-ranging By contrast, the Bush approach speaks in Member Countries. For details of its rea- speech delivered, appropriately enough, at of working with the developing world to sonable advertisement rates see the appropri- the National Oceanic and Atmospheric “help them realize their potential, and bring ate page at the end of the magazine. Orders Administration in Maryland, President Bush the benefits of growth to their peoples, from Member Countries (and areas not listed acknowledged the fact that “addressing including better health, and better schools below) should be sent directly to the Editor- global climate change will require a sus- and a cleaner environment.” And while the in-Chief at the Secretariat address. Other- tained effort over many generations.” He President added that he would not inter- wise, orders should be placed through the spoke not only of the importance of en- fere with the plans of any nation to ratify following Advertising Representatives: couraging measures to ensure that the the Kyoto Protocol if they felt that was the North America: Donnelly & Associates, United States pursues a path of environ- best way forward, he stated clearly that he PO Box 851471, Richardson, Texas 75085- mentally-sound economic growth by mak- felt his proposals amounted to “a better ing greater use of, inter alia, cleaner fuels approach, (so) that we can build our future 1471, USA. Tel: +1 972 437 9557; fax: +1 972 and more efficient energy technologies, but prosperity along a cleaner and better path.” 437 9558. also of the need to “foster economic growth Do the measures announced by Presi- Europe: G Arnold Teesing BV, Molenland in the developing world, including the dent Bush really amount to a “better alter- 32, 3994 TA Houten, The Netherlands. Tel: world’s poorest nations.” native to the Kyoto Protocol,” as the White +31 30 6340660; fax: +31 30 6590690; It is not our purpose here to examine House has emphatically stated? Only time, e-mail: [email protected]. the finer details of the President’s new ini- and practical experience, will tell. Indeed, Middle East: Imprint International, Suite tiative, such as its focus on cutting the in- the President himself has explicitly acknow- 3, 16 Colinette Rd, Putney, London SW15 tensity of greenhouse gas emissions (ie, the ledged that further measures may be needed 6QQ, UK. Tel: +44 (0)181 785 3775; fax: ratio of emissions to economic output) by in the future if the current package does not +44 (0)171 837 2764. 18 per cent over the next ten years. How- bring the desired progress. For the moment, Southern Africa: International Media ever, if one key element of the US proposals however, the US moves deserve to be wel- Reps, Pvt Bag X18, Bryanston, 2021 South can be singled out for praise, it is the fact comed as an approach that takes into ac- Africa. Tel: +2711 706 2820; fax: +2711 706 that the new approach recognizes that eco- count the needs and aspirations of all nations 2892. nomic growth is the solution, not the prob- on this Earth, rich and poor alike.

February 2002 3 FORUM OPEC and the new-old realities of the international oil market

one’s interest. Oil price stability, and the However, after two OPEC cuts in necessary co-operation to achieve that, is 1998 which did not have the desired ef- really the only way forward. As a result, fect, it was really the joint OPEC/non- many leading industrialized countries have OPEC reductions of March 1999 that set stepped up their consultation with OPEC the oil market — and in fact the whole oil to achieve stable prices. They too, are industry — on the road to recovery. convinced of the need to deliver reliable, This is the same strategy OPEC is long-term energy to consumers at a rea- currently pursuing, although the Organi- sonable price. zation would be the first to admit that it Before we revert to history to help was much quicker to react this time. Con- explain the present, let me briefly examine sequently, at its Meeting in Cairo in De- on the reasoning behind the OPEC/non- cember, OPEC reaffirmed that it would OPEC agreement to cut almost 2.0 mil- cut production in conjunction with its lion barrels/day of oil output from the non-OPEC partners — Russia, Norway, The importance of OPEC’s market, which was confirmed in Cairo at Mexico, Oman and Angola — to avert a efforts to bring stability to the the end of December last year. Since the similar price collapse to that of 1998. international oil market is September 11 attacks on the United States, underscored by their strong oil producers have been faced with a sce- Prudent tactics nario of low projected demand due to the Of course, one can argue whether such historical precedent, notes the world economic downturn and the subse- tactics are prudent at a time when major Organization’s Secretary quent recession in the United States and economies are in recession. Some argue General, Dr Alí Rodríguez several other countries. that oil producers have looked to shore up This state of affairs was coupled with their income in the short term, at the Araque, in this article.* higher levels of non-OPEC output due to expense of a prolonging the recession. come onstream this year — particularly While that argument may sound convinc- from Russia. These scenarios, however, ing, an experienced observer knows that if are not new to oil producers. For example, prices stayed depressed for some time, oil eginning from a historical perspec- the Asian financial crisis of 1997-98 trig- stock levels would rise, which in turn tive, this article will first of all look gered a similar situation to what we are could keep crude prices at rock bottom for Bat how oil markets have been currently experiencing post-September a protracted period of time. If this were the managed since the Texan oil boom and 11 — surplus oil and weak demand — case, the entire oil industry would be af- bust cycle of the 1920s, to the formation which saw oil prices collapse to as low as fected, as it was in 1998. of OPEC in 1960 and beyond. The $10/b. The ramifications that low prices have intention is to underline the fact that oil The events of 1998 caused a sea change on the industry are severe, so much so, that markets need some type of regulation, throughout the entire oil industry, due to after the Asian financial crisis, consuming other than the forces of supply and de- downsizing, cutbacks in budgets, spend- countries encouraged OPEC’s decision to mand. ing and production, to the unprecedented cut production to rescue prices. The United Without it, threats to the security of oil wave of mergers and acquisitions that we States was particularly concerned about supply due to boom/bust cycles serve no are still experiencing. In the United States recovering its lost production. Britain and at the time, many thousands barrels per Norway had their output costs to consider * Based on Dr Rodríguez Araque’s address to day of oil production from stripper wells in the North Sea, and they were concerned the Venezuelan-American Association of the were shut in because low prices had made over how long they could sustain low United States, New York, February 4, 2002. them uneconomical. prices.

4 OPEC Bulletin FORUM

Oil companies suffered more perma- At the time, conservation was also re- (or IOCC, which is today known as the nent changes, as mentioned earlier. An- lated to price stability. Experience of oil Interstate Oil & Gas Compact Commis- other lasting ramification of 1998 is that gluts had advanced opinion that crude, an sion) was created to co-ordinate the quotas oil companies still remain hesitant to com- exhaustible natural resource, would be of the most important oil-producing states mit themselves to billions of dollars of wasted at unreasonably low prices. Conse- of America. investment, in high-cost areas, that make quently, the Texas Railroad Commission The IOCC can be seen as the immedi- returns more risky. In fact, it is expected — in charge of pro-rationing — forecast ate and logical precursor of OPEC. Like that the oil majors’ fourth quarter earnings demand, month by month. OPEC at present, however, the time came for 2001 will be dismal after low crude oil when it could no longer regulate the mar- prices have taken their toll on profits. kets alone. In the 1930s, the USA pro- Again, it is only stable prices that will duced about two-thirds of world oil, produce sufficient levels of investment in whereas in the 1950s, that figure came the industry, which in turn guarantees the down to less than half, and since 1947, the security of supply in the long-term. ‘OPEC cannot country has become a net importer. As production in the USA declined, and other Market share do its regulating oil came onstream, the most important Another risk related to unstable oil producing and exporting countries of the prices is when market share becomes an job properly western hemisphere were invited to join issue for oil producers. Oil producers have without the in, albeit as observers. Venezuela and hopefully learnt the bitter lessons of those Canada used to attend the IOCC meet- years when market share was pursued at co-operation ings. the expense of stable prices. On each But with the growing importance of occasion, there was a disastrous effect on of the most oil from the eastern hemisphere at the prices, in that they sank to unreasonably time, the efforts of the IOCC were no low levels. As a result, petroleum pro- important longer enough either. By 1959, the IOCC ducers had to change their strategy and — informally assisted in its efforts by the policies, and instead stick to the quota non-OPEC big international oil companies — could system. no longer maintain an equilibrium, which Prior to the introduction of OPEC oil-exporting meant one price structure in world petro- quotas in the early 1980s, we must ask leum markets. ourselves whether world petroleum mar- countries.’ Cheap oil from the exporting coun- kets managed to function adequately with- tries threatened the domestic industry in out them, earlier in the twentieth century? the USA. Hence, the country decided to The answer is quite simply, no. Oil mar- impose official import quotas on oil at the kets, left to supply and demand as the only same time that OPEC was formed to regulating forces, tend to generate sudden In the 1930s, the Texas Railroad Com- restore world market prices to levels con- and huge variations in prices, from boom mission, originally a railroad company, sistent with US domestic prices. to bust, in a way that is unacceptable to assumed the responsibility of regulating natural resource owners, investors and oil production by distributing those de- Joining forces consumers. This has been acknowledged mand figures to the wells. This was done in If the history of oil were to bear first and foremost by the United States — the form of ‘allowables’ — which was a witness, world petroleum markets today historically the most important oil pro- percentage of MER they were allowed to cannot do without OPEC — this is de- ducing country in the world. produce. Marginal wells, of course, were spite the unfair accusation of OPEC Let us examine the situation in the always allowed to produce at 100 per cent, being labelled a ‘cartel’. Many an aca- United States in the late 1920s and early because they would have had to be shut demic and oilman has argued the case 1930s. This was when the producing states, down and abandoned otherwise, with no for OPEC over the years. and above all Texas, began to regulate possibility of later recovery, and the de- The Organization, however, cannot production, setting up a system of pro- finitive cost of the remaining natural re- do its regulating job properly without rationing. Based on the idea of conserva- source. the co-operation of the most important tion of natural resources, every single well Of course, in years of high demand, non-OPEC exporting countries. Thus, was assigned a maximum efficient rate the companies were authorised to produce we have to continue to join forces with (MER). Nobody was allowed to produce at at 100 per cent MER, but in years of low other major oil-exporting countries, as higher rates, which would damage the demand, it could be as low as 40 per cent. we did recently in Cairo, and in the late wells. It still operates in this way today. A Although Texas was the most important 1990s. consequence of overproduction is a low oil-producing state, it could not cope with The ultimate question one must ask recovery rate of crude oil when the total the problem alone. Consequently, in 1935, oneself is whether the system is working accumulated output is measured. the Interstate Oil Compact Commission properly or, at least, reasonably well? There

February 2002 5 FORUM

is a strong case for arguing that, yes, it is. during the time. The average price for the protect against erratic price trends. She has After many years of turmoil, of structural OPEC Basket of seven crudes in May last said quite plainly: “It is no more in Eu- imbalance, it appears that that there is a year, around the time of one price spike, rope’s interest to have prices which are too process towards a new equilibrium. That was around $26/b. low, than prices which are too high.” means a price level is emerging that is more This has been OPEC’s position for or less acceptable to all the parties con- many years. OPEC is an Organization cerned: the natural resource owners, in- that co-ordinates the policies of its Member vestors, and consumers. Countries, from different regions around ‘OPEC’s price the globe. OPEC’s task, therefore, is to Equilibrium price defend the legitimate rights of these sover- OPEC has pinpointed $25/b as being band has eign countries regarding the crucial natu- the price of equilibrium, which takes into ral resource they all possess — namely oil. consideration adequate levels of invest- increasingly ment to ensure the security of supply. Of Fair agreement course, in times of recession and falling oil received more At the same time, there are many coun- prices, the intent is more on getting prices tries whose main interest lies in the price of back within OPEC’s price band of $22- support from crude oil. The stability OPEC is searching 28/b. With co-operation from non-OPEC, for definitely depends on a fair agreement this should be possible. the world’s that recognises, on the one hand, the rights OPEC’s price band has increasingly of owners to obtain a just price for their received more support from the world’s leading exhaustible and non-renewable resource. leading industrialised countries. Senior On the other hand, the right exists for US Administration officials, commenting industrialised consumers to be guaranteed crude oil sup- on high gasoline prices in America at times ply at a price that does not hurt the econo- in the recent past, have said that those countries.’ mies of their countries. This will probably prices had nothing to do with the price of be one of the main topics for discussion at crude oil, and that OPEC had very little to the 8th International Energy Forum, com- do with the situation. monly known as the producer-consumer In fact they have made it clear that dialogue, which will take place in Japan OPEC should not be made to shoulder the In addition, the European Commis- later this year. blame for high gasoline prices, but that the sioner for Transport & Energy and EC It is to be hoped that, after a long problems pointed to a lack of refinery Vice-President, Loyola de Palacio, has period of confrontation, we will arrive at capacity in the United States. Specifically, made it very clear that the European Un- an agreement that helps contribute to sta- it was mentioned that OPEC crude oil ion does not want low oil prices, but rather ble energy markets and, hence, to world output levels and prices had been stable is seeking stability in energy markets, which economic stability.

6 OPEC Bulletin

BOARD OF GOVERNORS OPEC Board of Governors holds its 105th Meeting in Vienna The OPEC Board of Governors (BoG) held its 105th Meeting at the OPEC Secretariat in Vienna, Austria, on February 13–15, 2002. Some scenes from the Meeting are shown on these pages.

Left: The BoG’s Chairman, HE Suleiman Jasir Al-Herbish (l) is seen here with OPEC Secretary General, HE Dr Alí Rodríguez Araque (r). In the background are (r-l): the Director of Re- search, Dr Adnan Shihab-Eldin; the Head of Energy Studies Department, Dr Rezki Lounnas; and the Head of the Secretary General’s Office, Karin Chacin.

Below: The Governors pose for a group photograph. Standing, l-r: HE Abdelhadi Benzaghou, Algeria; HE Abdulla H Salatt, Qatar; HE Hossein Kazempour Ardebili, Iran; Dr Mussab H Al-Dujayli, Iraq; Dr Gloria Mirt Hernández, Venezuela; Dr Rachmat Sudibjo, Indonesia; Hammouda M El-Aswad, SP Libyan AJ; and Hamdan Al Akbari, ad hoc Governor for the United Arab Emirates. Seated, l-r: Ms Siham Abdulrazzak Razzouqi, Kuwait; HE Suleiman Jasir Al-Herbish, Saudi Arabia; HE Dr Alí Rodríguez Araque; and Ms Amal I Pepple, Nigeria.

8 OPEC Bulletin BOARD OF GOVERNORS

Above: HE Hossein Kazempour Ardebili (c) makes a point to HE Abdelhadi Benzaghou (l) and Dr Rezki Lounnas (r).

Above: HE Abdulla H Salatt (r) in discussions with Hammouda M El-Aswad (l) and Dr Rachmat Sudibjo (c).

Above: Ms Siham Abdulrazzak Razzouqi (l) and Dr Gloria Mirt Hernández (r) in conversation.

Right: The Chairman of the Board, the Secre- tary General and the Governors in the middle of their deliberations.

February 2002 9

NEWSLINENEWSLINE

Landmark deal between Qatar’s RasGas and Iranian Petroleum Minister, Bijan Namdar Zangeneh, hailed the move, stat- India’s Petronet moves ahead as foundation ing that his country was “looking to Tur- key as a gateway for the export of Iranian stone is laid for world’s largest LNG train natural gas to European markets.” The gas transfer was an important oha — Qatar’s Ras Laffan Liq- under construction, and initial deliveries confidence-building measure for the two uefied Natural Gas Company of LNG are scheduled to commence there countries and represented a new phase in D(RasGas) has reached another in late 2003. their regional co-operation, he was quoted milestone, with the laying of the founda- These first deliveries will come from by IRNA as saying. tion stone for its third LNG train at Ras the 1.5m t/y of excess capacity that will The Managing Director of the Na- Laffan last month. be available from the first two trains, which tional Iranian Gas Company, Hamdollah The foundation stone for the new are currently producing LNG that is being Mohammad-Nejad, said the flow of gas train, which will be the world’s largest delivered to South Korea’s Kogas. had started through a new pipeline at the when completed, was laid at a ceremony Qatari Minister of Energy and Indus- Bazargan border point. It had the capac- by the son of the Emir of Qatar and Chair- try, Abdullah Bin Hamad Al Attiyah, said ity to transfer 40 million cubic metres/day man of the National Olympic Commit- a fourth train with a matching capacity of natural gas. tee, Sheikh Tamim Bin Hamad Al-Thani. would become imperative if RasGas was He noted that Iran had spent $1.86 Set to boost RasGas’s onshore and to fulfill its commitment to Italy’s Edison billion on the scheme, and added that its offshore gas production capabilities, the Gas to supply it with 3.5m t/y of LNG. inauguration meant that his country third train will have a capacity of 4.7 “We are positioning Qatar as the world would now meet 30 per cent of Turkey’s million tonnes/year of LNG, using gas from leader in LNG. We can achieve this with gas imports. the North Field. additional trains being set up by RasGas The Turkish Minister of Energy and The third train, scheduled for an early and QatarGas and their current produc- Natural Resources, Zeki Cakan, pointed 2004 start-up, will enhance RasGas’s off- tion capabilities,” the Minister noted. out that Iranian gas exports were the “best shore gas production capability to 2 bil- RasGas Chairman and Minister of and most inexpensive” option for the lion cubic feet/day from the existing 1.1bn Finance, Economy & Trade, Yousef country, saying that some 60 cities and cu ft/d. Onshore production of gas will Hussein Kamal, said the development of commercial centres in Turkey were con- go up to 11.3m t/y from the current level train three would help RasGas take advan- suming Iranian gas. of 6.6m t/y. tage of many synergies in both design and The delivery of Iran’s natural gas to operation and lower its capital and oper- Turkey via the 2,577-km pipeline began Incremental volumes ating costs, without compromising on its last month, after being delayed from its The new train, coupled with incre- operating performance. original start date of earlier in 2001 for mental volumes from RasGas’s trains one The project is being implemented by technical reasons. and two, will be supplied to Indian firm RasGas II, a Qatari joint venture formed Under the agreement between the two Petronet, which signed a landmark deal by Qatar Petroleum and Mobil Gas Inc, countries, Iranian gas exports to Turkey in 1999 with RasGas for 7.5m t/y of LNG an affiliate of US major ExxonMobil. are expected to rise to 4bn cu m by the for a period of 25 years. Currently, the two operational RasGas end of 2002 and to about 10bn cu m in A consortium made up of Chiyoda and trains have a capacity of 3m t/y of LNG. 2007. Mitsui of Japan, Snamprogetti of Italy, and Production from the facility began in Qatar’s Almana, is setting up the onshore 2000, to supply South Korea’s Kogas with facilities for the third train. LNG at a rate of 4.9m t/y over a 25-year Nigeria calls for bids These facilities, comprising one well- period. to design, build and head platform with seven wells and a pipe- line, will be provided by J Ray McDermott operate private refineries Middle East (Indian Ocean). Iran officially marks The engineering, procurement, and start of natural gas Abuja — As part of renewed efforts to construction contracts for the offshore and ensure healthy competition in the down- onshore facilities were signed in April last exports to Turkey stream sector of the Nigerian oil industry, year. the government has announced that it is Of the 7.5m t/y of LNG that RasGas Maku, Iran — The start of natural gas inviting bids for the licensing of private will supply to Petronet, 5.0m t/y will be exports from Iran to neighbouring Tur- refineries. delivered to a planned receiving terminal key was officially marked last month in a The country’s Presidential Adviser on at Dahej in the central Indian state of ceremony attended by the Oil and Energy Petroleum and Energy, Dr Rilwanu Gujarat, and another 2.5m t/y will be Ministers of the two countries, according Lukman, told newsmen and industry shipped to a terminal at Kochi, in Kerala. to the Islamic Republic News Agency operators in Abuja last month that The Gujarat terminal is currently (IRNA). prospective investors would be granted

February 2002 11 NEWSLINE

approval in three stages, culminating in their installed capacities, forcing Nigeria explore ways of reaching an agreement the granting of a licence to operate the to import gasoline and other petroleum with the government in the interest of all plant. products to augment local supplies. concerned. He said the first stage involved pre- The government has slated the four qualification of submissions by prospec- existing refineries for privatization and, tive investors and the selection of an ap- according to officials of the state-run Indonesia finally hikes propriate number of credible applications Bureau for Public Enterprises (BPE), the domestic fuel prices by on payment of a fee of $50,000. Port Harcourt plant may be sold as early The second stage entailed approval to as this year. average of 22 per cent construct a given refinery, following sub- However, one of Nigeria’s oil unions, mission of a basic design package, after the Petroleum and Natural Gas Senior Jakarta — The Indonesian government which the licensee could go ahead with Staff Association (Pengassan) has threat- has raised domestic fuel prices by an av- detailed engineering, procurement and ened to call a nationwide strike to protest erage of 22 per cent from the middle of construction. against the planned privatization of the January, using a new formula pegged to The third stage, said Lukman, involved refineries. the world market. the granting of a licence to operate the The government had explained that plant, on confirmation that it had been Privatization timetable the price hike was necessary to reduce the built in accordance with the approved Pengassan said in a statement released fuel subsidy’s burden on the state budget design. Another fee of $100,000 would in Lagos and signed by its President, Shina and curb smuggling of fuel out of the then be paid. Luwoye, that its members would embark country, according to newspaper reports. “The overall objective of the procedure on a nationwide strike when the BPE The price of kerosene for households is to provide a basis for identifying and published the privatization timetable. and small enterprises was raised to 600 selecting applicants with bankable projects The statement expressed regret that the rupiahs/litre (5.77 cents) from 400 to be issued a preliminary licence to es- government did not deem it fit to respect rupiahs/lt, while for industry it was put tablish a refinery,” he said. Pengassan’s position on the issue, stating: up to 1,230 rupiahs/lt. “We have made our position on the issue The premium gasoline price went up Prospective applicants known to the government, but they are to 1,550 rupiahs/lt from 1,450 rupiahs/ Lukman explained that only applicants still bent on going ahead with their plans.” lt, while automotive diesel for transporta- who could confirm general feasibility of The union said that while it was not tion and industry was priced at 1,150 the proposed projects would be granted opposed to the liberalization of the do- rupiahs/lt, up from 900 rupiahs/lt. licences. mestic oil sector, it called on the govern- The new prices, except for household He added that a selection committee ment to continue to play an active role in kerosene, would only apply until the end would scrutinize prospective companies, the industry. of February, said government officials at a in terms of background and expertise in “While we believe in liberalization, we press conference in the capital Jakarta. refining, as well as their financial where- don’t believe that the government should They stressed that the new price for- withal. totally divest its interest in the sector. mula was needed to help ensure that the Bidding applications would be enter- Private refineries should be allowed to set government fuel subsidy helped the right tained until March 7, 2002 and the entire up alongside government-controlled ones, people, and to curb rampant smuggling exercise would last for a period of 10 if only for security and economic reasons,” of fuel oil out of the country. weeks, noted Lukman. it observed. The government had reduced its fuel “The government’s encouragement of In response to Pengassan’s threatened subsidy for 2002 to 30.50 trillion rupiahs, the private sector’s involvement in the strike, the Group Managing Director of compared with 53.77tr rupiahs last year. refining of petroleum products through the state-run Nigerian National Petroleum It had also allocated 2.85tr rupiahs to the opening up of the system will result in Corporation (NNPC), Jackson Gaius- compensate poor people affected by the a reliable supply of petroleum products Obaseki, urged the union to address its new oil product prices. and increase industry efficiency, while grievances through dialogue. To avoid any impact of the extreme ensuring competitive pricing,” he said. Gaius-Obaseki said such a strike would fluctuations in global oil prices, the gov- Lukman explained that the setting up not solve the problem, but would, on the ernment had also set maximum and mini- of private refineries would encourage the contrary, retard the development of the mum prices, the reports noted. participation of new entrants, thereby petroleum sector. The decision to hike the prices came promoting a vibrant industry and provid- “As the sector is struggling to get a after Indonesian President, Megawati ing opportunities for technology transfer. strong foothold in the economy, a strike Soekarnoputri, gave the green light, while Nigeria has four operating refineries at this point in time will undoubtedly also acknowledging the move as a tough with a total installed capacity to process retard the move and shut down the na- decision. 445,000 barrels/day. However, due to a tion,” he warned. The increase in fuel prices and elec- lack of maintenance and generally poor He advised the leadership of Pengassan tricity rates were unpopular moves, but performance, the plants operate below to rescind the decision to go on strike and they could not be cancelled either, said

12 OPEC Bulletin NEWSLINE

Megawati during a meeting with the Kuwait, Qatar and Oman on his recent Chairman of the Muhammadiyah Youth tour, he stressed that such a proposal had Organization, Imam Addaruqutni. been made only to the UAE. However, co- In brief In a related development, Finance operation in the oil and gas sectors had Mideast seen as key petrochems player Minister Boediono has tried to soften the been discussed with officials in the other ABU DHABI — The Middle East has a crucial blow of the fuel price rise by making all countries, he noted. role to play in the development of the global imported basic foods, including essentials, The UAE and Ukraine would finalize petrochemical industry, as more and more such as rice and corn, exempt from value the two agreements soon, he said, indi- companies will be driven to the region for added tax. cating that the accords were likely to be long-term investments, according to an in- dustry expert. Addressing an industry con- It was hoped that the decision would signed during the visit to the UAE of the ference in Abu Dhabi, Andrew Pettman, a help maintain social stability and control Ukrainian President in the second half of Director of CMAI Europe, said that the huge inflation, officials noted. They pointed out this year. capacity growth in the Middle East forecast that former President Soeharto was forced Meanwhile, the Abu Dhabi Chamber for 2005-10 would mean that by 2010, the to quit in part due to social unrest sparked of Commerce and Industry has called on region’s ethylene capacity would likely be at by protests against fuel price hikes. Ukraine to co-operate with the Emirate the same level as in north-east Asia and west- ern Europe. Explaining the reasons for the Inflation rates surged even as in setting up joint ventures in petrochemi- slow growth in key markets such as Europe, Megawati’s predecessor, Abdurrahman cals, shipbuilding and agriculture. north-east Asia, and at least for the next five Wahid tried to defer fuel price hikes twice The Chamber’s President, Saeed Saif years, in North America, he said the key is- during his presidency last year. Bin Jabr Al Suwaidi, told the Ukrainian sue was the ageing of steam crackers in the delegation that Abu Dhabi would like to developed world. Investment was increasingly co-operate with his country in the petro- limited by relatively high labour costs, envi- ADNOC mulls Ukrainian chemicals and shipbuilding sectors, which ronmental legislation, and other issues, he noted. proposal for oil and gas were well developed in the Ukraine. Zlenko said his country was now at a Austria’s OMV to boost investment terminal on Black Sea stage where economic growth was taking BRUSSELS — The Austrian oil and gas group, off, following reforms introduced two OMV, is to increase its spending by about Abu Dhabi — The Abu Dhabi National years ago. $2.33 billion in 2002-04. The company said Oil Company (ADNOC) is to consider a Gross domestic product growth had the increased level of investment would be spent on exploration, production and mar- proposal from Ukraine to set up a joint- increased from six to nine per cent, while keting. “We are reinforcing our strategy of venture oil and gas terminal at the Black industrial growth had climbed to 16 per organic growth and have therefore increased Sea port of Odessa, according to the lat- cent from 12 per cent. our capital expenditure,” OMV boss ter’s Minister of Foreign Affairs, Anatoly Wolfgang Ruttenstorfer said in a statement. Zlenko. “Our aim is to double our market share Significantly, the United Arab Emir- Top Libyan and Algerian within the next five to seven years and this increase is a crucial step in this direction,” he ates (UAE) and Ukraine would shortly energy officials hold talks added. The firm noted that 64 per cent of conclude two agreements: an investment the capital expenditure would be invested in promotion accord, and a protocol to avoid on boosting co-operation growth and expansion, while the remaining double taxation, he added. 36 per cent would earmarked for rationaliza- “A proposal has been submitted to Algiers — Algerian Energy and Mines tion, restructuring and maintenance projects. ADNOC for participation in the interna- Minister, Dr Chakib Khelil, met with the tional consortium for an oil and gas ter- Head of Libya’s National Oil Corporation, Yemen starts output from new wells SANA’A — Yemen has begun pumping crude minal at Odessa for oil transportation to Dr Abdulhafid Mahmoud Zlitni, in Al- at a rate of 13,000 barrels/day from two oil western countries,” said Zlenko, who giers last month to discuss bilateral energy wells in block 53, the Yemeni news agency, noted that ADNOC had agreed to con- co-operation between the two countries. Sabaa, reported last month. The agency sider the joint venture. According to an Algerian Energy quoted the Minister of Petroleum and Min- A pipeline to transport Russian oil to Ministry statement, the discussions cen- eral Resources, Rasheed Saleh Baraba’a, as western Europe via Odessa and Brody tred on the evaluation of partnership saying that output could reach 25,000 b/d within the next few months. At a ceremony (Poland), had just been initiated and ef- projects being undertaken by the two marking the start of production in the forts were now been made to make it sides, particularly in the areas of geophys- Hadhramout governorate, the Minister said operational, the Minister observed. ics, and exploration and production ac- that production from the Rodoud 1 and 2 He added that Ukraine was keen that tivities. wells would help boost total output to about ADNOC participated in the consortium Khelil and Zlitni also examined ways 475,000 b/d. Block 53 had 61 million b of and it would be given preferential treat- and means of reinforcing and developing proven crude oil reserves, while the country’s total crude deposits were estimated at 4.6bn ment. “Ukrainian companies are capable Algeria-Libyan economic relations, in the b, according to the report. Total gas reserves of high-quality construction at cheap interests of the two nations. were put at about 420bn cubic metres. Oil costs,” he pointed out. In this regard, they looked at partner- accounts for about 35 per cent of Yemen’s Although the Minister also visited ship possibilities in other sectors, includ- total revenue.

February 2002 13 NEWSLINE

ing the marketing and distribution of 50 list. The firm ranks seventh and sixth petroleum products. in refinery capacity and oil product sales, In brief To boost bilateral dealings, the two respectively. India’s crude oil production falls men also agreed to hold regular meetings While state-owned companies such as NEW DELHI — India’s crude oil production between economic organizations and firms Saudi Aramco maintain their leading has showed a decline, with output from the from both countries. positions in the overall rankings, PIW country’s main Mumbai High offshore fields noted that “a whole new group of major falling by 1.1 per cent to 2.78 million tonnes oil companies has taken shape in recent in December last year. This compared with Saudi Aramco tops PIW years.” 2.81m t produced in December 2000, said a report carried by the Press Trust of India. oil industry rankings All eleven OPEC Members feature in the PIW top 50 rankings. Their overall According to the latest figures released by th India’s Petroleum Ministry, crude oil produc- for 13 straight year placings are as follows: Saudi Aramco (1), tion was 1.9 per cent lower at 24.05m t dur- Venezuela’s PDVSA (2), National Iranian ing the first nine months of the current fiscal Dhahran — Saudi Aramco has been Oil Company (4), Indonesia’s Pertamina year (April-December 2001), compared with named the world’s number one oil com- (10), Algeria’s Sonatrach (11), Kuwait 24.47m t in the corresponding period in 2000. However, refinery throughput was 8.8 pany for the thirteenth consecutive year, Petroleum Corporation (13), the UAE’s per cent higher at 9.52m t in December 2001, maintaining its position while a new in- Abu Dhabi National Oil Company (18), as against 8.75m t in the same month the dustry structure emerges, according to the Iraq’s National Oil Co (19), the Nigerian previous year. For the whole nine-month pe- new annual ranking list from Petroleum National Petroleum Corporation (20), riod, refinery output increased by 4.2 per cent Intelligence Weekly (PIW). Libya’s National Oil Co (22) and Qatar to 80.18m t, compared with 76.91m t in the The PIW rankings, which place Ven- Petroleum (23). corresponding period the previous year. ezuela’s PDVSA second and ExxonMobil UK oil output expected to recover third, are based on 2000 figures for oil Algeria to export 85bn LONDON — United Kingdom oil production reserves and production, gas reserves and is expected to recover in the coming months output, refinery capacity, and product cubic metres of gas as new technology takes effect, reversing the sales. current falls in output, according to a survey “We are proud of our achievements, annually by year 2005 published last month by the Royal Bank of which we owe to the effectiveness of our Scotland. The Edinburgh-based bank’s monthly oil and gas index said UK oil out- employees,” said Saudi Aramco President Algiers — Algeria will boost its gas ex- put in November last year showed a small and Chief Executive Officer, Abdullah S ports to 85 billion cubic metres/year by drop, and was 6.9 per cent lower than in Jum’ah, in a press statement. 2005, compared with 62bn cu m last year, November 2000. The fall in production com- “We recognize that our responsibili- according to Energy and Mines Minister, bined with the decline in oil prices over the ties extend beyond such accolades. We Dr Chakib Khelil. last year to reduce oil revenues by 46.9 per have responsibilities to the Kingdom, our Addressing the bi-annual symposium cent, compared with the year before. How- ever, the country’s gas output experienced a customers and our partners. We also have of the Algerian Gas Industry Association, seasonal surge, increasing by 34.1 per cent in social and environmental responsibilities,” he noted that such an objective would be November from October. Gas production he noted. reached, thanks to the development of new was 2.8 per cent higher than in November “Increasing competition will encour- gas fields. 2000. The bank also noted that the value of age us to remain at our best in all respects The finds would enable the country’s Britain’s North Sea oil production in Novem- and to maintain a high level of co-opera- gas production to rise to 150bn cu m/y, ber averaged $45.45 million per day. tion with key players in the petroleum up from the 130bn cu m/y produced TotalFinaElf, Yukos sign Shatsky deal industry. currently. PARIS — French oil giant TotalFinaElf an- “We also have initiatives that are This would be possible, said Khelil, nounced last month that it had signed an among the biggest in the world, which thanks to efforts undertaken by the gov- agreement with Russia’s Yukos to develop the include a business integration system that ernment in committing funds for costly Shatsky zone in the Black Sea. The two com- will help us increase our productivity and investment, and moving towards the lib- panies, set to have equal shares in the ven- efficiency to maintain a position of respon- eralization of the domestic energy market. ture, would begin additional seismic work on the area in the coming months, a statement sible leadership,” he added. However, he pointed out that the said. The Shatsky zone is located in Russian In the rankings, Saudi Aramco main- country’s gas initiatives were at risk of waters and has water depths of 1,500–2,000 tains an enormous advantage in crude being impaired by the new European Gas metres. The agreement must be approved by reserves. The gas deposits held by the Directive, on which gas-producing coun- the federal Russian authorities before it can company placed it fourth on PIW’s rank- tries had not been consulted. be implemented. TotalFinaElf already holds ing list. Khelil stressed that the unilateral im- a small interest in the Timan Pechora region, where it produces 12,000 barrels/day from Saudi Aramco also dominates in oil plementation of this Directive risked the Khariaga field. Under a production-shar- output, put at 8.6 million barrels/day in weakening gas contracts and could have a ing accord, it should be able to increase out- 2000. Its gas production, at 4.6 billion negative influence on investment in the put to 30,000 b/d by the end of the year. cubic feet/day, ranks ninth on PIW’s top sector.

14 OPEC Bulletin NEWSLINE

In a separate development, it was re- investment by the consortium, in which ported last month that Algeria’s hydrocar- TotalFinaElf had a 47 per cent interest, bons export receipts stood at about PDVSA 38 per cent, and Statoil 15 per In brief $18.5bn last year, down from the $21.2bn cent, the statement added. Unocal finds gas reservoir in Alaska registered in 2000. NEW YORK — The Unocal Corporation has According to Energy and Mines Min- announced the discovery of a natural gas res- istry sources, the fall in hydrocarbons More international firms ervoir on Alaska’s Kenai Peninsula. The receipts began in the third quarter of 2001, interested in Kuwait’s Grassim Oskolkoff 1 well, the first explora- following a downturn in prices on inter- tion well drilled under a joint operating agree- ment between Unocal and Marathon Oil in national markets. northern oil fields the Ninilchik exploration area, indicates sig- The decline in earnings was also a nificant natural gas accumulations. A 39-ft consequence of cuts in Algeria’s oil pro- Kuwait — The Kuwait Petroleum Cor- interval in the Miocene formation yielded duction, as part of the measures by OPEC poration (KPC) announced last month restricted flow rates of up to 11.2 million to help stabilize the market. that more international oil companies had cubic feet/day of gas. The zone tested was at However, the sources noted that last shown an interest in participating in the 9,822 ft, and the well was drilled to a total depth of 11,600 ft. Several significant un- year’s results were still viewed as satisfac- development of the country’s northern oil tested intervals exist elsewhere in the well. tory, compared with the 1990s, when fields. Exploration efforts also continue at several export earnings roughly averaged $10bn A KPC statement said the protocols other wells in the unit. Unocal holds a 40 per per year. signed with some companies that were to cent working interest in the well and the The sources also stressed that the rela- participate in the scheme allowed consid- 25,000-acre Ninilchik area. Marathon is op- tive firmness of last year’s hydrocarbons eration of additional applications. erator and holds the remaining interest. revenue was boosted by the level of gas The Corporation would, therefore, for Malaysian gas investment to hit $7bn prices in the second half of 2001. Crude a limited period, receive additional and KUALA LUMPUR — Gas producers in Malay- oil prices in the first half of the year were final non-operator applications by com- sia are expected to invest as much as $7.1 bil- around $27/barrel, they added. panies that had not previously expressed lion over the next three years to meet their interest, it said. increasing energy demand, local newspaper KPC’s Vice-Chairman, Nader Al-Sul- The Star reported last month. Investments France’s TotalFinaElf tan, said the Corporation was pleased with were being considered both for the upstream and downstream sectors to fully exploit Ma- announces completion of the great interest in the northern oil fields laysia’s 82.5 trillion cubic feet of reserves, project and the positive response by inter- which would last for the next 30 to 40 years, Venezuelan Sincor unit national companies. the paper quoted Vice-President of Gas “The new applications indicate in- Business at state oil firm Petronas, Muri Paris — French oil major TotalFinaElf creasing international interest in the Muhammad, as saying. Muri pointed out that has announced the completion of project project, which is initiating a new phase,” the industry had invested $22.43bn on gas projects, including petrochemical plants, facilities to launch Venezuela’s Sincor he noted. which were using natural gas as a feedstock. project, designed to produce heavy crude The Corporation said, however, that The power-generating sector was the main oil from the Orinoco belt. no further applications would be accepted consumer of natural gas, taking 71 per cent The French firm said in a statement after February 17 this year, which was the of the 1.93bn cu ft/day of gas produced last that the project, which also included official closing date. year, said Muri. Petroleos de Venezuela (PDVSA) and Norway’s Statoil as partners, would aim Ecuador prepares for oil bidding round Nigeria raises prices QUITO — Ecuador is preparing to call the to produce 200,000 barrels/day of extra- country’s ninth international oil bidding heavy 8° API crude at peak output. of gasoline and other round, with emphasis on exploration offshore The crude would later be upgraded to in the country’s search for new hydrocarbon produce 180,000 b/d of high-quality oil petroleum products deposits. The state oil company, at the Jose facility on the Caribbean coast, PetroEcuador, has defined eight blocks in the the statement noted. Abuja — Nigeria has implemented an latest bidding, four offshore with blocks 4, 5, 39 and 40, with another four in the Amazon Since initial production commenced increase in the price of domestic gasoline, region, comprising blocks 20, 32, 33 and 35. in January, 15 million barrels of crude have from 22 naira per litre to 26 naira/lt, it The firm is currently analyzing the possibil- so far been treated and blended with was officially announced last month. ity of including three more oil blocks in the lighter crude to obtain 16° API oil suit- The Chairman of the petroleum prod- Amazon region. Before the bidding, able for export. ucts pricing regulatory committee, Chief PetroEcuador identified 13 structures with Greater volumes would be handled Rasheed Gbadamosi, said diesel would also probable reserves capable of supporting pro- duction of 350 million barrels of heavy crude. when additional upgrading facilities were sell at a new price of 26 naira/lt, instead At present, the company is preparing the tech- operational at the Jose terminal next of 21 naira/lt, while kerosene would retail nical documents for the bidding, such as geo- month. at 24 naira/lt, instead of 17 naira/lt. logical maps of the blocks, socio-economic The project required $4.2 billion in He told a news conference in Abuja studies, and legal work.

February 2002 15 NEWSLINE

that the new prices would be applicable who would be able to export to neighbour- immediately and for the first quarter of ing countries. In brief this year. The increases were part of the “It will promote investments, leading UK oil discovery biggest since 1988 liberalization of the downstream sector of to a vibrant industry, thereby creating new LONDON — Estimates of the yield of a United the Nigerian petroleum industry. jobs,” Gbadamosi stressed. Kingdom North Sea oil field have been re- “In arriving at these prices, not all vised upwards, making it the biggest discov- interests of the marketers, transporters, the ery of oil in the area for more than a decade, Nigerian National Petroleum Corporation Qatari Emir inaugurates was announced last month. PanCanadian (NNPC), or even the government, were Energy had calculated that it could recover expanded crude oil up to 300 million barrels of oil from the Buz- completely accommodated, as they were zard field, located 96 km north-east of Aber- disallowed any increases in their margins,” refinery at Mesaieed deen, Scotland. The field was first drilled last he said. summer, but subsequently PanCanadian’s Gbadamosi said that only bridging and Doha — The Emir of Qatar, Sheikh London-based unit said further test drilling transport costs were allowed upward re- Hamad Bin Khalifa Al Thani, has inau- had shown that the oil reservoir was larger views, in response to the need to reduce gurated Qatar Petroleum’s $850 million than previously thought, and could yield 400m b. The announcement was welcomed difficulties in transportation. expanded refinery at Mesaieed. by Britain’s Energy Secretary, Brian Wilson. The government had accepted a move The scheme has significantly boosted “This is a prime example of why we are work- to abolish the existing three naira con- the state’s oil refining capacity and has ing so hard with industry to get offshore sumption tax, while import duties to cover facilitated the processing of crude oil and blocks in the hands of the right operators. administrative costs would be levied at condensates from gas production facilities. This is the biggest North Sea discovery since 1.50 naira/lt. The state-of-the-art refinery has more the Nelson field in 1988 and confirms that Gbadamosi pointed out that the new than doubled Qatar’s refining capacity to there are still huge prizes to be won,” Wilson said. prices were not cast in iron, but could be 137,000 barrels/day. It will also meet lo- seen as ceilings for each of the product cal and foreign demand for finished pe- Poll sees lower oil prices this year categories. He added that the committee troleum products for a minimum of 15– BRUSSELS — Respondents to a survey by expected that the forces of competition 20 years. Reuters are forecasting that oil prices will drop might push some prices down. A fluid catalytic cracking unit at the by 20 per cent to below $20/barrel during He said the liberalization policy was new refinery uses the technology to con- the course of this year, as a result of poor de- mand and worries about the strength of an aimed at assisting Nigerians who had vert residue from the crude unit and con- economic upswing. The Reuters poll forecasts suffered because of the shortages of petro- densate refinery into premium products. a fall in the price of North Sea Brent crude leum products and other problems in the The two-grade motor gasoline being pro- from nearly $25/barrel in 2001 to $19.46/b past. duced by the refinery is totally lead-free. in 2002. The survey also projects global oil Gbadamosi noted that the monopoly The project was formally launched by demand growth of 510,000 b/d, building on currently being enjoyed by the NNPC the country’s Minister of Energy and In- a 100,000 b/d rise in 2001, but still well be- low average growth over the past decade, would endure, with all the imperfections dustry, Abdullah Bin Hamad Al Attiyah, which has been in excess of 1m b/d. Of the of the system, unless an enabling environ- in July 1998. Qatari Heir Apparent, survey respondents, Merrill Lynch expects ment was created to encourage participa- Sheikh Jassem Bin Hamad Al-Thani, laid demand to be affected by the “worst global tion by other operators. the foundation stone for the expansion in economic conditions in 20 years.” The com- He said the committee intended to February 1999. pany forecasts an oil price of $15.50/b for meet on a quarterly basis to review mar- The expanded refinery’s commercial the first quarter of the year. ket fundamentals, in accordance with its production began in July last year, some Bush seeks support for energy policy mandate and arrive at appropriate prices six months ahead of the original sched- NEW YORK — United States President, for the following quarter. ule. The first shipment of surplus prod- George W Bush, last month addressed a meet- Gbadamosi said the nation stood to ucts from the new refinery was made on ing of union presidents at the International gain from a deregulated downstream sec- 22 July 2001. Brotherhood of Teamsters headquarters, to tor as there would be the renewal and The new expansion also involves sev- rally support for his controversial national expansion of product reception and stor- eral other units, services and facilities. energy policy, which includes petroleum ex- ploration in the Arctic National Wildlife Ref- age facilities and the construction of new They include a new condensate refinery uge (ANWR). “This energy bill is a jobs bill. depots by marketers. capable of processing 57,000 b/d of local When we explore (for oil) in the ANWR, He explained that the enabling envi- condensate to produce finished petroleum we’re not only becoming less dependent on ronment created would result in the im- products, debottlenecking of the existing foreign sources of crude oil, we’re creating jobs port of petroleum products by several li- refinery to process an additional 20,000 for American workers,” said the President, censed players and this would lead to sta- b/d of crude oil. who was accompanied by other top Admin- istration officials including Energy Secretary, bility in product supply. In addition, the instrumentation and Spencer Abraham. According to estimates by It would also provide opportunities for control system has been upgraded and the US Geological Survey, the ANWR could viable cross-border trade and foreign ex- modernized. The project’s contractors were contain as much as 16 billion barrels of oil. change earnings for Nigerian companies South Korea’s LG and Germany’s Lurgi.

16 OPEC Bulletin NEWSLINE

A substantial sum of the investment ditional gas pipelines, according to a re- was made to solve pollution problems, said port by the Islamic Republic News Agency Qatar Petroleum in a statement. Effluents (IRNA). In brief from the refinery were being treated to He said the country formerly had the ASEAN to sign gas pipeline pact eliminate hazardous components before capacity for transferring 100bn cu m/y of KUALA LUMPUR — An agreement covering the disposal to air, sea or land. gas, but the figure had now dropped to construction of a trans-ASEAN gas pipeline For the first time in the Middle East, about 75bn cu m/y. is expected to be signed in July by the mem- an RFCC gas scrubber was installed at the The Turkmen President added that bers of the Association of South-East Asian refinery to preserve and protect the envi- talks were under way for the transfer of Nations. The project, which will link gas sup- ply centres to demand within the region, is ronment. natural gas to Turkey and Armenia, via estimated to cost $6 billion. When in place, Speaking at the inauguration cer- Iranian territory, reported IRNA. the gas pipeline network will harness the re- emony, Al Attiyah said the expanded re- gion’s rich reserves and reduce dependence on finery would help meet the burgeoning imported oil. An official from Malaysia’s state demand for petroleum products in the Chinese firm set to be oil company Petronas said that ASEAN mem- country. bers would sign the accord when their En- largest offshore oil ergy Ministers met on Indonesia’s island resort In line with stringent international of Bali. “A special task force has been set up environmental regulations, the new refin- producer in Indonesia to make sure everything is ready to sign a ery had been designed to produce high- memorandum of understanding when the quality products that met internationally Jakarta — The China National Off- ASEAN Ministers of Energy meeting con- accepted quality standards, said the Min- shore Oil Corporation (CNOOC) is set venes in July,” the official said. ister. to become the largest offshore oil producer It had adopted technologies that not in Indonesia, following the $585 million US petroleum demand fell in 2001 NEW YORK — For the first time in a decade, only protected the environment, but also purchase of concessions held by Repsol- overall consumer petroleum product demand optimized production and yielded at a YPF of Spain, it was reported last month. in the United States in 2001 declined by level which matched the best in the world. The deal, which is the biggest single nearly one per cent, with 19.59 million bar- investment by CNOOC, has left several rels/day consumed, as measured by industry international oil companies, including deliveries, the American Petroleum Institute Iran mulls increasing Indonesian state oil and gas firm (API) has reported. Demand for most oil products weakened during the year, except imports of natural gas Pertamina, flat-footed. gasoline, which showed a 1.4 per cent rise The acquisition would add 360 mil- over 2000 figures. Among the causes of the from Turkmenistan lion barrels of oil equivalent to CNOOC’s overall annual decline were sharply reduced proved net working interest reserves and air travel in the aftermath of the September Ashkhabad — The President of 15m–20m boe to its annual output, ac- 11 attacks, the continued lacklustre economy, Turkmenistan, Saparmurat Niyazov, said cording to the Chinese firm’s Chairman, industrial fuel switching from residual fuel oil to cheaper natural gas, weak demand for last month that that Iran wants to increase Wei Liucheng. petrochemical feedstock, and abnormally its purchases of Turkmen gas to about eight The fields, with production of 70,300 warm winter temperatures. The API also billion cubic metres this year. barrels/day, would increase CNOOC’s noted that the domestic use of imported crude Under the terms of a 25-year contract daily production by 17 per cent to oil and refined products last year reached a signed by the two countries for the trade 356,000 boe/d this year. record high of 11.6m b/d, which was 1.2 per of gas, Turkmenistan currently exports The acquisition of the operations held cent higher than in 2000. about 5bn–6bn cu m/year to Iran. by Repsol-YPF’s nine Indonesian subsidi- PetroEcuador’s crude oil output down About 3.5bn cu m of Turkmen gas was aries would be finalized by September 30, QUITO — Crude oil production by Ecuador’s exported to Iran in the first 10 months of 2002. state-owned oil company, PetroEcuador, fell 2001, according to local media reports. The move was expected to generate by 6.2 per cent during the first 10 months of Niyazov pointed out that the earnings and cash flow for this year, but last year, according to government sources in Korpeche-Kordkouy gas pipeline had the CNOOC officials have declined to project the capital Quito. However, they noted that capacity to transfer up to 12bn cu m/y of what earnings would be. the country’s total crude output in the pe- riod registered an increment of 2.3 per cent, gas. CNOOC, listed in New York and due to the contribution from private oil firms, The 195-km Turkmenistan-Iran gas Hong Kong, has been on an aggressive who compensated for the PetroEcuador de- pipeline, which was inaugurated at a cer- acquisition trail and aims to have 15 per cline. The government had estimated that emony attended by the Iranian and cent annual output growth in the near PetroEcuador would produce 97m barrels Turkmen Presidents, was the first project future. during 2001, but actual output was only ex- that Turkmenistan implemented after at- It had 95m boe output in 2001 and pected to have reached 94.4m b. The gov- ernment had intended selling 94m b of taining independence, he noted. has raised the target to 125m–130m boe PetroEcuador’s crude oil production, but up Niyazov said his country also planned for this year. Meanwhile, Repsol-YPF said until last November, only 43.9m b had been to export 40bn cu m of gas to Ukraine it would keep its 2,200 b/d Jambi Merang exported. With the shipments for December, and 10bn cu m to Russia through its tra- concession in Indonesia. sales were estimated to reach 47.5m b.

February 2002 17 NEWSLINE

Commenting on the deal, Pertamina Bab Thamama F gas and gas re-injection President Baihaki Hakim told the Indo- facilities for recycling gas to the Thamama In brief nesian House of Legislators that although F reservoir. The other onshore project, South Korea sees fall in energy costs his company had missed out on the Asab gas development phase two, is due SEOUL — South Korea’s total energy costs for Repsol-YPF acquisition, there were many to be completed in early 2007. last year, including those of petroleum, coal other such opportunities. and liquefied natural gas, amounted to $31.9 Pertamina has also been directed by the billion, down by 5.5 per cent from 2000, ac- government to build its assets through Algeria’s Sonatrach cording to the country’s Commerce, Indus- acquisition as it becomes an independent try and Energy Ministry. It said the projected brings new HBN oil drop was due to the fall in the price of Dubai oil company in about two years’ time. crude to $19-21/barrel during the year, com- field into production pared with the $23/b average seen in 2000. The country’s crude oil import bill was ex- New UAE gas project Algiers — The Algerian state oil and gas pected to drop by 6.7 per cent year-on-year to be launched later in company Sonatrach has brought into pro- to $19.9bn, said the Ministry. Petroleum costs duction the Hassi Berkine North (HBN) fell by 15.2 per cent to $25.2bn last year from 2002, says ADNOC 2000 levels. The Ministry pointed out that oil field, which is located in the south-east domestic electricity consumption was ex- of the country. panding, having increased by 6.8 per cent Abu Dhabi — A new gas project to tie According to government sources, the from a year ago to 217.58m kilowatt hours up the Abu Dhabi offshore and onshore HBN field, which was jointly developed in November 2001. facilities is slated to commence this year, by Sonatrach, Italy’s Agip, Maersk of it was announced last month. Denmark, and Anadarko of the United NYMEX energy trading hits record “This is embodied in a project that will States, would produce at 75,000 barrels/ NEW YORK — Options trading in 2001 set an annual volume record for the fifth con- export gas from the Umm Shaif super day in its first phase. secutive year on the New York Mercantile Ex- complex (offshore) to the Habshan gas hub Output from the field, added to pro- change (NYMEX), it was announced last (onshore). The pipeline is expected to carry duction from concessions in adjacent month. Annual volume records were set in some 500 million cubic feet/day of gas and blocks scheduled to come on stream in natural gas options, unleaded gasoline futures, will commence in 2002,” the Abu Dhabi 2002 and next year, should increase the and options and trading on NYMEX Access National Oil Corporation (ADNOC) said country’s oil production capacity by 7, the Exchange’s Internet-based electronic trading system. Exchange-wide volume for in a report. 285,000 b/d. the year was 103,025,093 contracts, the third Last May, ADNOC (through its sub- Algeria’s oil production capacity at time in as many years that it has topped the sidiary Gasco) completed the Abu Dhabi- present stands at around one million b/d 100m mark. NYMEX options volume to- Jebel Ali gas pipeline, which is currently and is expected to rise to about 1.5m talled 15,475,878 contracts, surpassing the supplying 500m cu ft/d of natural gas to b/d by 2005. previous record of 15,260,056 contracts Dubai. In another development last month, traded in 2000. Natural gas options trading set a record for the tenth consecutive year The ongoing offshore Zakum Crestal Sonatrach, Agip and BHP of Australia since the contract was launched in 1992, with gas-injection project, which would en- awarded a $257m contract to the Italian- 5,974,240 contracts, surpassing the 5,335,800 hance oil recovery, was expected to be French joint venture of Saipem/Bouygues. deals traded in 2000. completed by the first quarter of 2004, the The deal covers the development of the company noted. Rhourde Oued Djemaa oil field and five EU examines GCC single market plan It said the Umm Shaif Crestal gas- other adjacent fields jointly exploited by BRUSSELS — The European Union (EU) is injection project for installing facilities and Sonatrach, Agip and BHP in the Berkine closely examining the move by Gulf Co-op- eration Council (GCC) member countries to wells for auto-injection of 600m cu ft/d basin. tear down their internal customs barriers and of Umm Shaif Khuff gas into the Arab D The project involves the provision of join each other in a single market. According and C reservoirs to increase oil output, was various installations, including a central to industry analysts, the move would give expected to be completed by 2006. treatment unit, a gathering network, and birth to the biggest oil bloc in history as the The company, in the report highlight- oil storage tanks. GCC countries controlled just over half the ing three decades of achievement, added: The scheme, which requires additional world’s extractable crude oil wealth. The mar- ket was to become a reality at the start of “One of its major successes in the last few investment of $190m for the drilling of 2003, two years ahead of the original sched- years was the substantial increase in its oil 20 producing wells, is scheduled to be ule, they noted. The EU has long used the production capacity by Zadco in the brought into production in 2004. The six absence of a single GCC market to maintain Upper Zakum field.” fields have recoverable reserves estimated petrochemical and other tariffs, seen as un- The country’s onshore gas develop- at 300m b. fair by the GCC, in order to protect the high- ment projects currently under implemen- Saipem/Bouygues won the contract in cost European producers. However, with the creation of a single GCC market, analysts tation include onshore gas development a tender in which three other companies have said that the pressure would be on the phase three, expected to be completed in took part: the Swiss-Swedish firm ABB EU to lift those barriers, but the GCC still early 2007. Lummus, Italy’s Snamprogetti, and the needed to further relax its investment rules. This comprises the expansion of the JVC corporation of Japan.

18 OPEC Bulletin MARKETMARKET REVIEW REVIEW

January started with a strengthening the long holiday weekend (Martin Luther 1 of crude oil prices, underpinned by cold King Day) and the expiration of the Feb- January weather in Europe and the USA, as well ruary WTI contract on January 22 pushed as the coming-into-effect of the OPEC/ prices lower. Meanwhile, weak refiners’ non-OPEC output/export cut. In the US margins prompted refinery run-cuts, un- market, the benchmark crude West Texas dermining demand, and, on the supply Intermediate (WTI) firmed, following a side, it was still too early to assess OPEC’s reduction in imports amid a narrow WTI/ and non-OPEC’s compliance with the Brent spread that virtually closed all agreed cuts. arbitrage opportunities. Meanwhile, the Even though crude prices weakened American Petroleum Institute (API) and slightly, the price slide came to a halt the Department of Energy’s Energy Infor- during the third week of January. Prices Crude oil price movements mation Administration (EIA), in their drew support from the strength of product weekly stock reports, showed considerable prices, amid reduced crude runs, as a After four consecutive months of pro- rises in distillate inventories. Weak gas consequence of poor refiners’ margins. nounced declines, from September– prices undermined demand for distillates The news that 22m b of crude would be December last year, the monthly price of on the US East Coast, putting some pres- added to the Strategic Petroleum Reserve OPEC’s Reference Basket2 bounced back sure on crude prices. Several factors com- (SPR) also contributed to the price con- up in January. It gained 80 cents per barrel, bined, during the second week, to trigger solidation. During the week, comments or 4.6 per cent, with respect to the previous a fall in crude prices. by the Iranian Petroleum Minister, Bijan month; however, on a year-on-year basis, The pronounced price decrease began Namdar Zangeneh, expressing dissatisfac- it fell by an astonishing 24 per cent. On with market scepticism over Russia’s com- tion with the present oil price level, firmed a weekly basis, the Basket started the month pliance with the pledged 150,000 b/d prices. During the last week of the month, well, rising by 49¢/b to $18.50/b; it firmed export cut and remarks by the Chairman the upward price trend, that had started even further during the second week, of the Federal Reserve Board, Alan earlier, was consolidated. Price support gaining another 80¢/b to finish at Greenspan, that the US economy faced materialized at the beginning of the week, $19.30/b. It deteriorated considerably in ‘significant’ near-term risks. Adding to the on news of good OPEC-10 compliance the third week, losing $1.49/b, or almost bearish market sentiment was the release with the output levels agreed in December eight per cent. For the fourth week, the of the API’s weekly figures. They showed in Cairo. decline reached another low, at $17.69/b. crude and gasoline stocks rising consider- A further recovery arose from concern However, the Basket recovered towards ably, while distillate inventories, which over a possible oil workers’ strike at five US the end of the month, gaining 71¢/b to include heating oil, fell by much less than refineries, involving 30,000 employees. average $18.40/b. anticipated. Heavy fund-selling ahead of Prices made further gains in ACCESS On a disaggregate basis, all the Bas- ket’s components posted gains, with Mi- Table A: Monthly average spot quotations of OPEC Reference Basket and selected nas and Dubai leading the rise, with crudes including differentials $/b $1.24/b and 94¢/b, respectively. Bonny Light and Arabian Light followed closely, Year-to-date average rising by 87¢/b and 84¢/b, respectively. December 01 January 02 2001 2002 Isthmus and the Bonny-related crude, Saharan Blend, firmed by 69¢/b and Reference Basket 17.53 18.33 24.06 18.33 56¢/b during the month. Finally, Tia Arabian Light 17.99 18.83 22.31 18.83 Juana Light posted the smallest gain, Dubai 17.60 18.54 22.56 18.54 finishing 48¢/b higher at $15.37/b (see Bonny Light 18.78 19.65 25.43 19.65 Table A). Saharan Blend 19.08 19.64 26.08 19.64 Minas 17.64 18.88 24.03 18.88 1. This section is based on the OPEC Monthly Tia Juana Light 14.89 15.37 23.18 15.37 Oil Market Report prepared by the Research Isthmus 16.73 17.42 24.80 17.42 Division of the Secretariat — published in mid-month and containing up-to-date analy- Other crudes sis, additional information, graphs and tables. Researchers and other readers may Brent 18.58 19.48 25.60 19.48 download the publication in PDF format WTI 19.40 19.71 29.42 19.71 from our Web site (www.opec.org), provided OPEC is credited as source for any usage. Differentials 2. An average of Saharan Blend, Minas, Bonny WTI/Brent 0.82 0.23 3.82 0.23 Light, Arabian Light, Dubai, Tia Juana Brent/Dubai 0.98 0.94 3.04 0.94 Light and Isthmus.

February 2002 19 MARKET REVIEW

markets late on January 31, on news of a Table B: Selected refined product prices $/b huge explosion in an oil gathering facility in northern Kuwait. Nevertheless, on the Change bearish side, the release of the weekly API Nov 01 Dec 01 Jan 02 Jan/Dec report exerted pressure on oil markets. The report showed a big rise in gasoline US Gulf stocks and a small draw on distillates. Regular gasoline (unleaded) 20.99 21.35 22.63 +1.28 Crude stocks were slightly higher; how- Gasoil (0.2%S) 22.13 21.02 21.43 +0.41 ever, the rise was considerably smaller than Fuel oil (3.0%S) 13.62 14.68 14.77 +0.09 the consensus expectation. Rotterdam US and European markets Premium gasoline (unleaded) 20.20 19.16 20.65 +1.49 Cold weather in the USA and Europe Gasoil (0.2%S) 23.03 21.35 21.72 +0.37 and the coming-into-effect of the near- Fuel oil (3.5%S) 14.67 14.95 15.25 +0.30 2.0m b/d OPEC/non-OPEC cuts saw benchmarks WTI and Brent climb during Singapore the first week of January. An unusual Premium gasoline (unleaded) 20.75 22.61 20.95 –1.66 premium for Brent to WTI arose, in con- Gasoil (0.5%S) 21.87 20.11 20.94 +0.83 junction with the largest-ever trade of an Fuel oil (380 cst) 15.46 16.44 16.19 –0.25 exchange of futures for physicals in the Brent market, involving some 30m b. The uncommon WTI discount to dated Brent Table C: Refinery operations in selected OECD countries reversed the normal east/west transatlantic arbitrage for West African and North Sea Refinery throughput (m b/d) Refinery utilization (%)1 grades. Nov 01 Dec 01 Jan 02 Nov 01 Dec 01 Jan 02 Crude imports into the USA fell by 600,000 b/d during the second week, but USA 15.10 15.03 14.67 91.3 90.9 88.5 then rose in the third week, only to fall France 1.79R 1.74 1.64 94.8R 92.0 86.3 again by 1.16m b/d in the last week. Germany 2.26 2.21R 2.17 100.1R 98.0R 95.9 Meanwhile, falling product demand and Italy 1.81R 1.82R 1.74 76.7R 77.4R 76.4 weakening refiners’ margins saw refinery UK 1.66R 1.67 1.62 93.8 R 94.4 91.1 utilization rates and crude runs decline Eur-162 12.31R 12.22R 12.00 90.2R 89.6R 87.9 considerably throughout the month. Crude Japan 4.15 4.22 na 83.7 85.1 na and gasoline stocks rose week after week. The continued absence of Iraqi Basrah, 1. Refinery capacities used are in barrels per calendar day. na Not available. hampered by the UN imposition of ret- 2. European Union plus Norway. R Revised since last issue. roactive pricing, kept sour grades strong Sources: OPEC Statistics, Argus, Euroilstock Inventory Report/IEA. in the US markets. Turning briefly to the European market, as stated above, the Meanwhile, Middle East crudes drew Product markets and strength of Brent and other grades eroded support from the cuts implemented to refiners’ margins, forcing refiners to re- term supply contracts for February deliv- refinery operations duce runs. Product stocks in Europe ery. Saudi Arabia deepened its cuts of dropped, but a consistent lack of demand February term allocations to Japan and Oil product markets posted gains in the left the market indifferent to the low stock South Korea by an additional four per Atlantic basin in January, with a hefty rise scenario. cent, bringing the total reduction to around in gasoline prices, amid refinery run cuts 24 per cent below the contractual vol- and intensive maintenance. Singapore’s Far Eastern markets umes. Qatar and the UAE also imple- product market fundamentals were ham- Market sentiment was firm at the mented cuts in term supplies. Sentiment pered by slackening regional demand. beginning of the month, especially for for Middle East grades deteriorated later Refinery run-cuts were widespread, caused distillate-rich grades, amid healthy de- in the month, as the return of Iraqi Basrah by prevailing weak margins (see Table B). mand. Support for other regional sweet supplies to the region compensated for grades was steady, in the absence of an the cuts made by other major regional US Gulf market influx of West African competing crudes. producers. Brent’s uncommon narrow Light product prices rose in January, However, overall demand in Asia weak- premium to regional similar grades opened with a pronounced surge of $1.28/b in the ened after the February allocation period the arbitrage window to West African gasoline price, followed by a moderate had come to an end and weak refiners’ crudes, putting additional pressure on local increase of 41¢/b for gasoil. Although margins forced refiners to reduce runs. crudes. gasoline usually registers its lowest yearly

20 OPEC Bulletin MARKET REVIEW

demand in January, its price was relatively demand and robust demand from Medi- In Japan, despite the closure of the strong compared with other distillate prod- terranean utilities during the first half of 80,000 b/d Hyogo refinery on weak prod- ucts. This indicated a switch in the mar- the month, as a result of colder-than- uct demand, refinery throughput increased ket’s focus from heating oil to gasoline, in average weather. Nonetheless, Russia’s slightly to 4.22m b/d in December. The light of the persistent unseasonably warm decision to remove fuel oil export limits refinery utilization rate was 85.1 per cent, weather during the current winter, amid and cut the tariff tax by half, as well as an which was 5.4 percentage points below the hefty distillate stock-builds, which were influx of South American cargoes, causing level in the corresponding period last year. 16 per cent higher than last year’s level. abundant supply, exerted downward pres- Gasoline inventories, on the other hand, sure on its price later in the month (see saw a modest rise of eight per cent above Table B). The oil futures market the previous year’s thin level. Refiners’ margins recovered slightly, Furthermore, discretionary refinery but remained well in negative territory, as NYMEX WTI started 2002 with a sharp run cuts, in response to weak refiners’ the surge in the Brent price hindered gain of $1.17/b on the first trading day in margins, and intensive refinery turna- product price gains. January, as bullish sentiments were rounds, lent support to NYMEX gasoline Refinery throughput in Eur-16 (EU + strengthened by OPEC/non-OPEC’s cuts futures and, with it, the spot markets, in Norway) fell by a further 210,000 b/d to and the high volume of short non- anticipation of tightened supply in the 12.00m b/d in January, responding to commercial positions. For the rest of the foreseeable future. The fuel oil price poor refiners’ margins. The equivalent first week of January, prices were volatile. climbed by 9¢/b, reflecting balanced fun- utilization rate was 87.9 per cent, which The downward pressure on prices stemmed damentals, as the less well-supplied mar- was 5.5 percentage points below the pre- from the weak heating oil market, since ket, caused by refinery shut-downs and ceding year’s figure (see Table C). distillate stocks were higher than the five- lower South American cargo arrivals, was year average and there were forecasts of offset by slow activity in transatlantic Singapore market abnormally warm weather on the East arbitrage to Europe (see Table B). The prices of both the light and heavy Coast. The bullish sentiments that pushed A combination of the strong gasoline ends of the barrel deteriorated, driven prices higher were a forecast of tightness price and moderate increases in other essentially by fading regional demand, in 1Q02; they also reflected healthy im- product prices eclipsed a modest rise in the while gasoil rose, tracking Dubai’s strong plied gasoline demand figures (8.8m b/d) WTI market, and therefore refiners’ mar- market, in January. Gasoline fell by in the USA, despite the weakness in the gins moved barely into positive territory. $1.66/b, undermined by the absence of economy. However, the bearish sentiments Under pressure from the continuously the largest regional buyer, Indonesia, al- were stronger and WTI moved down to weak margins, US refinery throughput though the rising regional naphtha price $20.38/b. accelerated its downward movement, los- and prevailing lower exports from China The second week witnessed a contin- ing another 360,000 b/d from its Decem- were supportive factors later in the month. ued downward move, with widening in ber level to average around 14.67m b/d in Gasoil fundamentals continued to be the contango. The weakness in crude was January; this reflected the prevailing more weighed down by more-than-ample sup- attributed to the expectation of lower steeply reduced refinery run cuts and the ply facing sagging demand, linked to the refinery runs, as crude stocks were steady, start of annual maintenance in the US economic turmoil; nevertheless, its price despite lower exports. Further selling oc- Gulf refining centre. The equivalent refin- gained 83¢/b, supported by the relative curred after the market interpreted the ery utilization rate was 88.5 per cent, strength of the marker crude, Dubai, assessment of Federal Reserve Chairman, which was 2.3 percentage points lower compared with other world benchmark Alan Greenspan, as negative, leading to than last year’s level (see Table C). crudes. Lack of Chinese demand for fuel weak demand. The API’s weekly data put oil, after its larger-than-normal purchase further pressure on prices, since it showed Rotterdam market during December, and a build in high builds of 4.0m b and 4.2m b in crude and Gasoline rebounded, gasoil experi- domestic inventories, particularly in the distillate stocks, respectively, as well as a enced a moderate increase and fuel oil southern province of Guangdong, put contraction in gasoline demand from 8.8m sustained modest rises in December, at- downward pressure on the fuel oil price, b/d to 8.0m b/d. Speculation about OPEC/ tributed in part to the relative strength of which lost 25¢/b; this shrugged off the non-OPEC’s compliance with their agreed Brent, compared with WTI. Intensified rising crude price, although the market cuts dragged prices down further and WTI arbitrage trading to the US East Coast, was less well-supplied, due to the absence reached $17.97/b. however, was the underlying reason for of European cargoes, on narrowed price During the third week, prices reversed the gasoline price soaring by $1.49/b, differentials and sustained Asian refinery their trend and moved upwards, basically although regional demand was sluggish. run cuts (see Table B). due to short-covering and technical buy- Gasoil rose by 37¢/b, despite a continued Refiners’ margins plunged into nega- ing. The rise in prices came, despite bear- lack of demand from the largest European tive territory, due largely to the excep- ish indicators. For example, Valero cut its market, Germany, due to sufficient end- tional strength of Dubai’s price and, to a refinery output of 1.5m b/d by 18 per cent user inventories. Fuel oil increased by a lesser extent, the weakness of the gasoline in January, partly due to weak refiners’ further 30¢/b, assisted by healthy bunker and fuel oil markets (see Table C). margins. API statistics showed that im-

February 2002 21 MARKET REVIEW

ports surged to 9.6m b/d and that crude level. Sailings from the Middle East also played mixed trends in January. They oil stocks were at 315m b. Despite this, rose, by 4.06m b/d to a monthly average improved in the Middle East, retreated in WTI moved up to $19.70/b. of 18.50m b/d, which was about 65 per the Caribbean, the Mediterranean and The last week of January was volatile. cent of total OPEC sailings. Arrivals at the North-West Europe and stabilized in Sin- The upward movement at the beginning US Gulf Coast, the East Coast and the gapore. Freight rates on the route from the of the week was due to short-covering by Caribbean rose further last month, by Middle East to the Far East rose by eight funds, while the bearish demand and stock 730,000 b/d to a monthly average of 9.02m points to W154, on the back of increased data shown in figures from the API and b/d, while arrivals in North-West Europe enquiries in both regions, while the rates the US Department of Energy took over and Euromed increased by 240,000 b/d from the Caribbean to the US Gulf Coast later in the week, to push crude prices to 6.76m b/d and 400,000 b/d to 6.14m declined by seven points to W182. Mean- down. News of an explosion at an oil- b/d, respectively. Estimated oil-at-sea on while, clean tanker freight rates, from gathering centre in Kuwait and a potential January 27 was 464m b, which was 12m North-West Europe to the US East Coast refinery workers’ strike salvaged crude b below the level observed at the end of and from the Mediterranean to North- prices at the end of the month and raised December. West Europe, declined by five points each WTI to $19.48/b. Crude oil tanker freight rates exhib- to W173 and W170, respectively. On the ited mixed trends in January. They firmed route across the Mediterranean, freight for VLCC and Aframax tankers, but were rates witnessed the biggest drops, as they The tanker market depressed for Suezmax tanker trading across plummeted by 38 points to W152 in an the Atlantic Basin. The VLCC spot mar- over-supplied market, especially older OPEC area spot-chartering rose by 2.37m ket in the Middle East continued to enjoy tonnage. However, freight rates stabilized b/d to a monthly average of 10.19m b/d the positive trend that had started in on the route from Singapore to Japan at in January, despite the OPEC/non-OPEC December, amid considerable activity, as W172, which was only one point below agreement to reduce oil production by fixture volumes improved significantly, the previous month’s level, encouraged by about 2m b/d, starting on January 1. especially in the last three weeks of the the start of the free trade pact that called However, compared with the same period month, combined with a reduction in oil for tariff reductions on oil products traded last year, the current level of OPEC fix- company relets, which partially squeezed between the two countries. tures was 3.69m b/d lower. Meanwhile, tanker availability in prompt positions. non-OPEC spot-chartering also rose in Therefore, the monthly average freight January, by 780,000 b/d to 7.31m b/d, rates on the Middle East eastbound and World oil demand due to increased short-haul trading. There- westbound long-haul routes rose by eight fore, global spot fixtures grew by 3.15m points to Worldscale 48 and five points to Revision for 2000 b/d to 17.50m b/d; but this level was W43, respectively. Suezmax freight rates There has been a minor downward 6.14m b/d below the corresponding month reversed their upward trend and displayed revision to the 2000 world oil demand in 2001. The OPEC area’s share of global a weaker trend in January, as the market figure, which is now assumed to be 75.79m spot-chartering improved by 3.70 per- appeared to correct what was perceived as b/d, instead of the 75.83m b/d given in centage points to 58.22 per cent, although overvalued rates during the previous the last report. This adjustment is notice- this was 0.50 percentage points below the month, compared with VLCCs operating able in the ‘Other Europe’ region, where previous year’s level. Most of the incre- on the same routes. Hence, the monthly the apparent demand has been revised ment in OPEC chartering was attributed average freight rates for Suezmax tankers down by 40,000 b/d. to a rise in spot fixtures from the Middle operating on the routes from West Africa East on the eastbound long-haul route, by and North-West Europe to the US Gulf Estimate for 2001 2.22m b/d to 4.72m b/d, while, on the Coast plunged by six points to W66 and westbound route, they rose by a marginal 14 points to W69, respectively. However, World 110,000 b/d to 1.27m b/d. Consequently, Aframax trading on the short-haul routes World oil demand growth has been the Middle East eastbound share of total witnessed positive trends and regained revised down slightly. The estimated fig- OPEC fixtures improved by a significant some of the previous month’s losses, on ure for 2001 is now 75.81m b/d, just 14.42 percentage points to 46.28 per cent, improved market activity. Freight rates on 20,000 b/d higher than in 2000, a devel- while the westbound share fell by 2.30 the routes across the Mediterranean and opment not experienced since 1984. The percentage points to only 12.47 per cent; to North-West Europe rose by ten points weak demand is due to the combination together, they accounted for 58.75 per to W127 and seven points to W121, re- of global economic slowdown, a signifi- cent of total chartering in the OPEC area, spectively, while they surged by 24 points cant reduction in commercial air travel, which was 12.12 percentage points higher to W124 on the route from the Caribbean lower natural gas prices and the mild winter than in the previous month. Preliminary to the US East Coast. Freight rates for 70– weather. The quarterly data shows that, estimates of sailings from the OPEC area 100,000 dwt tankers, on the route from compared with the year-earlier figures, surged by 6.72m b/d to a monthly average Indonesia to the US West Coast, im- petroleum consumption rose by 710,000 of 28.45m b/d, which was 30.92 percent- proved by a further nine points to W114. b/d and 520,000 b/d in 1Q and 2Q, age points above the previous month’s Product tanker freight rates also dis- respectively. This increase was offset by

22 OPEC Bulletin 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 Jan 02/ 2000 3Q01 Dec 01* 4Q01 2001 Jan 02* Dec 01 1998 2.77 3.02 3.18 3.20 3.04 1999 3.12 3.62 3.52 3.49 3.44 Algeria 808 831 823 813 821 792 –31 2000 3.97 4.13 4.47 4.01 4.14 Indonesia 1,279 1,209 1,180 1,180 1,216 1,163 –16 20011 4.30 4.74 4.83 4.39 4.57 IR Iran 3,671 3,706 3,459 3,479 3,665 3,310 –149 20022 4.90 5.31 5.00 4.95 5.04 Iraq 2,551 2,487 2,030 2,558 2,385 2,192 162 Kuwait 2,101 2,012 1,952 1,949 2,032 1,869 –83 1. Estimate. SP Libyan AJ 1,405 1,366 1,304 1,308 1,361 1,270 –34 2. Forecast. Nigeria 2,031 2,087 2,095 2,116 2,097 2,000 –95 Qatar 698 691 618 632 683 592 –25 declines in the remaining successive quar- Saudi Arabia 8,247 7,914 7,500 7,538 7,918 7,246 –254 ters. According to historical data, this UAE 2,251 2,122 2,026 2,031 2,163 1,960 –66 demand pattern has not been observed Venezuela 2,897 2,801 2,695 2,701 2,830 2,580 –115 before. On a regional basis, average annual Total OPEC 27,941 27,226 25,681 26,305 27,170 24,974 –707 OECD consumption registered a decline of 170,000 b/d and DC demand a de- * Not all sources available. crease of 50,000 b/d. The only increase Totals may not add, due to independent rounding. can be seen in the former centrally planned economics (CPEs), where the apparent USA was experiencing unusually warm Forecasts for 2002 demand rose by 240,000 b/d. weather in November, when heating oil The world oil demand forecast for decreased by 220,000 b/d, cold weather 2002 has been revised down by 90,000 OECD was sweeping parts of Western Europe, b/d to 76.16m b/d, indicating 350,000 The latest available data, which in- boosting heating oil consumption by b/d, or 0.5 per cent, growth. This adjust- cludes 11 months (January to November 100,000 b/d. ment has been made to account for down- 2001), and the best estimate for Decem- ward revisions to regional and global GDP ber show a decrease of 170,000 b/d, or 0.4 Developing countries growth rate estimates. This demand growth per cent, to average 47.66m b/d. The Oil demand in developing countries is is obviously higher than 20,000 b/d in entire decline has been concentrated in estimated to have decreased by 50,000 2001, but lower than 580,000 b/d in 2000 North America and the OECD Pacific, as b/d, or 0.3 per cent, to average 18.72m and 1.47m b/d in 1999. they dropped by 140,000 b/d and 90,000 b/d for the year. However, because of the On a quarterly basis, the first half of b/d, respectively, while Western Europe huge time-lag and the limited reliability of the year is expected to witness a moderate expected a rise of 60,000 b/d. data in this group, this assessment is sub- increase of 80,000 b/d, compared with the On a quarterly basis, compared with ject to further change. Evidence suggests previous year, due to continued economic the year-earlier figures, OECD demand that consumption in Latin America decel- weakness and the recent unseasonably rose by 670,000 b/d, or 1.4 per cent, erated, due to the repercussions of the US warm weather. Reflecting the emergence during 1Q; for the remaining three quar- economic slowdown and the crisis in the of economic recovery and the assumption ters, demand growth declined by 80,000 Argentine economy. ‘Other Asia’ shows a of normal weather, demand in the second b/d, 450,000 b/d and 810,000 b/d, re- marginal increase; this group of countries half of the year is projected to be 610,000 spectively. has been hit strongly by the economic b/d higher than in the same period last A relative slowdown in the economies slowdown in their key export markets. year. of the USA, Japan and Europe in 3Q and Most of the consumption growth is 4Q, a reduction in jet fuel consumption Other regions expected to come from North America, for the period September to December Apparent demand in ‘Other regions’, the Middle East, ‘Other Asia’, the FSU and warmer weather in the USA, where according to primary data, grew by 240,000 and China, while Western Europe will the heating degree days were 21 per cent b/d, or 2.7 per cent, to a total of 9.43m show a contraction in demand. The OECD below normal in 4Q, contributed to the b/d. Within this group, the FSU is ex- Pacific’s demand growth will be negligi- year’s decline in oil demand. pected to enjoy the highest growth, of ble, while Latin America will suffer, due The total OECD oil requirement in 180,000 b/d, or 4.9 per cent, contrary to to Argentina’s economic collapse. November fell by 170,000 b/d. Signifi- the period 1998–2000, when FSU de- The current outlook for oil demand is cant drops of 230,000 b/d and 90,000 mand contracted every year. China fol- marked by a key uncertainty in the pro- b/d in North America and the OECD lows with 70,000 b/d, continuing a positive jection of GDP. If the recovery in those Pacific, respectively were offset by a rise of trend. A minor decline is expected in economies, mainly the USA and emerging 140,000 b/d in Western Europe. As the ‘Other Europe’ demand. Asian countries, which led the oil demand

February 2002 23 MARKET REVIEW

growth in the late 1990s, does not mate- OPEC crude oil production period last year. Meanwhile, a draw of rialize, then there is the risk that world oil Available secondary sources indicate 10.3m b to 171.2m b on ‘Other oils’ demand could be flat, or even decline. that, in January, OPEC’s output was capped this build. Other major product 24.97m b/d, which was 770,000 b/d lower inventories displayed minor draws, main- than the revised December level of 25.68m taining more or less the previous month’s World oil supply b/d. Table E shows OPEC’s production, levels. The overall level was 81.5m b, or as reported by selected secondary sources. about nine per cent, above last year’s fig- Non-OPEC ure. During the same period, the US Stra- Figures for 2001 Rig count tegic Petroleum Reserve (SPR) rose by The 2001 non-OPEC supply figure 5.2m b to 554.2m b. This rise occurred has been revised up by 40,000 b/d to With effect from this issue, this section on the under the new ‘royalty-in-kind’ pro- 46.53m b/d, compared with the last re- rig count will be included in the Monthly Oil gramme, as a means of filling the SPR to port. The figures for 1Q and 2Q have been Market Report. full capacity (see Table F). revised down by 20,000 b/d to 46.22m b/d and 40,000 b/d to 45.97m b/d, re- Non-OPEC Western Europe spectively, while those for 3Q and 4Q Rig activity in 2001 was 260 rigs higher Commercial onland oil stocks in Eur- have been revised up by 10,000 b/d to than in 2000, with 1,991 rigs in 2001, 16 in January showed a further contra- 46.64m b/d and by a significant 210,000 against 1,732 in 2000. Most of the in- seasonal build, increasing by a slight 1.2m b/d to 47.27m b/d, respectively. The yearly crease in rig activity took place in the b, or a rate of 40,000 b/d, to 1,065.7m b. average increase is estimated at 750,000 OECD, especially North America. In This build, which occurred solely in major b/d, compared with the 2000 figure. January 2002, the non-OPEC rig count product inventories (4.9m b), was capped increased by 138 to 1,771, compared with by a draw of 3.7m b to 432.2m b on crude Expectations for 2002 the December 2001 figure of 1,633. A 141 oil stocks, on the back of fewer arrivals, Our 2002 non-OPEC supply forecast rig rise in the OECD was partially offset especially Iraqi cargoes. Gasoline contrib- has been revised up by 110,000 b/d and by a drop of five rigs in developing coun- uted the most to the build in product shows an increase of 940,000 b/d, com- tries, which was totally attributable to the inventories, when it rose by 3.2m b to pared with the figure estimated for 2001. situation in Latin America. 155.0m b; this was due mainly to low The expected 2002 quarterly distribution exports to the US market, as transatlantic is estimated at 47.14m b/d, 46.90m b/d, OPEC arbitrage had been closed in December, 47.58m b/d and 48.23m b/d, respectively, OPEC’s rig activity in 2001 was 32 encouraging European refiners to store resulting in a yearly average of 47.47m b/d. rigs higher than in 2000, with 238 rigs in most of their gasoline output, in a situa- The net oil export figures for the FSU 2001, compared with 206 in 2000. In tion of low local demand. for 2001 and 2002 have been revised up January 2002, the OPEC rig count Middle distillates also added to this by 10,000 b/d to 4.57m b/d and by 30,000 dropped by eight to 236, compared with build, moving up by 1.5m b to 332.7m b/d to 5.04m b/d, respectively, compared the December 2001 figure of 244. b. Lower demand, as well as increasing with the last report (Table D). Russian gasoil exports, was behind this rise. Total oil stocks were 3.5m b higher OPEC natural gas liquids Stock movements than the year-ago level (see Table G). The OPEC NGL figures for 1998–2002 remain unchanged from the last report, at USA Japan 3.01m b/d, 3.07m b/d, 3.23m b/d, 3.24m US commercial onland oil stocks In December, commercial onland oil b/d and (forecast) 3.26m b/d, respectively. showed an unseasonable build of 8.1m b, stocks fell by a further 18.5m b, or a rate or a rate of 230,000 b/d, to 1,017.3m b of 510,000 b/d, to 182.0m b. Distillates OPEC NGL production — 1998–2002 during December 28–February 1. Most of contributed largely to this draw, declining m b/d the build occurred with crude oil, which by 8.4m b to 37.8m b, on the back of lower 1998 3.01 rose by 9.4m b to 319.3m b, on the back output, due to weak refiners’ margins. 1999 3.07 of low refinery runs, due to poor refiners’ Other major products also contributed to 2000 3.23 margins, as well as higher crude oil im- this decrease, as gasoline and fuel oil de- 1Q01 3.24 ports. This was followed by gasoline, which clined by 1.8m b to 12.3m b and 1.4m b 2Q01 3.24 rose by 8.5m b to 216.4m b, due to an to 18.5m b, respectively. A 70,000 b/d 3Q01 3.24 increase in gasoline output, as weak heat- improvement in refinery throughput, to- 4Q01 3.24 ing oil margins encouraged refiners to gether with lower imports, were behind 2001 3.24 produce more gasoline at the expense of the draw on crude oil of 4.1m b to 113.4m Change 2001/2000 0.02 distillates, as well as substantially lower b. Total oil stocks were 3.5m b, or about 2002 3.26 apparent demand, which fell by about two per cent, above the year-ago level (see Change 2002/2001 0.02 four per cent, compared with the same Table H).

24 OPEC Bulletin MARKET REVIEW

Table F: US onland commercial petroleum stocks1 m b

Change Jun 29, 01 Oct 5, 01 Dec 28, 01 Feb 1, 02 Jan/Dec Feb 11, 01

Crude oil (excl SPR) 310.7 307.4 309.9 319.3 9.4 294.2 Gasoline 221.6 206.1 207.9 216.4 8.5 205.6 Distillate fuel 112.8 124.6 137.6 137.3 –0.3 118.2 Residual fuel oil 42.5 36.7 40.9 40.6 –0.3 37.1 Jet fuel 43.0 44.0 40.7 40.5 –0.2 43.7 Unfinished oils 90.4 88.9 90.6 92.0 1.4 91.6 Other oils 191.4 219.7 181.5 171.2 –10.3 145.5 Total 1,012.4 1,027.4 1,009.2 1,017.3 8.1 935.8 SPR 543.3 544.8 549.0 554.2 5.2 541.7

1. At end of month, unless otherwise stated. Source: US/DoE-EIA.

Table G: Western Europe onland commercial petroleum stocks1 m b

Change Jun 01 Sept 01 Dec 01 Jan 02 Jan/Dec Jan 01

Crude oil 438.5 436.6 436.0 432.2 –3.7 420.0 Mogas 155.6 144.6 151.8 155.0 3.2 155.8 Naphtha 25.1 26.0 26.4 26.0 –0.4 23.3 Middle distillates 331.4 323.4 331.2 332.7 1.5 336.4 Fuel oils 122.2 121.0 119.1 119.8 0.7 126.6 Total products 634.3 615.0 628.5 633.4 4.9 642.1 Overall total 1,072.8 1,051.6 1,064.5 1,065.7 1.2 1,062.1

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

Table H: Japan’s commercial oil stocks1 m b

Change Jun 01 Sept 01 Nov 01 Dec 01 Dec/Nov Dec 00

Crude oil 127.3 118.0 117.5 113.4 –4.1 105.1 Gasoline 14.3 13.8 14.1 12.3 –1.8 12.7 Middle distillates 33.6 45.7 46.2 37.8 –8.4 40.3 Residual fuel oil 19.8 19.9 19.9 18.5 –1.4 20.4 Total products 67.7 79.5 80.3 68.6 –11.7 73.4 Overall total2 195.1 197.5 197.8 182.0 –15.8 178.5

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

February 2002 25 MARKET REVIEW

OECD Table I: Estimated stock movements in OECD on fourth quarter of 20011 In 4Q01, OECD commercial onland m b oil stocks (the USA, Eur-16 and Japan) are estimated to have shown a marginal sea- Change Dec/Sept sonal draw of 20.8m b, or a rate of 230,000 September 01 December 01 m b m b/d b/d, to 2,255.7m b, compared with the previous quarter. US and Japanese stocks USA 1,027.4 1,009.2 –18.2 –0.20 decreased by 18.2m b and 15.5m b, re- Eur-16 1,051.6 1,064.5 12.9 0.14 spectively, while a contra-seasonal build of Japan 197.5 182.0 –15.5 –0.17 12.9m b in Eur-16 diminished the overall OECD total 2,276.5 2,255.7 –20.8 –0.23 impact of the draw (see Table I). 1. Includes USA, Eur-16 and Japan only. Data as at end of month. Balance of supply/demand

For 2001, world oil demand and non- OPEC oil supply have been revised down by less than 100,000 b/d to 900,000 revision to world oil demand of 100,000 by less than 100,000 b/d and up by less b/d, while the other three quarters have b/d to 76.2m b/d, while total non-OPEC than 100,000 b/d to 75.8m b/d and 49.8m been revised up by less than 100,000 supply has been revised up by 100,000 b/d, respectively. These revisions have re- b/d to 1.7m b/d, less than 100,000 b/d to b/d to 50.7m b/d. This has resulted in sulted in a yearly average difference of 1.4m b/d and more than 200,000 b/d to an expected annual difference of around 26.0m b/d, down by 100,000 b/d, com- 400,000 b/d, respectively. The 2000 bal- 25.4m b/d, down by 200,000 b/d, pared with the last report, with quarterly ance has been revised up by less than compared with the last report, with a distributions of 27.1m b/d, 25.4m b/d, 100,000 b/d to 1.2m b/d, compared with quarterly distribution of 26.3m b/d, 24.5m 25.8m b/d and 25.9m b/d, respectively. last month’s report. b/d, 25.0m b/d and 25.9m b/d, respec- The balance for 1Q has been revised down The year 2002 shows a downward tively (see Table J).

26 OPEC Bulletin MARKET REVIEW

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

1998 1999 2000 1Q01 2Q01 3Q01 4Q01 2001 1Q02 2Q02 3Q02 4Q02 2002

World demand OECD 46.8 47.7 47.8 48.8 46.5 47.5 47.8 47.7 48.7 46.4 47.3 48.5 47.7 North America 23.1 23.8 24.1 24.2 23.7 24.0 23.9 24.0 24.0 23.9 24.0 24.2 24.0 Western Europe 15.3 15.2 15.1 15.2 14.8 15.5 15.2 15.1 15.2 14.6 15.3 15.4 15.1 Pacific 8.4 8.7 8.7 9.4 8.0 8.1 8.8 8.6 9.4 7.9 8.0 9.0 8.6 Developing countries 18.2 18.6 18.8 18.7 18.8 19.0 18.4 18.7 18.8 18.9 19.1 18.8 18.9 FSU 4.3 4.0 3.8 3.9 3.7 3.8 4.4 3.9 3.9 3.7 4.1 4.4 4.0 Other Europe 0.8 0.8 0.7 0.8 0.7 0.7 0.7 0.7 0.8 0.8 0.7 0.7 0.8 China 3.8 4.2 4.7 4.4 4.9 4.7 5.0 4.7 4.5 5.0 4.6 5.0 4.8 (a) Total world demand 73.8 75.2 75.8 76.6 74.6 75.7 76.4 75.8 76.7 74.7 75.9 77.4 76.2

Non-OPEC supply OECD 21.8 21.3 21.9 21.8 21.6 21.8 22.3 21.9 21.9 21.7 21.9 22.4 22.0 North America 14.5 14.1 14.3 14.2 14.3 14.5 14.7 14.4 14.4 14.4 14.6 14.9 14.6 Western Europe 6.6 6.6 6.7 6.8 6.5 6.6 6.9 6.7 6.7 6.5 6.6 6.9 6.7 Pacific 0.7 0.7 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.7 0.7 0.7 0.8 Developing countries 10.5 10.8 11.0 11.0 10.8 11.0 11.0 11.0 11.2 11.0 11.3 11.2 11.2 FSU 7.3 7.5 7.9 8.2 8.5 8.6 8.8 8.5 8.8 9.0 9.1 9.3 9.0 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 3.2 3.3 3.2 3.3 3.3 3.3 3.3 3.3 3.4 3.4 3.3 Processing gains 1.6 1.6 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 Total non-OPEC supply 44.5 44.6 45.8 46.2 46.0 46.6 47.3 46.5 47.1 46.9 47.6 48.2 47.5 OPEC NGLs 3.0 3.1 3.2 3.2 3.2 3.2 3.2 3.2 3.3 3.3 3.3 3.3 3.3 (b) Total non-OPEC supply and OPEC NGLs 47.5 47.6 49.0 49.5 49.2 49.9 50.5 49.8 50.4 50.2 50.8 51.5 50.7

OPEC crude oil production1 27.8 26.5 27.9 28.1 27.1 27.2 26.3 27.2 Total supply 75.2 74.1 76.9 77.6 76.3 77.1 76.8 76.9 Balance2 1.5 -1.1 1.2 0.9 1.7 1.4 0.4 1.1

Closing stock level (outside FCPEs) m b OECD onland commercial 2698 2446 2527 2523 2595 2650 2621 OECD SPR 1249 1228 1210 1210 1207 1205 1220 OECD total 3947 3675 3737 3733 3803 3855 3841 Other onland 1056 983 999 998 1017 1031 1027 Oil on water 859 808 876 913 834 863 na . Total stock 5861 5466 5612 5645 5653 5749 na .

Days of forward consumption in OECD Commercial onland stocks 57 51 53 54 55 55 54 SPR 26 26 25 26 25 25 25 Total 83 77 78 80 80 81 79 Memo items FSU net exports 3.0 3.4 4.1 4.3 4.7 4.8 4.4 4.6 4.9 5.3 5.0 5.0 5.0 [(a) — (b)] 26.3 27.6 26.8 27.1 25.4 25.8 25.9 26.0 26.3 24.5 25.0 25.9 25.4

Note: Totals may not add up due to independent rounding. na not available. 1. Secondary sources. 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 29, while Graphs One and Two (on pages 28 and 30) show the evolution on a weekly basis. Tables Three to Eight, and the corresponding graphs on pages 31–36, 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).

February 2002 27 MARKET REVIEW

Graph 1: Evolution of spot prices for selected OPEC crudes, October 2001 to January 2002

$/barrel 35 Saharan Blend Arab Light Minas Arab Heavy Iran Light Dubai Kuwait Export Tia Juana Light Brega OPEC Basket Bonny Light 30

25

20

15

10 1 2 3 4 5 1 2 3 4 1 2 3 4 1 2 3 4 October November December January

28 OPEC Bulletin MARKET REVIEW

Table 1: OPEC spot crude oil prices, 2001–2002 ($/b)

2001 2002 Member Country/ Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec January type of crude (API°) 5Wav 4Wav 4Wav 4Wav 5Wav 4Wav 5Wav 4Wav 4Wav 5Wav 4Wav 4Wav 1W 2W 3W 4W 4Wav Algeria Saharan Blend (44.1) 26.08 27.80 24.82 25.65 28.47 28.16 24.82 25.96 26.13 20.65 19.00 19.08 19.67 20.88 18.95 19.00 19.63 Indonesia Minas (33.9) 24.03 25.62 25.64 27.64 28.21 27.86 25.32 24.82 24.59 19.53 18.29 17.64 18.89 19.21 19.17 18.46 18.93

IR Iran Light (33.9) 22.63 24.65 23.58 24.05 25.58 25.80 23.78 24.68 24.54 20.04 17.64 17.69 18.90 19.88 18.33 18.45 18.89

Iraq Kirkuk (36.1) —————————————————

Kuwait Export (31.4) 21.08 23.10 22.03 22.50 24.03 24.25 22.47 23.13 22.99 18.49 16.09 16.14 18.25 19.02 17.65 17.53 18.11

SP Libyan AJ Brega (40.4) 25.93 27.79 24.69 25.54 28.85 28.18 24.96 25.73 25.91 20.62 19.00 18.81 19.65 20.88 19.00 19.12 19.66

Nigeria Bonny Light (36.7) 25.43 27.40 24.35 25.43 28.51 28.06 24.81 25.41 25.98 20.60 18.92 18.78 19.88 20.81 18.88 18.96 19.63

Saudi Arabia Light (34.2) 22.31 24.82 23.77 24.24 25.77 26.17 24.03 24.92 24.73 20.16 17.82 17.99 18.95 19.63 18.55 18.22 18.84 Heavy (28.0) 20.74 23.32 22.57 23.15 24.60 24.88 22.61 23.77 23.63 19.36 17.00 17.21 18.20 18.78 17.70 17.37 18.01

UAE Dubai (32.5) 22.56 24.79 23.67 24.06 25.40 25.86 23.45 24.70 24.37 19.93 17.62 17.60 18.63 19.39 18.01 17.91 18.49

Venezuela Tia Juana Light1 (32.4) 23.18 22.79 21.08 20.79 22.77 22.30 20.55 21.54 20.72 17.66 15.28 14.89 15.77 16.58 14.64 14.73 15.43

OPEC Basket2 24.06 25.41 23.70 24.38 26.25 26.10 23.73 24.46 24.29 19.64 17.65 17.53 18.50 19.30 17.81 17.69 18.33

Table 2: Selected non-OPEC spot crude oil prices, 2001–2002 ($/b)

2001 2002 Country/ Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec January type of crude (API°) 5Wav 4Wav 4Wav 4Wav 5Wav 4Wav 5Wav 4Wav 4Wav 5Wav 4Wav 4Wav 1W 2W 3W 4W 4Wav

Gulf Area Oman Blend (34.0) 22.43 24.29 23.26 23.82 25.55 25.53 23.61 24.44 24.49 19.93 17.67 17.87 18.76 19.45 18.09 17.94 18.56

Mediterranean Suez Mix (Egypt, 33.0) 22.09 22.61 19.73 21.58 24.56 23.83 21.37 22.48 23.11 17.75 16.09 16.68 17.78 18.59 16.10 15.23 16.93

North Sea Brent (UK, 38.0) 25.60 27.30 24.42 25.37 28.35 27.96 24.66 25.78 25.84 20.54 18.80 18.58 19.71 20.58 18.70 18.82 19.45 Ekofisk (Norway, 43.0) 25.51 27.49 24.34 25.38 28.45 27.59 24.55 25.70 25.73 20.35 18.70 18.51 19.62 20.49 18.59 18.67 19.34

Latin America Isthmus (Mexico, 32.8) 24.80 24.63 22.60 22.86 24.62 24.25 22.67 23.86 23.49 18.94 16.61 16.73 17.72 18.63 16.45 16.55 17.34

North America WTI (US, 40.0) 29.42 29.48 27.27 27.37 28.60 27.67 26.53 27.41 26.40 22.20 19.49 19.40 20.36 20.97 18.81 18.79 19.73

Others Urals (Russia, 36.1) 24.40 24.78 21.72 23.60 26.46 25.60 23.08 24.46 25.05 19.80 17.83 18.37 19.42 20.33 17.68 17.38 18.70

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.

February 2002 29 MARKET REVIEW

Graph 2: Evolution of spot prices for selected non-OPEC crudes, October 2001 to January 2002

$/barrel 35

Oman Isthmus Suex Mix West Texas Brent Urals Ekofisk OPEC Basket 30

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20

15

10 1 2 3 4 5 1 2 3 4 1 2 3 4 1 2 3 4 October November December January

30 OPEC Bulletin MARKET REVIEW

Table 3: North European market — bulk barges, fob Rotterdam ($/b) regular gas premium gas fuel oil 2000 naphtha unleaded 87 unleaded 95 gasoil jet kero 1%S 3.5%S January 27.41 27.81 28.23 28.96 32.24 19.85 18.83 February 29.87 31.63 32.32 29.85 32.72 21.52 19.81 March 31.06 35.71 36.27 30.28 34.01 22.67 22.12 April 24.83 32.90 33.42 28.23 32.81 19.44 18.12 May 28.39 37.01 38.99 29.87 32.07 20.02 18.70 June 30.41 40.57 44.28 31.40 34.40 23.79 21.23 July 29.89 36.51 37.67 33.02 36.07 24.13 19.79 August 29.79 34.82 36.20 36.46 38.69 21.47 19.69 September 33.28 36.87 37.70 42.09 43.84 24.29 23.04 October 33.15 34.72 35.28 40.06 43.64 27.06 23.82 November 32.51 32.72 33.46 40.68 43.61 25.61 22.18 December 29.27 27.77 28.05 34.25 37.50 23.24 18.31 2001 January 27.36 29.44 29.85 30.15 32.03 20.54 15.48 February 29.23 32.11 32.49 30.88 33.41 20.48 18.21 March 27.19 30.69 31.52 29.38 31.72 20.56 17.58 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 18.98 19.95 20.76 21.67 23.34 16.15 15.24 Sources: Until September 2000 Platt’s Oilgram Price Report & Platt’s Global Alert; as of October 2000 Reuters. Prices are average of available days.

Graph 3: North European market — bulk barges, fob Rotterdam $/barrel 50

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10 naphtha fuel oil 1%S regular fuel oil 3.5%S premium jet kero gasoil 0 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2000 2001 2002

February 2002 31 MARKET REVIEW

Table 4: South European market — bulk cargoes, fob Italy ($/b) gasoline fuel oil 2000 naphtha premium unleaded 95 gasoil jet kero 1%S 3.5%S January 26.26 27.55 28.06 31.43 20.48 17.85 February 28.57 32.11 29.97 31.28 22.12 19.05 March 29.65 36.27 29.63 32.31 22.40 21.27 April 23.41 32.77 26.69 31.16 19.28 17.09 May 27.01 38.38 29.15 29.67 20.52 16.51 June 28.93 44.06 30.14 31.99 24.50 19.95 July 28.26 38.25 32.92 34.18 23.20 18.76 August 28.14 36.67 36.09 36.60 20.85 17.85 September 31.58 37.87 41.97 41.89 25.00 21.49 October 32.48 37.20 41.53 41.85 27.16 23.58 November 32.47 33.57 40.44 40.33 24.71 19.47 December 27.74 27.79 34.92 35.99 23.46 17.96 2001 January 26.35 28.76 27.32 28.73 20.13 14.35 February 26.04 31.89 31.32 29.11 18.80 16.86 March 24.13 30.53 27.55 27.89 18.39 16.28 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 27.58 27.74 18.20 16.93 September 23.46 29.93 27.58 29.36 18.99 17.44 October 19.14 23.55 27.58 23.61 15.61 15.07 November 16.22 19.41 27.58 20.54 13.61 12.48 December 16.91 19.11 27.58 19.16 15.15 13.15 2002 January 18.01 19.89 27.58 19.53 17.65 14.00 Sources: Until September 2000 Platt’s Oilgram Price Report & Platt’s Global Alert; as of October 2000 Reuters. Prices are average of available days.

Graph 4: South European market — bulk cargoes, fob Italy $/barrel 50

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10 naphtha jet kero premium fuel oil 1%S gasoil fuel oil 3.5%S 0 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2000 2001 2002

32 OPEC Bulletin MARKET REVIEW

Table 5: US East Coast market — New York ($/b, duties and fees included) gasoline fuel oil 2000 regular unleaded 87 gasoil jet kero 0.3%S LP 1%S 2.2%S January 29.41 34.21 39.42 30.08 21.76 20.42 February 33.91 34.64 35.50 31.74 22.90 21.22 March 37.10 32.01 34.31 27.07 21.06 20.87 April 30.35 30.16 32.20 26.81 20.98 19.85 May 37.17 31.39 33.26 28.66 24.59 21.86 June 40.12 32.62 33.69 30.69 27.11 23.20 July 36.04 32.53 34.42 29.28 24.44 22.20 August 36.33 37.17 38.59 29.48 24.50 21.57 September 39.90 41.25 43.80 37.21 29.42 25.39 October 39.83 41.04 42.86 36.86 29.51 25.96 November 39.56 43.46 45.52 35.43 28.66 25.26 December 30.96 39.52 40.97 34.59 25.63 22.04 2001 January 34.81 35.51 36.03 33.09 25.40 22.34 February 34.68 32.99 34.90 31.51 23.38 19.73 March 32.96 31.12 32.91 27.61 23.31 20.30 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 22.90 22.53 23.63 19.23 16.07 15.22 Sources: Until September 2000 Platt’s Oilgram Price Report & Platt’s Global Alert; as of October 2000 Reuters. Prices are average of available days.

Graph 5: US East Coast market — New York $/barrel 50

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10 regular fuel oil 0.3%S LP

gasoil fuel oil 1%S

jet kero fuel oil 2.2%S 0 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2000 2001 2002

February 2002 33 MARKET REVIEW

Table 6: Caribbean cargoes — fob ($/b) fuel oil 2000 naphtha gasoil jet kero 2%S 2.8%S January 28.17 30.61 32.85 19.82 18.46 February 33.52 31.85 32.95 20.57 19.36 March 32.74 30.82 33.01 20.17 19.70 April 28.25 29.44 30.74 19.15 18.50 May 32.59 31.11 31.84 21.16 19.39 June 36.24 32.27 32.78 22.27 21.40 July 31.06 32.35 33.38 20.84 19.67 August 32.92 36.63 37.80 19.78 18.54 September 35.32 41.01 42.78 23.59 20.46 October 34.77 39.90 41.32 23.95 21.71 November 34.37 40.93 43.64 22.96 17.96 December 29.73 34.63 36.40 19.89 16.90 2001 January 34.10 35.56 36.17 20.21 16.48 February 29.87 31.85 32.42 18.14 16.31 March 28.63 28.97 30.11 18.26 17.16 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 19.55 21.47 22.28 14.54 13.90 Sources: Until September 2000 Platt’s Oilgram Price Report & Platt’s Global Alert; as of October 2000 Reuters. Prices are average of available days.

Graph 6: Caribbean cargoes — fob $/barrel 50

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10 naphtha fuel oil 2.0%S gasoil fuel oil 2.8%S jet kero 0 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2000 2001 2002

34 OPEC Bulletin MARKET REVIEW

Table 7: Singapore cargoes ($/b) gasoline fuel oil 2000 naphtha premium unleaded 95 gasoil jet kero 0.3%S 180C 380C January 25.02 28.36 28.14 31.30 21.58 19.66 19.95 February 27.09 31.16 29.90 31.14 23.43 20.76 21.15 March 29.08 32.58 32.94 32.37 25.85 24.66 24.69 April 25.01 28.01 26.73 27.99 24.54 22.13 22.39 May 27.27 31.90 28.12 29.09 26.62 23.62 23.60 June 28.13 33.08 30.69 31.23 26.78 25.30 25.31 July 27.80 36.05 31.86 33.25 25.45 22.00 22.09 August 30.19 38.31 37.46 37.98 27.08 21.57 21.64 September 34.53 35.05 40.13 42.21 28.44 24.81 24.87 October 33.50 33.03 38.96 43.30 26.77 26.35 26.55 November 30.43 32.96 34.85 39.88 26.50 24.36 24.49 December 25.52 29.97 29.61 32.92 24.45 19.78 19.74 2001 January 25.50 30.02 28.41 29.70 22.54 18.37 17.99 February 27.83 31.33 27.57 30.48 22.68 19.91 19.69 March 27.43 29.88 26.83 28.72 22.43 20.08 20.04 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 19.20 20.95 20.94 22.77 16.30 16.04 16.19 Sources: Until September 2000 Platt’s Oilgram Price Report & Platt’s Global Alert; as of October 2000 Reuters. Prices are average of available days.

Graph 7: Singapore cargoes $/barrel 50

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10 naphtha fuel oil 0.3%S premium fuel oil 180C gasoil fuel oil 380C jet kero 0 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2000 2001 2002

February 2002 35 MARKET REVIEW

Table 8: Middle East— fob ($/b) fuel oil 2000 naphtha gasoil jet kero 180C January 24.62 26.63 29.87 18.47 February 26.75 28.32 29.64 19.59 March 28.42 31.28 30.79 23.40 April 24.42 25.01 26.36 20.66 May 26.84 26.39 27.46 22.06 June 27.63 28.76 29.40 23.60 July 27.07 29.73 31.24 20.27 August 29.12 35.24 35.88 19.49 September 33.03 37.79 40.01 22.98 October 31.51 36.62 40.97 24.39 November 28.88 32.42 37.38 22.05 December 24.19 26.46 29.73 17.06 2001 January 24.29 25.05 26.38 15.68 February 26.86 24.40 27.31 17.58 March 26.28 24.31 26.41 17.93 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 19.42 20.08 21.92 15.01 Sources: Until September 2000 Platt’s Oilgram Price Report & Platt’s Global Alert; as of October 2000 Reuters. Prices are average of available days.

Graph 8: Middle East — fob $/barrel 50

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10

naphtha jet kero

gasoil fuel oil 180C 0 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2000 2001 2002

36 OPEC Bulletin MEMBER COUNTRYMEMBER COUNTRY FOCUS FOCUS

At the end of the prescribed term, the project would be Nigeria unveils plans to strengthen transferred to the ADE. The opening of the sealed tenders is operations of ports this year scheduled to be conducted in Algiers in June this year. The Oran plant would be the country’s second desalination Abuja — The Nigerian Minister of Transport, Ojo Maduekwe, unit, after the unit to be constructed at Arzew, also awarded has said that the privatization of the country’s ports, scheduled recently to the Japanese association of Itochu/Ihi. for this year, would proceed speedily and thoroughly to improve Two other desalination units are projected to be set up in operations in the West African country. Algeria, one in Algiers and the other in Skikda, in the east of However, he told newsmen in the capital Abuja that the the country. state-run Nigerian Port Authority (NPA) would not be sold off, noting that “the government is not in the process of selling the NPA.” The proposed privatization of Nigerian ports has drawn Iran and Syria hold discussions controversy over the fate of the workers of the Authority. The on boosting energy co-operation Minister explained that the privatization programme was de- voted to “the improvement of those aspects that will be amenable Damascus — The first meeting of the Iran-Syria joint energy to privatization, so as to achieve the optimal level of moderni- commission was held last month with the participation of zation at our ports.” representatives from Iran’s Ministry of Energy and Syria’s Ministry He said the development of port infrastructure and increased of Electricity. training of personnel and allied workers would be some of the At the talks, Syrian Deputy Minister of Electricity, Sofyan dividends of the envisaged privatization. Al-Alav, pointed out that peak energy consumption in Syria had “What we are looking at is beyond privatization. The goal reached 4,699 megawatts, while its power-generating capacity is the modernization of the ports and the tool is privatization,” stood at 7,700 mw. he explained. According to a survey, domestic capacity should reach 15,500 Maduekwe went on: “We are studying models around the mw in 2020, which would require investment of $10 billion, world where ports are fully privatized, and the federal govern- the Islamic Republic News Agency (IRNA) reported. ment will only be involved in land ownership, safety of opera- Referring to the fact that Syria imported 90 per cent of its tions and training.” electrical supplies from overseas, Al-Alav expressed an interest He said the strengthening of the ports and operations of the in Tehran-Damascus joint power generation projects. NPA were aimed at positioning them effectively for the chal- Iranian Deputy Energy Minister and Managing Director of lenges facing Nigeria as a commercial hub in West Africa’s the state-run power firm Tavanir, Mohammad Ahmadian, maritime sector. referred to the potential of the Iranian energy sector. According to the Minister, Nigeria was strategically placed Syria is currently the most significant market for Iran’s in the world to handle increased crisscrossing of ocean liners and electrical equipment and energy services. So far, 25 agreements vessels from Asia to Europe and America. have been signed between the two countries, while 40 more are He noted, however, that except the mainly private sector- being discussed. controlled ports of Hong Kong and Singapore, “there is no port in the world where there is zero participation on the part of the government.” Pertamina seeking out-of-court settlement with power firm Algeria accepts offers from four Jakarta — Indonesian state oil and gas company Pertamina firms for desalination plant will seek an out-of-court settlement with independent power producer (IPP) Karaha Bodas. Algiers — The Algerian Water Authority (ADE) last month The move comes despite a recent ruling by a Geneva-based accepted technical offers from four international firms for the arbitration panel awarding $261.1 million in compensation to realization of a desalination plant at Oran, in western Algeria. the firm for the cancellation of a power scheme in 1998. The firms comprise French water companies Vivendi and Pertamina had filed an appeal against the ruling and was Ondeo Degrement, the United States-Spanish group of Madesa, asking the American-Japanese-Indonesian joint venture to re- and SNC Lavalin of Canada. solve the dispute through an out-of-court mechanism for the The plant would have a capacity of 100,000 cubic metres/ sake of all parties, the Jakarta Post newspaper reported. day of water and would be constructed with World Bank support The international tribunal ordered both Pertamina and state under a build-operate-transfer procedure. electricity company PT PLN to pay compensation, plus interest The successful company would be responsible for the global of four per cent per year starting in January 2001, to Karaha financing of the plant, which it would operate on a concessionary Bodas. basis over a period varying between 10 years and 20 years. The company is 37.5 per cent-owned by Florida Power, 37.5

February 2002 37 MEMBER COUNTRY FOCUS

per cent by New York-based Caithness, five per cent by Japan’s needed by the energy sector, the official said that some 90 per Tomer, and 10 per cent by Indonesia’s Sumarah Daya Sakti. cent of the required equipment, including generators, electricity Pertamina said it would approach Karaha Bodas to recom- posts and power transfer lines, were currently being produced mence the development of the $1 billion geothermal power and manufactured by Iranian firms and factories. project in the West Java region. The joint-venture company had invested about $100m in the scheme before the project was stopped. PLN would renegotiate the power selling rates with Karaha Shell’s Nigerian unit to generate Bodas, said the report, adding that either Pertamina or PLN 400 megawatts of electricity would pay arrears due to the IPP, which had signed a contract in 1994 to develop the 400-megawatt project. Abuja — The leading oil and gas producing company in Industry observers said the out-of-court settlement would be Nigeria, Shell Petroleum Development Company (SPDC) is essential for Indonesian energy and power companies as they assisting the government to realize its plan of attaining regular faced several arbitration suits filed by other IPPs, whose projects and uninterrupted power supplies this year. had been affected, or earnings from power sales had suffered, This would be done through the generation of 400 mega- due to huge differences in market demand and the dollar/rupiah watts of electricity by the middle of 2002, said Shell in its exchange rate. monthly Shell Bulletin. The Indonesian government had been stressing the need to The figure would be raised to 1,930 mw by the end of 2004 renegotiate the IPP contracts as energy demand in the country from the Afam V power plant of the state-run National Electric had fallen below expectations since the mid-1990s economic Power Authority (NEPA). and political crisis. The power project would boost NEPA’s power generation The IPP contracts were set on a more optimistic energy capacity by 20 per cent, while the Afam V plant currently demand scenario and double-digit economic growth projections. supplied 100 mw to the national grid. According to the report, the work, to involve investment totalling $540 million, was expected to be undertaken jointly with Eskom Enterprises, a South African utility company. Iran’s power capacity to get SPDC’s Managing Director, Ron van den Berg, was quoted 800-megawatt boost by March as saying that the project fitted in perfectly with the national strategy of ensuring reliable and cost-effective power supply. Tehran — The current capacity of existing Iranian power “Our involvement in the project indicates our commitment plants, affiliated to the Energy Ministry, is some 27,000 mega- to the long-term sustainable development of Nigeria,” he added. watts and will be increased by 800 mw by the end of the current The report also pointed out that the project would help to Iranian year in March, it was announced last month. stimulate the Nigerian economy by enabling the delivery of The Managing Director of the Iranian Electricity Promo- reliable, affordable and cleanly generated power to the people. tions Organization, Hossein Mahmoudzadeh told reporters that Shell secured approval to undertake the Afam V power plant three phases of the Shazand power plant in the central city of for an initial period of 15 years from an open tender process Arak joined the country’s electricity network this year and a conducted by NEPA late last year. fourth phase was set to become operational in the next few months. The Islamic Republic News Agency (IRNA) quoted him as saying that four phases of the Kerman combined-cycle power UAE’s Borouge begins first plant in south-eastern Iran had so far become operational, shipments to Egypt, India adding that this power plant would have eight phases, the fifth of which was going through test operations. Abu Dhabi — The Abu Dhabi Polymers Company (Borouge) Six gas units of the Martyr Rajaie power plant, located in this month made its first shipments of petrochemical products the northern province of Qazvin, comprising nine gas and steam to Egypt and India and will begin exports to Syria shortly, it units, had been put into operation and three other units would has been announced. become operational next month, said IRNA. Having gone on stream last month, the $1.2 billion Borouge Mahmoudzadeh noted that the capacity of the country’s petrochemicals complex had achieved full capacity production power plants would reach 40,000 mw by the end of the country’s of ethylene and 70 per cent capacity of polyethylene, said the third five-year development plan. firm’s Chief Executive Officer, Joost Schrevens. During this period, the absorption of foreign capital in the He noted that production was going ahead at full steam, and area of energy would be paid special attention to, he said, stating said that they expected to achieve 100 per cent production of that some reputable German, Swedish and Japanese companies polyethylene by the end of February. had announced an interest to take part in Iranian energy Schrevens was quoted by the Gulf News of Dubai as saying projects. that some 2,000 tonnes of ethylene had been shipped to Egypt Regarding efforts made to produce equipment and facilities and India.

38 OPEC Bulletin MEMBER COUNTRY FOCUS

“As per our plans, one-third of the total production will be The report said the planned cut in production was part of exported to Middle East markets and the rest will be shipped Indonesia’s agreement with Thailand and Malaysia to cut rub- to Asia and Europe,” he said. ber exports by four per cent over the next two years to lift prices The Borouge complex at Ruwais comprises a 600,000 tonnes/ on the global market. year ethylene cracker and two Borstar bimodal polyethylene plants with a combined production capability of 450,000 t/y. Borouge signed a contract recently with the Abu Dhabi National Tanker Company to undertake shipments of ethylene Khelil launches exploitation from Ruwais to the hub port of Mina Zayed, as well as to Jebel of Algeria’s first gold field Ali in Dubai. An accord has also been signed by Borouge with Mina Zayed, Algiers — Algerian Energy and Mines Minister, Dr Chakib Mussafah port and Jebel Ali for the export of polyethylene. Khelil, last month launched the exploitation of the country’s first Schrevens said Borouge expected positive cash flows starting gold mine, situated in the south of the country. next year. “The market is a bit flat this year, but we will break The Tirek field, which contains pure gold reserves amount- even next year and this is as per our plans. The 11 September ing to about 600,000 ounces, has started production with incidents and what followed slowed down growth,” he noted. monthly average output of 55 kilograms. Global demand for polyethylene would touch some 50 million The project is being supervised by the National Gold Com- t/y by the end of 2002, far exceeding production, he went on. pany (ENOR), which has a capital of $110 million. It is owned “Borouge will be well-positioned to benefit from the in- 34.12 per cent by the Algerian oil and gas company, Sonatrach. creased global demand as by that time, the market will be Speaking at the ceremony, Khelil also announced the familiar with our products and our capacity will also be en- upcoming launch of an international tender for the joint exploi- hanced,” he added. tation of Tirek and the other gold mines of Amesmessa, located in the same area. The Amesmessa scheme, which has total gold reserves of 1.4 million ounces, will require investment of about $40m. Indonesia to introduce new ENOR expects the possible participation of Canadian, South rulings on tin, rubber exports African, and Australian firms, all of which had shown an interest in the project. Jakarta — Indonesia will soon introduce new rulings on the country’s tin and rubber exports, the Jakarta Post newspaper reported last month. The paper quoted Trade and Industry Minister, Rini Saudi Arabia plans to build Soewandi, as saying that the aim of the move was to control 20 more desalination plants exports and boost prices for the country’s two vital commodities. The new tin export ruling would replace Presidential Decree Riyadh — Saudi Arabia plans to build 20 desalination plants 146/1999, which allowed tin concentrate exports. The ruling to meet the growing domestic demand for fresh water, triggered would help curb rampant illegal tin mining, said the paper. by soaring population growth, it was reported last month. The government was also considering designating tin as a Another 13 projects to build 15,000 km of pipelines for the strategic commodity, the trading of which would be supervised transport of water, fuel and natural gas were under consideration by the Ministry, said Ferry Yahya, Director of Agriculture and on the east coast, said Abdullah Ibn Abdul Rahman Al-Hussain, Mining Exports at the Ministry. Governor of the Saline Water Conversion Corporation (SWCC). The state-owned tin mining firm PT Timah has repeatedly He noted that demand for domestic consumption of water, complained about rampant illegal mining at its sites. which was rising at an average rate of 2.6 per cent annually, According to Timah, many thousands of illegal miners were would increase from 1.8 billion cubic metres in 2000 to 2.03bn producing 30,000 tonnes/year, compared with the company’s cu m in 2004, and to 3.1bn cu m by the year 2020. production of 40,000 t/y from the Bangka and Belitung islands. The figures were contained in a special report issued by Tin concentrate exports by illegal miners had affected global SWCC to mark 20 years of rule by Saudi Arabia’s King Fahd. prices, which had fallen to $3,630/t since the middle of last year, Major cities to benefit from the new plants include Riyadh, the lowest in three decades, said the paper. Timah said its tin Jeddah, Makkah, Taif, Dammam and Jubail, as well as other production cost was averaging $4,200/t. areas in the central and southern parts of the Kingdom. The new ruling on rubber exports would also help prop up The population of the Kingdom is just over 22 million, prices, said the paper, pointing out that the government would according to 2000 figures, with 73.6 per cent of the total being cut this year’s exports by 10 per cent to some 1.23 million t. Saudi nationals. The government had earlier said it would cut rubber output Average individual consumption of drinking water in major by 60,000 t this year and by 75,000 t next year through cities has jumped from 120 litres/day in 1980 to 315 lt/d in replanting in older plantations, while prohibiting the expansion 2000. of acreage by encouraging planters to switch crops. Saudi Arabia, which accounts for 21 per cent of the global

February 2002 39 MEMBER COUNTRY FOCUS

production of desalinated water, has 30 plants built at a total The BMI report said the trade surplus would continue to cost exceeding $18.6bn, including $4bn for operation and be the dominant contributor to a healthy current account maintenance. surplus and it expected the current account to record a $5.5bn All the country’s desalination plants are run by SWCC, and surplus in 2001. produce over 3m cu m/d of fresh water and 5,000 megawatts For 2002, the current account would stand at $4.07bn, said of electricity. the BMI. Again, this marked a sharp fall on the 2000 surplus, Several foreign companies are vying to enter the Kingdom’s which provisionally stood at $9.21bn, equivalent to 15.1 per water desalination industry, which experts estimate will need cent of GDP, it added. investment of $40bn over the next 20 years. The drive is being led by companies from the United States, Japan and South Korea, but also involves local investors. The Kingdom’s Supreme Economic Council, headed by Indonesian government mulls Crown Prince Abdullah, has set up a permanent department to new laws on investment receive and scrutinize offers from local and foreign firms regard- ing desalination projects. Jakarta — The Indonesian government will be tabling a new bill on investment in the country, to replace the existing laws which are more than three decades old, it was announced last month. Iran’s industrial exports to “We will submit a new bill to the House of Representatives hit $2.7 billion in 2002-03 for deliberation in February,” said Theo F Toemion, the Chair- man of the Investment Co-ordinating Board. Tehran — Iran’s industrial exports will increase from a value He stressed that the government planned to provide equal of $1.72 billion in the current Iranian year (which started on treatment both to foreign and local investors under the new law. March 20, 2001) to $2.7bn next year, according to a report in The proposed new bill, to replace the 1967 law on foreign the English-language Iran Daily last month. investment and the 1968 law on domestic investment, would The paper quoted Ahmad Qasemi, Director General of aim to make Indonesia a more attractive investment destination. Exports at the Ministry of Industries and Mines, as saying that Theo noted that he had studied several countries’ investment some $1.2bn worth of goods were exported during March- laws and planned to set up a single agency to approve investment December last year. projects and offer attractive incentives, including tax holidays. He noted that the country’s third five-year economic devel- The new law is part of moves to reverse the recent steep opment plan (2000-05) projected industrial exports at $1.72bn decline in foreign investment in Indonesia, which dropped by for the current Iranian year, of which 93 per cent had so far been a hefty 41.5 per cent year-on-year to $9.02 billion in 2001. achieved. Investors have been expressing concern about political and Qasemi said the major industrial exports were ferrous metals security uncertainties, as well as laws prohibiting their opera- (15.3 per cent), mineral products (14.3 per cent), textiles (12.2 tions. Under existing laws, foreign investors are expected to take per cent), and foodstuffs (11.6 per cent). on a local partner after a certain number of years in operation. “The budget for the coming fiscal year projects $5.28bn of A new law on wealth-sharing with provinces has led to non-oil exports, 41 per cent of which will comprise industrial confusion affecting several foreign-owned projects. Provincial products,” he pointed out. administrations had been claiming right of partnerships and royalty fees, said diplomatic sources. UAE seen likely to register $4.38bn trade surplus for 2001 Nigeria and Switzerland sign accord on debt rescheduling Abu Dhabi — The United Arab Emirates (UAE) is expected to register a trade surplus of $4.38 billion for 2001, equivalent Abuja — The governments of Nigeria and Switzerland have to seven per cent of the country’s gross domestic product, signed a debt rescheduling agreement, covering the $152 million according to a new study. owed to the Alpine nation by Nigeria. The nation’s trade surplus was forecast to decline to $2.64bn The debt is being rescheduled for repayment in 18 years, in 2002, with the expected weakening of oil prices, said the latest including a three-year moratorium period, at a fixed interest rate country report on the UAE by Business Monitor International of 4.7 per cent per year. (BMI). Nigerian Minister of Finance, Adamu Ciroma, signed for The UAE posted a trade surplus of $9.23bn in 2000, the Nigerian government, while the Swiss Ambassador to Ni- according to provisional figures. The central bank is yet to geria, Rudolf Knoblauch, signed for his country. update the provisional balance of payments data which it re- Speaking at the signing ceremony, Ciroma expressed the leased earlier in 2001. hope that the rescheduling would open a new chapter in relations

40 OPEC Bulletin MEMBER COUNTRY FOCUS

between the two countries and promote greater bilateral eco- in Abu Dhabi last month showed that total Arab oil export nomic, commercial and financial co-operation. earnings swelled to about $180bn in 2000, up from around “I seize this opportunity to reaffirm Nigeria’s commitment $118bn in 1999. towards actualizing the agreements and in working towards a The growth was due to a sharp increase in crude prices to reduction in Nigeria’s external debt burden through discussion nearly $27/barrel, up from $17.50/b the previous year. and negotiation with our creditors,” he said. Economists said they expected Arab GDP to have slowed Ciroma said the rescheduling would also provide a platform down in 2001 as crude prices had lost nearly $4/b, with output for the resumption of normal business, trade and investment also lower. Oil production was set to go down further this year, relations between the two countries, which were hindered by a in line with the OPEC/non-OPEC deal to cut supplies. previous inability to resolve the problem created by a backlog of debt service arrears. He urged Switzerland to accelerate the restoration of insur- ance cover by the Swiss Export Credit Agency for Nigerian Qatari firm begins supplies of imports from Switzerland, particularly by private-sector organi- caustic soda to local market zations. Ciroma also called for the Swiss government to sponsor trade Doha — The Qatar Vinyl Company (QVC) has started and investment missions to Nigeria, with a view to ensuring a supplying caustic soda to the local market, it was announced last speedy improvement in business relations between the two month. countries. The first local delivery was made to gas firm RasGas, The Head of Nigeria’s Debt Management Office, Akin according to Hamad Rashed Al-Nuaimi, who is QVC’s Deputy Arikawe, pointed out that the government had earlier concluded General Manager. an agreement with the 15 member countries of the Paris Club The company began the production of caustic soda in April of creditor nations, to which Nigeria owed 75 per cent of its total last year from its $700 million world class petrochemical unit debt of about $28.6 billion. at Mesaieed. The total debt to be rescheduled under the accord was the The plant has been designed to produce a total of 580,000 equivalent of $20bn, he said, adding that Nigeria would sign tonnes/year of caustic soda in solution form of 50 per cent a bilateral agreement with each of the Paris Club members concentration. within the framework of the debt rescheduling deal. Nuaimi said the supply of caustic soda was mainly to overseas destinations. However, with the setting up of a new truck- loading station at Mesaieed, QVC was now able to supply caustic Arab states posted growth soda to the local and regional market. QVC was set up to produce raw materials for the PVC of 12.5 per cent in 2000 industry. Besides caustic soda, it can produce 175,000 t/y of ethylene dichloride (EDC) and 230,000 t/y of vinyl chloride Abu Dhabi — The economies of Arab countries grew by monomer (VCM). nearly 12.5 per cent in 2000, with most of the increase achieved The unit is the first producer of EDC, VCM and caustic soda in the Middle East, due to strong oil prices, according to official in Qatar, using available ethylene produced by Qapco as one and independent estimates. of the feedstock materials. The combined gross domestic product of the 22-nation Arab League leapt to $709 billion in 2000 from around $629bn in 1999, concluded a recent study on the performance of Arab economies in 2000. Algeria records trade surplus The study was prepared by the Abu Dhabi-based Arab of $10.28 billion in 2001 Monetary Fund (AMF), the 10-member Organization of the Arab Petroleum Exporting Countries (OAPEC), and the Ku- Algiers — Algeria registered a $10.28 billion trade surplus last waiti-based Arab Fund for Economic and Social Development. year, down from the $12.71bn surplus recorded in 2000, it was “There was growth of around 12.5 per cent, mainly because officially reported last month. of expansion in industries and other sectors and higher exports, According to the National Statistics Centre, the country’s mainly crude oil,” said the report. total global exports were worth about $20.04bn in 2001, down Experts said it was the highest recorded growth rate since by 9.04 per cent from the $21.85bn recorded the previous year. the early 1980s. Gulf oil producers registered the largest growth Last year’s imports cost the nation $9.76bn, up by 6.4 per in the region as oil sales accounted for more than 80 per cent cent over 2000 figures. Hydrocarbon exports constituted the of their income and a third of their GDP. bulk (97.2 per cent) of Algeria’s sales abroad in 2001, and were They estimated that combined GDP in the six-nation Gulf valued at $19.47bn, compared with $21.23bn in 2000. Co-operation Council (GCC) jumped by more than 15 per cent The 2001 hydrocarbon export figure was revised upwards in 2000 to around $330bn, nearly 45 per cent of total Arab GDP. from a provisional estimate of $18.5bn, which has been an- An Arab League study presented to an economic conference nounced earlier in the month.

February 2002 41 OPEC FUND NEWS OPEC Fund extends debt relief under HIPC to two African countries, and assists victims of volcano in DR Congo

In January and early February, the OPEC Fund for International Development extended debt relief under the Enhanced HIPC Initiative to two countries, Senegal and Mauritania, and supported a sugar-producing factory in the Sudan. It also approved four new grants totalling $339,000, including one to help the victims of a volcanic eruption in the Democratic Republic of Congo. Details are given in the following press releases.

No 1/2002 finance community, including multilat- debt relief under the HIPC Initiative and Dakar, Senegal, January 16, 2002 eral institutions. the Enhanced framework in the total In October 1999, the international amount of $145.8 million. The relief is community agreed to make the Initiative directed to 21 countries, 17 of which are Senegal gets debt relief broader, deeper and faster by increasing in Africa and four in Latin America. from OPEC Fund under the number of eligible countries, raising In June 2000, the decision point was the amount of debt relief each country reached for Senegal, and support to a the HIPC initiative would receive and speeding up delivery. comprehensive debt reduction package for Both HIPC and the subsequent HIPC this country under the HIPC Initiative The OPEC Fund for International Devel- Enhanced Framework foresee this being was agreed upon by the IMF and the opment has signed an agreement with the achieved through a strategy of fully pro- World Bank. Total relief from all Sen- Republic of Senegal for the provision of portional burden-sharing among all offi- egal’s creditors is worth around $850m. In debt relief within the framework of the cial creditors. About 38 countries could net present value (NPV) terms, the package Enhanced Heavily Indebted Poor Coun- ultimately qualify for HIPC assistance, of is equal to $688m. This assistance will tries (HIPC II) Initiative. Endorsed by the which 34 are in sub-Saharan Africa. To help Senegal advance its poverty reduction Interim and Development Committees of date, 24 countries have reached their de- programmes and stimulate widely shared the World Bank and the International cision point under the Enhanced HIPC and sustainable economic development. Monetary Fund in September 1996, the Initiative and of these, four have reached The OPEC Fund has been involved in Initiative represents a united effort by the their completion point under the original development activities in Senegal for over international community to address the HIPC Initiative. These 24 countries are two decades, providing balance of pay- external debt problems of the world’s now receiving debt relief which will amount ments support, helping finance a com- heavily indebted poor countries. Specifi- to some $36 billion over time. They qualify modity imports programme and assisting cally, it aims to reduce the debt of eligible for debt relief in two stages: in the first projects in the sectors of agriculture, edu- countries to sustainable levels, subject to stage, the debtor country will need to cation, industry, transportation and water satisfactory policy performance, in order demonstrate the capacity to use prudently supply and sewerage. The country has also to ensure that adjustment and reform the assistance granted by establishing a benefited from technical assistance grants efforts are not put at risk by continued satisfactory track record, normally for three which went towards regional programmes high debt and debt service burdens. As the years; in the second stage, the country will in the energy, agriculture and health sec- Initiative requires participation by all rel- implement a full-fledged poverty reduc- tors, and one emergency grant to help evant creditors, debt relief efforts entail tion strategy and an agreed set of measures alleviate food shortages. Under this agree- co-ordinated actions by the international aimed at enhancing economic growth. ment, financing in the amount of $6.9m The OPEC Fund — committed as it will be made available to ease Senegal’s is to strategies aimed at securing economic debt burden. OPEC Fund for International Development, Parkring 8, PO Box 995, 1011 Vienna, Austria. growth for the countries it works with — The agreement was signed in Dakar, Tel: +43 1 515640; fax: +43 1 513 9238; tx: 1- has from the very beginning expressed its Senegal by Mamadou Faye, Director of 31734 fund a; cable: opecfund; e-mail: support of the Initiative and has partici- Debts and Investments of the Republic of [email protected]; Web site: http://www. pated actively in its design. Senegal, and by HE Dr Y Seyyid Abdulai, opecfund.org. So far, the OPEC Fund has approved Director-General of the OPEC Fund.

42 OPEC Bulletin OPEC FUND NEWS

No 2/2002 lishing a satisfactory track record, nor- The agreement was signed in Nouak- Nouakchott, Mauritania, January 22, 2002 mally for three years; in the second stage, chott by HE Mohamed Ould Nany, the country will implement a full-fledged Minister of Economic Affairs and Devel- poverty reduction strategy and an agreed opment of the Islamic Republic of Mau- OPEC Fund extends debt set of measures aimed at enhancing eco- ritania, and by HE Dr Y Seyyid Abdulai, relief to Mauritania under nomic growth. Director-General of the OPEC Fund. The OPEC Fund — committed as it the HIPC initiative is to strategies aimed at securing economic growth for the countries it works with — No 3/2002 The OPEC Fund for International Devel- has from the very beginning expressed its Vienna, Austria, January 29, 2002 opment has signed an agreement with the support of the Initiative and has partici- Islamic Republic of Mauritania for the pated actively in its design. provision of debt relief within the frame- The OPEC Fund has approved debt OPEC Fund extends work of the Enhanced Heavily Indebted relief under the HIPC Initiative and the humanitarian aid to Poor Countries (HIPC II) Initiative. Enhanced framework to 21 countries, 17 Endorsed by the Interim and Devel- of which are in Africa and four in Latin Congo volcano victims opment Committees of the World Bank America. and the International Monetary Fund in In February 2000, the decision point The OPEC Fund for International Devel- September 1996, the Initiative represents was reached for Mauritania, and support opment has approved an emergency assist- a united effort by the international com- for a comprehensive debt reduction pack- ance grant of $100,000 to the Democratic munity to address the external debt prob- age to this country under the HIPC Ini- Republic of Congo to help purchase relief lems of the world’s heavily indebted poor tiative was agreed upon by the IMF and items for victims of the recent volcanic countries. Specifically, it aims to reduce the World Bank. Over time, total relief eruption that inundated the city of Goma the debt of eligible countries to sustainable from all of Mauritania’s creditors will with lava flows. At least half of Goma’s levels, subject to satisfactory policy per- amount to approximately $1.1bn, which 500,000-strong population have lost their formance, in order to ensure that adjust- implies debt service savings of roughly homes and, with most of the business ment and reform efforts are not put at risk $36m per year over the next 10 years, or district destroyed, livelihoods too have by continued high debt and debt service 40 per cent of total yearly debt obligations. been compromised. burdens. As the Initiative requires partici- In net present value terms (NPV), this relief So far, relief workers have made con- pation by all relevant creditors, debt relief represents around $622m. This assistance siderable headway in restoring water sup- efforts entail co-ordinated actions by the will help Mauritania cope with its external plies, and food continues to be delivered international finance community, includ- debt burden and reduce the strain on to the estimated 350,000 people who have ing multilateral institutions. national budgetary resources, thus freeing returned to their homes. By the middle of In October 1999, the international up funds to help accelerate structural re- this week, additional shipments should community agreed to make the Initiative forms and finance needed social pro- reach some 55,000 households. Mean- broader, deeper and faster by increasing grammes. while, refugee camps in Rwanda are still the number of eligible countries, raising The OPEC Fund has been involved in struggling to re-unite families separated the amount of debt relief each country development activities in Mauritania for during the flight from their homeland. would receive and speeding up delivery. over two decades, providing balance of Efforts are underway to clear lava from Both HIPC and the subsequent HIPC payments support, helping finance a com- Goma’s airport, and inhabitants are slowly Enhanced Framework foresee this being modity imports programme and assisting trying to rebuild their lives, although most achieved through a strategy of fully pro- public sector projects in the sectors of of the infrastructure remains buried under portional burden-sharing among all offi- agriculture, education, energy and trans- a layer of lava that will remain hot for cial creditors. About thirty-eight countries portation. months. could ultimately qualify for HIPC assist- The Fund has also helped promote The UN Secretary General, Kofi ance, of which 34 are in sub-Saharan Mauritania’s private sector. In addition, Annan, has appealed to the international Africa. To date, 24 countries have reached the country has also benefited from tech- donor community to assist with ongoing their decision point under the Enhanced nical assistance grants for regional pro- relief and cleanup efforts. Immediate needs HIPC Initiative and of these, four have grammes in the areas of agriculture, health, are essential supplies such as blankets, reached their completion point under the energy and transportation, and two others plastic sheeting, utensils as well as food, original HIPC Initiative. These 24 coun- in support of social development. Addi- water clothing and other goods. tries are now receiving debt relief which tional grants were extended towards the The OPEC Fund’s contribution to will amount to some $36 billion over time. purchase of educational materials and the aid effort will be used to procure They qualify for debt relief in two stages: helping alleviate food shortages. Under emergency relief items, food and medical in the first stage, the debtor country will this agreement, financing in the amount supplies and will be channeled through need to demonstrate the capacity to use of $9m will be made available to ease the International Federation of Red Cross prudently the assistance granted by estab- Mauritania’s debt burden. and Red Crescent Societies.

February 2002 43 OPEC FUND NEWS

No 4/2002 Company Ltd, and by HE Dr Y Seyyid has extended to ARCT. In 1994, $80,000 Khartoum, Sudan, February 7, 2002 Abdulai, Director-General of the OPEC was approved to help upgrade the Centre’s Fund. training facilities, and in 1997, a $100,000 grant co-financed a training programme OPEC Fund supports on strengthening technical human resource sugar producing firm No 5/2002 skills in sub-Saharan Africa. in the Sudan Vienna, Austria, February 13, 2002 No 6/2002 A private sector loan agreement for $10 Fund approves $80,000 Vienna, Austria. February 13, 2002 million was signed between the OPEC grant in support of Fund for International Development and the Kenana Sugar Company in the Sudan. training workshops OPEC Fund supports Operating near Rabak from a 70,000 research project with hectare estate, of which 43,000 ha are The OPEC Fund for International Devel- under cultivation, the Kenana Sugar opment has approved a grant of $80,000 $60,000 grant Company is presently undergoing a $61m in support of a one-year programme, the capacity expansion programme. The aim Promotion of Modern Women Entrepre- The OPEC Fund for International Devel- is to increase sugar production to substi- neurship for Food Security and Poverty opment has approved a grant of $60,000 tute for imports and generate foreign ex- Alleviation in Rural Africa, sponsored by in support of a research project launched change flows. the African Regional Centre for Technol- by the Corsica-based DYNMED Research The Fund loan will help finance the ogy (ARCT). Group. To be implemented within the project’s core component, the boiler unit, Under this scheme, a series of work- framework of the European Union’s which will furnish sufficient thermal and shops will be held in Dakar, Senegal, with Euromed Heritage Programme, the initia- electrical energy to increase cane-crushing the aim to help develop the technical skills tive aims to increase the capacity of south- capacity to target levels. Output is conse- of micro-, small- and medium enterprises ern Mediterranean countries to upgrade, quently expected to expand by 50 per cent, in the agro-food sector, particularly those manage and promote their own tradi- from a current maximum of 300,000 tons run by women. tional resources through partnership with to some 450,000 t of refined white sugar The workshops will provide training the northern countries of the region. annually. for women in the area of modern food Working together, research teams and This loan represents the OPEC Fund’s processing; rural entrepreneurs on the local actors will first identify the particular first private sector operation in the Sudan. construction and operation of bio-digestors skills and know-how that lend themselves Substantial assistance totaling $140m, and the use of compost for horticultural to promotion, and then develop them into however, has previously been directed to purposes; enterprise managers and gov- a series of pilot projects designed to en- the public sector in the form of loans: ernment officials in the negotiation of courage development in the region. project loans went to benefit the energy, contracts for the acquisition and transfer Expected to run over a three-year period transportation and agricultural sectors, four of food technologies for rural micro-enter- (2002-2004), the project will concentrate loans were extended for balance of pay- prises; and a one-week study tour on the on traditional economic channels such as ments support and four others financed technical co-operation and entrepreneur- ceramics, textiles, food processing and commodity imports programmes. ship among developing countries in North metal and stoneworking. Other areas of The country has also benefited from a Africa, which will be attended by women focus include technology transfer, strength- large number of Fund grants directed at a officials and entrepreneurs. ening the role of social agents, developing diverse range of projects and programmes, ARCT was established in 1977 by entrepreneurial and organizational capa- from the construction of primary schools African heads of state and plenipotentiar- bilities and the endorsement of profes- and rural water supply and sanitation ies and became operational in 1980. sional training through seminars and schemes, to health care improvement, Headquartered in Dakar, the Centre has workshops. research studies and emergency assist- a current membership of 31 member states. DYNMED was established in 1992 as ance. Its mandate is to strengthen the tech- an interdisciplinary international network In addition, the Fund has helped the nological capabilities of African countries, of researchers, consisting of 22 research Sudan cover its subscription to the Com- and become an efficient instrument for groups from 11 different countries, namely, mon Fund for Commodities, the Amster- the promotion and co-ordination of tech- Italy, France, Spain, Portugal, Greece, dam-based international organization nological policies and capacities at regional, Tunisia, Algeria, Egypt, Palestine, Leba- aimed at achieving stable conditions in national and international levels, espe- non and Turkey, with Morocco and Syria commodity trade. cially with regard to food, energy, capital showing a keen interest in joining. The agreement was signed in Khar- goods and information technology devel- The OPEC Fund has made a previous toum, the Sudan, by Osman Abdalla El opment. contribution of $15,000 to DYNMED in Nazir, Managing Director of Kenana Sugar This is the third grant the OPEC Fund support of an earlier research project.

44 OPEC Bulletin SECRETARIAT NOTES

No 7/2002 can and European countries. IDLI held its Vienna, Austria, February 13, 2002 inaugural meeting at the OPEC Fund’s headquarters in Vienna on March 18, January 1983. Its mandate is to promote the use OPEC Fund extends of legal resources in the development $99,000 for legal process of developing and transition Secretary General’s diary economy countries. To this end, IDLI training seminars conducts training courses for legal profes- sionals and, since its inception, has trained The Oil, gas and electricity summit was The OPEC Fund for International Devel- some 9,600 individuals from 162 coun- organized by The Economist Conferences opment has approved a grant of $99,000 tries. for Greece & Cyprus, and held in Athens, to help finance the attendance of legal The first course, on Enterprise and Greece, January 30–31, 2002. professionals from developing countries at investment for lawyers, which will be held two training courses to be held at the in June–July 2002, is designed to assist The 2002 Annual meeting of the World International Development Law Institute’s lawyers and advisors to governments and Economic Forum was held in New York, (IDLI) seat in Rome, Italy in 2002. Or- business communities in meeting the legal USA, January 31–February 4, 2002. ganized by the IDLI, training will be di- challenges that arise from complex prob- rected towards the latest developments in lems associated with a country’s economic international trade and business. restructuring and its transformation into Secretariat missions Proper legal expertise plays a vital role a market-oriented economy. in the development process, where project The course will also examine the The 7th Mediterranean petroleum confer- financing, contracting and investment special legal issues that are encountered ence & exhibition (MPC 2002) was organ- involve complex negotiations and the during enterprise formation and opera- ized by the Tripoli-based International drafting of intricate agreements. How- tion. A second two week seminar will Energy Foundation, and held in Tripoli, ever, many developing countries fail to be conducted during September 16–27, Libya, January 15–17, 2002. derive the full benefits of international 2002. Legal and regulatory aspects of transactions as their representatives often e-commerce and public procurements The Interim meeting of international oil lack the specialized legal skills to deal with will examine regulatory and transactional organizations (a continuation of the 4th the technical issues that frequently arise. aspects of electronic commerce, drawing International meeting on oil statistics), was As a result, delays and excessive costs occur on a number of examples from existing organized by the IEA/OECD, and held in during a project’s implementation, result- multilateral, regional and national initia- Luxembourg, January 25, 2002. ing in many lost opportunities. tives. IDLI was established in March 1983 The OPEC Fund has been active in The Sixth meeting of experts from energy as a non-governmental, international or- furthering the development of IDLI, and exporting and importing countries was or- ganization and converted in 1991 to a has previously extended three grants to ganized by the IEA, and held in Abu public international entity by an intergov- IDLI totaling $359,000 to sponsor the Dhabi, UAE, January 28–29, 2002. ernmental agreement formed by a number attendance of 50 participants from devel- of African, Asian, Northern, Latin Ameri- oping countries at earlier seminars. Training courses entitled An introduction to futures & Energy futures workshop were organized by IPE Training, and held in London, UK, January 29–31, 2002.

OPEC Meetings

The 119th Meeting of the Conference will be held at the OPEC Secretariat, Vienna, Austria, on March 15, 2002.

February 2002 45 OPEC FUND NEWS O Felix Ayadi, Amitava Chatterjee and C Pat Obi The closure of European nuclear power For an in-depth look plants: a commercial opportunity for the gas-producing countries — Jean-Pierre at the oil market Pauwels and Carine Swartenbroekx Energy economics and related issues

and related issues Vol. XXV, No. 4 December 2001 September 2000 Energy taxes and wages in a general equilib- rium model of production — Henry Thomp- the OPEC Review son Oil outlook to 2020 Adnan Shihab-Eldin, Rezki Lounnas and Resource windfalls: how to use them — contains research papers Garry Brennand Rögnvaldur Hannesson OPEC oil production and market Atmane Dahmani and Energy consumption in the Islamic Repub- by experts from across fundamentals: a causality relationship Mahmoud H. Al-Osaimy lic of Iran — A M Samsam Bakhtiari and F

Oil demand in North America: Salman Saif Ghouri Shahbudaghlou the world 1980–2020 Oil and non-oil sectors in the Saudi Arabian economy — Masudul A Choudhury The price of natural gas A.M. Samsam Bakhtiari and Mohammed A Al-Sahlawi Now in its 25th annual volume, the June 2000 OPEC Review is published quarterly. The case for conserving oil resources: the Its content covers the international oil fundamentals of supply and demand — Douglas B Reynolds market, energy generally, economic Vicissitudes in the Hong Kong oil market, development and the environment. 1980–97 — Larry Chuen-ho Chow People wishing to submit a paper for Economic theory and nuclear energy — publication should contact the Editor-in- Ferdinand E Banks The economic cost of low domestic prod- Subscription enquiries to: Blackwell Chief of the OPEC Review, Farouk U uct prices in OPEC Member Countries — Publishers Journals, PO Box 805, 108 Muhammed, at the Public Relations and Nadir Gürer and Jan Ban Information Department, OPEC Secre- Cowley Road, Oxford, OX4 1FH, UK. tariat, Obere Donaustrasse 93, A-1020 March 2000 Free sample copies sent on request. Vienna, Austria. Energy and interfactor substitution in Tur- key— Carol Dahl and Meftun Erdogan Domestic demand for petroleum in OPEC The gas dimension in the Iraqi oil industry countries — Ujjayant Chakravorty, Recent issues — Thamir Abbas Ghadhban and Saadallah Fereidun Fesharaki and Shuoying Zhou Al-Fathi Cyclical asymmetry in energy consump- The Russian coal industry in transition: a tion and intensity: the Japanese experience linear programming application — Bo — Imad A Moosa September 2001 Jonsson and Patrik Söderholm Before demand-side management is dis- What have we learned from the experience The future of gaseous fuels in Hong Kong — carded, let’s see what pieces should be of low oil prices? — A.F. Alhajji Larry Chuen-ho Chow kept — Clark W Gellings The estimation of risk-premium implicit in oil prices — Jorge Barros Luís December 2000 December 1999 The economics of an efficient reliance Global energy outlook: an oil price scenario Energy in the Caspian Sea region in the on biomass, carbon capture and analysis — Shokri Ghanem, Rezki Lounnas late 1990s: the end of the boom? — Chris- carbon sequestration in a Kyoto-style and Garry Brennand tian von Hirschhausen and Hella Engerer emissions control environment — Gary W. The hybrid permit cum price ceiling policy Household energy demand in Kuwait: an Yohe proposal: intuition from the prices versus integrated two-level approach — M Nagy The geopolitics of natural gas in Asia — quantities literature — Gary W Yohe Eltony and Mohammad Hajeeh Gawdat Bahgat World oil reserves: problems in definition The economics of the Nigerian liquefied and estimation — Ghazi M Haider natural gas project — M Eghre-Ohgene June 2001 A vector autoregressive analysis of an oil- and O Omole Has the accuracy of energy projections in dependent emerging economy — Nigeria — Income determination in the GCC member OECD countries improved since the 1970s? states — Richard G Zind — Jan Bentzen and Hans Linderoth Oil product consumption in OPEC Member Countries: a comparison of trends and structures — Atmane Dahmani “The principal objective of the OPEC Review is to Oil and macroeconomic fluctuations in Ecuador — François Boye broaden awareness of (energy and related) issues, Energy indicators — OPEC Secretariat enhancing scholarship in universities, research March 2001 Estimating oil product demand in Indone- institutes and other centres of learning.” sia using a cointegrating error correction model — Carol Dahl and Kurtubi

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February 2002 47 ORDEROPEC FUND NEWSFORM

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48 OPEC Bulletin