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K December Conference capbusy will year ments when the 160 upon a busy year with some notable unexpected develop - As 2011draws to aclose, OPEC’s Oil Ministers will reflect of crude in the future, inlinewith OPEC’s longstanding planners as they seek to ensure steady, secure supplies an ultimate resolution, andadd to theuncertainty facing are still very much active issues, with no clear vision of Africa andthesovereign debt crisis intheEuro-zone. Both tor —theupheavals inpartsof theMiddle East andNorth extending into theworld economy, including theoil sec an unexpected, but pronounced, way, with implications Few peoplecome would to thefore dispute ontheinternational thefact agenda that this two topics year have in damentals. go before prices better reflect supply anddemand fun- ket this year suggests that there is still much to further price volatility we have continued to seeintheoil mar strengthen financial sector regulation since 2008,the es. Despite theprogress that has already beenmade to century —theimpact of thefinancial markets onoil pric which has troubled theoil industry for most of thenew Energy Agency held asecond joint workshop onatopic before Shortly the International that, also in Energy ForumVienna, andtheInternational experts from OPEC, tions seek to secure apost-Kyoto agreement. are fully andfairly represented as theongoing negotia- that theinterests of oil-producing, developing countries UN Framework Convention onClimate Change, to ensure Many of themwill befresh back from the20 in Vienna onDecember 14. for theoverlapping 17 have beenable to make southto Durban thetripfurther the well-informed participants. Some Ministers may also provided oneof many energy issues examined in depthby Qatar in Doha, where the challenges facing the oil market Petroleum Congress, hosted by OPEC Member Country th Meeting of the Conference is held th Conference of theParties to the th World - - - have come at abetter time inthe build-up to the 160 Ministers during theirdeliberations in Vienna onDecember 14. Conference. Insights gained from such events will clearly benefit OPEC’s the 160 TheMinisters will beeager to reach amarket-related agreement at for thecoming months andbeyond. iar issues that need to be assessed when reviewing the market outlook attention of theMinisters at theConference, together with themore famil - commitment. These two topics, therefore, may well command thespecial what happened at the159 from June. However, perhaps someoutside observers made too much of portant here. The 20 is often at noticevery short andshrouded inuncertainty. Dialogue is im- adapt to changing circumstances, however severe, as they arise, andthis world affairs. Institutions of any persuasion ordiscipline, The year however, 2011has must demonstrated once again theunpredictability of any institution’s success. other regular processes is a clear, thoughoften understated hallmark of icated in-house analysis andadvice. The smoothrunning of these and concern newchallenges that arise where ourMember Countries seek ded- including market updates, budgets andstaff matters, while others may its Vienna-based Secretariat. Some of these may beof aroutine nature, of issues relating to theway theOrganization notably performs, through preme authority, theConference reviews anddecides uponawide range nounced to themedia at theconcluding press conferences. As OPEC’s su- just about preparing high-visibility production agreements that are an- important business to conduct at its meetings. Such gatherings Also, one aremust not not overlook the fact that the Conference has other ers andconsumers alike. and supportedthemas they rose again to levels acceptable to produc agreement, for example, which put afloorunder collapsing oil prices ments at theConference, benefiting all parties. Take theDecember 2008 has a very good record of reaching sound, realistic production agree- this, if onelooks back over the years, onewould seethat theOrganization during periods of highpressure. OPEC is noexception. Notwithstanding institution of any to sort fall of short aconsensus sometimes, especially th Meeting of theConference, to complete theunfinished business th World Petroleum Congress, for example, could not th Meeting. It is by nomeans unusual for an th Meeting of the -

Commentary OPEC bulletin Contents Market Spotlight Focus onAfrica Centre (QNCC), venue of the 20 night view of the Qatar National Convention This month’s cover shows anarchitectural Cover Vol XLII, No9,November 2011,ISSN 0474—6279 Publications Launch Cover image courtesy QNCC. Petroleum Congress inDoha,Qatar. northern hemispherenorthern Oil product markets seen improving as winter bites market stability A commitment to

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g Hard copy subscription: $70/year in PDF format. 2011 November OPEC Bulletin OPEC mation about theOrganization andback issues of the Visit theOPEC Web site for thelatest news andinfor Web site: www.opec.org E-mail: [email protected] Fax: +43121112/5081 Contact: The Editor-in-Chief, OPEC Bulletin Telefax: +4312164320 Telephone: +43121112/0 1010 Vienna,Austria Helferstorferstraße 17 Organization of thePetroleum Countries Exporting OPEC Publishers Mozambique’s growth New discoveries to drive Gas inthetank! Oil andGas Conference which are also available free of charge Gas Forum 12 28 Workshop Reuters - Petroleum Congress Doha hosts prestigious World Membership onDecember 31,2008. 1995. Indonesia joined in1962andsuspended its rejoined in2007.Gabon joined in1975andleft in in 1973,suspended its Membership in1992,and Nigeria (1971);Angola (2007). Ecuador joined OPEC Arab Emirates (Abu Dhabi, 1967);Algeria (1969); Qatar joined in1961; SP Libyan AJ(1962);United industry. The Organization comprises 12Members: and afair return oncapital to those investing inthe regular supply of petroleum to consuming nations; for petroleum producers; anefficient, economic and Countries, inorder to secure fair andstable prices and unifypetroleum policies among its Member and Venezuela. Its objective —to coordinate 10–14, 1960,by IRIran, Iraq, Kuwait, Saudi Arabia Organization, established inBaghdad, on September OPEC is a permanent, intergovernmental OPEC Membership andaims 6 first Summit inDoha producers hold gas Global 26 — El-Badri gas achievements heart of great oil and Technology at the Headquarters workshop at OPEC part inpetroleum Iraqi officials take Bite with the Bulletin 36

Leonardo Maugeri —

Spotlight 40 MITGE A man ahead of his time

Opinion 42

EGF Energetic stuff!

Newsline 46 Uncertainty’s certainty Borouge-3 to give substantial boost to UAE’s petrochemical operations Brent premium established as the new norm in oil markets (p48) Middle East oil tankers secure record fixtures in November (p49) US announces first lease sale in Gulf of Mexico since oil spill tragedy (p50) Japan sees surge in domestic oil use as nuclear option remains stalled (p51)

Secretary General’s Diary 52 Secretariat Activities 52 Arts and Life 54

Kuwait celebrates 50th Anniversary of the Constitution KNPC goes from strength to

strength (p56) Gredinger Picture this ... (p60)

OPEC Fund News 62 Market Review 68 Noticeboard 82 OFID hosts IEF symposium on alleviating energy poverty OPEC Publications 84

Secretariat officials Contributions Editorial staff Secretary General The OPEC Bulletin welcomes original contributions on Editor-in-Chief/Editorial Coordinator Ulunma Angela Agoawike Abdalla Salem El-Badri the technical, financial and environmental aspects Director, Research Division Editor of all stages of the energy industry, research reports Dr Hasan M Qabazard Jerry Haylins Head, Data Services Department and project descriptions with supporting illustrations Associate Editors Keith Aylward-Marchant, James Griffin, Fuad Al-Zayer and photographs. Alvino-Mario Fantini, Steve Hughes Head, Finance & Human Resources Department Production In charge of Administration and IT Services Editorial policy Diana Lavnick Department The OPEC Bulletin is published by the OPEC Design & Layout Alejandro Rodriguez Elfi Plakolm Secretariat (Public Relations and Information Head, Energy Studies Department Photographs (unless otherwise credited) Oswaldo Tapia Department). The contents do not necessarily reflect Diana Golpashin and Wolfgang Hammer Head, Petroleum Studies Department the official views of OPEC nor its Member Countries. Distribution Dr Hojatollah Ghanimifard Names and boundaries on any maps should not be Mahid Al-Saigh Head, PR & Information Department regarded as authoritative. No responsibility is taken Ulunma Angela Agoawike for claims or contents of advertisements. Editorial General Legal Counsel Asma Muttawa material may be freely reproduced (unless copyright- Head, Office of the Secretary General ed), crediting the OPEC Bulletin as the source. A copy Indexed and abstracted in PAIS International Abdullah Al-Shameri to the Editor would be appreciated. Printed in Austria by Ueberreuter Print GmbH Oil product markets seen improving

Oil product markets in the United States, the world’s largest energy consumer, are beginning to see some recovery after the “devastating” summer season, which saw demand for

Market Spotlight Market gasoline slump markedly. Countries According to OPEC’s Monthly Oil Market Report (MOMR) Exporting for November, with the impending start of the winter sea- son in the northern hemisphere, demand for middle dis- etroleum the P tillates in the US had averaged 4.2 million barrels/day of Report in October. Organization C lMEarket Encouraging news Oi This volume, said the report in its leading article, P represented a year-on-year increase of 446,000 Monthly b/d, a rise that was largely supported by higher O November 2011 export opportunities. This was encouraging news for oil demand e Article: Featur following the situation in the summer months, when OPEC estimated that demand for US Product markets ahead of winter 1 gasoline had fallen by two per cent. 3 In its September MOMR, OPEC com- Oil market highlightse article mented that the US driving season had Featur 5 vements fallen short of its peak, with the eco- 10 nomic slowdown contributing to a “dev- Crude oil price mo 16 astating performance”. Commodity markets World economy 28 The latest MOMR stated that gas- 39 oline demand in the entire Atlantic World oil demand rld oil supply 49 Basin had remained weak through- Wo ations y oper 55 out the year’s summer driving efiner season. anker market 58 T ade During this period, it said, Product markets and r Oil tr 64 US gasoline consumption vements 69 Stock mo averaged around 8.9m b/d, representing a decline of Balance of supply and demand

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OPEC bulletin 11/11 bulletin OPEC H Fax +4312164320 4 Tel +43121112 demand, andlimited exportopportunities. economic concerns intheEuro-zone, weaker domestic rowed onanumberof factors, including theimpact of Russian andstronger exports, regional consumption for from Asia, following refinery disruptions, adecline in This, said was the report, dueto reduced inflows in gasoil cracks. a sharp recovery of almost $3/b on the back of a rebound refinery margins for Brent crude inRotterdam had shown Despite the bearish sentiment inthetop of thebarrel, Stronger regional consumption The continued to show amixed performance. Incontrast, oil product market sentiment inEurope $7/b,” thereportexplained. on theUS Gulf Coast has reached ahighlevel of around mark crudes since January, even the margin for Arab Heavy of WTI, which has beendisconnected “Although this partly reflects from otherbench the relatively- low price the highest level seenin years. jumped to more than $25/bover thelast few months, West Texas Intermediate (WTI), on theUS Infact, Gulf themargin Coast for American benchmark had crude, back of exportopportunities to LatinAmerica andEurope. demand, US refiners had enjoyed healthy margins on the However, it noted that, despite theweak gasoline report. travel, leading to adecline inUS mileage,” observedthe “Thisels andrelatively reduction came as higherretail elevated gasoline unemployment prices lev impacted well below thepre-recession levels of 9.6mb/d. 300,000 b/d,or3.3percent, from theprevious year and as hemisphere northern winter bites MOMR said that light distillate cracks had nar - - article concluded.article any upward pressure on prices,” the supplied throughout thewinter season andshould limit “Takingensure that thecrude andproduct markets all these developments remain together, well this should days considered normal by theindustry. 57–58 days of forward cover, well above the level of 53 economies has kept OECD commercial stocks at “Moreover, around weak demand growth intheadvanced availability of light sweet crude. tial recovery inNorth Sea output, should result inahigher increase inLibyan oil production, combined with apoten- Onthecrude side, said theMOMR,continued normal. hemispherethe northern turned out to becolder than potential increase inheating oil demand if thewinter in would lead to higher middle distillate output to meet any begin to increase with theendof refineryoverhauls. Additionally,This it said, global refinery runs would also thesupplyport balance Increasing andbegin to narrow oil product margins. inflows were also likely to sup- Singapore. well as therestart of disrupted refineries in Taiwan and of refineries from maintenance in China and India, as supply situation inAsia could ease following thereturn The refinery margins for Dubai crude to $6/b. shutdown in Singapore, which contributed The market to therise in had tightened by been further a refinery year oncontinued healthy middle distillate demand. margins had kept thegains seenover thecourse of this InAsia, despite theweak naphtha cracks, refining well as continued strong demand inLatinAmerica. ultra-light sulphur diesel inthetransportation sector, as MOMR said that, looking ahead, theoil product leading MOMR’s leading

5 OPEC bulletin 11/11 6 OPEC bulletin 11/11 Oil and Gas Conference at the heart ofgreat joined other guest speakers, including the talks, whichthe talks, this yearashad their theme ‘Technology and innovation in Exporting Countries Forum (GECF), at his counterparts at the International a visit to Iran inearly November. He worldwide. For more than acentury, newtechnologies tries anddramatically transformed thesupply “It has geography profoundly changed thenature of ourindus- Tehran, Iran. IIES 15 Secretary General, Abdalla Salem El-Badri, told the made intheoil andgas industries over the years, OPEC Technology is at theheart of all thegreat achievements Conference onOiland Gas,during OPEC Secretary General, Abdalla International Institute ofEnergy Studies (IIES) 15 Energy Forum (IEF)and the Gas Salem El-Badri, addressed the th International Conference onOil andGas, in ac the oiland gas industry’. hievements Te oil and gas chnology — El-Badri th International

Instressing what anhonourit was for himto bein the opening address. Conference President, Eng Rostam Ghasemi, presented conference afterIranian Petroleum Minister andOPEC El-Badri was delivering akeynote speech to the and supply,” hesaid. and produced, leading to amassive growth inreserves have changed theway reserves are identified,developed El-Badri said thesuccessful application of new of drilling and production.” zons. “Technology has also beenagame-changer interms ments to sub-surface imaging of deepandcomplex hori- harder-to-reach fields,” he affirmed, referring to improve “Today many newtools allow us to finddeeperand explorers into newfrontier areas. and had extended thereach of surveyors, geologists and This had enhanced thelikelihood of finding oil andgas, Finding oil andgas able about different geological structures. improved thequantity andquality of information avail- theme of theconference —interms of exploration, had the OPEC Secretary General stated that technology —the Tehran, capital of oneof OPEC’s five Founding Members, A general view of the conference inTehran and (left) OPEC Secretary General, Abdalla Salem El-Badri, making his keynote address. - of oil —are widespread,” he said. carbon dioxide orotherchemicals to improve recovery “Of course, today, such techniques —using water, using the giant Duri oil field in Indonesia as an example. depleted —had beenbrought back to life, said El-Badri, new technology, old fields —orthose considered to be rates andextended thelife of existing oil fields. With Technological changes had also improved recovery total global oil supply accounts for 30percent,” hestated. was considered unconventional. Today, this of portion ones. Remember that only 40 years ago, all offshore oil resources once thought unconventional into conventional “Andnewtechnologies have helpedtransform lenging locations. production inharsh environments andremote andchal- industry’s drills to “frontier fields”, allowing drilling and technologies had literally extended thereach of the

7 OPEC bulletin 11/11 8 OPEC bulletin 11/11 Oil and Gas Conference into thefuture. been most impressive. Andthis was expected to continue Hepointed out thaton reserve growth the impact and the world’s of technological resource base change had also and additional supply to consumers.” discoveries, will result intremendous endowment growth that we will seemore oil —which, combined with new rates by several percentage points more, “we can assume technologicalfurther TheOPEC changesSecretary General said that could if newtools increase and recovery products. around theworld produce more environmentally-friendly mental risks and new technologies had helped refineries of newtransportation materials, had reduced environ - Cleaner oil andgas storage systems, andtheuse industry’s environmental footprint. El-Badri statedment of that newtechnologies theearly development had anddeploy also helpedreduce the only beenagame-changer, but also acost-cutter. ated with upstream activities. Technology had thus not reducing capital needs and minimizing the risks associ- the drilling andproduction costs of oil andgas activities, Henoted that technology had also helpedreduce El-Badri. strengthening of security of supply worldwide,” observed “Thus,of by oil helping andgas, to expand theglobal technology resource has base contributed directly to a Andtotalestimated original at 3.5trillion recoverable barrels, according resources to OPEC’s wereWOO. recently growth, orfuture discoveries. turned into proven reserves — either through reserve cent of theworld’s resource base still remained to be original El-Badri endowments said suggested that, looking globally, that more than 30per estimates of total and had produced more than 40percent of this amount. region had 40 per cent of the world’s original endowment Comparatively,nessed growth intotal endowments. But thenon-OPEC non-OPEC countries, too, had also wit of this amount. original endowment andhad produced just 20percent more importantly, they now had 60percent of theworld’s of world crude oil reserves —around 80percent —and Member Countries now accounted for themajority technological innovation over the years. Countries andtheirreserves had benefitted greatly from According to OPEC’s World Oil Outlook (WOO), Member OPEC’s World Oil Outlook - - in thelong-term.” in consuming countries that could impact demand levels also beaware of thepolicies andtechnological changes attention to crude prices intheshort-term,we should ongoing, timely investments. While we should pay close long-term nature of ourindustries, R&Deffortsrequire ous Hemaintained challenges. that this remains “We oneof should themost also remember that seri- given the majority of ourwork-force is aging andgrowing scarce.” ers who know how to best use this technology. But the out and buying new technology. We needskilled work all these areas. However, this El-Badri is said not technology just amatter “offers of going us away forward in reducing costs. ronment, andinextending thereach of theindustry and opment andproduction, ineffortsto protect theenvi- address all of sorts challenges …inexploration, devel- “In-depthscientifica vital andtechnical role inourindustries. It research has consistently has played helped able andmost convenient source of energy. may yet helpexpand oil’s role as theworld’s most afford- and gas industries. With innovation, further technology vation were thekey to thecontinued El-Badri success stressed that science, of theoil technology and inno- added. that fossil fuels “Thus, can innovations be friendly to the environment,” inscience he andtechnology mean technological solutions, El-Badri maintained if it was combined with targeted R&D efforts and new advances could make it commercially viable —especially posed challenges interms of costs andefficiency, further ture andstorage (CCS). Although this technology still Oneproven scientific innovation was carbon cap- Sultani, oneof theDeputies to thePresident of Iran. He also met briefly with other officials, including Dr to beconvened onDecember 14. year OPEC Ministerial Conference in Vienna, scheduled Conference President Ghasemi concerning theend-of- El-Badriof theevent also andheld talksgave a press with theIranian Minister conference and on the sidelines industry.” together —andcontinue to reach newfrontiers inour R&D activities, we can attend to this common challenge among Member Countries andgreater collaboration on lenge before us all. “But through continued dialogue This, headded, was thedelicate, dual nature of thechal- Continued dialogue - OPEC Secretary General, Abdalla Salem El-Badri, listening to the presentations. OPEC Conference. Eng Rostam Ghasemi, Iranian Minister ofPetroleum and President of the GECF Secretary General, Leonid Bokhanovsky. IEF Secretary General, Noé van Hulst.

9 OPEC bulletin 11/11 10 OPEC bulletin 11/11 Oil and Gas Conference for OPEC. Seyed Mohammad Ali KhatibiTabatabai, Iran’s Governor Advisor to the Minister for Legal and International Affairs; Sohrabi, Head of the Office of the Minister; AhmadVand, Representative; Mr Karimi, from the Minister’s Office; Mr Department; Safar Ali Keramati, Iran’s OPEC National Ghanimi Fard, Head ofOPEC’s Petroleum Studies of the Office of the OPEC Secretary General; Dr Hojatollah General; and from left to right: Abdullah Al-Shameri, Head Abdalla Salem El-Badri (fourthleft), OPEC Secretary of Petroleum and President of the OPEC Conference; Above: Eng Rostam Ghasemi (fourthright), Iranian Minister All photographs courtesy of the Iranian Ministry ofPetroleum. petroleum andenergy industries. training services for seniormanagers andexpertsof the tegic, developing andapplied researches, as well as It also provides consulting services, regarding stra- institutes. tion with leading national andinternational scientific studies, it has established scientific research coopera- try. As anactive research TheIIES centre is ininternational thethink energy tank of Iran’s petroleum indus- ment with afocus ontheoil andgas industry. about all aspects of innovation andtechnology manage- and share theirexperiences, newideas andresearch scientists, engineers and scholar students to exchange OrganizedMinistry, under theIIES the auspices Conference of the Iranian Petroleum brings together researchers, 1010 Vienna, Austria (tel: +43121112-0;e-mail: [email protected]). Submissions should bemade to: Executive Editor, OPEC Energy Review, OPEC Secretariat, Helferstorferstrasse 17, please refer to arecent issue of theOPEC Energy Review. spelt out andlisted inalphabetical order at theendof thepaper (aftertheendnote listings). For more details of style, authorship of three ormore names, thewords ‘et al’ should beinsertedafterthefirst name); references should be list at theendof thetext. Reference citations inthetext should beby last name(s) of author(s)anddate (for joint Endnotes should beindicated inthetext consecutively, with superscript numbers, andshould beexplained ina be easily comprehensible. Mathematical expressions should beclearly presented, with equations numbered. either via e-mail attachment orcompact disc (CD). Tables andfigures should titles,carry relate directly to the text and Manuscripts should bewritten inclear English andnot exceed 8,000words. Submissions should bedoneelectronically co-authors. Authors will retain copyright to theirpapers, while giving thePublishers’ Exclusive Licence to publish. affiliation, full postal address, e-mail address and telephone numbers. Similar details should beprovided for all of theprincipal authorshould begiven: full name (and,if different, desired name for publication purposes), title, Abstracts of upto 150words should beincluded. Inthecovering letter, oronaseparate sheet,thefollowing details publication elsewhere. Manuscripts are evaluated by referees. to imply that it contains original, unpublished work andis not being submitted for presented in anobjective and balanced manner. Submission of apaper will be held product of research inanarea of interest and value to thereadership, andthat it is The criteria for publication intheOPEC Energy Review are that thematerial is the world. distributed to universities, research institutes andothercentres of learning across the The OPEC Energy Review, which is prepared by theOPEC Secretariat in Vienna, is fields of energy economics, law, policy, the environment andinternational relations. relaunched quarterly academic journal, the OPEC Energy Review, which specializes inthe We invite you to submit awell researched scholarly paper for publication inOPEC’s Call for papers Editor-in-Chief/Chairman, Editorial Board: Dr Hasan MQabazard General Academic Editor: Professor Sadek Boussena Executive Editor: Angela UAgoawike

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and Pierru Axel 11/11/2010 2:56:44 PM 2:56:44 11/11/2010 11 11 OPEC bulletin 11/11 12 OPEC bulletin 11/11 World Petroleum Congress any other” experience “unlike to deliver Qatar promises World Petroleum Congress Doha hosts prestigious A traditional coffee which pot, represents hospitality and welcome inArabic culture.

Shutterstock Q The20 in global energy circles. of its kind andoneof themost prestigious conferences ers, will come together at what is now thebiggest event including ministers, industry expertsanddecision-mak Acarefully selected group of high-level participants, as well as for the State of Qatar as thehost nation. inspire apositive legacy for theenergy sector ingeneral, already confirmed as the biggest in the WPC’s history, will Expectations are highthat thefive-day gathering, business. brightest minds andbiggest names intheglobal energy Centre (QNCC) for thetriennial event andto someof the the 20 Energy andIndustry, DrMohammed Bin Saleh Al-Sada, Following welcoming remarks by Qatar’s Minister of the State of Qatar”. cessful bid is being hailed as a“great achievement for the Congress will behosted in theMiddle East. The suc the first time since the WPC’s establishment in1933that for theGulf OPEC Member since, surprisingly, it will be Qatar’s selection for hosting the meeting is a major coup Great achievement investment. solutions for all: promoting cooperation, innovation and and speak onProducer-consumer dialogue: expectations Salem El-Badri, whowill take partinaplenary session as will theOrganization’s Several OPECSecretary General, Abdalla Ministers will participate intheevent, Al Thani. address from theEmirof Qatar, Sheikh Hamad BinKhalifa th WPC will beofficially openedwith theinaugural doors of its brand newQatar National Convention an experience “unlike any other”. (WPC) onDecember 4–8,andpromises to deliver atar hosts the20 The country’s capital, Doha, will openthe th WPC will beheld under thethemeof Energy th World Petroleum Congress - - Convention Centre, venue of the 20 An architectural night view of the Qatar National Congress. its social, economic andenvironmental impact. alternative energy, themanagement of theindustry and operations, to therole of natural gas, renewable and technological advances inupstream anddownstream It looks at all aspects of theenergy industry, from its size andinternational standing. the ‘Olympian event’ of theoil andgas industry, such is with everysuccessive The WPC, which has grown gathering, instature is andimportance oftenreferred to as Energy Agency (IAE),Maria van derHoeven. by theExecutive Director of theParis-based International and deliverables. He is expected to bejoined onthepanel th World Petroleum plenary session. El-Badri, whowill take part in the OPEC Secretary General, Abdalla Salem 13 OPEC bulletin 11/11

OPEC 14 OPEC bulletin 11/11 Above: WPC delegates will beable to take advantage of such attractions as the souq Waqif market inDoha,withits many restaurants and Shisha lounges. According to astatement issued by the20 exhibition dedicated to oil andgas industries. earned its reputation as being themost significant global service companies andmanufacturers. It has more than national oil and gas companies TheExhibition showcases alongside key themost importantsuppliers, inter leading national oil andgas companies andagencies. mittees of the World Petroleum Council, including the Exhibition which features exhibits from the national com- Held alongside the WPC is the World Petroleum tional institutions, whoalso join inthedialogue. sectors,try non-governmental organizations andinterna- outside stakeholders, such as governments, It is other indus attended by aglobal oil andgas audience and ments being made across the range of their operations, for top energy stakeholders to showcase the advance- Organizing Committee, this year’s gathering is designed th WPC - - people of theregion with great honour,” hestated. unlike any other. Iwould like to say that we represent the ward to welcoming theworld anddelivering anexperience “Qatar is ready to host the20 years,” Al-Ghanim was quoted as saying. est array of industry stakeholders for thefirst timeinthree “The 20 Representing theregion energy matters. Qatar, but underscores theregion’s growing role inglobal being hosted inDoha is not only agreat achievement for Organizing Committee, said thefact that theCongress is Issa Bin Shahin Al-Ghanim, Chairman of the their growing credentials inahighly competitive market. as well as for representatives of theMiddle East to prove th WPC will bebringing together theworld’s broad th WPC andlooks for - - Around 5,000 delegates are expected to attend the develop new oil, gas and alternative energy resources, Congress, which will hear from some 500 speakers and as well as set higher standards for wiser, more efficient panelists, including more than 50 ministers from various and cleaner energy consumption. countries. In addition, around 500 top executives repre- “The need for a long-term view on the massive invest- senting energy companies and allied businesses, and ments required by the energy sector and the returns to hundreds of international journalists will be present. investors that adopt such a visionary approach, will also “Our partners and sponsors have been working be highlighted and debated,” it states. closely with the Organizing Committee to take the mes- The 20th WPC programme has been designed by a sage of the Congress to the world. We are fortunate to specialist team of senior experts comprising an elected have established long-term relationships with many programme committee chair with 11 representatives of our sponsors and plan to continue that trend,” said nominated by the World Petroleum Council, as well as Al-Ghanim. experts nominated by the national committees. With its headquarters in London, the World Petroleum Three members from the region — Iran, Qatar and Council comprises over 60 members from around the Saudi Arabia — are represented on the Committee. world, which together represent in excess of 95 per cent Ali Al-Sidiky, Congress Programme Committee of global oil and gas production and consumption. National Representative for Qatar, noted that the 20th The 20th WPC will focus its debate on solutions aimed WPC team has been travelling the world to secure the at providing global access for all to reliable, affordable support and participation of industry stakeholders and and sustainable energy in both the near and long-term. has been enthused by the response it has received from Comments carried by the event’s programme state top industry executives, many of whom will be panel par- that to achieve these goals, producers and consumers, ticipants and speakers at the event. governments and social representatives need to work in He affirmed: “The programme is designed to address close cooperation to develop innovative ways to find and the most important issues in the energy sector today and

Below: An architectural view of the inside of the QNCC, venue of the 20th WPC. OPEC bulletin 11/11 bulletin OPEC

15 16 OPEC bulletin 11/11 World Petroleum Congress delegates at the20 Al-Sidiky said this is important too, particularly to added. has become longer, As ultimately aresult, theindustry’s long benefiting list the world, he of best practices cured heobserved. andpreserved, recovery solutions are changing theway energy is pro- efficient, whilst modernreservoirmanagement and densates Newtechnology andotherproducts has to global locations made thetransport more of fuel, con- energy landscape. and key strategic investment have changed theglobal gates will hear more about how innovation, collaboration With thecurrent WPC programme, headded, dele- changed intheworld of energy. 19 Al-Sidiky pointed out that since Madrid hosted the ways,” hewas quoted as saying. helped shape global energy circles inunimaginable WPCs have grown into much greater ideas that have opinions. Some of these opinions voiced at previous “The WPC has always beenprivileged to hear their in these specific subjects. elicit constructive responses from people whospecialize Above: AQatari fisherman. th editionof the WPC inthesummer of 2008,much has th WPC, which is why oneof themajor at the20 “We are also proud to say that thepanelists andspeakers Brightest minds According(QNA), the20 to areportcarried by theQatar News Agency people will listen,” heprofessed. of trial, error and eventual success, “Whenthebrightest you can minds be sure intheworld that tell stories nent expertsintheworld,” hestated. event will be ExxonMobil’s Chief Executive Officer, Rex High-ranking industry officials attending the Minister, Sergei Schmatko. Minister of Oil andGas Affairs, andRussia’s Energy Oil andGas, DrAbdul Hussain BinAli Mirza, Bahrain’s Dr Mohammed Otherministers BinHamad Al Rumhy, participating at the WPC Omani will Minister of include Dhaen Al Hamli. United Arab Emirates Minister of Energy, Mohamed Bin Chairman of theKuwait Petroleum Corporation, andthe of Oil, State Minister of National Assembly Affairs, and Conference, DrMohammad Al-Busairi, Kuwait’s Minister Rostam Ghasemi, whois this year’s President of theOPEC Saleh Al-Sada, the Minister of Petroleum of Iran, Eng Qatari Energy andIndustry Minister, DrMohammed Bin ministers from the Middle East Theopening plenary region, session including the will feature prominent authorities. participation of high-ranking industry andgovernment tice keynotes andplenary sessions with theconfirmed broad variety of round-tables, special sessions, best prac the Congress. The technical programme also includes a Around 100of these papers will bepresented at economy, education and governance. and sustainabilitycommitment,environment, social, and petrochemistry; complementary energy sources; innovations inrefining, transportation, fuel technology tiersand technologies; fromwell theconsumer: tothe makes adifference; new exploration and production fron- tributed into five blocks —Naturalenergygas: the that ted for the24technical Anear 2,000 high-quality papers have forum sessions beensubmit which are dis- entities intheglobal market. Petroleum Council who represent over 95 per cent of all value chain and so are the members of the World “Oil and gas are omnipresent in the global energy tice presentations ineveryblock topic discussed. features at each Congress is theinclusion of best prac th WPC are undeniably among themost promi- th WPC is already establishing newrecords. - - - Tillerson, Shell’s CEO, Peter Voser, Robert Dudley from BP, The WPC is hosted every three years by a mem- Christophe de Margerie from Total, José Sergio Gabrielli ber nation of the 66-member World Petroleum Council, from Brazil’s Petrobras, and Nobel Peace Prize recipient, which is the only international organization represent- FW de Klerk from South Africa. ing all aspects of the petroleum sector and includes both Reda I Ali, the Organizing Committee’s Project OPEC and non-OPEC countries. Director, in confirming that the 20th WPC is already set The 20th WPC Organizing Committee will also host to be the biggest in WPC history, revealed that, in paral- social events for all registered delegates on the side- lel, the World Petroleum Exhibition, which has been sold lines of the Congress and Exhibition. These will include out for months, will be by far the most extensive since the Opening Ceremony on December 4 at the Doha the Congress began its meetings. Exhibition Centre; the Arabian Night on December 6 at In fact, this year’s event has attracted 20 per cent Doha’s Cultural Village (Katara); a Youth Desert Party on more participation than the 19th WPC held in Madrid in December 7 at the inland sea; and the official Closing 2008. Ceremony on December 8 at the QNCC. Over 50 international companies, sporting some of The QNCC, due to be inaugurated before the WPC, is the world’s leading brands, have given their support, one of the largest and most advanced centres of its kind both as partners and sponsors, for the 2011 WPC, which in the world. It took four years to complete. has again further enhanced the international credentials According to Saad Al-Muhannadi, Vice President of the event. of Capital Projects and Facilities Management at the They include both national and international oil firms, Qatar Foundation for Education, Science and Community as well as multinational leaders in analytics, law, mar- Development, the centre can accommodate 27,000 peo- keting and communication. ple at one time. He told QNA that it had 40,000 square metres of exhibition space, a conference hall for 4,000 delegates, a 2,300-seat lyric-style theatre, three additional tiered auditoriums, banquet space for up to 10,000 in exhibi- tion halls, in addition to a total of 57 meeting rooms, luxurious lounges, hospitality suites, a business centre and media rooms.

Pictured here is Qatar’s inland sea, Khor Al Udaid.

All photographs, unless otherwise credited, courtesy of QNCC. OPEC bulletin 11/11 bulletin OPEC

17 A commitment to market stability

Given the increasing scope and intricacies of the global energy system, it is essential to continually evolve data gathering, research and analysis into the industry’s past, present and future. From OPEC’s perspective, this can be viewed in two of its annual publications, the ASB and the WOO. Publications Launch Publications The former ties in the past and the present, bringing together time-series data for a wide variety of oil market and energy indicators, and the latter links the present and the future, with state-of-the-art economic modeling and forecasting used to present information, projections and concepts for the medium- and long-term outlooks. The Organization’s efforts are visible in comments expressed by OPEC Secretary General, Abdalla Salem El-Badri, in the forewords of both publications. In the ASB, El-Badri says the aim of the publication “is to provide accurate, reliable and timely historical annual data on the oil and gas industry.” He notes that the Organization’s data-gathering, ongoing since OPEC was formed in 1960, “has played an increasingly impor- tant role in the stabilization of the world oil market by ensuring greater transparency.” As for the WOO, he stresses that the 2011 edition “illustrates OPEC’s constantly evolving analysis of the global oil market, over all timeframes, and further rein- forces its commitment to market stability.” He adds that it is an important reference tool, “offering insights into trends and possible developments in the years ahead.” This year, the release of the two publications took place at a press conference on November 8, in front of assembled press and analysts at the OPEC Secretariat in Vienna, as well as a global online audience. The event was presided over by El-Badri, who was joined by Dr Hasan M Qabazard, Director of OPEC’s OPEC Secretary General, Abdalla Salem El-Badri. OPEC bulletin 11/11 bulletin OPEC

18 cu m,or51percent. 2009. Non-OPEC reserves, onthe other hand, were 98tr reserves. This marked anincrease of four percent from standard cubic metres, or49percent, of total world gas ProvenAt theendof natural 2010,Member Countries gas had reserves 94trillion also rose, Al-Zayer noted. activities for meeting global energy needs inthefuture. tinues to highlight theimportance of theOrganization’s Islamic Republic of Iran, Iraq and Venezuela —andcon- Countries was dueinparttoincreases 2010reserve inthe America. The total increase reserve inOPEC Member of reserves are now located in the Middle East and Latin Additionally, Al-Zayer noted that about 77percent produced around 11bnbthroughout 2010. was realized, despite thefact that Member Countries had from theprevious year. This increase inproven reserves of the global total, representing a0.4per cent increase 2009, to stand at 1,193bnb. This was nearly 82percent about 12percent —by theendof 2010,compared with Member Countries had risen by 129billion barrels —or Al-Zayer indicated that proven crude oil reserves inOPEC In presenting thekey messages of theASB2010/11, Rising proven reserves and main messages of theASB. the floorwas given to Al-Zayer to present thekey findings of OPEC’s Public Relations and Information Department, Following introductions by Angela Agoawike, Head Ban. and Senior Research Analysts, GarryBrennand andDrJan Studies Mohamed Department; Hamel, Senior Adviser; Services Oswaldo Department; Tapia, Head of theEnergy Research Division; Fuad Al-Zayer, Head of theData

(ASB) 2010/11andtheWorld OilOutlook (WOO)2011. the release of OPEC’s Annual Statistical Bulletin November 8press conference marking for theOPEC Bulletin onthe and James Griffinreport Alvino Mario Fantini November 2011 November 19 OPEC bulletin 11/11 20 OPEC bulletin 11/11 Publications Launch Fuad Al-Zayer, Head of the Data Services Department. well as intheMiddle East andLatinAmerica. Al-ZayerAmerica andtheAsia-Pacific noted that region, most especially increases China, as were found in North b/d, orabout 1.1percent. increased for thefirst timesince 2005,rising by 500,000 lion barrels/day, or 2.6 per cent. Consumption in the OECD sumption rebounded sharply in2010by around 2.2 mil- Additionally, ASBdata indicates that world oil con- and production activities. increased significantly, inlinewith growing exploration than those at theendof 2009.Also, active rigs worldwide rigs was 526,which is 63rigs —or13.6percent —more during 2010.At theendof 2010,thenumberof active drilling activities in OPEC Member Countries rebounded ing economic uncertainties, thenumberof active rigs and The data from the2010/11ASBshow that despite ongo- Drilling, consumption andproduction Eastern Europe andtheAsia-Pacific region. of natural gas reserves are located in the Middle East, and Venezuela, hesaid. Of theglobal total, 81percent Countries was driven by increases Theincrease in IR Iran, intotalSaudi Arabia gas reserves inOPEC Member the maximum was $94.31/binDecember 2010. average crude price was $77.43/binFebruary 2010,and ronment for investment decisions. The minimummonthly 2009, was less volatile andhad led to amore secure envi- Henoted that theORBin2010, as compared with aged $77.45/bin2010,upfrom $61.06/bin2009. ery. The OPEC Reference Basket (ORB),for example, aver Al-Zayer also noted that 2010had seensomeprice recov Price recovery Oswaldo Tapia, Head of the Energy Studies Department. 600,000 b/d,or2.2percent, more than in2009. total of 26.82mb/dof Overall, crude oil andoil hesaid, products OPEC in2010, Member Countries a exported Europe had received 4mb/d,or17.1percent. AmericaNorth intheamount of 5.1mb/d,or22percent. from OPEC Member Countries had by also been imported Asian andPacific countries. Large shares of crude exports — 11.5mb/d,or50percent —had beenreceived by of crude exported from OPEC Member Countries in2010 Interms of crude oil Al-Zayer exports, said thebulk b/d, or1.1percent, innon-OPEC producers. by 300,000b/d,or0.9percent, compared with 500,000 Countries in2010had increased theircrude oil production Turningto support increasing to crude oil world oil production, henoted that demand, OPEC inorder Member - - publication, the WOO is widely recognized as oneof the baton was passed to the WOO. Now inits fifth year of Following theconclusion of theASB presentation, the Setting thescene not from theprices charged by oil-producing countries. den ontheconsumer is taxation inconsuming countries, OPEC sales revenue and it is thus clear that thereal bur Al-Zayerby OECD countries pointed out that theamount is of around taxes $144bn per year more collected than tries, received $734bn. Countries, ontheotherhand, which are developing coun- resents ashare of 68percent, or$600bn.OPEC Member OECD countries received $878bn,of which theG7rep- As anannual average over that five-year period, OPEC Member Countries. compared with the$3,668bninrevenues received by $4,393bn, of which theG7nations absorbed $3,005bn, total amount of oil taxes received by Inaggregate, OECD for countries the five-year period2006–10,the was or exemptions, heexplained. the OECD that does not consider tax deductions, credits bined with a VAT estimate based ontotal consumption in revenues from excise taxes Thetax by reported theOECD, numbers used inthebrochure com- are based on the sale of that oil. 32 percent that oil producers themselves received from around 64 per cent from taxation, compared with around Forof example, theUnited Kingdom, Italy, noted Al-Zayer, Germany andFrance received in 2010 the governments price of alitre of crude. of oil According that goes to thedata,ofto taxes thecost theportion is of alitre often higher than the actual the national governments of oil-consuming countries. and theindustry margin, but also thetaxes imposed by per litre of oil is not only made upof Al-Zayer theactual crude price explained that theprice that end-users pay tuations —andhow much goes to taxes. ing, transportation, distribution andexchange rate fluc goes to theindustry margin —that is, thecosts of refin- price perlitre ofcrude oil, imported indicating how much Thebrochure provides abreakdown of theaverage oilden imposed onimported inG7andOECD countries. oil? pamphlet, which graphically illustrates thetax bur the latest data inOPEC’s Whogets what from imported Al-Zayer concluded his presentation with asummary of Who gets what from imported oil? - - - Garry Brennand, Senior Research Analyst. surging to record highs in the first of quarter 2011. In price driver in2011,with speculator activity ontheNymex role of excessive speculation It has was continued also important to to note, beamajor added Tapia, that the higher range than previously observed.” over thepast year, andprices have tended to move ina edition. Hesaid that “price volatility has beenobservable rather different price behaviour to that preceding the2010 of decline, andat thesame time,themarket has observed were once more on the rise period in 2010,after a short Hestressed that upstream and downstream costs initially from thepoint of view of costs andprices. briefly examining thecontext of this year’s publication, presentation delivered by Oswaldo Tapia. This Hebegan was by clearly evident inthe first partof the WOO to analyze andcomment on. modity exchanges — there was much for the publication tility, andincreased speculator activity onthemain com- trophe inJapan earlier this year, excessive oil price vola - world, thenatural disasters andensuing nuclear catas- crisis intheEuro-zone, social unrest in many partsof the ing theinternational financial system, thesovereign debt macroeconomic uncertainties, heightened risks surround- first paragraph of the WOO’s foreword And given theissues —deepenedglobal underscored by El-Badri inthe variety of industry stakeholders. spread media coverage andonedrawn uponby awide industry’s premier publications; onethat receives wide- 21 OPEC bulletin 11/11 22 OPEC bulletin 11/11 Publications Launch in any way, aprojection of likely ordesirable prices.” “Itthese should figures beemphasized, are only anassumption. however,” saidThey do not reflect, Tapia, “that reaching $133/bby 2035. decade, compared with $75–85/binlast year’s WOO, nal terms, prices stay intherange of $85–95/bfor this Case increased from last year. It is assumed that, innomi- mind, theORBprice assumption in the WOO’s Reference slight reassessment With thebehaviour of of prices how upstream over costs thepast might evolveyear anda in frameworks.” low closely the push towards new financial regulatory the impacts of such speculative behaviour, andwe fol- this regard, hesaid: “InOPEC, we are concerned about Dr JanBan,Senior Research Analyst. to 23mb/dover theperiod2010–35,reaching almost IntheReference Case, demand increases by close emphasized. increasingly influence long-term demand patterns,” he ics and, to alesser extent, oil price developments, will “Theimpact of policies, technologies, demograph- in thelong-term otherimportant drivers come into play. tral driver for medium-term oil demand is the economy, Interms of oil demand, hesaid that while thecen - be nodifficulty insupplying rising demand.” tional and non-conventional, andit is clear that there will from anincreasingly diverse set of sources, bothconven- are plenty To of resources. support this For oil, “supply growth, Brennand will stressed that becoming there in someregions by theevents inFukushima, Japan. sion, althoughtheprospects have clearly beenaffected hydropower andnuclear power witness someexpan- energy will grow fast, but from alow base, while both With regard to non-fossil fuels, hesaid, renewable tially elsewhere. cations of shale gas developments intheUS,andpoten- cent, andBrennand also highlighted thepossible impli- with its overall share rising from 23percent to 25per than otherfossil Gas fuels, inpercentage use in the Reference terms and Casevolumes, will rise at faster rates falls from 34percent to 28percent.” energy typewith thelargest share, althoughtheshare And for most of theprojection period,oil will remain the will still make up82percent of theglobal total by 2035. ing for 87percent of primary commercial energy supply, 51 percent. Hesaid that “fossil fuels, currently account primary energy demand intheReference Case increases by by stressing that over theperiod2010–35,commercial The floorwas thengiven to GarryBrennand, whobegan The energy outlook mies overheating. ended, as well as thepossibilities of emerging econo- economy after the government-led stimulus measures Euro-zone, thefragmented recovery intheUnited States emphasized thecontinuing sovereign debt crisis inthe cant downside risks, as can be viewed presently. He per cent perannum—hesaid there remained signifi- average global growth over theperiod2010–15is 3.9 from theGreat Recession than expected a year ago — this year’s WOO underscores amore robust recovery elaborated onthehealth of theglobal economy. Whilst TheHead of OPEC’s Energy Studies Department - oil supply from theCaspian, Brazil andOPEC Member Over thelong-term, hesaid, increases incrude over themedium-term.” to remain at comfortable levels, intherange of 6-8mb/d developments andOPEC investment activity, is expected over 31mb/dby 2015”and“spare capacity, given these crude will rise gradually Brennand from added 29.3mb/din2010to just that “therequired amount of OPEC 2010 to more than 6mb/din2015. expected Anincrease over themedium-term, rising inOPEC from 4.8mb/din natural gas liquids (NGLs)is also well as biofuels, mainly inEurope andtheUS. Brennand, are theCaspian region, Brazil andCanada, as over theperiod2010–15. The key growth drivers, said increases steadily From over thesupply themedium-term, rising perspective, total by 3mb/d non-OPEC supply the periodto 2035.” accounting for close to 90percent of theincrease over countries is central to future global demand growth, Brennand added that “transportation innon-OECD OECD by 2035. where demand reaches almost 90percent of that inthe of theincrease in global demand is indeveloping Asia, 110m b/dby 2035.Interms of regions, fully 80percent Members of the media whoattended the press conference. ply anddemand. realistic alternative assumptions to thedrivers of sup- explore developments that could feasibly emerge under Brennand stressed, however, that it was important to Uncertainties current levels.” OPEC crude intotal supply not markedly different from reaching just over 39mb/dby 2035,with theshare of Reference Case rises throughout theperiodto 2035, Brennand added that “OPEC crude supply inthe to 2035. satisfy more than three-quarters of the demand increase Thetotal increase of non-crude liquids supply will 2010 to almost 17mb/dby 2035. by 6mb/dover thesame period—from 10.5mb/din total NGLs supply, from OPEC andnon-OPEC, increases more than 11mb/dover the years 2010–35.Ontop Total of this, non-OPEC non-conventional oil supply rises by mature regions. will more than compensate for expected decreases in tional oil, mainly from biofuels, oil sands and shale oil, Countries, as well as steady increases innon-conven- 23 OPEC bulletin 11/11 24 OPEC bulletin 11/11 Publications Launch tively behardly any room for additional future OPEC crude Consequently, Brennand stated: “There will effec Case. is 3mb/d higherby 2035,compared with theReference when volumes reach around 102mb/d.Non-OPEC supply global oil use by 2035,compared with Inthis theReference scenario, Case, more than 7mb/dis removed from alternative fuels. world, electric vehicles; andmore aggressive support for an accelerated shift to hybrids, andinsomeparts of the ciency improvements to internal combustion engines; and Policy (ATTP) scenario, which assumes highereffi- The first is the Accelerated Transportation The WOO 2011 exploresTechnology two alternative scenarios. over energy security.” the threat of climate change, andperceived concerns policies, theenvironment andwhat evolves to combat ences as Hestressed “technologies, that these particularly could intransportation, bedriven by such influ- Agoawike, Head, Public Relations and InformationDepartment. Energy Studies Department; Garry Brennand, Senior Research Analyst; Dr JanBan,Senior Research Analyst; and Angela Hasan MQabazard, Director, Research Division; Abdalla Salem El-Badri, Secretary General; Oswaldo Tapia, Head of the Pictured (l–r),OPEC officials:Mohamed Hamel, Senior Adviser; Fuad Al-Zayer, Head of the Data Services Department; Dr - big aconcern with regards to security of demand as the growth uncertainties are therefore probably at least as growth, from boththe upside anddownside. Economic uncertainty over future oil demand dueto economic Brennand added: “This demonstrates further the 119m b/dby 2035. growth scenario, it is over 112mb/dby 2030,andalmost slightly over 100mb/d,while inthehighereconomic the lower growth scenario, oil demand by 2035reaches Scenarioseconomic growth rates were developed with bothhigherandlower of 0.5percent perannum.In cations for theevolution of oil demand. mediumandlong term, havethe short, important impli - documenting how uncertainties over economic Thesecond growth, in scenario examines theglobal economy, requirements are subject to huge uncertainties.” underlines theidea that OPEC upstream investment OPEC crude neededwill beless than current levels. This supply in this scenario. Indeed, by 2035, the amount of Downstream over to theshort mediumterm.” development of policies andtechnologies, especially region. as theever-increasing share of Asian from imports this of the Middle East These projections, as said themajor Ban, highlight crude oil the future exporter, role as well oil trade flows. and theMiddle East, which has clear implications for key for theAsia-Pacific region, dominated by China andIndia, of distillation Andinterms of regions, capacity hesaid that expansions the vast tomajority 2035are projected removal, especially indeveloping countries. quality specifications, with aparticular focus onsulphur Ban saidity will that thehighlevel benecessary of desulphurization to capac meet progressively tighter product version capacity and23mb/dof desulphurization units. tions will berequired by 2035,around 14mb/dof con- Interms ofmore than long-term 17m b/d of projected global capacity distillation requirements, capacity addi - declining.” ucts, with the heavy part of the refined barrel slowly “demand growth is for middle distillates andlight prod- What is clearly apparent, added Ban, is that future slate.” but certainly not least, expected changes inthedemand liquids, stricter product quality specifications andlast, such as regional demand increase, growth of non-crude sion of therefining system is For thelong-term, driven by Ban stated: several “Theexpected key expan- factors, is “This to beexpected inEurope process andtheUS,”hestated. is already underway inJapan, but more OECD region. pressure for capacity rationalization, especially inthe as well as depressed profitability, indicating sustained extended periodof lower utilization rates inmost regions, Thus, headded, themedium-term outlook is for an is closed.” plus approach 10mb/dby 2015, unless somecapacity next Hesaid five thatyears “newprojects are expected coming to see theoverall onstream over refining the sur to increase therefining surplus. which, combined with capacity additions, is anticipated fering from thedemand collapse of thepast few years, ber of key points. The first was that theindustry is suf elaborated onby DrJanBan, whounderscored anum- From the viewpoint of the downstream, the picture was

- - - ing attention to possible impacts onwater resources. production of bothshale gas andshale oil are also draw- Heunderlinedsubstantial that production from oil amounts sands of water involves andemerging trends inthe water resources.” relationship between energy use, orproduction, and described as theoften“much-neglected issue of the major challenge for theindustry, andwhat Brennand availability of qualifiedtechnical talent remaining a crucial importance of human resources, with thefuture Otherchallenges highlighted in the WOO are the Inthisyear as regard, agreat hementionedtheRio+20meeting next opportunity push to further this issue. poverty by 2015. Development Goal of halving of theproportion people in energy poverty as ameans of achieving theMillennium essential that theworld effectively tackles theissue of biomass for theirbasic needs.” Thus, headded, it is Hepointed out that “some2.7bnpeople rely on the needto alleviate energy poverty. elaborated ontheextremely important area relating to tant technology of carbon capture andstorage. Healso lighted thechallenge of climate change andtheimpor lenges for theindustry going forward. Brennand high- This year’s WOO also emphasizes anumberof otherchal- Other industry-related challenges www.opec.org. Bothpublications are available for free download at: supporting market stability. firming theOrganization’s longstanding commitment to forewords to both publications, they are a means of reaf all stakeholders. And,as El-Badri touched uponinthe thering of pragmatic dialogue andcooperation among OPEC views themas important elements inthefur and what challenges remain. it is today, where it may possibly head to inthefuture, ble resources Inthis respect, that boththeASBand WOO detail are valua how the oil- industry got to where future for all. lenges is advanced to helpdeliver asustainable energy among theindustry’s stakeholders oncommon chal- feels that it is essential that a mutual understanding eration continue to evolve andflourish. The Organization ence, it is ever more important that dialogue andcoop- OPEC believes that inaworld of growing interdepend - Improving mutual understanding - - - 25 OPEC bulletin 11/11 26 OPEC bulletin 11/11 Workshop OPEC Headquarters petroleum workshop at Iraqi officials take part in Hojatollah Ghanimi Fard. The Data Services Department’s work andresponsibilities were by reported Puguh Irawan, the Energy Studies andPetroleum Studies Thework Departments were given by of the theirrespectiveSecretariat’s heads, Oswaldo Research Tapia Division andDr was outlinedinapresentation by Qabazard, while overviews of listened to power-point presentations ontheactivities of the Secretariat. After‘introduction to(PRID), Angela OPEC’ comments Agoawike, by theHead andtheHead of of the the Secretariat’sSecretary General’s Public Office, Relations Abdallah Al-Shameri, andInformation Department the visiting delegates ties of OPEC The21-strong andthework team, which of the also includedSecretariat. representatives from theIraq Energy Institute, learned about theactivi - El-Badri, by theDirector of the Secretariat’s Research Division, DrHasan MQabazard. with Committee Vice-Chairman, Thegroup, headed by Ali Dhari Adnan Ali, Al-Janabi, was Chairman received of theOil onbehalf and Energy Committee of theOPEC intheIraqi parliament, along Secretary General, Abdalla Salem A activities of theOrganization of thePetroleum Countries. Exporting take part in atwo-day introductory course on OPEC and its activities, organized to acquaint themwith the group of parliamentarians and other officials from Iraq visited the OPEC Secretariat in Vienna in October to the evolving relations between national oil stream oil sector to 2030,fiscal regimes, term outlooks, theoutlook for thedown- Data Initiative, theOPEC mediumandlong- Reference Basket, theJoint Organizations the energy industry, including theOPEC a range of subjects related to OPEC and Over thetwo days, otherpresentations- were given by Secretariat officials on Al-Zayer. deputizing for theDepartment’s Head, Fuad Statistical Systems Coordinator, who was Division. M Qabazard, Director ofOPEC’s Research Parliament, being welcomed by Dr Hasan Forat Al-Sharla (r),aMember of the Iraqi Qabazard, Director ofOPEC’s Research Division. pictured below inagroup presentation withDr Hasan M the introductory course onOPEC and its activities. They are Members of the 21-man team from Iraq that participated in the Iraqi Parliament. for theMembers of theCommission onOil andEnergy in Secretary General arrangements for an exploratory course Secretariat inMay by Al-Janabi to discuss with the Theworkshop was preceded by a visit to the tation, as well as emission constraints andoil demand. technology advances onoil consumption inroad transpor companies andinternational oil companies, theimpact of - 27 OPEC bulletin 11/11 28 OPEC bulletin 11/11 Gas Forum hold first Summit inDoha Global gas producers GECF seeks significant role inglobal energy dialogue gas-producing andgas-exporting countries have gathered “Itheads is thefirst of state timeintheworld’s andgovernment economic history from thelargest that natural tally friendly fuel. securing andmaintaining afair price for theenvironmen- of establishing long-term supply contracts, as well as Qatar, inNovember, to discuss thegrowing importance Countries Forum (GECF) held theirfirst Summit inDoha, The leaders of themembercountries of theGas Exporting A general view of the opening session of the first Gas Exporting Countries Forum (GECF) Summit inDoha,Qatar. Bokhanovsky, whose term as Secretary General was in theglobal energy dialogue.” front with theobjective of playing a very significant role that the GECF membercountries are organized inaunited first gas summit will sendastrong message to theworld development “This of theforum,” hestressed, gives apowerful adding: “This political impetus to thefurther Leonid Bokhanovsky, told thegathering. together toGECF affirmtheirsupport,” Secretary General,

Reuters at ministerial level every year since. organization since it was established in2001,meeting has made steady progress as aninter-governmental The GECF,together control some70percent which of global comprises gas 12membercountries resources, who and technological In addition, collaboration the Summit reviewed cross between GECF investments members. reliability through close cooperation among producers. Itral also looked gas expand to further theutilization worldwide of natu andto ensure- supply diversification and technologies. experiences andcooperation indeveloping advanced worldwide andto openupopportunities for exchange of the effortsof producers to promote thegas industry Otherobjectives of the Summit were to co-ordinate second most significant primary energy source, afteroil. world’s total energy consumption andis considered the Natural gas constitutes around of one-quarter the ing thedisparity between crude oil andgas prices. under agas-to-oil indexation, with theaimof overcom- It also sought ways to establish afair price for gas of security for exporters andconsumers of natural gas. discuss thepriority of long-term contracts as thebasis According to theGECF, the Summit was convened to A fair price for gas gas, which is usually sold under long-term supply contracts. the needto achieve afair price oninternational markets for Sheikh Hamad BinKhalifa Al Thani. The Highontheagenda wasSummit was presided over by theEmirof Qatar, a stable global gas market,” heaffirmed topics are fair pricing andgreater coordination to ensure has beenamajor partof ourconversations. The headline ble “Coordination, market, continues inorder to build aresponsive to beapriority for thegroup and andsta- ber countries to theircustomers. how best to provide areliable supply of gas from mem- was straightforward — to continue discussions about extended for two more years, said the Summit’s agenda Summit inDoha. of Qatar, Sheikh HamadBinKhalifa Al Thani;pose during the opening session of the GECF (NTC) leader, Mustafa Abdel Jalil; Algeria’s President, Abdelaziz Bouteflika; and the Emir L–r: Qatar’s Deputy PrimeMinister, Abdullah Al-Attiyah; Libya’s National Transitional Council 13 Tobago andnewmember Oman, just accepted at the Egypt, Equatorial Guinea, Libya, Nigeria, Trinidad and Theotherseven members comprise Bolivia, of theworld’s gas reserves and42percent of production. and Algeria —between themaccount for nearly two-thirds largest of exporter liquefied natural gas (LNG), Venezuela gas Just five producer, of its members —Russia, andOPEC theworld’s Members biggest Iran, Qatar, theworld’s Netherlands have GECF observer status. Reuters th Ministerial Meeting. Norway, Kazakhstan andthe 29 OPEC bulletin 11/11 30 OPEC bulletin 11/11 Dr Mohammed BinSaleh Al-Sada, Gas Forum Industry, speaks during aGECF Qatar’s Minister ofEnergy and news conference inDoha. TheMinister said that holding the13 are not yet inparity with oil,” hewas quoted as saying. to anenergy commodity, “Producers especially just crude want oil.Gas afair prices price for gas that is linked he stressed. tion. It is not theduty of this Forum “Fair to determine prices prices,” are determined by demand andproduc product. were only Hetold concerned apress about conference getting afair price that for their members of theGECF Speaking onthe Summit, Al-Sada said it was an headquarters. gas industry, andit was now thehomeof theGECF’s to establishing theForum, it played aleading role inthe fact that Qatar was oneof the countries that contributed the GECF inDoha held historical importance, dueto the ing for theiractivities, InDecember GECF 2008,inabid to establish members agreed onacharter asound foot interests of its members. producers determined to protect andpromote themutual TheForum sees itself as agathering of leading gas

Reuters trol international gas prices. the GECF was looking to con- denied that, inits operations, Saleh Al-Sada, strenuously Industry, DrMohammed Bin Minister of Energy and ent gas market.” oping astable andtranspar among members for devel- as effective cooperation aswell gasindustry, natural “the challenges facing the a communiqué, reviewed in Doha, which, according to Meeting of the GECF, also held days after the 13 guaranteed. predictability of price can be so that more stability and the fuel to that of crude oil means of linking theprice of members to findways and been increasing calls by its headquarters inDoha. and on setting up the Forum’s At the talks, Qatar’s The Summit came two Over the years, there have th th Meeting of Ministerial - - - proposed hosting it. regards thenext Gas Summit, bothIran andRussia have be held inEquatorial Guinea, inNovember next year. As Thenext GECF ministerial meeting is scheduled to global sustainable development. in meeting future global energy demand; and achieving eration among members; actively promoting natural gas market developments; providing aframework for coop- of gas for its members; developing aGECF view ongas sustainable maximization of thelong-term added value gas market; pursuing opportunities that allow for the its membercountries’ common interests inthe global nized inter-governmental organization, which The goals represents include establishing the GECF as a recog the Forum’s main goals andoutlines thechallenges. GECF approved a five-year strategy to 2015, which lists At its last Ministerial Meeting inJune this year, the over the years inthecrude oil market. make its mark This inthegas augurs well sector, for the GECF just as which OPEC is determined has to done demand for thefuel. until 2035to develop thesector, inlinewith expected willtry needinvestment TheAgency of around has $400 billion a estimatedyear thatup theglobal gas indus- likelihood of aforthcoming “golden age of gas”. International Energy Agency (IEA)recently referred to the eration, would appear assured. Infact, theParis-based But thefuture of gas use, especially for power gen - nami andresultant nuclear crisis. ing its after its LNG imports March earthquake and tsu- rebounded somewhat, mainly as aresult of Japan boost But according to theGECF, demand has already with theadvent of acold snap. demand, dueto milder weather, but this could all change Analysts are also pointing to afall inEuropean gas Demand rebounds the global economic slowdown. Gasand highstocks, producers bothof which are concerned are mostly as over aresult a slump in demand of plies to consumers worldwide,” commented theMinister. resources andto ensure thestability of natural gas sup- producers to achieve optimal utilization of theirnatural ment to support dialogue at thehighest level among “TheEmiralso wanted to demonstrate his commit natural gas can play globally as aclean energy source. reflecting his strong conviction on the significant role that initiative that had been developed by the Emir of Qatar, - - - India, two large markets, heaffirmed. This was inaddition to rising demand inChina and Cooperation Council (GCC) region. includingeverywhere, South America andintheGulf tions, because of thenewmarkets being established would grow, even during unfavourable economic However, condi - Bokhanovsky said global demand for gas to thefuture of nuclear energy.” the world energy mix. Inparticular, Imean those related many recent moves that are influencing thegas share in demand would beinthenear future, stating: “There are year-on-year Hesaid global in2010,but herefused gas to speculate consumption onwhat grew by 7.3percent was currently higherthan in2008. recovered from thefinancial crunch; gas consumption supply, hemaintained that theworld gas market had On the current state of global gas production and dollar investments neededto ensure security of supply. markets andby providing planning security for thebillion- holders by smoothing out price fluctuations onthespot Bokhanovskypricing formulae provided said significant long-term contracts benefits to all with stake oil-pegged - based onoil indexation,” hesaid. there is noneedto change theexisting system of pricing, “Thisshown to beareliable practice oneandwe, at of theGECF, linking to theoil products’ basket believe has for thesuppliers andsupplies for theconsumers. ble to distribute risks fairly. It also guaranteed demand linked to theoil products’ basket, which made it possi- Underthis framework, hesaid, thegas price was and suppliers. tecting the massive investments of upstream producers sumers from major fluctuations inspot prices andpro- rity to producers andconsumers alike, shielding con- more years, said such contracts provided mutual secu- unanimously extended by the Forum’s Bokhanovsky, members for two whose term as Secretary General was Meeting of theForum, inDoha, Qatar, inNovember. Times General, Leonid Bokhanovsky, with inaninterview theGulf That was thestatement made by GECF Secretary interests of global natural gas producers andconsumers. long-term gas contracts are thebasis for balancing the The Gas Countries Exporting Forum (GECF) is confident that — gas interests Long-term contracts best way for balancing newspaper, on the sidelines of the 13 Bokhanovsky th Ministerial secure, predictable andfair market for natural gas. to consumers. Member countries would also continue working Hemaintained to ensure that there was the primary aim of the GECF a was to ensure stability of supply Bokhanovskyate greater reliability inthemarketplace stated that cooperation andamore between efficient members of development theForum of helpedto cre resources.- our basic principles,” he said. “Membership inourorganization is opento any gas-exporting country that shares criminating principles, was gaining more support intheworld. stress that theForum’s position, based ontransparent, market-oriented andnon-dis- Inreference to thenewmembership of Oman, Bokhanovsky said hewanted to quarters here,” hestated. “We are grateful to theEmirandto theGovernment of Qatar for hosting ourhead- met thehighest international standards. business, located intheheart of theGulf. The GECF Bokhanovsky headquarters intheQatari capital stressed that Doha was apremium-class hubfor theglobal energy markets.” bers of the GECF, play a very significant “Besides role Qatar, in providing three Arab reliable countries gas — Algeria, supplies Egypt to and Libya the — and all mem- key to LNGexporter global markets,” hesaid intheinterview. “Qatar is oneof the countries holding major gas reserves intheworld andis the played inproviding reliable Bokhanovsky gas supplies also lauded to Qatar theglobal andotherArab gas market. producers for thekey role they tracts between companies,” heexplained. “Inthegas industry, volumes andprices are definedprimarily by long-term con- supply to themarket. ments, the GECF Bokhanovsky sought to bring more stability said to the thatgas through coordination sector and security of of gas exploration, production andinvest and delivery.” ments made by national andindependent gas companies inexploration, production the gas they need inall climates, while also protecting themulti-billion dollar invest ence pricing. Ourmembercountries believe intheimportance of customers receiving define production quotas, orinflu- organizations inthat it does not “The GECF differs from other on gas will be very different as well. any institutionalized forum focused much different from oil and,as such, “No, thatquoted as is saying. not ourstyle,” hewas “Thegas market is pricing. duction quotas, orinfluencing Forum had norole indefining pro- Bokhanovsky pointed out that the Speaking ontheGECF, GECF Secretary General, Leonid Bokhanovsky.

- - Reuters 31 OPEC bulletin 11/11 32 OPEC bulletin 11/11 Focus on Africa for development over thelong term. Mozambique,and northern is attracting strong interest TheRovuma Basin, which spans southern Tanzania couldnorth bring anotherincome flow to theeconomy. the southof As thecountry. aresult, export-oriented growth is concentratedThe emerging gas industry inthe in agriculture. income of much of thepopulation is still derived from capital Maputo, which lies inthesouth,although by aluminium produced by theMozal smelter near the At present, Mozambique’s exportsare dominated lific offshore gas deposits. policy, is set boosted to befurther by thecountry’s pro- strong business environment andprudent government Mozambique’s rapid economic growth, shored upby a and industrial growth. Bulletin Mozambique. Incontinuing our Focus onAfrica, Daniel Brett reportsfor the of the United States and Italy’s Eni have discovered hugegas fields offshore East Africa could now become a significant gas player as Anadarko Petroleum North and West Africa have dominated gas exports to western markets. But New discoveries to drive Mozambique’s growth Gas inthetank! onwhat these new resources could mean for Mozambique’s economic Areas Norway’s 2and5withStatoil imminent plans holds for drilling. a90percent Malaysia’s stake inoffshore exploration continues. and there is apossibility that this could riseas further largest gas reserves in sub-Saharan If confirmed, Africa Mozambique behind Nigeria would have thesecond- Oil and Gas Insight. resources of over 900billion cubic metres, according to major, Eni,have discovered estimated combined US independent,Anadarko Petroleum, andItalian possibly within thespace of onegeneration. devastatedtry by civil war to amiddle-income economy, side theMiddle East, promising to catapult it from acoun- Mozambique as oneof themost exciting prospects out Discoveries over thepast year orsohave marked OPEC OPEC -

VisMedia 2011 onits Area Anadarko 1offshore permit, east had of several Eni’s block. successful It strikes in2010and liquefaction. in Australia, amajor target for global investment ingas capacity and on a par with new projects being developed with asimilar cost estimate of $2,800/t of LNGexport Eni’s proposals follow similar plans by Anadarko, to latest data from theInternational Energy Agency. around of aquarter Japan’s total consumption, according as Australia’s total gas To exportsfor 2010andwould cover put that into context, this is about thesame level of 25bncu m,based ona25-year project lifespan. ity of up to 18 million tonnes per annum, the equivalent launched as soonas 2016. This would imply exportcapac Enihasplant saidon thecountry’s coast that northern it could with first build exports atwo orthree-train LNG (ENH). and state-run Empresa Nacional de Hidrocarbonetos which is theworld’s largest corporate buyer of LNG, Portugal’s Galp Energia, South Korea’s state-run Kogas, the gas discovery with the rest shared equally amongst Currently, Eniowns a70percent operating stake in Liquefaction plans times greater than the$2.2bninvested inMozal. five times Mozambique’s total GDP in 2010 and is many This level of investment is theequivalent of around demand. it as anLNGexportplant to capitalize onsoaring Asian its massive offshore Mamba gas discovery, developing of Eni, indicated that the company will InNovember, spend $50bn on Paulo Scaroni, Chief Executive Officer various prospectors. sector The potential is scale shown intheinvestment of Mozambique’s proposals burgeoning set out by gas after tests are finished onthefirst one. ond commitment well, 1,will Mamba North bedrilled cu feet of gas inplace intheMamba EniestimatesSouth Area. Asec that there could beat least 15trillion has exceeded pre-drill expectations. the Cabo Delgado coast, theexploration well onArea 4 Drilled to atotal depthof 5,000metres, 40kmoff gasprovince”. natural and confirming that theRovuma Basin is a“world-class covery as thelargest Enihas inthecompany’s described exploration thedeepwater history Mamba South dis- the company has sofar not disclosed its plans. Petronas also holds significant offshore acreage, although - -

uids plant in South Africa. However, this is via the Mozambique already exportsgas to agas-to-liq - discoveries. ner to share therisks andfinancing of theirdeepwater Eni’s LNG experience, while providing Eni with This a part approach would enable Anadarko to learn from to unitize theirinterests. joint development opportunities if theparties decided likely that they are thesame reservoirandcould present As Eni’s discovery is close to that of Anadarko, it is awarded licenses offshore Kenya. Mozambique soit can concentrate onexploring newly Cove Energy has mulled selling its interest in sector. Anadarko lacks experience andexpertiseintheLNG trains totaling a10mt/yr capacity. However, unlike Eni, engineering anddesign study for theLNGplant with two KBRhas secured the contract for thepre-front-end- ing to Mozambican newspaper Notícias. should seethescheme come onstream by 2018,accord- has submitted a $15bn project proposal that, if approved, Anardarko also wishes Asian to serve markets and cent interest carried through the exploration phase. Ltd, andLondon-based Cove Energy. ENHholds a15per Videocon andBPCL subsidiary Bharat Petro Resources by Japanese trading house, Mitsui, Indian companies, holds a36.5percent stake intheblock with therest held Reuters - gas discovery. $50bn inMozambique’s Mamba Officer ofEni, which will invest Paulo Scaroni, Chief Executive 33 OPEC bulletin 11/11 34 OPEC bulletin 11/11 Focus on Africa This may prompt a postponement of investment and it is likely that the requirements for Eni’s plans could rise to $60bn. export capacity, as seeninsomerecent projects inAustralia, If infrastructure investment needs lead to Mozambican costs rising to $3,300/t of line infrastructure. as stated, theRovuma It remains Basin thepoorest gas area inoneof fields theworld’s are also poorest remote from existing countries. pipe- And, and has yet to recover fully from thecivil war that endednearly 20 years ago. country, which is traditionally agricultural, has apoorlevel of infrastructure country that lacks energy infrastructure Thekey andlocal risk expertise. of the willThe north bethepossibility of escalating construction costs ina and tariff exemptions. tax obligations, various tax deductions linked to infrastructure development jects through theprovision of The Mozambican free industrial governmentzone status, has reduced encouraged corporate investment in mega-pro- Mozambique’s economy. gas industry andensure that such progress delivers positive results for friendly business environment, will be vital to continue progress in the Prudent management of thesector, along with maintaining aninvestor- Major risks of megaprojects sion inthefirst half of 2012. per cent stake intheproject, The partners will make afinal investment deci- The 140 megawattwill bebuilt gas-to-power under ajoint ventureplant, with which local is power utility, expected to EDM,taking cost a51 $220.6m, Gas3.5bn cu ft in2009,according consumption inthecountry to theUS was Energy Information Administration. 14bncu ft in2006but petered out to through power generation, which would start earlier in2013. owns theGTL plant andwants Mozambicans to benefit from theirgas riches and are discussing otheropportunities onexploration andproduction. Sasol Thegovernments of bothcountries wish to intensify theircooperation Basin. Temane-Secunda pipeline,which is almost 3,000kmfrom theRovuma LNG vessel.An

James Lacombe project. state-run company, such as Sinopec, to helpfund the company will seek out anotherindustry major, orAsian market inChina. Central Asia could also undermine thegrowth intheLNG by pipeline after2020.Gas deliveries from Russia and Neither will China needadditional gas transported in thenext decade. as much more LNGfrom 2020onwards than it will require able shale gas resources —meaning it will needonly half China’stionable position, considering however, it as has akey massive customer is technically ques- recover involved ingas exploration to secure supplies. stakeholder It is unsurprising inOffshore Area 1,along with thenthat Anadarko, Mitsui, thesecond-largest is lowing theFukushima nuclear incident inMarch. eration mix because of thefallout of nuclear power, fol- Mozambique. Gas is likely to dominate inits power gen- likely to feature strongly as apotential exportmarket for Japan, theworld’s largest LNGimporter, is also for any additional trains. economies of scale that could reduce expansion costs structed, this infrastructure was expected to provide Hestated that once thefirst two trains were con- success.” trains based uponcontinued exploration andappraisal two 5m t/yr trains with the flexibility to develop additional ment plans have now been expanded to a minimum of Worldwide Operations, said: “Ourbase case develop- Chuck Meloy, Anadarko Senior’s Vice President, the liquefaction complex as appropriate. look andexploration Anadarko success, is soconfident it is about thegas determined to increase demand out minal togas import from Mozambique. is already considering building anLNGregasification ter significant gas growth. import Area 1stakeholder, BPCL, double the61.9bncu mconsumed in2010,requiring By 2020,India’s gas demand is set to more than in Japan andIndia. turn is unlikely to dent theanticipated surge ingas use to meet market demand? Indeed, the economic down- So, will theliquefaction plant inMozambique beready Markets ready for Mozambique While majors andAsian economies would nodoubt Competing for thetrickle-down - - - Rovuma basin gas field operators Block Operator Area 1 Anadarko Area 2 Statoil (Hydro) Area 3 Petronas Area 4 Eni Area 5 Statoil (Hydro) Area 6 Petronas

Source: Author’s research. benefit from the exploitation of the Rovuma Basin, the impact on Mozambique could be limited. There are doubts about the extent to which liquefaction facilities will stimulate the development of the littoral north- ern provinces of Cabo Delgado, Nampula and Zambezia, where nearly half the country’s poor reside. Nigeria’s LNG facilities at Bonny Island, which contribute around ten per cent of the world’s total LNG supply, have had limited impact on economic development in the region. The problems that have afflicted many impoverished countries lacking strong institutions could well play out in Mozambique. Although the country has been at peace for two decades, recent riots over the surging price of bread suggest that there are significant tensions within Mozambican society over the country’s economic direction. Indeed, gas development is likely to contribute less to devel- opment than the Mozal smelter, which is criticized for its lack of contribution to government finances and the wider economy. The export-oriented nature of proposed LNG megaprojects means that job opportunities in utilities, services and down- stream industries are limited and most wealth creation will flow out of the country. Moreover, the tax incentives in place to stimulate invest- ment, such as one per cent VAT on total sales by megaprojects, also limit the amount of money flowing to government coffers for expenditure on development and public services. Revenue will primarily come from the ten per cent stakes ENH holds in the offshore blocks. As such, while GDP growth figures will be boosted by gas production, as far as most Mozambicans are concerned, the gas boom may well pass them by. NB: As we went to press, Anadarko was quoted by the Financial Times newspaper as announcing that it had just more than doubled the estimated size of its biggest natural gas discovery, offshore Mozambique, making it potentially “one of the most important VisMedia natural gas fields discovered in the last ten years.” 11/11 etin A BG gas installation. OPEC bull

35 36 OPEC bulletin 11/11 Bite with the Bulletin L I’m curious how someone at such a young age decides day. his of generous nature has permitted me to take afew hours this city has coincided with his own brief visit andhis headquarters is actually inRome, my well-timed visit to hotelury in downtown Milan. Although his office at Maugeri Eni is sitting with meintheplush café of alux time, I’ve beenfascinated by oil.” me,” Maugeri says, stirring his coffee. “Andsince that world events inthe1970s had asignificant impact on Middle East, Arab sheikhs andcrude oil.“Those real- the nightly news with rapt attention, fascinated by the A man ahead of his time Leonardo Maugeri — rapidly diminishing fuel supplies, hewatched bit him. While adults around himfretted over old whenthe1973oil crisis hit andtheoil bug eonardo Maugeri says hewas only nine years global energy trends andthefuture of oil. — for awide-ranging discussion about Government inCambridge, Massachusetts University’sHarvard Kennedy School of Science andInternational Affairs at Senior Fellow at theBelfer Center for of several books onenergy andnow a of theItalian oil company, Eni,author — former Senior Executive Vice President meets with Leonardo Maugeri (pictured) OPEC Bulletin’s Alvino-Mario Fantini with energy industry professionals, the In anotheroneof theseries of interviews - said, ‘Oil!? But that’s thepast! It is very uninteresting!’” after theoil price collapse of 1986and“my professor oil. “Iremember this very well,” hesays. It was one year oil. When thetimecame to write his thesis, healso chose he would focus ontheeconomic andgeopolitical role of Maugeri knewbefore starting his university education that Unlike his peers, most of whogrew upwith otherdreams, Ahead of his time he says, was that “theworld was dominated by oil.” of aworld inwhich oil played thekey role. What hesaw, condor,of the which hesaw andliked) —reflected a view — thenews, thebooks, themovies (like Thethreedays almost inevitable: Everything around himduring his youth to dedicate his life to thestudy of oil.But hesays it was Centre for Strategic and International Studies inWashington, DC. Leonardo Maugeri (l)withformer US Secretary ofState, Henry Kissinger (c),and CERAChairman, Daniel Yergin (r), at anevent at the background is particularly unusual considering thefact Maugeri’s intensely oil andgas centred academic strategies. ny’s recent history, responsible for the company’s global of 36hehad become the youngest director inthecompa- Strategic Studies andInternational Relations. By theage Assistant to theChief Executive andthen,later, Head of the oil industry made him ideally suited for the roles of another degree ineconomics, his advanced training in he occupied numerous important positions. Aftertaking hired by theCEO of Afterpublishing Eni,theItalian oil his company, first book where onoil, in1994hewas for aUS energy investment fund. fascinated.” During this period,healso started working pauses, takes asip of coffee andsays, “Iwas completely standing geology andits othertechnical aspects.” He nomics of oil, I really couldn’t do it without also under that if Iwanted to understand the geopolitics andeco- something else heneededto study: geology. “Irealized University intheUS.Along theway, helearned there was School of Economics intheUK andthento Georgetown Itresearch was during this that period,while working Maugeri went onhis abroad doctoral —first to theLondon energy economics. he says. Hethus went onto earn aPhDininternational I neededto understand theeconomic aspects as well,” geopolitics of oil that it was a very complicated world and which heneededto study. “Irealized while studying the doll, everylayer of understanding revealed anotherlayer ning. He discovered that, much like a Russian matryoshka degree inpolitical science. But this was only thebegin- But Maugeri persevered. He eventually took a first - Maugeri recalls that during thelate 1980s and1990s,OPEC triedrepeatedly late. “They were unprepared.” sities —realized that energy was still a very, very key factor,” hesays. But it was too Western universities —mostly US universities but also, of course, European univer to sky-rocket —upto $50/barrel andthento $100/bin2008.“All of asudden, to re-start theirenergy programmes, especially Maugeri after2005whencrude prices was started not surprised when universities around the world later scrambled early 60s —retires, there will beareally big hole intheenergy world,” henotes. skilled workers. “Once thecurrent generation — all of whomare intheirlate 50s or resources shortfall —andalack This is why today, of energy economists, many mining engineers andother years later, theoil industry faces such aserious human instead was aninterest inenvironmental studies. neering sciences. “This phenomenonlasted 20 years,” Maugeri says. What emerged programmes, cutting back ontheteaching It was of energy economics, during this mining andengi- periodthat most Western universities cancelled theirenergy anymore, headds, even thoughit remained “akey element of modernlife.” ple away from theindustry. Noonecared about —noonewas interested in—oil mid-1980s had pushed energy off thetop of theagenda andeffectively turned peo- At thetime,lack of interest inoil surprised him.But theoil price collapse of the The importance of adequate prices that,” hesays. universities were interested inenergy studies, least of all, oil.“Noonecared about strange animal.” Even intheUnited States, hestood Few out. of his colleagues at US one went into energy. “I was the only one,” he says with a smile. “I was of a sort a mates whodidn’t go into electrical engineering The 1980s went was instead also the age into of finance. the first But real no stock market boom, so those class- gramming —so“there was abig emphasis onthis.” to electrical engineering.” It was, after all, the age of the personal computer and pro- “In my generation,” hesays, “themost brilliant people wanted to devote themselves that most of his university classmates inthe1980s were going inotherdirections. - 37 OPEC bulletin 11/11 38 OPEC bulletin 11/11 Bite with the Bulletin times,” hesays, “is that nooneseems to realize that thescale of theworld’s energy needs are simply too large,” Maugeri says. Thetruthis “What that has nothing can astonished replace memany fossil fuels inthenext few decades. “Our window-dressing.” grammes at theircompanies for public relations reasons,” hesays. “It is of asort believe ingreen energy at all, they will still launch alternative andgreen energy pro- that they are indeedtryingto improve theworld. “Soeven if most oilmen do not to de-emphasize fossil fuel activities, push for a green agenda and demonstrate considered —especially “bad, dirty” inthe West —many oil executives feel obliged marily to avoid being criticized So why by do so many theenvironmental oil companies movement, hesays. today pursueWith oil a green energy agenda? It’s pri- ties of anentire whole. tion” —wherein a person confuses theproperties of asingle partwith theproper exasperation. In mathematics, Maugeri explains, this is the“fallacy of composi- Brazil. But theconditions inBrazil are entirely different, henotes with ahint of for biofuels. Some policymakers Thesame can besaid intheUS,for example, about Brazil, would like which to emulate has become theworld’s poster child Denmark!” heexclaims. “Thewind conditions there are unique intheworld.” today relies onwind energy for 25percent of its energy needs. “But theworld is not means interms of scale,” Maugeri says. People point to Denmark, for example, which tion is possible —abig green energy revolution —they don’t understand Thenthere is theproblem what this of scale: “When people say that abig energy transi- all theotherpossible sources of energy.” but simply because of thelaw of physics: They had thebest energy density among of energy “not because there was aconspiracy among governments, orcompanies, would like to think, oil, coal andnatural gas have emerged as thedominant sources lar, thelaws of energy density andpower density.” Contrary to what somepeople stand that there are laws of chemistry andphysics,” Maugeri says,- “and,inparticu stand thecomplexity of thechallenges, Too many heexplains. people pushing “People for alternative don’t want sources to under are simply unwilling to under swindlers.” fuels and their alternatives, Maugeri Inhis is 2010book,Beyond farthe age ofoil: lessthe myths, realities diplomatic, calling and themall future “green offossil he says diplomatically. fully understand energy. “They want to hype things that they have intheirhands,” and anarray of vested interests —like banks and venture capital firms —whodon’t firmly. The green agenda, heexplains, has beenpushed by politicians, journalists “I think there’s beentoo much hype about renewables andalternatives,” hesays fuels. Helistens patiently to my litany of ‘green’ arguments, as Iplay devil’s advocate. many people think could pose achallenge to thefuture of crude oil andotherfossil The conversation turns to the topic of alternative and renewable energies, which The challenge of alternatives onstrated its inability to seebeyond theshort-term.” could lead to problems inthefuture. “Once again,” Maugeri argues, “the West dem- says, it was difficult to convince energy-hungry Western nations that low oil prices to ensure future supplies. But with crude prices oscillating between $16–18/b,he to remind theworld’s oil-consumers that theoil industry neededadequate prices - - - other problems.” For example, Maugeri says, thebiggest on thecarbon footprint,” he says. “But there are many just for reducing carbon emissions. “Everyone focuses are, however, promising. But more are neededandnot reduce theenvironmental impact of fossil fuel activities Investments focused onfinding technologies to ishing phenomenon.” knows have beenstructured inthis way. “It is anaston - energy andtechnology.” All the venture capital firms he expertise andmaybe three people had any knowledge of financial experience —only three orfive people had legal where, for example, out of 30people —all of whomhad Headds: “I’ve known alot of venture capital firms care about how they can sell thething to themarket soon.” technology, orits potential impact,” hesays. “They only investors donot care about analysing thecomplexity of the logical point of view, without any kind of bias. “But most to analyse themfrom bothaneconomic andatechno- gies, he says, you need to have people who have the ability ogy. Andto findthese potentially break-through technolo- today’s investors have noexperience with such technol- on the contrary, they could. Rather, the problem is that It’s not that green energy projects may not pay off; nological start-ups —ingreen energy.” ing innewtechnologies,” hesays, “by investing intech- wasted. “I’ve seenmany people lose money by invest in research programmes inenergy start-ups are totally contrary, hesays, around 90percent of investments of energy promise thehighrisk worth involved? Onthe energy projects. Isn’t thepotential pay-off that newforms gas industry are being wrongly allocated towards green I ask if investments that should begoing to theoil and The needfor investments could beapplied to therest of theworld.” alternative energies andgeneralize them,thinking they “You cannot take a few examples of success with specific way to continue to fuel thelifestyle we enjoy now, hesays. mize theirenvironmental impact.Fossil fuels are theonly fossil fuels anddevote plenty of R&Dinvestments to mini- huge scale of our energy needs, accept a life that includes society, notes, hewryly orwe can to try understand the Sowe can eithergo back to somekind of primitive than ten percent of thetotal energy mix after2030.” ally, hesuggests, but “at best they will achieve less wind may eventually have abigger role to play glob- natives you are speaking about peanuts!” Solar and energy needs is sohuge, that when you talk about alter - - But we are not yet there. Chinese companies donot else they will have to get from China.” countries will be left merely as producers. “Everything the technology andhas all theknow-how, oil-producing producers, noting that if China ends upcontrolling all Heservesthis upas acautionary message to oil else, heexclaims. “It’s amazing.” produces aphotovoltaic panel at half thecost anywhere ity!” hesays. Infact, thephotovoltaic industry inChina of installed solar power capacity andwind power capac “They are already thefirst country intheworld interms know-how andtechnology —inevery field,” Maugeri says. in such Othercountries terms. “China is are alreadyvery keen ontryingto thinking take about thefuture over oil sector andtheknow-how to use it will bekey.” he says, “having such breakthrough technologies inthe the owner of advanced technology. “Andinthefuture,” securing theirfuture, not just as anoil producer, but as on, they are taking animportant strategic step towards do not needit yet, eventually they will. By investing early enhanced oil recovery (EOR) technologies. Although they devoted alarge partof its current research budget to For example, Maugeri notes that Saudi Arabia has region could assume partof these responsibilities. producing countries of the Middle East Africa and North ogy, things are changing. And,with theright moves, the has beentheowner of all theknow-how andtechnol- in theoil industry, hesays. While traditionally the West ity is shiftingfrom West to East. This Already, is also happening theeconomic andfinancial centre of grav mainlyperformed by theUnited States,” hesays. take over therole that for more than acentury has been be clever enoughto understand that “now is thetimeto “protagonists of theirown development.” They have to refining andselling theiroil andgas, but inbecoming the them, hesays, not only to take over theresponsibility of tions globally. There is ahuge window of opportunity for and, more importantly, improve their own strategic posi- other things they can doto strengthen theiroil industries Additionally, Maugeri says, oil-producing countries have A power shift increase. cially sothat public acceptance of all fossil fuels may countries to focus on those emissions aspects” — espe- notes. “SoIthink it is very important for oil-producing duces 50percent of themercury intheenvironment, he problem related to theuse of coal is mercury. Coal pro- Photographs provided by Leonardo Maugeri, courtesy of the Massachusetts Institute ofTechnology and General Electric. - - Leonardo Maugeri speaking with the OPEC Bulletin’s Alvino Mario Fantini. Technology. Leonardo Maugeri during alecture at the Massachusetts Institute of Once you have all that, “you are theowner of thegame.” like China is doing now.” so that they may acquire newtechnologies andknow-how —“just tories andmore instarting theirown venture capital firms abroad, They needto invest more inR&D, more increating theirown labora- a bigger role indifferent areas inorder to be“owners of theirfuture.” time, Maugeri advises OPEC Member Countries to find ways to play as may happen with thenext revolution: tight oil). So, inthemean- US companies, as has happened with theshale gas revolution (or industry is still by performed very small —sometimes mid-sized — yet have theknow-how andtechnology. Andinnovation intheoil

Ellen Kryger 39 OPEC bulletin 11/11 40 OPEC bulletin 11/11 Spotlight Energetic stuff! made and sees just why the Foundation continues to attract bignames to its cause. at the RioConference in2012.TheOPEC Bulletin’s Steve Hughes reports on the progress they In tackling anambitious agenda, participants were keen to prepare amanifesto to bepresented The Austrian-based Energy GlobeFoundation held its 2011Board Meeting inSalzburg recently. Rural Development and Fisheries. Franz Fischler, Austrian politician Commissioner for Agriculture, and former European Union an introductory statement. member of theClub of Rome, thefirst Moderated session by saw Prof Franz each J Radermacher, participant allocated five minutes climate to make expertat the University of Ulm,Germany, and a emphasis was onhard work. a pretty, narrow side street in Salzburg’s old town just a stone’s throw from theRiver Salzach, the the meeting took place inaswish venue —think historic But drawing vaulted upameaningful ceilings manifesto andbare is brickwork different andgenerates —on much less pizzazz. Though tigious environmental prize.” website puts it:“theEnergy GlobeAward for Sustainability is theworld’s most prominent andpres- former Chairman of the World Bank Inspection Panel. As a voiceover onafilm ontheFoundation’s Chairwoman At(Jury the andChairwoman Foundation’s of theHonBoard) was international expected, alongside Prof Energy Eduard Globe Gala Ayensu, in November in Wels, Austria, Maneka Gandhi Jeremy Rifkin, as well as celebrities like Martin Sheen, Dionne Warwick, Previous Energy Globe Robin events have Gibbandmore. involved thelikes of Kofi Annan, Michail Gorbachev and free, energy forms. Awards celebrate projects that use energy resources carefully, oruse renewable, oremission- Foundation’s website puts it:“theOscars of thesustainability movement.” of achieving its goals, particularly through its Energy Globe World Award for Sustainability or, as the level of awareness TheFoundation itself of —anon-profit energy efficiency organization andsustainability that bills —has itself as already focusing enjoyed on creating successes ahigher interms Globe Foundation. Rural Development andFisheries, as, of course, was Wolfgang Neumann, founder of theEnergy was Franz Fischler, Austrian politician andformer European UnionCommissioner for Agriculture, of theClub of Rome andCo-Chair of Among themwas theUnited Nations International environmental Resource and sustainable Panel. Also present development expert Ashok Khosla, President put it. First off, theevent attracted somebig names, or‘Wise Men’, as theorganization’s press release how didthey do? tions head-on anddrawing upa‘manifesto’ inthelight of themyriad challenges facing us today. So in Salzburg, soexpectations were high. The challenge There were some big questions for theparticipants? Addressing posed at the Energy these Globe ques Foundation’s- 2011 Board Meeting achievable andaffordable worldwide? to anenergy-efficient andsustainable future onthebasis of acomfortable existence for everyone What changes must society make? Is enoughemission-free energy available worldwide? Is theroad Innovation Foundation in India speak about grassroots Indeed,listening to Anil Gupta of theNational explained. together the global aspects,” a detailed “Theinputs given emailed were highly response valuable andbrought at afollow-up meeting at somestage inthefuture. and seewhat comes It out.” plans to focus onthe details designed to becomplex inanattempt to “move thestone pretty solid, explaining how theagenda was purposely Iput this to theFoundation andtheiranswer was clusions from being drawn. of discussion topics would combine to thwart any con- Allit didappear inoneafternoon,it that seemedabig ask. Andat timepressure times, andtherange andscale ofservation resources?’ new sustainable world order to launch thecentury of con- an unbelievable trade volume andtheopportunity of a and ‘Business, government andfinance: can we utilize not only thefinancial crisis, but also theenergy crisis?’ addition to ‘What changes must society make to handle requisites? How long dowe needfor implementation?’ in free energy available worldwide andwhat are thepre- address thefollowing questions: ‘Is enoughemissions- plex issues. Session ‘b’alone,for example, Later aimedto sessions attempted to address similarly com- and investment funds for sustainable projects. ernment, to thesocial responsibilities of entrepreneurs from global cooperation andtheresponsibilities of gov the speakers addressed arange of topics —everything Often talking quickly to counter theticking clock, of the United Nations International Resource Panel. Ashok Khosla, President of the Club ofRomeand Co-Chair - See www.energyglobe-foundation.com Theboard for meetings more. are now set to beregular events, continuing next year. further,” Energy Globe explained. “Andit is very oftentheinformal partof such meetings that moves things experts. countries and organizations, taking the messages home, involving yet more been worthwhile. The Foundation explained how key Regardless speakers returned of to their the outcome of the manifesto, though, the event has already topics anddiscuss andpublish more specifically Inthecoming too.years, theFoundation explained, it plans to take upspecific and move with thetopics that are top of theagenda at any point intime. on raising awareness —something that will Work allow theFoundation is to stay currently underway flexible to come upwith a general publication, focused cessful themeeting was inproducing arelevant andmeaningful document. year andpresented at the2012RioConference, sowe shall wait to seehow TheFoundation’s suc manifesto is dueto bepublished before theendof this have suggested key speakers, as well as topics further for consideration. Foundation explained, otherinstitutions have become interested as aresult and Despite this, however, therelease “caused reactions”. For example, the very nature, needto begeneral. again they seemto Alittle beon solid general ground, explaining andhigh-level that perhaps, press but whenIput releases, this to by theFoundation, their must get away from thenotionof endless economic growth, among otherthings. proper framework conditions, that local effortsare andtheworldvery important, Eachare it important, continued, andeveryindividual’s going contributions onto state that policymakers needto create and by becoming more efficient andfrugal. only onaglobal level andthrough joint efforts climate problems, it read, are solvable. But world’s current energy, environmental and noted, forceful, as well as positive. The Themessage was, thepress release that accompanied thebreakfast. to follow whenconveyed by thepress release For me,theFoundation’s message was easier translator, things seemed a little disjointed. meaning that althoughIhad thehelpof a through themedian of theGerman language, Much of theproceedings took place bled andrecorded. there seemedto beadecent turnout) scrib- and presented, while journalists (of which Atbreakfast a long table, festooned offerings, with key up-market participants talked after themeeting proper had ended. together; thanks, nodoubt,to someout-of-hours work by Neumann andhis team Thenext morning, at apress conference inanearby hotel, things came innovations for inspiration, was fascinating andeye-opening. initiatives triggering efficiency gains; how we should look to nature andlocal Images courtesy ofEnergy GlobeFoundation. - Foundation. Energy Globe founderof the Neumann, Wolfgang 41 OPEC bulletin 11/11 42 OPEC bulletin 11/11 Opinion cause theeuro to fail? Could this lead to acollapse of the Did October’sthe endof Europe’s announcement sovereign debt herald crisis? thebeginning of If not, will this some questions to answer: forward and likely conclusions. Specifically, there are presently overshadowing global markets, reveals straight of these, inthecontext of thethree main “uncertainties” Theeconomic andpolitical facts are clear. Analysis — what exactly is uncertain about this crisis? uncertainty, but, as this explores, article thequestion is threat. Unsurprisingly, There are even fears that this theeuro itself may has beunder caused agreat deal of is especially tenuous. their respective troubles, but the state of affairs in Europe Atlantic have struggled to present credible solutions to Europe’s proposed plan. Politicians onbothsides of the Considerable doubts remain about the viability of greatest impact ontheprice of oil inthecoming months. consequential effects on financial markets, will have the ongoing, it is probable that actions inEurope, While andtheir American efforts to reduce its own deficit are the looming crisis spurred by aGreek default. kets thenhad to contend Fresh with from thedebt theEuropean ceiling handling of debacle inAmerica, mar of debt, bothintheUnited States andEurope. cerns over burgeoning deficits and unsustainable levels The second half of 2011has beendominated by con- Uncertainty’s certainty sooner, rather than later. And withhis prediction that international oilprices will Turney remain firmfor the duration, that is indeed goodnews for OPEC and its Member recovery and stem future growth, many financial experts have expressed fears and the banking fraternity working inunison,a turnaround can beexpected Countries, whoregard uncertainty as being one of their biggest challenges. over the likelihood ofadouble-dip recession. But according to one analyst, WithEuropean the debt situation threateningderail to economicglobal the it is not all doomand gloom.Writing specifically for the OPEC Bulletin, Ben , aneconomic analyst living inSweden, maintains that withgovernments - - Theheadlines around theworld for this “bailout” sovereign debt crisis. conclusion of theirsummit to bring about theendof the On October 27,2011,European leaders announced the The European solution? futurefurther shocks are to beexpected. As long as these three points remain inforce, then with more debt. And thirdly, a debt crisis is not permanently solved will remain loose for asustained period. Inaddition, monetary policy intheUS andEurope Firstly,seek to support the financialWestern system, central nomatter thecost. bankers andpolicymakers will key lessons, learned since late 2007,to bear inmind. Before scrutinizing today’s events, there are some these problems are two sides of thesame coin. focus has beenonEurope’s sovereign debt crisis, but globe. Andit shows little sign of abating. The topical stimulus, thecredit crisis still reverberates around the After nearly four years andover $2trillion inmonetary The credit crisis rumbles on the medium-term pricing of oil? global financial system? Andwhat may this all mean for deteriorated. obvious, thepolitical environment also significantly If the weaknesses in the plan were not soglaringly pared to add more tax revenue. prepared to print, while member nations were not pre- this support. The European Central Bank (ECB) Instark was contrast, not the European bailout totally lacks by metaphorical electronic printing. its £275bnof quantitative easing, bothwere underpinned chasing programme andtheBank of England engaged WhentheUS in Federal Reserve initiated its $2trpur bailout is anattempt to achieve such agoal. dom of solving adebt crisis with more debt, Europe’s new money. Leaving to oneside for themoment thewis- Thestructural flaw of this plan is clearly thelack of not present attractive investment opportunities. surely beunacceptable to bond-holders. Such terms do per cent write-down, which, inthecurrent climate, will tionable, this still leaves therisk of at least 30 afurther meet its 20percent first loss guarantee, which is This ques- is just pure fantasy. Even if theEFSF is able to the Chinese) to purchase underwritten Euro-zone debt. foreign investors (for that read oil-producing nations and intend to set up special purpose vehicles (SPVs) Inaddition to these measures, to enable theEuropeans also deal worse than thecover being offered. cent (as Greek bondholders had just accepted), agood losses insuch anevent would bemuch closer to 50per also ignored. If history is any guide,thenit suggests Thehistorical precedent for sovereign default was tap this facility) was conveniently overlooked. by That thelikes someof these commitments of hadSpain beenprovided andItaly (countries most likely to loss onsovereign debt. made by memberstates to underwrite the20percent first Theirplaneraging to existing “expand” theEFSF actually financial relied onlev commitments through promises place. which was aroot-cause of thecredit crisis inthefirst hoping tothesame perform kind of financial alchemy, It soonbecame clear that European politicians were surface about thefeasibility of therescue plan. However, within hours, serious concerns started to point openeduptheEFSF to banks. guarantee on future bond purchases. Ineffect, this last and investors were now offered a20percent first loss Financial Stability Fund (EFSF)was to beboosted to ¤1tr into accepting 50percent write-downs, theEuropean were impressive. Greek bondholders had beencajoled - - catalyst for thedemise of theEuro-zone. “uncertainty” concerns whetherornot this will bethe plans for theEFSF looking shaky at best, thenext major So, with theGreek default all but guaranteed andthe End of theEuro-zone? more time. ble reason this money may now be paid is to buy Europe Union (EU),thenthecountry will default. The only plausi- the International Monetary Fund (IMF)andtheEuropean Ifviously Greece planned does ¤110bn notbailout receive organized the ¤8bnloan from thepre by- the ECB, ailing country’s next round of bondpayments is due. table andcould happen as early as December whenthe As for theGreeks, theirtimeis up. Default is inevi- bond markets is clear —Italy must act fast. much-needed reforms. Even so, themessage from the fall back onandis well positioned to take advantage of in scale, organization androbustness. Italy has more to troubles. The Greek and Italian economies differ greatly Italians still have it in their power to out sort theirown TheGermans believe (probably correctly) that the is unsustainable. cent onits five-year bonds. Anything above six percent Italy has just paid aEuro-zone record of 6.29per them. be reaching apoint where this choice is taken away from steadfast intheirrejection of this idea, but we may well the Euro-zone. So far, Europe’s politicians have been to eject Greece andany otherdefaulting nations from Thealternative is to dosomething far more radical; mandate andstart printing. to provide this, thentheECB will beforced to extend its new money. If memberstates are unwilling, orunable, tive easing programme, this will have to besupportedby If Europe decides to follow somekind of quantita- there are really only two choices left: it is not areal solution. As unpalatable as they may be, ahead with this “bailout”, but there can belittle doubt It remains to beseenwhetherthey will still press Europe’s leaders have failed. succession TheGreek andthere is aconsensus-building andItalian governments thenfell that inquick future position within theEuro-zone. damage was doneandhas called into question Greece’s bailout. Although this folly was dropped, agreat deal of proposed areferendum onwhetherornot It to accept is almost inconceivable the that theGreek government 43 OPEC bulletin 11/11 44 OPEC bulletin 11/11 Opinion months to come as they to try prevent contagion spilling across This will as nodoubt serve arallying cry to policymakers in chiefly German Chancellor, Angela Merkel. announcement, this call has been taken up by Europe’s leaders, economic Heused this governance as aplatform to call (across for theEuro-zone).” “more robust andintegratedSince October’s to resolving thesovereign debt crisis. Commission (EC), gave a very revealing speech outlining theresponse OnOctober 12,Manuel Barroso, President of theEuropean The euro has to survive. highly indicative of theprevailing moodamongst Europe’s leaders. cause more of anuproar, but, whatever thecase, Inmany this ways episode is it was surprising that this sleight of hand didnot removing therequirement for ratification by referenda. Treaty, but was expressed as amendments to existing treaties, thereby This contained the vast majority of thedetail of theConstitutional circumvent Rather than accept democratic process this decision, through the EuropeanTreaty politicians sought of to Lisbon in2007. (it didnot even reach a vote intheUK). rejected thedocument, bringing theprocess of However, ratification to inMay anend andJune of that year, Dutch andFrench voters which previously required unanimous support. Rights andexpanding qualified majority voting into policy areas, with a single text, giving legal force to theCharter of Fundamental for Europe in2005. This would have replaced existing EUtreaties rounding theattempts to create a Treaty As evidence establishing of this, oneonly aConstitution has to recall thecontroversy sur at critical junctures. politicians to act against theexpressed wishes of theirpopulations Greece to enter inthefirst place), theaspiration has emboldened naive denial incertain critical choices (most relevantly Although thehighhopes allowing of the venture have led to collective amongst ordinary European citizens. Theeuroof is will aproject of behindit political is immense, aspiration notwithstanding andhope. increasingThe strength opposition draw, but this does not mean thecurrency will collapse. will behindit is too strong. Greece Quite simply may too much ormay has not beforced beeninvested to with init- andthepolitical an extremely serious event, it is highly unlikely that theeuro will fail. assessment of theeuro’s prospects. While theGreek default will be Closer examination reveals an alternative, more convincing, brink of failure within three years —that is quite adecline. From potential usurper as theworld’s currency reserve to the to collapse. strength. Now there is a consensus building that the euro is about the euro should replace theUS dollar It was whenpricing oil, such not long ago that was there was its adebate over whetherornot to beno. However, nomatter what somemight say, theanswer to this has - etary rules of participation. forced to adhere more rigorously to thefiscal andmon- as its remaining members (whoever they may be)will be euro should emerge stronger once this crisis is resolved, borders. Andalthoughtheprocess will bepainful, the announced it has noexposure to Greece. lapsed thanks to theircontrarian trade, whilst PIMCo has Eighteen monthsGreek later, exposure those investors to bepunished. deserved MF with Global additional col - has beenaware of how untenable this situation is. when thefirst Greek Thesame cannot bailout besaid was of Greece. announced, theworldSince May 2010, extremely instructive of contemporary expectations. Given PIMCo’s general exceptional performance, this is been buying Lehman paper right upuntil thecollapse. attributable to Lehman bonds were $3.4bn.PIMCo had Investment Management Company (PIMCo) losses It was reported early in the summer that Pacific revelation, during Lehman’s bankruptcy proceedings. not allow it to happen. This view is supported by arecent cation to that point was that theFederal Reservewould Lehman’s bankruptcy was atrueshock. Every indi- stimulus measures employed since then. as we were in2008,thanks to theincredible monetary And thirdly, we are not yet facing aglobal liquidity crisis default will bemuch smaller than theLehman’s failure. is not going to be a surprise to anyone. Secondly, a Greek crisis and that of September 2008: Firstly, a Greek default There are three critical Events differences unfolding now present between the current adecent case inpoint. also fail to take into account basic facts. ally driven andis prone to exaggeration. As such, it can dence can beanotoriously fickle indicator. It is emotion- crisis now is onapar with that of 2008.However, confi- According to this barometer, theexpectation is that the yields, confidence By any surveys etc) measure confidence (eg stock is crushed. market performance, bond Answeringbut this theevidence question is, suggests admittedly, we are more not. difficult, and Lehman Brothers’ failure? another catastrophe similar to that of September 2008 rent “uncertainty”, namely are we about to experience This brings us neatly to thethird question of cur many are predicting. However,hurt. it might not beas damaging as much as But let us make nomistake; aGreek default is going to This is not anotherLehman - Views expressed in this articleare solely those of the author and innoway reflect the views ofOPEC and its Member Countries. is being placed inEurope’s current “solution”. This general sell-off and increase volatility. Little or no faith Once Greece does default, this will probably trigger a The immediate implications for markets incredible sum of money will continue to prop upmarkets. Howrun advisable is extremely debatable, this will but for thetimebeing this prove to beinthemuch longer and is just waiting to re-enter themarket. ity, thefact remains that this money is onthesideline current $1.6tr takes ahuge bite out of short-termliquid- gerously low onliquidity thesystem was. Although the peaked at atouch over $400bn,highlighting how dan- At thedepth of thecrisis in2008/09,this figure of uncertainty. Reserve andECB. This flight to safety is common intimes global banks had placed roughly $1.6trwith theFederal Thelatest figures show that at theendof October, now awash with at least $2trinstimulus. have beenutilized to ensure that thefinancial system is window andall manner of othermonetary policy tools easing, sustained low interest rates, use of thediscount The Troubled Asset Relief Programme, quantitative of printed money onto thefinancial system. Central banks around theworld unleashed atidal wave Thesituationmeasures is markedly taken different at that now because timeinresponse of the to that threat. whole financial system crashing down. Such afailure ran the very real risk of bringing the tional liquidity crisis. — that theglobal economy was inthemidst of anexcep- this was inthecontext of thethird point mentionedabove at thepoint of bankruptcy. It must beremembered that estimated that total counterparty risk Shiftingourgaze exceeded back $800bn to Lehman’s collapse, it was the same losses. stand to recoup about ¤164.3bn,whilst incurring roughly if Greece’s default If is the50percent disorderly) thenGreek write-down holds bondholders (andit might not holders might incur. for thetimebeing, while we consider what losses bond- ¤328.6bn. Although this figure is slightly dated, At it theendof serves 2010,theGreek national debt stood at of Lehman’s counterparty risk in2008. compare thesize of thecountry’s national debt to that contagion stemming from aGreek default, it is useful to no onereally knows what risks there might bethrough Sowhat about thesize of theproblem? Although printing this will beadilemma for anotherday. Over-indebtednessbut while central will banks remain andgovernments as astructural are prepared to long-term continue problem, relative resilience of markets since thesummer. but will Any ultimately sell-off, triggered prove by to beshorted-lived. Thisa sovereign is default, reflected may by well the be sharp, is awash with liquidity. political support for theeuro is too strong Talk andthe financial system of total collapse does not reflect theunderlying reality. The the euro itself. bymonetary intervention theECB, oracomprehensive overhaul of reaching aclimax. Radical actionis likely, eitherthrough amajor ment at theendof October, events onthecontinent now look to be Although European leaders disappointed with theirannounce- well overstate this. to theglobal economy, but current opinion,as demonstrated, may Adisorderly Greek default certainly presents asignificant risk be maintained. dollar weakness, conditions look set for recent oil price trends to today. With record levels of monetary stimulus andlikely further inflation. There is no reason to believe this Historically, should not be the case excess money supply has beenanotable cause of recession, we have entered aninflationary period. upward trajectory. Even if demand is to suffer through arenewed Long-term average prices will most probably continue their oil remain strong. volatility is to beexpected, but beyond this the fundamentals for Looking at theimplications for theinternational oil markets, price What this means for theprice oil unparalleled buttress. ence of at least $1.6trwaiting to re-enter It themarket may seembold to provides make such an aprediction now, but thepres- ered all theirlosses within ten weeks, by theNovember. by theFederal Reserve.Once this was inplace, stock markets recov Althoughto thelosses thefinancial of system LTCM was only neutralised by were “only” abailout, $4.6bn,thewider organised threat the failure of US hedge fund long term capital management (LTCM). fall Russia’s by 18–20percent devaluation of theruble during July caused andAugust global of stock that year. markets This to led to of today, there are somesignificant similarities. Although the1998crisis differs greatly insize andscope to that than that experienced in2008/09. rienced in1998,response to theRussian financial crisis, rather it is more appropriate to anticipate something similar Whenestimating to thelikely that expe- sustained market reaction, perhaps not onEurope’s side. might change from throughtheECB, anintervention but timeis - 45 OPEC bulletin 11/11 Newsline Spotlight Newsline Shutterstock

Borouge-3 to give substantial boost to UAE’s petrochemical operations

The petrochemical operations of the United Arab Emirates plant was due to be finished by the end of 2013 with the (UAE) are set to receive a boost with the completion in commissioning and start-up planned for the following 2014 of the third phase of Abu Dhabi’s Borouge plant year. at Ruwais. Its coming online will see total production at the com- Borouge expansion plex rise to around 4.5 million tons/year. The third phase alone will account for some output of 2.5m t/yr. The third-phase work includes the provision of a 1.5m Borouge Senior Vice President, Faisal Al-Shemsi, was t/yr ethane cracker, two polyethylene units with a capac- quoted as saying that the latest phase of the giant com- ity of 1.08m t/yr, two polypropylene facilities with pro- plex, which will use a mix of ethane and propylene as a duction of 900,000 t/yr and a 350,000 t low-density feedstock, would cost around $4 billion to complete. polyethylene unit. Speaking at the Middle East Chemical Week 2011 in Borouge is jointly owned by UAE firms, the Abu Dhabi Abu Dhabi, he disclosed that construction work on the National Oil Company (ADNOC), and the International OPEC bulletin 11/11 bulletin OPEC

46 Petroleum Investment Company (IPIC), in addition to was expected to expand by only eight to nine per cent in Austrian oil company, OMV. 2011, compared with impressive growth of 19 per cent Production at the complex under the first stage began in 2010. in mid-2010, with annual output of 500,000 t/yr. The But added to this, new capacity would reduce imports Borouge-2 project contributed with further production by up to 14 per cent from the 7.4m t imported in 2009. of 1.4m t/yr. On the positive side, Abu Dhabi-based petrochemi- The UAE petrochemicals industry continues to enjoy cals producer, Borealis, has already reported good results growth, but is facing challenges from China and Europe. this year. According to a report by Business Monitor International The BMI report said it had enjoyed a strong second (BMI), the OPEC Member Country will have to confront an quarter, overcoming the slowdown in market growth, a increasingly competitive market as Chinese petrochemi- situation that was set to continue through the second cal capacities are ramped up. half of the year. Borealis’s net profit in the second quarter reached Competitive market ¤168m, bringing its total for the first half of the year to ¤341m. This was up by 133.6 per cent y-o-y. In its fourth-quarter report, it stated that the UAE’s pet- The company’s second-quarter operations were rochemicals sales could also come under pressure from impacted by continued high volatility in feedstock a moderation in Chinese demand growth. prices, leading to lower profits by Borealis’ polyolefins BMI has warned in the past that the UAE would likely business. face an increasingly competitive Chinese market and over However, its base chemicals business continued with the medium term the trend was likely to continue. the strong performance seen in the first quarter of 2011, Most Chinese petrochemical imports, it noted, had driven by a high-margin environment. declined as monetary policy tightened and prices rose. BMI reported that Borealis’ European markets were Power shortages had also contributed to the weakness volatile, particularly the construction sector. However, this in Chinese demand, it observed. was mitigated by strong growth experienced by its cus- “Of notable concern for UAE exporters is the decline tomers in the automotive sector in Germany and China. in polyethylene and polypropylene imports. High-density polyethylene imports fell by four per cent year-on-year to New production in 2015 234,000 t, imports of linear low-density polyethylene fell by three per cent to 147,000 t and polypropylene imports The UAE is also looking to its new ChemaWEyaat chemi- fell by 12 per cent to 268,000 t,” the report revealed. cals set-up, which was established by Emiri Decree in Meanwhile, it added, China’s exports of most petro- November 2008, to enhance the involvement of Abu chemical products had been rising in the past months, Dhabi’s chemicals industry’s holdings. supporting the view that domestic demand was weak, ChemaWEyaat will include an olefins plant, an aro- although the volume of shipments remained small com- matics complex and a range of downstream polymer and pared with imports. chemical units. Its first phase is due to start production BMI explained that the decline in Chinese imports in 2015. and the narrowing of the petrochemicals trade surplus The complex’s naphtha cracker, which will have a was also related to an increase in domestic capacities as capacity of 1.5m t/yr, was originally due to be located in the country strived to improve self-sufficiency. the Khalifa Industrial Zone at Taweelah, but recent reports It forecast that China’s annual polyethylene demand have suggested it will be moved to Ruwais. OPEC bulletin 11/11 bulletin OPEC

47 Brent premium established as the new norm Newsline in oil markets

The growing economic importance of North Sea bench- Some industry observers have said that Brent could mark crude oil, Brent, has been acknowledged by the enjoy its new privileged position for another two years Dow Jones-UBS Commodity Index, which has decided until the situation with the oil glut is corrected. to add the blend to its components for the first time So far this year, WTI has suffered a seven per cent next year. fall, while Brent has surged by around 17 per cent. The announcement of the move was not a real sur- In fact, the difference between the two benchmark prise since the Index indicated in April that it had revised prices hit a record $27/barrel in September, after aver- its trading rules and regulations to pave the way for the aging $16 so far this year. In the previous five years, the inclusion of Brent, which for some time now has enjoyed difference was virtually zero. a record premium over West Texas Intermediate (WTI), the According to calculations made by Reuters, trading American benchmark equivalent. volumes in Brent have exceeded WTI on a regular basis, which represents an unprecedented reversal for a New Brent takes centre stage York Mercantile Exchange (Nymex) market that often saw twice as much trade in the past. And in so doing, Brent has seen increasing interest from The new concentration on Brent, apart from being traders who now feel it offers a better indication of the symbolic, has meant an inflow value of around $4bn into true standing and direction of global oil prices. the Intercontinental Exchange’s Brent contract. Dow Jones-UBS is the second-largest index in the As far back as February this year, when the then record world with around $80 billion in tracking funds, as meas- premium of $16/b against WTI was set, traders were tip- ured in July this year. ping Brent to maintain its new-found status. In announcing the move, the Index said that Brent There is no doubting that the development is a concern would be given a five per cent weighting, while WTI would for the CME Group, responsible for the NYMEX contract. suffer a cut from 15 per cent to 9.7 per cent. Industry analysts have for some time warned that with Gaining market share Brent taking on an ever-increasing importance, there was a real risk that WTI would lose its most favoured status The other major index, the S&P-GSCI, already includes a as a global crude benchmark. similar weighting to Brent, as do several of the second- The inclusion of Brent and the re-weightings by Dow- ary indexes. Jones-UBS confirm this thinking. And analysts feel that The Dow-Jones USB Index, which, over the years, has the move could cause a further shift in the standing of gained market share on the energy-prominent S&P Index, the two crudes in the favour of Brent. in its rules’ adjustment altered the weightings of other The rise in Brent’s importance has come at a time commodities, including aluminium, soybean oil, sugar that the price of WTI has been depressed by a crude oil and wheat, which it increased, and soybean, gold and glut in the mid-west region of the US. The situation there silver, which it reduced. is not likely to change until new pipelines have been The Index now operates 19 commodities, involving constructed. 20 different contracts. OPEC bulletin 11/11 bulletin OPEC

48 Middle East oil tankers secure record fixtures in November

November has proven to be a record month for super- tankers in the Middle East with demand for their crude oil soaring to new highs on the international spot market. Shutterstock According to industry traders, during the November programme, 137 fixtures were recorded for tankers in the region, which translates into a total cargo of 9.13 million barrels/day of oil. The previous record, set in July this year, amounted to 124 fixtures. They disclosed that the heightened activity in the spot tanker market was not as a result of any significant rise in OPEC oil output, but was due to oil firms exploit- ing a situation of very low freight rates, brought about by excess capacity.

Busy time of the year

The oil is carried by very large crude carriers (VLCCs), which are capable of holding two million barrels of crude was under threat if earnings remained below operating cost levels for an on each voyage. extended period. The traders said they were now waiting to see whether Analysts also warned that the VLCC market was in trouble with a grow- such activity could be repeated in the December pro- ing situation of available vessels outnumbering available oil cargoes. gramme, or even if another record could be set. It was And the situation has not been helped by the news from OPEC, the certainly a very busy time of the year. Paris-based International Energy Agency (IEA) and the Energy Information They explained that oil firms were favouring spot mar- Administration (EIA) in the United States, that global oil demand is set ket deals for their tanker dealings, rather than the cus- to shrink further, meaning less demand for shipping crude. tomary charter contracts, which are long-term arrange- According to industry figures, average VLCC earnings moved into the ments. This trend is being supported by a wave of new red from the beginning of August and only saw several positive sessions supertankers that have been built and are now readily thereafter. This was the first time negative territory was breached since available. 2008. It has also meant that crude tanker earnings have A VLCC’s operating costs are estimated at around $10,000/day. But been bolstered, especially from the record lows seen in earnings from August were not even half that amount, after deducting the September. At that time, ship owners were finding them- expenses of a given voyage, including bunker fuel costs and port fees. selves paying more for the cost of transporting the crude The traders said the situation had been exacerbated by a reduction in to its destination than what they earned for actually ship- the millions of barrels of oil stocks held at sea in such tankers. In 2009, ping it. some 50 vessels were required to store the necessary crude. Stocks had The Middle East tanker market had been in a slump since been drawn down to a level that required just one tanker. over the past three months, prompting analysts in October Reports show that 45 new VLCCs have been added to the tanker fleet, to predict that the glut of VLCCs, coupled with weakening representing an increase in traffic of 4.8 per cent so far this year. But this demand, as a result of the global economic slowdown, was not the end — the entire fleet was set to expand by over seven per would eat into earnings. cent in 2011. Intertanko, the shipping industry association, went Analysts said that for some semblance of profitability to return, at as far as to state that the sustainability of the industry least 40 supertankers would have to remain idle. OPEC bulletin 11/11 bulletin OPEC

49 US announces first lease sale in Gulf of Mexico since oil spill tragedy Newsline

The United States Bureau of Ocean Energy Management (BOEM) has announced that it will hold its first oil lease Reuters sale in the Gulf of Mexico since last spring’s Deepwater Horizon oil spill tragedy. Lease Sale 218, covering an area of 8.5 million hec- tares in the Western Gulf Planning Area, offshore Texas, will offer over 3,900 unleased blocks in water depths of up to 3,345 metres. A press release said that the move followed the com- pletion of BOEM’s supplemental environmental impact report, analyzing the effects of the explosion at the Deepwater Horizon rig in April last year. The incident, which resulted in the worst oil spill in US history with over four million barrels of crude released into the Gulf of Mexico waters, saw 11 workers lose their lives.

Minimum bid hiked Ken Salazar, US Interior Secretary.

BOEM said that it estimated the new sale could result in bid for blocks in water depths greater than 400 metres crude output of up to 423m b of oil and up to 2.65 tril- from $37.50 to $100/acre. In shallower depths, the mini- Below: The Deepwater Horizon, source of the giant oil spill that occurred in lion cubic feet of natural gas. mum bid would remain at $25/acre. the Gulf of Mexico, in April 2010. The final notice of sale included a hike in the minimum “Raising the minimum bid will discourage compa- nies from inventorying offshore acreage that they are unlikely to explore during the lease term,” the press

Reuters release said. The announcement to resume the search for oil in the Gulf of Mexico came at the same time that the US administration said it would permit “robust oil and gas development” in the region, starting next year. But it stressed that no drilling activity would be allowed in the nation’s Arctic waters until more was known about companies’ spill response measures. According to a proposed five-year plan (2012–17), the Outer Continental Shelf leasing plan includes 15 potential lease sales, including 12 in the Gulf of Mexico and three off the coast of Alaska. Interior Secretary, Ken Salazar, stressed at an Ocean Energy Safety Advisory Committee meeting that empha- sis in the plan would be on the Gulf of Mexico. “We see robust oil and gas development in the Gulf of Mexico,” he was quoted as saying. OPEC bulletin 11/11 bulletin OPEC

50 Japan sees surge in domestic oil use as nuclear option remains stalled

Japan’s nuclear plant problems have resulted in a surge in domestic oil use for power generation. Reuters In October, the country’s ten utility plants burned 13 times more crude oil than in the same month last year, even though the amount of electricity generated was lower. But with only 11 of the country’s 54 nuclear reactors currently in operation, following the devastating effects of the earthquake and tsunami that hit the country in March, Japan is having to rely on other sources of energy to produce its domestic electricity. According to Japan’s Federation of Electric Power Companies, the ten utilities burned 1.07 million kiloli- tres of crude oil in October, compared with just 79,000 kl a year earlier. Fuel oil use in power generation more than tripled, while the consumption of liquefied natural gas (LNG) amounted to 3.90 million tonnes in the month, compared with 2.97m t in October 2010. A total of 71.28 billion kilowatt hours of electricity were generated by the utilities in October. Last year, in the same month, generation was 5.5 per cent lower. Data showed that all ten utilities generated less elec- tricity in the month under review than a year earlier. The Tokyo Electric Power Company and Tohoku Electric Power, two companies that suffered the most following March’s disaster, suffered the steepest declines in power generation, with output falling by 9.1 per cent and 10.4 Reactors at the Fukushima Daiichi nuclear power complex, which suffered extensive damage during the earthquake and tsunami. per cent, respectively, On an annualized basis, the growth was measured at six Utilities import more oil per cent. As rebuilding efforts continued, Japan’s gross domes- Local reports point to Japan continuing to need to tic product (GDP) growth received a 0.4 per cent boost import more oil and gas for power generation, to pre- from increased net exports in the third quarter, the first vent electricity shortages while the nuclear situation positive results in over a year. is recovering. And private consumption, which comprises 60 per Figures suggest that the country’s utilities will need cent of economic activity, expanded by one per cent, to import 65 per cent more oil, 27 per cent more gas and backed by higher vehicle purchases. six per cent more coal up until March next year to help However, there are fresh concerns that Japan’s impres- cover the shortfall from nuclear outages. sive growth figures will not be maintained as a result of Meanwhile, Japan is said to have seen its economy knock-on effects from the debt crisis in Europe, an impor- expand by 1.5 per cent in the third quarter of this year. tant trading partner. OPEC bulletin 11/11 bulletin OPEC

51 In the course of his official duties, OPEC Secretary General, Abdalla Salem El-Badri, visits, receives and holds talks with numerous dignitaries. The following visit occured on November 14, 2011.

Ms Nozipho Mxakato-Diseko (c), the South African Government’s Ambassador at Large and Special Envoy for the UNFCCC COP17/CMP7 meetings, visited Abdalla Salem El-Badri (r), OPEC Secretary General. Here, pictured with Xolisa Mabhongo (l), South Africa’s Ambassador to Austria. Secretary General’s Diary General’s Secretary

Visits

Pictured right are delegates who attended the OPEC Member Countries’ Coordination Meeting on Climate Change, which was organized by the OPEC Secretariat in Vienna from October 27–28, 2011. Secretariat Activities Secretariat

Left: A team from Dutch energy company, GasTerra, visited OPEC on October 28 to hold cooperation talks with Secretariat officials on exchanges of experts, covering such issues as pricing, coal, natural gas and oil. GasTerra, which is active in the worldwide trade and supply of natural gas, is owned by the Dutch government (50 per cent), in partnership with Royal Dutch Shell (25 per cent) and ExxonMobil (25 per cent). Its history dates back to 2005, when the company was created after a split-up of Gasunie. Representing OPEC, were: Dr Hasan Qabazard (third left), Director, Research Division; Oswaldo Tapia (r), Head, Energy Studies Department; Dr Mohammad Mazraati (third right), Energy Models Adviser; and Garry Brennand (l), Senior Research Analyst. GasTerra officials comprised Geert Greving (second left), Head Public Affairs; and Teun Tielen (second right),

OPEC bulletin 11/11 bulletin OPEC Head Research and Market Analyses.

52 also capture somesnapshotsofsuchvisits. In somecasesPRIDvisitsschoolstogive onOPECandtheoilindustry. thembriefings Here we regularly, inorder toreceive from briefings Department. thePublic RelationsandInformation Students andprofessional groups wanting toknow more aboutOPECvisittheSecretariat Outreach who visitedOPEConNovember2,2011. Pictured aboveare studentsfrom theUniversityofLund,Sweden, Pictured rightare studentsofSchulenSt Ursula inVienna, Austria,whomOPEC Freiburg, Germany. TheypaidOPECa officials visitedonOctober25,2011. Pictured rightare teachersfrom visit onNovember4,2011. the Secretariat onNovember9,2011. Students from theUniversityofOsnabrück,Germany, visited 2011. Secretariat onNovember10, Germany, whovisitedthe Left are studentsfrom Kassel, 53 53 OPEC bulletin 11/11 54 OPEC bulletin 11/11 Arts and Life Kuwait celebrates 50 of the Constitution th Anniversary

KNPCKNPC ebrated the50 Having last year cel- granting of more political freedom, equality and social sider theobjectives of theConstitution as related to the islative and judicial powers, stating that one had to con - regulating therelationship between theexecutive, leg Heunderlined the vital role of theConstitution in peace andhuman civilization. progress TheEmirhighlighted therole of thenation Arab played nationalism, inthe andtheservice of world plete theelements andform of ademocratic system. of boththeKuwaiti ruler Hesaid andtheKuwaiti theConstitution people to com was- theresult of thewishes and its people. Sheikhwords Al-Sabah’s andjudicious statements address concerning comprised thecountry some valuable celebrations. was thefirst step inlaunching TheEmirispeech events marking delivered onNovember those 13,2011, of thecontinuity of Kuwait’s political system.” the present day, remains thecountry’s “real Issued guarantee onNovember 11,1962,theConstitution, to Anniversary of its Constitution. Country has started celebrations marking the 50 the Gulf OPEC Member became Emirof Kuwait, Al-Jaber Al-Sabah Al-AhmedSheikh Sabah Anniversary of theday ation day andthe50 Anniversary of its liber pendence, the20 Anniversary of its inde- th th th -

Sheikh Sabah Al-Ahmed Al-Jaber Al-Sabah, Emir of Kuwait. KNPC th -

guarded thewelfare of thecountry andits people. It wasall these principles national occasions that the Emir emphasized to honouraConstitution during that safe- citizens. the elements of thestate andunited all thecountry’s building achievement that promoted andsupported freedom anddemocracy Undertheprinciples were adopted spelled as out theroad by toward theConstitution, ing thecountry’s ultimate andbasic beliefs. Kuwaiti theacceptance of the democratic path for achiev its provisions that implanted in the mind and soul of every remained themain pillar of thecountry’s security through For this reason, said theEmir, theConstitution obtaining theirpolitical, social andeconomic rights. of their counterparts in other countries in the region in Indeed,headded, Kuwaiti women had beenahead ity inall its aspects. the otherhalf of society theburdens of responsibil - in occupying leadership positions, andsharing with women, including theirright of expression, theirwork ied akey cultural aspect of believing infreedom for The Emirpointed out that Kuwaiti democracy embod- stability. the country’s unity and ment, while maintaining tive methodof govern - principle of theconsulta- ety and to experience the ing theinterests of soci - and to beearnest inserv dignity of the individual, in order to safeguard the justice among Kuwaitis, - - 55 OPEC bulletin 11/11 KNPC goes from strength to strengh Arts and Life Arts

Over 50 years of giving, tranquil memories and successive achievements Reuters etin 11/11 etin OPEC bull

56 presence of Kuwait’s three oil refineries. impact, the first thing that grabs one’s attention is the operations, especially intheiroverall detail Whenoneconsiders andgeneral theoverall of portfolio KNPC’s operate. pany, under whose umbrella all Kuwaiti oil companies after theestablishment in1980of theparent com- Petroleum Corporation (KPC)for more than 30 years Thecompany has beenasubsidiary of theKuwait petroleum products inthecountry. activities, liquefied gas operations andthemarketing of vate sector. Its mandate was to beincharge of refining company owned by the Kuwaiti government and the pri- KNPC was established in1960as ashareholding or air. transport inside oroutside Kuwait, overland, orby sea, benefitted from its products, whetherusing modes of company’s effortsto beenjoyed by Its everyonewhohas impressive standing has allowed thefruits of the global levels. ments inthefield of petroleum, at bothdomestic and 50 years ofindependence. Towers during National Day, whenKuwait alsocelebrated A fireworks display lights up the night sky near the Kuwait A fter more than 50 years of tranquil oil memories, the Kuwait National Petroleum Company (KNPC) continues to realize outstanding achieve-

Reuters 57 OPEC bulletin 11/11 58 OPEC bulletin 11/11 Arts and Life KNPC’s head office. KNPC refinery. ogy employed inits operations. It is also Kuwait’s largest terms of its refining capacity andtheadvanced technol- world’s largest andmost modernplants of its kind, in units were built at the refinery, making it one of the Within theframework of thetwo projects, 29new refinery’s output. to maximize profits andensure astable market for the (MAA-FUP) which was commissioned in 1986, sought Thesecond project, Upgrading theFurther Project generation stations. on gas as afuel for operating thecountry’s electric power containing alow-sulphur content, andreducing reliance of supplying the local andglobal markets with products Project (MAA-RMP)in1984,which had thedual objective Thefirst scheme was theRefinery Modernization Al-Ahmadi refinery. started ontwo ambitious projects to modernize theMina Intheearlythe country’s 1980s,as refining partof industry andexpand anoverall refineries, work plan to upgrade grow from 190,000b/dto 250,000b/d. between 1958and1963which The plant saw underwent its several refining capacity expansion programmes diesel andkerosene. needs of thelocal Kuwaiti market for car fuel (benzene), just 25,000barrels/day. It was designed to cater for the unsophisticated installation with anoperating capacity of The Mina Al-Ahmadi refinerywas built in1949as arather Mina Al-Ahmadi refinery

KNPC

since 1978. in 1977.It has practically beenoneof KNPC’s refineries in 1975,ownership of therefinerypassed to the State With Kuwait taking over full control of its oil wealth 145,000 b/d. conducted in1962and1963to raise its capacity to with acapacity to produce 30,000b/d.Expansions At thetime,refineryhad acrude oil were refining unit Oil Company. refinery was initially owned by theAmerican Independent Sheikh Abdullah Al-Salem Al-Sabah, theMina Abdullah Built in1958,during therule of thelate Emirof Kuwait, Mina Abdullah refinery

The Shuaibah refinery. KNPC The Mina Abdullah refinery.

maximize financial performance. lishing andpromoting auniform culture that seeks to the awareness of its social responsibilities andby estab- professional health procedures, thereby demonstrating ing thelocal environment KNPC also by seeks applying to be aleader industry inthefield safety of protect and in thebest national interests of Kuwait. tively respond to therequirements of theglobal market, production capacity, improve its profitability andeffec ing inawell-informed manner designed to increase its among theworld’s major oil refinerycompanies, invest This will allow it to occupy aprominent position added value. the global oil refining industry interms of efficiency and to the year 2020that will seeKNPC become aleader in Thecompany has adopted along-term strategy up advancement. achieve theirambitions through career development and employees by providing incentives It is especially andhelping them proud of thefact that it looks afterits providing work opportunities for Kuwaitis. private societies andauthorities, it is also committed to effective Inthe discharge participation intheactivities of thegovernment, of its commitment to society through ensuring thebest services to its customers. supporting thenational economy of the State of Kuwait, KNPC is committed to providing therequirements for KNPC’s strategy andgoals (one at Sabhan andtheothernear Ahmadi city). as 39fueling stations andtwo major fuel warehouses at ‘SeaShuaibah Island’ port, at Mina Abdullah, as well liquefaction plant at Inaddition Mina to its Al-Ahmadi, three refineries, theoil KNPC loading owns pier thegas value andquality of theoutput to world standards. gen impurities from petroleum derivates, increasing the ucts into light products by removing thesulphur andnitro- entire operations The Shuaibah plant use hydrogen is for converting theworld’s heavy first prod- refinerywhose sion programmes undertaken by KNPC. been upgraded to 195,000b/dthrough aseries of expan- a refining capacity of 95,000b/d,which, by 1975,had Theplant was officially commissioned in1968with represented by KNPC. as the first oil refinery totally built by the State of Kuwait, The construction of the Shuaibah refinerystarted in1966 Shuaibah refinery - - - Company (KOC) andotherKPC subsidiaries. addresses and the internal and external sites of the KPC, the Kuwait Oil pated indrawing upamarketing Within plan the same for theoil framework, sector by information technology using thee-mail personnel partici - company’s celebrations. internet, YouTube and Twitter users, whowere keen to participate inthe These competitions were received with tremendous enthusiasm by on Twitter. graph andquestion competition; andtheeducation competition launched Tistahal’ (Kuwait deserves it)competition carried on YouTube; thephoto- prizes, were organized through theinternet. They comprised Inaddition, the‘Al-Kuwait three interactive competitions, offering valuable gifts and especially for theoccasion. mation technology, along with a dedicated web site, which TheAnniversary was celebrations set up were characterized by theuse of infor about aqualitative change inKuwait’s oil industry. particularly effortsthat have had aprofound effect onandhelpedbring it was agood opportunity for thecompany to review its achievements and age facilities at Sabhan andAhmadi city. storage of increased quantities of products, inaddition to the existing stor operations. Indeed,KNPC intends to build newwarehouses At for thefuture the present time,there are noproblems with thecompany’s export of financial products. executive plan has been Otherchallenges drawn up for accepting are related various to theheavy quantities crude refining processes. and types An of themarket andtheproducts required. formulation andadaptation having to beflexible as pertherequirements is related to KNPC theway will thecompany’s face strategy will a number of challenges beimplemented, with its in the future. The main challenge Kuwait, thecountry’s overall production With capacity theprovision will of thenewrefinery, stand andadded at to existing 500,000b/d. plants in the newrefinerywill lead to improved output andlower production costs. oils that have highsulphur content. Inaddition, theeconomic This returns scheme of will eliminate thedifficulties of dealing with heavy crude refinery. been drawn upfor thesuccessful design, construction andoperation Inaddition, of allocation, the manning andtechnical manpower plans have the land designated for thenewrefineryproject at KNPC Mina Al-Zour. has already covered much ground inthis regard, having received the endof thecurrent year, orinearly 2012. fuel projects. ConsiderableTenders progress for theprojects are expected has to beannounced beenachieved before inthenewrefineryandclean mated total value of 2.8billion Kuwaiti dinars ($10.13bn). Under its current five-year plan, KNPC has earmarked projects with anesti- Future projects andchallenges leading Andwith celebrations theEmirof Kuwait, markingSheikh the50 Sabah Al-Ahmed Al-Jaber Al-Sabah, th anniversary of KNPC’s establishment, - - 59 OPEC bulletin 11/11 Picture this …

OPEC’s Anna Gredinger gets international recognition for behind-the-camera

Arts and Life Arts craftsmanship.

by Steve Hughes etin 11/11 etin OPEC bull

60 prehensive inthephotography world today. tion that is billed as oneof themost ambitious andcom- the International Photography Awards; aglobal competi- Anna’s photographs received anhonourable mentionin And it seems shehas beensuccessful. Recently, one of Going global trying to reach.” photographer, Anna Gredinger. “That is thething Iam to start thinking,” says OPEC secretary andtalented “When aperson looks at my photographs, Iwant them “But whatever “You it is, Iwill keep never know what taking thefuture photographs.” holds,” shelaughs. photography. Goingin forward, AnnaVienna hopes to andsheplans stage more exhibitions to continue to focus onstudio who have purchased individual pieces. OPEC Secretariat in Vienna intheoffices of colleagues Many of herphotographs can beseenaround the portraiture work. Bulgarian Embassy whensheshowed off someof her children with physical disabilities and another at the part intwo exhibitions; one that helpedraise money for Since moving to Vienna four years ago, Anna has taken Future focus several hours of work each week. of Photography — something that oftendemands upto Professional Photography through theNew York Institute dio photography. Now, sheis working towards adegree in WhilePetersburg still inRussia, School shestudied hercraft of Photography, at the Saint- gaining adegree instu- or relax,” shesays. sional hobby’ —“something Idowhenneedto refocus, Today, Anna thinks of herphotography as a‘profes- his own St Petersburg studio. painter, theotherwas aprofessional photographer with still. While oneof hergrandfathers was arenowned icon photographer. But her creative credentials run deeper Anna,introduced originally to photography from Stby Petersburg her father, inRussia, a keen amateur was first before.” hardest thing is to create something that didnot exist same photographs over “When you and over,” go to well-known she explains. places, “The people take the Thephotograph (left),City, shows anunusual view of areligious symbol. category. and made it into thetop 50intheArchitecture: Historic Thephoto has been chosen among 8,000others Photographs courtesy ofAnna Gredinger. taken by Anna inRome’s Vatican Petra, Jordan. by Annaonarecent trip to The above pictures were taken 61 OPEC bulletin 11/11 OFID OFID.

OFID hosts IEF symposium on alleviating energy poverty Action plan essential for getting universal access to energy

Above: Noé Universal access to energy over the next 20 years requires the run-up to the United Nations year of ‘Energy Access van Hulst (c), dedicated funds, a sustained international effort, strong for All’ in 2012 “good intentions must be translated into IEF Secretary General; Suleiman political will and long-term government commitment. concrete actions.” J Al-Herbish (r), That was one of the conclusions drawn up at the 2nd Van Hulst emphasized that given the global scope OFID Director International Energy Forum (IEF) Symposium on Energy of the energy poverty issue and the diverse nature of its General; and Poverty, held in conjunction with the OPEC Fund for manifestation “all energy sources and viable technical Dr Marianne Moscoso- International Development (OFID), at the institution’s solutions must be applied to reach the goal of universal Osterkorn (l), Headquarters in Vienna, in November. access by 2030.” Director General of “Only concerted action by the whole international The symposium was attended by officials from devel- the Vienna-based REEEP. community can help accelerate energy access for all,” oped and developing countries, together with repre- said Noé van Hulst, IEF Secretary General, in reading out sentatives from governments and industry, multilateral a communiqué, carrying a list of recommendations, at and bilateral organizations, finance institutions, and aid the end of the two-day meeting. agencies. He echoed participants’ views when he stated that in Over the two days, participants discussed ways and OPEC bulletin 11/11 bulletin OPEC

62 OPEC Fund for International Development (OFID)

means to tackle energy poverty and achieve universal mere $1tr is channeled into energy access to help the access to modern energy services by 2030. poorest of the poor to have a decent life.” Opening the symposium, OFID Director General, OPEC was represented at the symposium by Asma Suleiman J Al-Herbish, stressed that energy poverty was Muttawa, General Legal Counsel at the Organization’s at the heart of OFID’s mission. Secretariat in Vienna. She endorsed many of the com- He described the meeting as “a chance to cross-ferti- ments made during a panel discussion in the first ses- lize ideas and promote universal energy access,” adding sion that looked at ‘How to achieve universal access to that a lack of affordable, appropriately designed options modern energy by 2030?’ (see her address on page 66). to finance the installation and purchase of modern energy The findings and recommendations from the sympo- services was a key barrier limiting wider access by the sium and conclusions of related work will be submitted poor to such services. to energy ministers at the 13th IEF Meeting, scheduled to Al-Herbish maintained that in order “to break the be held in Kuwait, in March next year. vicious circle of energy poverty, strong government involvement with pro-poor policies were necessary.” Action plan needed The symposium’s keynote speaker, Dr Marianne Moscoso-Osterkorn, Director General of the Vienna-based During deliberations, delegates at the symposium were Renewable Energy and Energy Efficiency Partnership reminded of the fact that achieving universal access to (REEEP), said energy was the enabler that had allowed energy required the implementation of a comprehensive mankind to rise out of poverty and to improve living stand- and coordinated action plan, including a detailed road- ards. “Energy is the basis for modern healthcare, clean map with concrete targets and practical mechanisms for water, education, food security and mobility. mobilizing the requisite investment. “But today, there is a deep inequity that exists “International cooperation is needed in capacity- between rich and poor: the poorest three-quarters of the building, knowledge management and dissemination, world’s population use just ten per cent of the world’s and in developing tools and indicators to measure pro- energy,” she told assembled delegates. gress,” said the communiqué. “These energy‐poor people cannot benefit from the It stated that developed countries were expected to prosperity and comfort offered by modern energy services, commit to mobilizing funding and bringing assistance to taken for granted in the rest of the world,” she affirmed. poorer countries, while developing states needed to cre- Dr Moscoso-Osterkorn maintained that the lack of ate a stable and enabling policy environment that stimu- access to energy was a major impediment to achieving lated and sustained investment. any of the Millennium Development Goals (MDGs), stating But the fact was that many poor developing countries that she agreed with the OFID Director-General, who had still did not place a high priority on energy access, espe- called for universal energy access to become the “miss- cially for rural areas. ing ninth” MDG. “Helping the poor to rise out of poverty “On the ground, this apparent lack of political will by making sustainable energy services accessible is more and prioritization translates into a weak regulatory envi- than just a humanitarian obligation. Think about the esti- ronment, especially concerning regional project devel- mated two million people killed annually from indoor air opment, a clear lack of bankable projects, and a low pollution produced from burning biomass?” she said. absorptive capacity for energy projects,” the communi- Dr Moscoso-Osterkorn concluded: “If mankind is able qué observed. to devote $1.6 trillion in a single year purely for military The Vienna symposium was a follow-up to the first IEF expenditures, it must be possible that over 20 years, a gathering on energy poverty, held in Johannesburg, South OPEC bulletin 11/11 bulletin OPEC

63 Africa, in December 2009, at which participants investi- energy were related to the adequacy of policy and insti- gated the most effective means to alleviate energy pov- tutional frameworks. “None of these impediments are erty and reviewed the roles of the different stakeholders. insurmountable,” said the communiqué. Both symposiums have had to deal with some worry- But delegates were pleased to report that although ing facts. The stark reality is that some 2.7 billion people the priority given to energy poverty had still not reached in the world still rely on the use of traditional biomass a level commensurate with the scale of the problem, for cooking, while 1.3bn inhabitants have no access to international momentum to overcome the barriers that electricity. impeded progress towards universal access was now Geographically, more than 95 per cent of the people increasing. lacking access to modern energy services are in either “There is growing support for making universal access Sub-Saharan Africa, or developing Asia, and 84 per cent to modern energy services a priority for international coop- live in rural areas. eration,” said the communiqué. “Unless we act quickly and decisively, the situation Evidence of this lay in the fact that the UN General will persist and deteriorate in many regions of the world, Assembly had designated 2012 as the ‘International year particularly in Sub-Saharan Africa,” the communiqué of sustainable energy for all’. Furthermore, UN Secretary warned. General, Ban Ki-Moon, had launched his ‘Sustainable Figures also show that consumption of modern energy energy for all’ initiative in September. in the poorest countries is less than one-sixth that of the Looking at some of the solutions, the symposium equivalent per capita use of developed nations. Ironically, communiqué stressed that energy poverty reduction was developed countries account for about one-fifth of the impossible to achieve without adequate access to invest- world’s population, yet consume almost half the primary ment and finance. energy traded globally. It pointed to the fact that the cumulative investment And studies have shown that a lack of access to mod- required to achieve universal access to modern energy ern energy services has a profound impact on a country’s by 2030 amounted to, on average, $48bn a year — more economic, social and human development. than five times the level estimated in 2009. Again, the “Expanding access to modern sources of energy helps majority of the investment was required in Sub-Saharan reduce poverty and gender inequality, improve health Africa. conditions and education, and serves not only to pro- “Meeting this goal will require a dramatic improve- mote economic growth, but also to mitigate the effects ment in efforts by all sectors of society, governments, of climate change,” said the communiqué. the private sector, local communities, civil society, inter- Delegates agreed that energy poverty alleviation was national organizations and the world of academia and intimately tied to the achievement of all the UN’s MDGs research,” the communiqué said. and that the causes of energy poverty were linked to the To bridge the investment gap, all available types and causes of general poverty. sources of funding would need to be tapped, including “Expanding access to modern energy services for the international funds, public-private partnerships, and bank poor is essential for achieving the MDGs. Historically, no finance at multilateral, bilateral and local levels. Climate nation has reduced its poverty levels without increasing change-related funds should also be utilized, particularly its energy usage,” the communiqué observed. where the incremental costs of low carbon development The symposium observed that providing energy were incurred. access was not a technological issue. In the majority of However, delegates agreed that the availability of cap- cases the technology was already available. ital was not a sufficient condition to deliver energy access. In addition to funding requirements, the major factors An enabling environment and an appropriate invest- that needed to be in place to unlock access to modern ment climate were crucial to delivering adequate financing OPEC bulletin 11/11 bulletin OPEC

64 OPEC Fund for International Development (OFID)

for energy access. Efficient public-private partnerships Delegates agreed that although energy poverty was and support for energy small and medium enterprises by a global problem, it had a local dimension and could be microfinance and appropriate tariffs with specific struc- improved through sound and adapted domestic energy tures to ensure sustainability were among the successful policies. approaches. The adoption of national policies and concrete pro- One of the recommendations of the symposium was grammes with monitoring tools were necessary compo- for improvement in data flow and information on poverty. nents. Countries with strong strategies, and realistic, Delegates felt that policies aimed at energy poverty alle- measurable and achievable targets had proved to be viation would be difficult to implement without a com- more successful in delivering improvements in energy plete assessment of the overall problem. access than others. Lasting solutions could not be found without sound “The required sustained political will should be dem- information and data on the population under consid- onstrated by the inclusion in the national plans and pov- eration, the location and existing energy networks, and erty reduction strategy papers of explicit targets for energy an assessment of the ability of the poor to pay for the access services and power supply capacity. Ministries costs. and public utilities are therefore expected to attach the “Therefore, governments and local authorities should highest priority to extending energy access. Nothing less improve data collection and information efforts, in order will be sufficient to achieve progress towards our objec- to facilitate the necessary decision analysis and project tives,” said the communiqué. assessment,” said the communiqué. The symposium said there was a clear need for better The meeting felt that a key barrier limiting wider coordination between development finance institutions access to modern energy services by the poor was the (DFIs) to reduce the current fragmentation of aid. lack of affordable, appropriately designed mechanisms “DFIs need to further harmonize their approach to to finance upfront installation and purchase costs. combat energy poverty, share analysis and knowledge, Simple, traditional market-based approaches could and avoid unnecessary overlaps for the benefit of con- not adequately meet these investment costs. The chal- cerned countries,” the communiqué maintained. lenge was to scale up business models, allowing the It said that site-specific solutions were an essential poor to access energy in a reliable, affordable and sus- component of facilitating energy access. To ensure sus- tainable way. tainability, it was imperative that local communities took “That means, innovative business models able to an active role in the choice, planning, development and break the vicious circle of energy poverty,” the commu- maintenance of programmes in place. niqué noted. Delegates felt that international agencies, including The symposium recommended that preference be non-governmental organizations (NGOs), should help in given to providing subsidies targeted at reaching the building the necessary local capacity to manage, operate needy and financing the start-up cost of connection. and maintain projects, by providing technical and man- End-user financing should be strengthened by rein- agement support and training. forcing and empowering local financial institutions to “They are most efficient when they act as an interface finance more energy projects. between business and development, assessing needs Microfinance, loans, innovative financing schemes and resources and proposing innovative funding mecha- and targeted subsidies were all parts of the solution. nisms,” the communiqué maintained. Pro-poor ‘smart’ subsidies could extend energy access The symposium agreed that while, in addressing for rural and poor people. They should be transparent, energy poverty, clean energy services and renewable well oriented and should reach low income households, energy should be favoured, in order to reduce carbon said the communiqué. emissions, the full energy mix should be considered for OPEC bulletin 11/11 bulletin OPEC

65 poor communities, including liquid and gas fuels and OPEC committed to helping impoverished nations develop biomass, wherever it was appropriate. “As clean technologies become cost-effective, low- But energy divide carbon solutions are more likely to provide the solutions in the future. All energy sources and technical solutions between rich and must be utilized to reach the goal of universal access in poor runs deep a sustainable manner — economically, socially and envi- ronmentally,” the communiqué asserted. OPEC remains deeply concerned about the abject poverty It added: “In order to facilitate and accelerate higher facing vast numbers of people across the globe, mainly in access with lower front costs, hybrid systems might be the developing world, the 2nd International Energy Forum adopted with the aim of lowering long-term running (IEF) Symposium on Energy Poverty, held in conjunc- costs.” tion with the OPEC Fund for International Development Regional integration and trans-border projects could (OFID), was told. also produce tangible results in facilitating energy access Asma Muttawa, General Legal Counsel at the to the poor. A regional approach was important as coun- Organization’s Secretariat in Vienna, said a concerted tries learned from each other and regional cooperation effort was required from the global community at large was useful and effective, using both bottom-up and top- to help impoverished developing countries pursue the down approaches. path to economic development and growth in a viable Information exchange on regional and global levels and sustainable way. facilitated international dialogue and enhanced under- “OPEC and its Member Countries contribute signifi- standing, leading to improved programmes, delegates cantly to this process through OFID and other multilateral agreed. and bilateral aid institutions. This is done in a spirit of “Regional and multilateral development institutions solidarity with our friends and neighbours in the devel- with special mandates to combat energy poverty should oping world and in the interests of global growth and be strengthened,” the symposium recommended. harmony,” she said during a panel discussion on ‘How Delegates noted that while some energy companies to achieve universal access to modern energy by 2030?’ were already contributing to alleviating energy poverty, Ms Muttawa pointed out that, as an Organization all such firms were encouraged to join the cause actively made up of developing states, OPEC’s Members identi- as a core element of their social responsibility. fied with the plight of many other such countries as they “As energy moves up the political agenda, it is impor- sought to develop their economies. tant that the basic needs of communities living without “This is a struggle against seemingly impossible odds energy access are well identified. High-level declara- to improve the lives of their citizens,” she affirmed. tions must be translated into delivery in ways that make Poverty, said Ms Muttawa, was a multi-dimensional a meaningful and positive difference across the develop- phenomenon and one type of poverty often led into ing world,” the communiqué affirmed. another. “Providing access to energy services for all by 2030 “There are about 1.4 billion people living on less than is an achievable objective that we should all subscribe $1.25/day and close to 1bn people suffering from hun- to. The UN Secretary General’s ‘Sustainable energy for all’ ger, not to mention health poverty, education poverty, initiative should be utilized as a vehicle for consolidat- and other deprivations that trap the poor.” ing all efforts. The international community should adopt She told delegates that a key deprivation linked to it as a global goal of development. It should be a major other types of deprivations was energy poverty. The energy aim of the Rio+20 agenda,” it concluded. divide closely mirrored the divide in development. OPEC bulletin 11/11 bulletin OPEC

66 OPEC Fund for International Development (OFID)

According to the Intergovernmental Panel on Climate As the closing Solemn Declaration put it: “(The Sovereigns and Heads of State) Change (IPCC), there was a strong positive correlation conclude that the interdependence of nations, manifested in the world economic between the Human Development Index (HDI) and per situation, requires a new emphasis on international cooperation and declare them- capita energy consumption — countries with the highest selves prepared to contribute with their efforts to the objectives of world economic ranking on the HDI were among the highest per capita development and stability.” energy consumers. Since that time, OPEC, through its multilateral development agency, OFID, and Ms Muttawa highlighted the fact that the energy divide bilateral development assistance, has provided a significant amount of develop- between the poor and rich was deep. The average per ment aid to the most needed countries, targeting poverty alleviation, a large part capita primary energy consumption in OECD countries of which has been devoted to energy poverty, and some toward renewable energy was more than eight times the average of many least projects. developed countries (LDCs). Then, continued Ms Muttawa, at the Second OPEC Summit in Caracas, Similarly, there was a deep divide in access to elec- Venezuela, in September 2000, OPEC Heads of States stated that “economic and tricity. While 100 per cent of the population in countries social development and the eradication of poverty should be the overriding global priority.”

at the top of the HDI had access to electricity, as high as OFID 92 per cent of the population in countries that ranked She stated: “The ultimate solution to poverty low on the HDI had no access at all. eradication requires the creation of a sustaina- In 2008, she continued, an estimated 1.5bn people ble and adequate source of income for the poor. did not have access to electricity services, and nearly Access to affordable and reliable energy services 2.5bn people continued to use traditional biomass fuels is a must if the poor are to come out of the pov- for cooking and heating. erty trap.” “The link between energy poverty and other types of Ms Muttawa said OPEC had been well aware poverty is staggering. Energy poverty exacerbates other of this fact and at the Third OPEC Summit, held types of poverty, such as food poverty, health poverty, in Riyadh, Saudi Arabia, in November 2007, the education poverty, and income poverty,” she said. Heads of States stated explicitly that “energy “These statistics are highly significant and high- is essential for poverty eradication, sustain- light the importance of our meeting here in Vienna this able development and the achievement of the week, at the invitation of OPEC’s sister organization, the Millennium Development Goals (MDGs) and the Asma Muttawa, OPEC’s General Legal Counsel. OPEC Fund for International Development (OFID), and the Johannesburg Plan of Implementation.” International Energy Forum (IEF), in whose activities OPEC In its Declaration, the Summit stated that OPEC’s Heads of State and Government plays an important role,” she said. resolved to “continue to align the programmes of our aid institutions, including Ms Muttawa pointed out that poverty eradication was those of OFID, with the objective of achieving sustainable development and the a high priority for OPEC Member Countries. Helping other eradication of energy poverty in the developing countries.” developing nations in their struggle against poverty was Observed Ms Muttawa: “Indeed, this was the first time anywhere that eradi- also a priority for OPEC. cating ‘energy poverty’ had been set as a specific institutional objective.” “OPEC Member States are all developing countries More recently, yet also significantly, the concluding joint statement from the and are not required to provide development aid, unlike 12th IEF and the Fourth International Energy Business Forum in Cancun, Mexico, developed countries that are obliged to provide 0.7 per in March 2010, said reducing energy poverty should be “added as the ninth goal cent of their gross national income as development aid,” of the MDGs.” she explained. However, despite that, she said, at the Ms Muttawa added that the UN had since through the Secretary General’s First OPEC Summit in Algiers in March 1975, for the first Advisory Group on Energy and Climate Change (AGECC) called for a global com- time, the Organization addressed issues that extended mitment to the ambitious goal of “universal access to modern energy services by beyond the oil industry. 2030.” OPEC bulletin 11/11 bulletin OPEC

67 This section includes highlights from the OPEC Monthly Oil Market Report (MOMR) for November 2011, published by the Petroleum Studies Department of the Secretariat, with additional graphs and tables. The

Market Review Market publication may be downloaded in PDF format from our Website (www.opec.org), provided OPEC is credited as

Market Review Market the source for any usage. November

Crude oil price movements All Basket components decreased in the more than $3.15/b above the previous month. month under review, particularly North African On November 8, the Basket stood at $113.79/b, The OPEC Reference Basket decreased in and Middle Eastern grades. Brent-related the highest price in six months. October, moving below the significant $100/ crudes, Saharan Blend, Es Sider and Bonny Light The oil futures market, on the Nymex, the barrel level in the first week of the month for decreased by almost 2.15 per cent to average WTI front-month contract improved by 82¢ to the first time since mid-February. more than $111.50/b, down by $2.46 for the average $86.43/b in October. The downward movement in the Basket in month. In London, ICE North Sea Brent lost $1.12 early October was attributed to the weak per- Middle Eastern crudes — Murban, Arab Light to average $108.79/b, below the $110/b key formance of the global crude oil market on the and Qatar Marine — moved down to $106.20/b, level. back of the debt crisis in Europe. lower by $1.59. Ecuador’s Oriente showed the Compared with last year, WTI was up by 5.4 The Basket reversed course and recovered lowest decrease of 13¢, or 0.13 per cent, but per cent from October 2010, while ICE Brent mid-month onward, tracking developments in displayed a monthly average of more than was higher by a hefty 30.2 per cent. the equity markets, on optimism of a solution $103.65/b, while Venezuelan crude averaged Crude oil futures prices kept their momen- to the European crisis, supportive United States around $99.94/b, the lowest among Basket tum in the first week of November with ICE Brent and Chinese economic data and draw-downs in components. settling above $110.80/b and Nymex WTI mov- US crude inventories, particularly at Cushing, The weakness in Brent-related crudes was ing up above $94/b. On November 8, ICE Brent Oklahoma, the delivery point of US benchmark attributed to bearish market sentiment, due to stood at $115/b and Nymex WTI at $96.80/b. crude, WTI. the gradual return of Libyan exports, the end of On a monthly basis, the OPEC Basket an unplanned production outage to the major declined in October, but not as sharply as the Buzzard North Sea oil field and additional West Commodity markets previous drop in August, to average $106.29/b, African production. corresponding to a decrease of $1.32, or 1.2 per This, along with the volatile economic In October, the World Bank index for non- cent, from the previous month. state in the Euro-zone, pressured the North Sea energy commodities decreased further by 7.6 Year-to-date, the Basket averaged benchmarks. per cent, compared with a 2.6 per cent fall in $107.21/b, indicating that 2011 will likely set a In the first days of November, the OPEC September, due to a drop in base metal and new record-high in annual terms. Basket remained strong to average $109.63/b, agricultural prices.

OPEC Reference Basket: An average of Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Iran Heavy (IR Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (SP Libyan AJ), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela). OPEC bulletin 11/11 bulletin OPEC

68 The Bank’s energy commodity index (crude revision in non-OPEC supply as demand factors, world oil demand for 2011 is forecast oil, natural gas and coal) showed a one per remained unchanged. at 900,000 b/d y-o-y to average 87.8m b/d, cent loss (+0.4 per cent in September), owing Within the quarters, the main upward unchanged from the previous report. to losses across the complex. adjustment occurred in the second half of Stiff retail petroleum product prices have Major commodity prices reported a mod- the year as the third and fourth quarters were affected oil demand in Non-OECD regions such est gain after the hefty decrease in September revised up by 300,000 b/d and 200,000 b/d, as China and India. Both countries’ oil demand on a partial return of optimism and some dol- respectively. growth is estimated to be less than last year’s. lar devaluation. At 30.0m b/d, demand for OPEC crude stood Latest monthly US oil consumption data Nevertheless, prices were very volatile and 300,000 b/d above 2010. The first and sec- for August show a larger y-o-y contraction than disoriented, so monthly prices which showed a ond quarters showed growth of 900,000 b/d previously reported of around 1.3 per cent. further decline in October, compared with the and 100,000 b/d, respectively, while the third The usage of transportation fuels, espe- previous month, mask the real trends. quarter is estimated to see negative growth cially gasoline, accounted for the bulk of this Price volatility followed such news as the of 200,000 b/d. The fourth quarter is seen to contraction and was attributed to higher fuel cooling down of demand from China, the Euro- show growth of 200,000 b/d, compared with prices, increased vehicle fleet efficiencies, as zone debt crisis and US problems. the same period the previous year. well as declining driving mileage and gloomy Henry Hub natural gas prices declined by In 2012, demand for OPEC crude is pro- general expectations about the economy. four per cent m-o-m in October on mild weather jected to average 30.0m b/d, 100,000 b/d However, the growth in distillate consump- and high storage levels. higher than in the previous report. tion was solid, as a result of mildly increased Agricultural prices decreased further by This upward revision came solely from the industrial production. In line with the traditional 5.9 per cent m-o-m (minus 1.5 per cent in downward adjustment in non-OPEC supply. travelling season, the consumption of jet/kero- September) on a negative macroeconomic Within the quarters, the first quarter was sene increased substantially, while demand for outlook. revised up by 200,000 b/d and all other quar- residual fuel oil continued to contract for the Corn prices declined by 6.9 per cent m-o-m ters were revised up by 100,000 b/d. fourth month in a row. in October, compared with a 4.8 per cent drop in Required OPEC crude is forecast to remain September and a three per cent gain in August. unchanged in 2012 from this year. The first Wheat prices declined by 5.2 per cent in quarter of next year is estimated to see growth “Demand for OPEC crude in October on macroeconomic uncertainties and of 300,000 b/d, followed by negative growth several other factors, while sugar prices fell by of 400,000 b/d and 200,000 b/d in the sec- 2011 has been revised up by 4.5 per cent. ond and third quarters, respectively. The Base metals as a whole saw some recovery fourth quarter is forecast to see an increase of 100,000 b/d from the previous in October. Copper prices declined by 10.9 per 300,000 b/d, compared with the same period assessment, driven mainly by cent m-o-m, but the monthly data masked the last year. fact that copper prices indeed recovered dur- Meanwhile, the fourth quarter of any year the downward revision in non- ing the month. is by nature a high season for oil consumption OPEC supply ...” Nickel prices declined by 6.6 per cent in as the world demands more heating and fuel October, compared with a 6.7 per cent and oil. However, despite the winter demand for 8.4 per cent drop in September and August, oil products, OECD oil demand is expected to respectively. remain negative as a result of the slowing eco- Propane/propylene consumption was stag- Gold prices decreased by 6.0 per cent in nomic momentum. nating as compared with last year. Furthermore, the month, while the price of silver dropped by Growing economic uncertainties in the the first nine months of 2011 implied decreas- 15.9 per cent on investor liquidation and slow- European Union have dampened the continent’s ing y-o-y consumption for all product catego- down in industrial demand. oil usage. US gasoline demand has been on the ries except distillate fuel oil. Motor gasoline and decline for the past four months, reflecting the residual fuel oil showed the strongest contrac- current economic woes, and the latest cold front tions in the first nine months of the year. World oil demand in the US is not expected to alter the country’s Given the fact that the driving season is oil consumption forecast. over, US gasoline demand is not expected to Demand for OPEC crude in 2011 has been Weakening Chinese oil demand is being show any healthy move for the remainder of revised up by 100,000 b/d from the previous offset by strengthening oil use in other non- this year and the first quarter of 2012. assessment, driven mainly by the downward OECD economies. As a result of these offsetting The signs for US oil consumption during OPEC bulletin 11/11 bulletin OPEC

69 2011 are, up to now, quite pessimistic; nev- August, showing a strong decline in the con- affected in October and November. Thailand’s ertheless cold weather in the US during the sumption of all oil products, especially gaso- total oil demand growth for the year is forecast fourth quarter could boost the consumption line, jet fuel and naphtha. at 80,000 b/d y-o-y. of heating oil. Moreover, the direct use of crude, one of Given the strength of oil demand in both Mexican oil consumption in September was the main factors behind growing oil demand in India and Thailand, Other Asia oil demand up by 3.1 per cent, as compared with last year, the summer months, remained flat as compared growth is forecast at 230,000 b/d in 2011, with all product categories showing increases. with last year. averaging 10.4m b/d.

Market Review Market The most observed increase was in industrial In South Korea, August oil demand grew Middle East oil demand growth is forecast fuels. just as it did in July; declines in transportation at 200,000 b/d this year. Saudi transport fuel Canadian oil demand contracted slightly by and some industrial fuels were more than off- consumption has added another 155,000 b/d 0.5 per cent in August. Negative contribution set by increasing naphtha demand. to the total oil demand pool. This strong con- to oil consumption by transportation fuels was OECD Pacific oil consumption as a whole sumption came about after a moderate demand almost offset by oil usage in industry. is expected to remain broadly flat in 2011 and level in the past two months. North American oil demand as a whole is 2012, with marginal declines of 20,000 b/d and In the past three quarters, gasoline and die- expected to shrink by 110,000 b/d in 2011 y-o- 40,000 b/d, respectively. However, projections sel usage grew by five per cent each. Despite y. In 2012, the region’s oil demand is projected are heavily dependent upon the speed of the the decline in Iranian oil demand, the strength to grow again by 110,000 b/d. recovery in Japan. in Saudi Arabia and other GCC countries’ oil European oil consumption contracted again Crude oil burning in power plants in lieu demand is expected to balance figures and end in September after being on the positive side of damaged nuclear plants increased Japan’s up with 2.6 per cent annual growth. in August. crude demand by 70 per cent in the first eight Brazilian oil demand increased by 84,000 During the first nine months of 2011, months of the year; however, in September b/d in August following a negative performance European oil consumption shrank by 150,000 there was no growth in crude oil usage as the in July caused mainly by lower use of alcohol. b/d, reflecting the weakened economy. summer heat faded out. The product that grew the most was gasoline, September oil consumption in Germany, France Following three months of slowdown in reflecting the high travelling summer season. and Italy fell, while United Kingdom consump- Indian oil demand, the country’s September Gasoline demand grew by 23.8 per cent in tion grew for the second month in a row. oil demand rebounded to achieve growth of August y-o-y, driving the country’s total demand Decreasing demand in transportation fuels, 200,000 b/d, or 6.1 per cent, y-o-y. This is the up by 50,000 b/d in the first nine months of as a result of high prices and, thus, decreas- highest growth this year. the year. ing driving mileage, were the main reasons India has been consuming natural gas in The largest growth in oil demand this year behind the decline in European September oil its power plants in lieu of oil. Furthermore, low in Latin America is forecast in Brazil and then consumption. consumption of diesel in the past four months Argentina and Ecuador. Latin America’s oil The short- and medium-term development was considered another reason for slow Indian demand growth is forecast at 170,000 b/d y-o- of European oil consumption will be mostly consumption at that time. y, averaging 6.4m b/d in 2011. determined by the continuing debt problems Bad weather reduced farming operations, Developing Countries’ oil demand growth in several European economies. leading to less diesel usage. September diesel in 2011 is forecast at 620,000 b/d y-o-y, aver- Oil demand in the European ‘Big Four’ demand grew by 6.3 per cent, adding another aging 27.6m b/d. decreased by 50,000 b/d in September, com- 108,000 b/d to the total diesel demand pool. China’s oil demand growth is forecast at pared with September 2010, and their con- One-third of the oil used in India is diesel, 440,000 b/d, or 4.9 per cent, y-o-y for 2011. sumption of transportation fuels continued to consumed by the transportation, industrial and The country reduced pump prices for both gaso- be in the minus during the same month, while agricultural sectors. Indian oil demand growth line and diesel by around four per cent early in some industry fuels showed increases. is forecast to be around four per cent this year. October; however, this move is not expected to The region’s total contraction in oil demand Economic activities hiked Thailand’s oil increase consumption drastically. The last time stands at 140,000 b/d in 2011. For 2012, oil demand in August by 14 per cent, or 115,000 b/d China reduced prices was in June 2010. consumption is expected to shrink again, as y-o-y. Industrial products were the most con- China’s oil demand has slowed since June a result of the rather pessimistic economic sumed, pushing the country’s total oil demand with y-o-y growth of less than one per cent. development, by a slightly lower magnitude of to average 920,000 b/d in August. For the first three quarters of the year, its 80,000 b/d. However, the recent flood in the country oil demand averaged 9.6m b/d. China’s third In Japan, latest September monthly data has been affecting industrial operations and, quarter oil demand growth was 140,000 b/d; reversed the optimistic picture seen in July and hence, industrial fuel demand has been heavily however, fourth-quarter growth is forecast at OPEC bulletin 11/11 bulletin OPEC

70 430,000 b/d. Such weak growth has not been world economy in 2012, next year’s oil demand introduced to Developing Countries’ oil sup- seen since the first quarter of 2009. forecast implies two scenarios; however, the ply in the third quarter as preliminary produc- Russia’s booming economy is calling for probability leans more towards the downside. tion data suggested lower-than-previously- more use of oil. The country’s oil demand has A worse than expected outcome of the US expected output in Mexico, the UK, Denmark, been in a growth mode since 2009. Industrial economy along with higher oil prices might re- Australia, Brazil, Colombia, Yemen, Kazakhstan, and transport fuel growth are the reasons for duce world oil demand growth by 200,000 b/d. Azerbaijan and China. this. In total, the FSU region’s oil demand is OECD Western Europe oil supply experi- forecast to grow by 100,000 b/d y-o-y in 2011, enced the biggest downward revision in the averaging 4.2m b/d. World oil supply third quarter as preliminary data indicated Looking ahead, the world economic outlook lower-than-previously-expected output in the has been worsening, due to the challenges fac- Preliminary figures indicate that global oil sup- UK and Denmark. ing the OECD economies. The forecast for world ply increased by 870,000 b/d in October to GDP next year has been revised down further, average 88.35m b/d. reflecting these uncertainties. Non-OPEC supply experienced growth of “Preliminary figures Next year’s oil demand growth is expected 860,000 b/d, while OPEC crude production to come from the non-OECD region, mainly remained relatively flat. indicate that global oil China, India, the Middle East and Latin America. The share of OPEC crude oil in global pro- supply increased by By sector, the industrial — particularly, duction remained steady at 34 per cent in petrochemical — and transport sectors will October. The estimate is based on preliminary 870,000 b/d in October to contribute the most to expected oil demand data for non-OPEC supply, estimates for OPEC growth. NGLs and OPEC crude production from second- average 88.35m b/d.” US oil demand is expected to return to its ary sources. normal growth mode; however, it will remain Meanwhile, non-OPEC oil supply is expected the wild card for 2012. Furthermore, petroleum to increase by 220,000 b/d in 2011 to average According to preliminary and estimated product retail prices will play a major role in 52.50m b/d. This represents a sharp downward data, total non-OPEC supply in the third quar- oil demand next year, mainly in the transport revision of 130,000 b/d from the previous ter of 2011 increased by 220,000 b/d over sector. report. the same period a year earlier. During the first EU oil demand will continue to contract The adjustment came mainly from the sec- three quarters, non-OPEC supply increased by next year, resulting not only from weak eco- ond half of 2011, as updated third-quarter pro- 220,000 b/d, compared with the same period nomic growth, but also from maintaining its duction showed lower-than-expected output. the previous year. efficiency trend. The UK, Australia, Brazil, Colombia, Yemen, On a quarterly basis, non-OPEC supply this OECD Pacific oil demand will be in better Ghana, Kazakhstan, Azerbaijan and China sup- year is expected to average 52.76m b/d, 51.97m shape than Europe’s as Japan’s oil consumption ply profiles encountered downward revisions, b/d, 52.17m b/d and 53.07m b/d, respectively. will reflect rebuilding projects. while upward revisions were experienced in Total OECD oil supply is forecast to increase World oil demand is forecast to grow by the US, Canada, Norway and Russia supply by 30,000 b/d in 2011 to average 20.01m b/d, 1.2m b/d in 2012 to average 89.0m b/d. estimations. following a downward revision of 20,000 b/d Chinese oil demand is expected to grow the The downward revisions were much larger from the previous month. most worldwide, despite government efforts to than the upward ones, resulting in the down- The downward revision was introduced to curb energy use within the country. ward revision to non-OPEC supply growth in OECD Western Europe and the OECD Pacific, Chinese oil demand is expected to rise by 2011. while the forecast for North America oil sup- 5.1 per cent y-o-y. Along with China, the Middle Most of the revisions came on the back of ply experienced an upward revision that offset East, India, Brazil, and the rest of the non-OECD updated production data, with the third quar- most of the downward revision. countries will boost world oil demand by 1.2m ter experiencing the largest revisions as more The OECD supply profile remains steady b/d, or 1.4 per cent, in 2012. actual production data has become available. with strong growth in North America, offset by However, next year’s oil demand forecast is Furthermore, some of the downward revisions the relatively sharp decline in OECD Western based on certain assumptions, such as higher in the third quarter were carried over to the Europe and the OECD Pacific in 2011. GDP, higher retail petroleum product prices, fourth quarter, in addition to changes to out- According to preliminary actual and esti- and a strong Chinese economy. put expectations for some fields. mated data, OECD supply averaged 19.88m b/d However, due to uncertainty in the total The largest downward revision was in the third quarter, an increase of 110,000 b/d OPEC bulletin 11/11 bulletin OPEC

71 from the previous quarter and an increase of b/d, indicating an upward revision of less than to decline by 70,000 b/d in 2011 to average 300,000 b/d, compared with the same quarter 10,000 b/d from the previous report. 530,000 b/d, indicating a downward revision last year. On a quarterly basis, Canada’s oil supply this of 15,000 b/d from the previous report. During the first three quarters of 2011, year is expected to average 3.57m b/d, 3.30m The downward revision came from OECD oil supply indicated an average increase b/d, 3.53m b/d and 3.58m b/d, respectively. Australia, while New Zealand’s oil supply esti- of 60,000 b/d, compared with the same period Mexico’s oil supply is expected to decline mate remained unchanged. a year earlier. by 20,000 b/d in 2011 to average 2.94m b/d, On a quarterly basis, total OECD Pacific oil

Market Review Market On a quarterly basis, OECD oil supply in unchanged from the previous month. supply this year is seen to average 520,000 b/d, 2011 is seen to average 20.14m b/d, 19.77m On a quarterly basis, Mexico’s oil supply in 500,000 b/d, 530,000 b/d and 570,000 b/d, b/d, 19.88m b/d and 20.26m b/d, respectively. 2011 is seen to average 2.97m b/d, 2.96m b/d, respectively. 2.92m b/d and 2.92m b/d, respectively. Australia’s oil supply is predicted to decline OECD Western Europe total oil supply is by 60,000 b/d in 2011 to average 440,000 “According to preliminary forecast to decline by 270,000 b/d in 2011 to b/d, a downward revision of around 15,000 average 4.11m b/d, indicating a downward revi- b/d from the previous report. data, OECD Western Europe sion of 50,000 b/d from the previous report. On a quarterly basis, Australia’s oil sup- oil production averaged Updated production data for the main pro- ply this year is seen to stand at 420,000 b/d, ducers required the downward revision mainly 420,000 b/d, 440,000 b/d and 470,000 b/d, 3.91m b/d in the third on the back of heavy maintenance and unex- respectively. pected shutdowns. Total Developing Countries’ oil supply is quarter, the lowest quarterly OECD Western Europe remains the region projected to increase by 50,000 b/d in 2011 output since 1986.” with the biggest decline among all non-OPEC to average 12.77m b/d, indicating a down- regions. ward revision of 50,000 b/d from the previ- According to preliminary data, OECD ous month. North America oil supply is expected to Western Europe oil production averaged 3.91m The downward revision affected the second increase by 380,000 b/d in 2011, the highest b/d in the third quarter, the lowest quarterly half of 2011 and was mainly driven by updated among all non-OPEC regions, to average 15.37m output since 1986, indicating a decline of production data in third quarter. b/d, indicating an upward revision of 45,000 150,000 b/d from the second quarter and a In general, the current regional supply pro- b/d from the previous month. drop of 110,000 b/d from the same quarter in file indicates growth from Latin America and The expected healthy supply growth from 2010. Africa, while supply from Other Asia and the the US and Canada and the relatively low antic- On a quarterly basis, OECD Western Europe Middle East is expected to decline. ipated decline from Mexico all supported the oil supply this year is seen standing at 4.31m Latin America, supported by Colombia, North America supply forecast. b/d, 4.06m b/d, 3.91m b/d and 4.18m b/d, and, to a lesser extent, Brazil, remains the On average, North America supply increased respectively. main growth driver within the group. Latin by 440,000 b/d during the first three quarters Norway’s oil supply is anticipated to decline America experienced a downward revision of of 2011, compared with the same period of by 80,000 b/d in 2011 to average 2.05m b/d, around 30,000 b/d compared with the previ- 2010, according to preliminary data. representing an upward revision of less than ous month’s assessment. On a quarterly basis, North America oil 10,000 b/d from the previous report. During the first three quarters of 2011, supply in 2011 is expected to stand at 15.31m On a quarterly basis, Norway’s oil sup- Developing Countries’ supply is estimated to b/d, 15.20m b/d, 15.44m b/d and 15.51m b/d, ply this year is expected to average 2.14m have declined by 40,000 b/d, compared with respectively. b/d, 1.98m b/d, 2.01m b/d and 2.08m b/d, the same period of 2010. US oil supply is forecast to increase by respectively. On a quarterly basis, this group’s oil sup- 290,000 b/d in 2011 to average 8.93m b/d, The UK’s oil supply is expected to decline ply this year is expected to average 12.82m indicating an upward revision of 40,000 b/d by 220,000 b/d in 2011 to average 1.14m b/d, b/d, 12.48m b/d, 12.69m b/d and 13.07m b/d, from last month’s appraisal. indicating a significant downward revision of respectively. On a quarterly basis, US oil supply this year more than 50,000 b/d from the previous month. Other Asia’s oil supply is forecast to is estimated to average 8.76m b/d, 8.94m b/d, On a quarterly basis, the UK’s 2011 oil sup- decrease by 70,000 b/d in 2011 to average 8.99m b/d and 9.01m b/d, respectively. ply is expected to average 1.27m b/d, 1.17m b/d, 3.62m b/d, representing a minor downward Canada’s oil supply is projected to increase 970,000 b/d and 1.16m b/d, respectively. revision of less than 10,000 b/d from the pre- by 100,000 b/d in 2011 to average 3.50m OECD Pacific total oil supply is anticipated vious report. OPEC bulletin 11/11 bulletin OPEC

72 India’s oil supply is anticipated to experi- and Yemen and Syria output are expected to During the first three quarters of 2011, ence the only supply growth in the region — at see declines. Russia’s oil production increased by 130,000 50,000 b/d — to average 900,000 b/d. Oman’s oil supply is forecast to increase by b/d on average, compared with the same period Vietnam’s oil supply is expected to aver- 40,000 b/d in 2011 to average 900,000 b/d, in 2010. age 360,000 b/d in 2011, a minor decline of flat from the previous report. On a quarterly basis, Russia’s oil sup- 10,000 b/d from the previous year. Yemen’s oil supply is estimated to average ply this year is seen to average 10.21m b/d, On a quarterly basis, Other Asia’s oil supply 210,000 b/d in 2011, a drop of 80,000 b/d 10.23m b/d, 10.28m b/d and 10.28m b/d, this year is seen to stand at 3.68m b/d, 3.53m compared with the previous year and indicat- respectively. In October, Russia’s oil produc- b/d, 3.60m b/d and 3.67m b/d, respectively. ing a downward revision of 10,000 b/d from tion averaged 10.36m b/d, up by 40,000 b/d Oil supply from Indonesia, the region’s larg- the previous month. from September. est producer, is expected to decline by 40,000 On a quarterly basis, the Middle East’s oil Kazakhstan’s oil supply is anticipated to b/d in 2011 to average 0.99m b/d. supply this year is estimated to average 1.78m increase by 20,000 b/d in 2011 to average Malaysia’s oil supply is foreseen to average b/d, 1.65m b/d, 1.70m b/d and 1.75m b/d, 1.62m b/d, indicating a minor downward revi- 640,000 b/d in 2011, a decline of 60,000 b/d respectively. sion of 10,000 b/d from the previous month. from the previous year, while Thailand’s oil sup- Africa’s oil supply is anticipated to increase During the first three quarters of 2011, ply is estimated to average 340,000 b/d this by 30,000 b/d in 2011 to average 2.62m b/d, rel- Kazakhstan’s oil supply increased by 20,000 year, a decline of 10,000 b/d from 2010. atively flat compared with the previous report. b/d on average, compared with the same period Latin America’s oil supply is projected to A minor downward revision was encoun- of 2010. increase by 140,000 b/d in 2011 to average tered in the Ghana oil supply forecast as reports On a quarterly basis, Kazakhstan’s oil sup- 4.81m b/d, representing a downward revision suggested that continued technical challenges ply this year is estimated to average 1.66m of 30,000 b/d from the previous report. are delaying output to reach a first phase peak b/d, 1.60m b/d, 1.54m b/d and 1.68m b/d, Argentina’s oil supply is expected to aver- of 120,000 b/d. respectively. age 730,000 b/d in 2011, a decline of 20,000 On a quarterly basis, Africa’s oil supply this Azerbaijan’s oil supply is expected to b/d from the previous year, while Colombia’s oil year is seen averaging 2.61m b/d, 2.58m b/d, supply is anticipated to increase by 140,000 2.61m b/d and 2.67m b/d, respectively. b/d to average 930,000 b/d, indicating a minor Total FSU oil supply is forecast to increase “Russia’s oil supply is projected downward revision of less than 10,000 b/d from by 70,000 b/d in 2011 to average 13.29m b/d, the previous month’s assessment. representing a downward revision of 30,000 to grow by 110,000 b/d in Despite the downward revision, anticipated b/d from the previous month. Colombia oil supply growth in 2011 marks the The downward revision came from 2011 and average 10.25m b/d, second-highest growth among all non-OPEC Kazakhstan and Azerbaijan due to updated pro- representing a minor upward countries. duction data. There was an upward revision to On a quarterly basis, Latin America’s oil sup- the Russia oil supply forecast; however, it was revision of 10,000 b/d.” ply this year is seen to average 4.75m b/d, 4.72m not enough to offset the downward revision. b/d, 4.77m b/d and 4.98m b/d, respectively. Growth remains expected from the FSU in decline by 80,000 b/d in 2011 to average Brazil’s oil supply is predicted to increase 2011, with Russia at the top of the list in terms 990,000 b/d, representing a downward revi- by 30,000 b/d in 2011 to average 2.69m b/d, of growth volume and offsetting the anticipated sion of 30,000 b/d from the previous report. indicating a downward revision of 20,000 b/d decline in other countries in the region. During the first three quarters of this year, from the previous month. During the first three quarters of 2011, FSU Azerbaijan’s oil supply decreased by 80,000 On a quarterly basis, Brazil’s oil supply this oil output increased by 90,000 b/d on average, b/d over the same period of 2010. year is expected to average 2.66m b/d, 2.67m compared with the same period of 2010. On a quarterly basis, Azerbaijan’s oil sup- b/d, 2.65m b/d and 2.80m b/d, respectively. On a quarterly basis, total oil supply in the ply in 2011 is expected to stand at 1.02m b/d, The Middle East’s oil supply is forecast to FSU this year is estimated to average 13.32m 1.00m b/d, 980,000 b/d and 960,000 b/d, decline by 60,000 b/d in 2011 to average 1.72m b/d, 13.26m b/d, 13.25m b/d and 13.35m b/d, respectively. b/d, indicating a downward revision of 10,000 respectively. Other Europe’s oil supply is estimated to b/d from the previous month’s evaluation. Russia’s oil supply is projected to grow by remain flat from 2010 and average 140,000 Oman remains the only country within the 110,000 b/d in 2011 and average 10.25m b/d, b/d in 2011. region with expected oil supply growth in 2011. representing a minor upward revision of 10,000 China’s oil supply is foreseen to increase Supply from Bahrain is expected to remain flat b/d from the previous report. by 30,000 b/d in 2011 to average 4.15m b/d, OPEC bulletin 11/11 bulletin OPEC

73 indicating a downward revision of 35,000 b/d According to secondary sources, OPEC Singapore, and this could offset the loss at the from the previous month. crude production, not including Iraq, stood at top of the barrel, resulting from disappointing During the first three quarters of 2011, 27.27m b/d in October, an increase of 85,000 demand from the petrochemical sector, thus China’s oil supply increased by 90,000 b/d, b/d over the previous month. allowing refinery margins to increase by a slight compared with the same period the previous Output of OPEC NGLs and non-conventional $1/b during this month. year. oils is forecast to grow by 390,000 b/d in 2011 Despite lower light distillate demand, strong On a quarterly basis, China’s oil supply this to average 5.29m b/d. export opportunities and favourable margins

Market Review Market year is estimated to average 4.22m b/d, 4.19m In 2012, production of OPEC NGLs and encouraged US refiners to continue operating b/d, 4.08m b/d and 4.12m b/d, respectively. non-conventional oils is expected to increase with higher refinery runs. Turning to 2012, non-OPEC oil supply is by 360,000 b/d to average 5.65m b/d. The refinery runs averaged 84 per cent of expected to increase by 820,000 b/d to aver- capacity in October, four points lower than in age 53.32m b/d. the previous month, due to unscheduled shut- The absolute level experienced a down- Downstream activity downs and the maintenance season on the West ward revision of 140,000 b/d, mainly due to Coast. the revisions undertaken in 2011. There were Light distillates continued to be bearish, los- In addition, refiners continued to maximize minor changes to the 2012 forecast on changes ing ground due to lacklustre demand in the gasoil production. However, distillate stocks in project scheduling. Atlantic Basin, while middle distillates and dropped below the five-year average for the The overall outlook for non-OPEC supply in fuel oil showed a vibrant recovery across the first time this year. 2012 remains relatively unchanged with strong world on the back of strong demand amid tight European refiners have continued to mod- growth anticipated from Latin America, driven product supply. erate throughput in response to deteriorating mainly by Brazil and Colombia. The margin for WTI crude on the US Gulf refining margins in the region in recent months, OECD Western Europe is seen to have the Coast showed a slight drop of $1 to stand at with refinery runs remaining at around 82 per largest decline in 2012. North America oil sup- $29/b in October, reflecting the loss in light cent. This lower level has caused the distillate ply is expected to continue to increase. distillates and the partial recovery in WTI. market to tighten, helping margins to increase FSU oil supply is projected to show an Meanwhile, for Arab Heavy crude on the US in October. increase next year. China’s oil supply is antici- Gulf Coast, the margin showed a sharp increase Asian refiners continued to moderate the pated to experience an increase, yet could of $3/b, on the back of the strength of the bot- high runs seen in recent months, due to main- encounter an upward/downward revision in the tom of the barrel and middle distillates. tenance in some refineries in India and China. coming period, depending on the output in the The decline in the margin was mainly However, with the restart of the CNPC and fourth quarter and the restart of the shutdown caused by plummeting gasoline cracks, due to Sinopec refineries, throughput should increase production. disappointing domestic demand. to meet the expected rise in diesel demand over Canada, Australia, Oman, Ghana, In Europe, product market sentiment exhib- the coming months. Kazakhstan and Azerbaijan are expected to ited a mixed performance, with light distillates Japan has reduced throughput to around continue to drive growth in 2012, in addition continuing to lose ground, due to both lacklustre 67 per cent, on the back of maintenance, and to Brazil and Colombia. demand in the region and poor export oppor- runs in Singapore have been affected by the On a quarterly basis, non-OPEC supply in tunities, while the middle and heavy parts of shutdown of the Shell refinery. 2012 is seen to average 53.32m b/d, 53.16m the barrel showed a vibrant recovery. US gasoline demand continued to fall in b/d, 53.22m b/d and 53.57m b/d, respectively. In addition, bullish sentiment was fuelled in October to 8.7m b/d. This represents a drop the middle distillate market, as refineries were of 250,000 b/d over the previous month and running at lower levels and at reduced inflows a sharp decline of 359,000 b/d from the same OPEC oil production to the region. month last year. The refinery margin for Brent crude in Despite weaker domestic gasoline demand Total OPEC crude oil output averaged 29.89m Rotterdam showed a sharp recovery from 70¢ — which fell to the lowest level in eight months b/d in October, a minor increase of 5,000 b/d in September, the lowest level seen this year, — gasoline market sentiment until mid-October from the previous month, according to second- to $3.5/b during October. was supported by the temporarily tightened ary sources. Asian refining margins built slightly on the supply created by several unexpected refinery Crude oil production experienced a consid- gains of last month. This was on the back of shutdowns (Motiva, Louisiana; Pasadena, Texas; erable increase from Libya, while production strong middle distillate demand in a tighter mar- and Trainer, Pennsylvania) and the turnaround fell from Iraq, Saudi Arabia and Venezuela. ket, due to the shutdown of the Shell refinery in season on the West Coast. OPEC bulletin 11/11 bulletin OPEC

74 However, at the end of the month, robust On the other hand, oil product exports rose were put at 52,000 b/d, 0.3 per cent lower than demand from Latin America, mainly Mexico slightly in October to 2.68m b/d, which is nearly last year’s level, while product exports were at and Brazil, was outweighed by disappointing 226,000 b/d, or 9.22 per cent, more m-o-m and 646,000 b/d, or 2.5 per cent, slightly below last domestic demand, and the crack plummeted 219,000 b/d, or 8.9 per cent, higher y-o-y. year’s level. to the lowest level in 30 weeks. As a result, US net oil imports declined in As a result, China’s total net oil imports Middle distillate demand jumped to 4.2m October to 8.0m b/d, down by 289,000 b/d, or decreased by a further 274,000 b/d, or 5.0 per b/d in October, a big increase of 356,000 b/d nearly 3.47 per cent, from the previous month. cent, from the previous month to stand at 5.1m over the previous month and 446,000 b/d However, net oil imports remained 7.2 per cent b/d. higher than in the same month last year. below the level seen a year ago. The drop can be attributed more to prod- The middle distillate market remained Japan’s crude oil imports increased slightly uct net imports which decreased by 243,000 steady and healthy over the month, supported in September. The downward trend seen ear- b/d to 250,000 b/d and less to crude oil net by stronger demand amid tight supply. lier this year was reversed in July and August. imports which showed a moderate decline of The US fuel oil market was supported by September imports increased to 3.6m b/d, 31,000 b/d, or 0.6 per cent. firm demand from Latin America and arbitrage an increase of 98,000 b/d, or 2.8 per cent, Looking at the first nine months of China’s opportunities to Asia, amid tight supplies of low compared with their August level. September net oil imports in 2011, total net oil imports sulphur grades. imports represented an increase of 156,000 rose by 313,000 b/d, or 6.1 per cent, to a level Light distillates continued losing ground, b/d, or 4.5 per cent, y-o-y. of 5.4m b/d. due to lacklustre demand in the region and Product imports (including LPG) edged up India’s crude oil imports decreased by poor export opportunities, while the middle to 1.07m b/d, which represents a slight increase 235,000 b/d, or 7.0 per cent, in September, to and heavy parts of the barrel showed a strong of 0.1 per cent, or 1,000 b/d, compared to the stand at 3.12m b/d. In the first eight months of recovery during the month. month before and 21.3 per cent, or 187,000 b/d, 2011, imports were put at 3.38m b/d, 215,000 Despite firm demand from North Africa and on a y-o-y basis. Product exports, including LPG, b/d, or 6.8 per cent, higher than in the same Saudi Arabia, the weak European gasoline mar- declined by 1,000 b/d, averaging 600,000 b/d. period the previous year. ket continued losing ground due to poor domes- As a result, Japan’s net oil imports increased tic demand amid limited export opportunities slightly in September by 100,000 b/d, or 2.5 to the other side of the Atlantic, as US gasoline per cent, to 4.1m b/d over August. On a y-o-y “Total OPEC crude oil output imports were at their lowest level in more than basis, an increase of 376,000 b/d, or 10.2 per ten years. cent, was recorded. averaged 29.89m b/d in October, China’s crude oil import rebounded after three months of consecutive declines from May a minor increase of 5,000 Oil trade to July 2011. In September there was a further b/d from the previous month, slight increase of 0.4 per cent to 4.99m b/d, Preliminary data in October indicate that US moving closer to the 5m b/d benchmark. according to secondary sources.” crude oil imports rose by 27,000 b/d, or 0.3 In a y-o-y comparison, September shows a per cent, m-o-m to average 8.83m b/d. decline of 12.2 per cent, or 694,000 b/d. The Product imports declined for four months in Imports in October were 294,000 b/d year-to-date comparison statistics shows an a row in September by 6.3 per cent m-o-m, or higher than last year’s level, when they stood increase of 160,000 b/d. 18,000 b/d, to an average of around 268,000 at 8.5m b/d. Product imports were down by 88,000 b/d, b/d. The only exception was the increase in LPG Year-to-date imports stood at 405,000 or 8.6 per cent, m-o-m to 940,000 b/d, falling imports. b/d lower than those of last year. They aver- back to the pattern of decline seen between Gasoline and fuel oil were the main con- aged 8.9m b/d between January and October, April and July. tributors to the decrease with a drop of around compared with 9.3m b/d for the same period China’s crude and product imports showed 62.4 per cent and 31.1 per cent, respectively. a year ago, implying a 4.3 per cent decline. declines of, respectively, 68,000 b/d, or 1.1 per India’s product imports in the first nine Oil product imports have dropped stead- cent, and 703,000 b/d, or 10.6 per cent, y-o-y. months of 2011 stood at 327,000 b/d, a decline ily since April this year to the level of 1.92m Chinese crude oil exports rebound by of 2.0 per cent, or 7,000 b/d, with the same b/d, declining m-o-m by 90,000 b/d, or 4.47 51,000 b/d to 80,000 b/d. Product exports period of 2010. per cent. A sharp y-o-y drop of 687,000 b/d, increased by 155,000 b/d, or 29.1 per cent, to Product exports decreased by 40,000 or 26.4 per cent, in October 2011 has been 690,000 b/d. b/d, or 3.0 per cent, compared with the month recorded. Crude oil exports over the first nine months before, standing at 1.28m b/d. On a y-o-y basis, OPEC bulletin 11/11 bulletin OPEC

75 product exports increased by 6.8 per cent in average 8.8m b/d, but they showed an increase months as refiners faced plant outages after September 2011. of about 100,000 b/d, compared with the pre- the March earthquake and reduced crude oil As a result, India’s net oil imports decreased vious year at the same time. imports. by 214,000 b/d, or 9.2 per cent, to average In contrast to the increase in US commer- Lower crude throughputs also contributed 2.10m b/d, but remained above this year’s low- cial crude oil stocks, product stocks declined to the rise in crude oil inventories. Indeed, crude est level in May of 2.096m b/d. by 13.1m b in October, following a sharp drop throughput has dropped by almost 200,000 b/d Total FSU crude exports rose by 216,000 in September. to average 3.36m b/d, and remained at 5.6 per

Market Review Market b/d m-o-m, or 3.6 per cent, in September to At 725.2m b, US product stocks stood at cent below last year. 6.51m b/d to reach their highest level since their lowest level since June 2011. The drop This corresponds to a refinery utilization April. in US product stocks in October came on the rate of 72.6 per cent, 4.1 per cent lower than Product exports from the FSU continued back of lower refinery output as total product the previous month and 3.9 per cent less than to fall in September by 2.9 per cent, or 81,000 demand remained weak, declining by around a year ago over the same period. b/d, to a level of 2.48m b/d. 200,000 b/d from the previous month. Total product inventories also rose for the At 18.6m b/d, US total oil consumption in third consecutive month to stand at 83.2m b, the October remained 1.9 per cent lower than dur- highest level in three years. With this build, the Stock movements ing the same period last year. With this draw, surplus with a year ago has widened to 15.9 per US product inventories remained at 28.0m b, cent from 5.9 per cent a month earlier; however, After a strong stock-draw in September, US com- or 3.7 per cent, below levels seen during the the deficit with the five-year average remained mercial oil inventories fell for the second con- same period a year ago, and 7.8m b, or 1.1 per at 6.3m b or 2.9 per cent. secutive month, declining by 9.8m b to stand at cent, less than the five-year average. The build in total Japanese products in 1,064.7m b, the lowest level since April 2011. In September, commercial oil stocks in September could be attributed mainly to the This drop was attributed solely to product Japan reversed the draw experienced the previ- decline of Japanese total sales of 5.5 per cent, stocks, which fell by 13.1m b, while crude com- ous month and rose by 6.9m b to stand at 183.1m averaging 3.13m b/d. mercial inventories rose by 3.2m b. b, the highest level since the end of 2008. Total oil product sales in September fell by With this decline in total US commercial oil At this level, Japanese commercial oil stocks 4.9 per cent from a year earlier, hurt by a higher inventories, the deficit with a year ago remained widened the surplus with a year ago to 13.8 per baseline that reflected a prolonged heat-wave at 54.3m b, or 4.9 per cent; however, they were cent from 2.7 per cent a month earlier, while the last summer. broadly in line with the five-year average. deficit with the five-year average narrowed to The decline of refinery output, which US commercial crude stocks reversed the 0.3 per cent from 6.2 per cent in the previous dropped by nearly 300,000 b/d, or 9.0 per sharp fall in September and rose in October to month. cent, to average 3.1m b/d, has limited the build stand at 339.5m b. Despite this build, US com- The stock-build was attributed to a rise in in product stocks. mercial crude oil stocks still indicated a deficit both crude and product stocks as they increased With the exception of naphtha, which of 26.3m b, or 7.2 per cent, with a year ago at by 2.4m b and 4.5m b, respectively. remained almost unchanged, all products saw the same period, while they presented a sur- Japanese commercial crude oil stocks also a build with the bulk of the gain coming from plus of 8.0m b, or 2.4 per cent, over the five- erased last month’s draw and increased by 2.4m gasoline stocks. year average. b to end the month at around 100.0m b. Product stocks in Singapore at the end of The build came mainly from the decline in With this build, Japanese crude commer- September continued their downward trend for crude oil refinery inputs, which decreased by cial oil stocks stood at 10.8m b, or 12.1 per the third consecutive month, falling by 1.2m b more than 400,000 b/d to average 14.6m b/d, cent, above the previous year during the same to end the month at 42.4m b. as refinery runs in the US remained relatively month and, for the first time in four months, With this draw, stocks remained at 4.3m b, soft before the heating oil season begins. they showed a surplus with the seasonal norm or 9.2 per cent, below levels seen during the However, US crude runs remained almost of 2.0m b or 2.1 per cent. same period a year ago. 500,000 b/d higher than a year ago during the The build in crude commercial oil stocks in Oil product stocks in the Amsterdam- same period. In October, US refineries operated September came from higher crude oil imports, Rotterdam-Antwerp (ARA) region in September at 84 per cent, some 3.4 per cent lower than which increased by around 100,000 b/d, or 2.8 fell by 3.0m b, following a small increase the in the previous month, and 1.8 per cent higher per cent, to average 3.6m b/d. previous month, ending the month at 30.2m b. than in the same month last year Crude oil imports also increased by 4.5 per With this draw, the deficit with a year ago The build in US crude commercial stocks cent versus a year ago, the first year-on-year widened to 21.2 per cent at the end of September came despite unchanged crude imports to increase in monthly crude imports in seven from 13.9 per cent a month earlier. OPEC bulletin 11/11 bulletin OPEC

76 Table A: World crude oil demand/supply balance m b/d World demand 2006 2007 2008 2009 2010 1Q11 2Q11 3Q11 4Q11 2011 1Q12 2Q12 3Q12 4Q12 2012 OECD 49.5 49.3 47.6 45.6 46.2 46.3 44.6 46.1 46.5 45.9 46.4 44.6 46.0 46.5 45.9 North America 25.4 25.5 24.2 23.3 23.8 23.8 23.3 23.7 23.8 23.6 23.9 23.5 23.8 23.9 23.8 Western Europe 15.7 15.5 15.4 14.7 14.6 14.2 14.1 14.7 14.7 14.4 14.2 14.0 14.6 14.6 14.4 Pacific 8.5 8.4 8.0 7.7 7.8 8.3 7.1 7.7 8.1 7.8 8.3 7.2 7.6 8.0 7.8 Developing countries 23.6 24.8 25.6 26.2 27.0 27.2 27.5 27.8 27.9 27.6 27.8 28.1 28.5 28.5 28.2 FSU 4.0 4.0 4.1 4.0 4.1 4.1 4.0 4.4 4.5 4.2 4.2 4.0 4.5 4.6 4.3 Other Europe 0.9 0.8 0.8 0.7 0.7 0.7 0.6 0.7 0.8 0.7 0.7 0.7 0.7 0.8 0.7 China 7.2 7.6 8.0 8.3 9.0 9.1 9.5 9.4 9.5 9.4 9.6 10.0 9.9 10.0 9.9 (a) Total world demand 85.2 86.5 86.1 84.7 86.9 87.5 86.3 88.3 89.1 87.8 88.7 87.4 89.5 90.3 89.0 Non-OPEC supply OECD 20.1 20.0 19.5 19.7 20.0 20.1 19.8 19.9 20.3 20.0 20.2 20.1 20.0 20.2 20.1 North America 14.2 14.3 13.9 14.4 15.0 15.3 15.2 15.4 15.5 15.4 15.5 15.5 15.5 15.6 15.5 Western Europe 5.3 5.2 4.9 4.7 4.4 4.3 4.1 3.9 4.2 4.1 4.1 3.9 3.8 4.0 4.0 Pacific 0.6 0.6 0.6 0.6 0.6 0.5 0.5 0.5 0.6 0.5 0.6 0.6 0.6 0.6 0.6 Developing countries 11.9 11.9 12.2 12.4 12.7 12.8 12.5 12.7 13.1 12.8 13.2 13.2 13.2 13.3 13.2 FSU 12.0 12.5 12.6 13.0 13.2 13.3 13.3 13.3 13.4 13.3 13.5 13.4 13.4 13.5 13.5 Other Europe 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.1 China 3.7 3.8 3.8 3.8 4.1 4.2 4.2 4.1 4.1 4.2 4.2 4.2 4.2 4.2 4.2 Processing gains 2.0 2.0 2.0 2.0 2.1 2.1 2.1 2.1 2.1 2.1 2.2 2.2 2.2 2.2 2.2 Total non-OPEC supply 49.9 50.4 50.3 51.1 52.3 52.8 52.0 52.2 53.1 52.5 53.3 53.2 53.2 53.6 53.3 OPEC ngls and non-conventionals 3.9 3.9 4.1 4.3 4.9 5.1 5.3 5.4 5.4 5.3 5.5 5.6 5.7 5.8 5.7 (b) Total non-OPEC supply 53.8 54.4 54.4 55.4 57.2 57.9 57.2 57.5 58.5 57.8 58.8 58.8 58.9 59.4 59.0 and OPEC ngls OPEC crude supply and balance OPEC crude oil production 1 30.6 30.2 31.3 28.8 29.3 29.6 29.2 30.0 Total supply 84.4 84.6 85.7 84.2 86.4 87.5 86.4 87.5 Balance2 –0.9 –2.0 –0.4 –0.5 –0.5 — 0.1 –0.8 Stocks OECD closing stock levelm b Commercial 2655 2554 2679 2641 2669 2631 2677 SPR 1499 1524 1527 1564 1561 1558 1561 Total 4154 4079 4206 4205 4229 4189 4238 Oil-on-water 919 948 969 919 871 891 853 Days of forward consumption in OECD Commercial onland stocks 54 54 59 57 58 59 58 SPR 30 32 33 34 34 35 34 Total 84 86 92 91 92 94 92 Memo items FSU net exports 8.1 8.5 8.5 9.0 9.1 9.2 9.3 8.9 8.9 9.1 9.2 9.4 8.9 9.0 9.1 [(a) — (b)] 31.4 32.2 31.6 29.3 29.8 29.6 29.0 30.8 30.6 30.0 29.9 28.7 30.6 31.0 30.0 1. Secondary sources. Note: Totals may not add up due to independent rounding. 2. Stock change and miscellaneous.

Table A above, prepared by the Secretariat’s Petroleum 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 1 and 2 on page 78, while Graphs 1 and 2 on page 79 show the evolution on a weekly basis. Tables 3 to 8 and the corresponding graphs on pages 80–81 show the evolution of monthly average spot prices for important products in six major markets. (Data for Tables 1–8 is provided courtesy of Platt’s Energy Services.) OPEC bulletin 11/11 bulletin OPEC

77 Table 1: OPEC Reference Basket crude oil prices $/b

2010 2011 Weeks 39–43 (week ending) Crude/Member Country Oct Nov Dec Jan Feb Mar Apr May June Jul Aug Sep Oct Sep 30 Oct 7 Oct 14 Oct 21 Oct 28

Arab Light — Saudi Arabia 79.93 83.32 89.24 93.59 101.21 110.37 118.27 110.08 109.37 111.61 106.43 107.72 106.40 103.16 100.70 106.80 108.62 109.30

Basrah Light — Iraq 79.36 82.14 88.09 92.33 99.52 109.16 117.05 107.93 106.65 109.87 105.07 106.68 105.00 101.76 99.55 105.89 106.97 107.52

Nigeria 84.35 86.83 93.08 98.10 105.66 116.75 127.12 118.88 117.27 119.69 112.41 115.63 113.09 110.03 107.98 115.06 114.80 114.82 Market Review Market Bonny Light —

Es Sider — SP Libyan AJ 82.60 84.93 91.13 96.10 103.51 114.35 124.52 115.90 114.84 117.69 111.26 113.93 110.24 108.33 105.13 112.21 111.95 111.97

Girassol — Angola 82.55 85.80 91.36 96.18 104.42 115.35 123.74 114.91 114.07 116.63 110.60 111.59 110.26 106.77 104.31 111.64 112.49 112.65

Iran Heavy — IR Iran 78.99 82.24 87.81 92.22 99.29 108.05 116.27 108.28 107.39 110.34 104.90 105.54 104.83 101.06 98.90 105.24 107.17 107.79

Kuwait Export — Kuwait 78.10 81.59 87.25 91.45 98.75 107.66 115.64 107.59 106.65 109.33 104.51 105.16 104.09 100.91 98.28 104.03 106.57 107.25

Marine — Qatar 80.31 83.41 88.98 92.69 100.18 108.87 116.41 109.10 107.83 110.34 105.14 106.46 104.68 102.43 98.55 104.20 107.29 108.41

Merey* — Venezuela 71.21 73.07 77.30 80.09 87.51 96.22 104.44 98.44 99.92 103.26 99.81 99.12 99.24 95.66 93.64 99.14 101.00 102.64

Murban — UAE 82.20 85.36 91.06 95.04 102.75 111.93 119.95 113.37 112.06 114.33 108.92 109.57 107.51 105.33 101.59 107.06 110.01 110.98

Oriente — Ecuador 76.42 77.45 82.99 84.80 90.14 105.04 112.82 104.63 98.87 103.46 97.91 103.82 103.69 99.87 97.96 104.42 105.13 107.06

Saharan Blend — Algeria 83.90 86.28 92.46 97.50 105.01 115.95 126.57 116.80 115.74 117.29 111.16 115.03 112.74 109.43 107.63 114.71 114.45 114.47

OPEC Reference Basket 79.86 82.83 88.56 92.83 100.29 109.84 118.09 109.94 109.04 111.62 106.32 107.61 106.29 103.07 100.61 106.80 108.44 109.13

Table 2: Selected OPEC and non-OPEC spot crude oil prices $/b

2010 2011 Weeks 39–43 (week ending) Crude/country Oct Nov Dec Jan Feb Mar Apr May June Jul Aug Sep Oct Sep 30 Oct 7 Oct 14 Oct 21 Oct 28

Minas — Indonesia1 83.35 85.96 94.98 99.74 105.29 114.62 127.19 119.69 116.28 121.71 117.03 113.32 110.01 108.10 105.54 109.17 111.64 112.91

Arab Heavy — Saudi Arabia 76.98 80.62 86.11 90.26 97.20 105.80 113.74 105.56 104.34 107.55 103.23 103.18 102.40 99.18 96.48 101.95 105.09 105.78

Brega — SP Libyan AJ 83.00 85.58 91.78 96.75 104.16 115.00 125.62 117.00 115.94 118.79 112.36 115.03 111.34 109.43 106.23 113.31 113.05 113.07

Brent — North Sea 82.75 85.33 91.53 96.35 103.76 114.60 123.72 115.10 114.04 116.89 110.46 113.13 109.44 107.53 104.33 111.41 111.15 111.17

Dubai — UAE 80.22 83.72 89.17 92.33 99.93 108.71 116.01 108.76 107.77 109.99 104.96 106.31 104.13 102.19 98.33 103.74 106.61 107.50

Ekofisk — North Sea 83.68 86.33 92.72 97.54 104.65 116.27 124.98 116.34 116.01 118.49 112.22 114.27 111.42 108.73 106.31 113.89 113.59 112.40

Iran Light — IR Iran 82.32 84.38 90.60 94.90 100.91 111.44 118.93 109.86 110.45 113.78 107.28 108.47 107.12 103.85 101.24 108.36 109.27 109.58

Isthmus — Mexico 79.58 82.03 88.17 90.46 94.56 107.97 117.90 109.62 106.30 108.62 101.06 104.05 105.18 98.86 98.84 106.14 106.57 108.75

Oman — Oman 80.44 83.91 89.24 92.49 100.27 109.00 116.56 109.25 107.90 110.41 105.30 106.65 104.96 102.77 98.94 104.46 107.86 108.35

Suez Mix — Egypt 78.76 81.97 86.88 90.87 98.64 108.40 116.50 108.06 108.81 112.08 106.33 107.56 104.96 101.51 99.15 106.69 106.60 107.34

Tia Juana Light2 — Venez. 77.91 80.14 85.97 88.37 92.85 105.60 115.31 107.97 104.28 106.66 99.24 102.17 103.40 97.08 97.16 104.34 104.77 106.90

Urals — Russia 81.53 84.74 89.74 93.56 101.49 111.50 119.60 111.50 111.68 114.90 109.25 110.39 108.10 104.35 102.32 110.05 109.77 110.28

WTI — North America 81.89 84.08 89.15 89.49 89.40 102.99 109.89 101.19 96.21 97.14 86.30 85.60 86.45 81.59 79.46 85.67 86.92 92.45

Note: As per the decision of the 109th ECB (held in February 2008), the OPEC Reference Basket (ORB) has been recalculated including the Ecuadorian crude Oriente retroactive as of October 19, 2007. As per the decision of the 108th ECB, the ORB has been recalculated including the Angolan crude Girassol, retroactive January 2007. As of January 2006, monthly averages are based on daily quotations (as approved by the 105th Meeting of the Economic Commission Board). As of June 16, 2005 (ie 3W June), the ORB has been calculated according to the new methodology as agreed by the 136th (Extraordinary) Meeting of the Conference. As of January 2009, the ORB excludes Minas (Indonesia). * Upon the request of Venezuela, and as per the approval of the 111th ECB, BCF-17 has been replaced by Merey as of January 2009. The ORB has been revised as of this date. 1. Indonesia suspended its OPEC Membership on December 31, 2008. 2. Tia Juana Light spot price = (TJL netback/Isthmus netback) x Isthmus spot price. Brent for dated cargoes; Urals cif Mediterranean. All others fob loading port.

OPEC bulletin 11/11 bulletin OPEC Sources: The netback values for TJL price calculations are taken from RVM; Platt’s; Secretariat’s assessments.

78 Graph 1: Evolution of the OPEC Reference Basket crudes, 2011 $/b 130

120

110

100

90

Saharan Blend Girassol Merey Oriente Bonny Light Es Sider 80 Iran Heavy Arab Light Marine Kuwait Export Basra Light Murban OPEC Basket

70 Jul 29 Aug 5 12 19 26 Sep 2 9 16 23 30 Oct 7 14 21 28 week 30 31 32 33 34 35 36 37 38 39 40 41 42 43

Graph 2: Evolution of spot prices for selected non-OPEC crudes, 2011 $/b 130

120

110

100

90

80 Oman Ekofisk Urals Arab Heavy Suex Mix Isthmus Dubai Tia Juana Light Brega West Texas Brent Iranian Light Minas OPEC Basket 70 Jul 29 Aug 5 12 19 26 Sep 2 9 16 23 30 Oct 7 14 21 28 week 30 31 32 33 34 35 36 37 38 39 40 41 42 43

Note: As per the decision of the 109th ECB (held in February 2008), the OPEC Reference Basket (ORB) has been recalculated including the Ecuado- rian crude Oriente retroactive as of October 19, 2007. As per the decision of the 108th ECB, the basket has been recalculated including the Angolan th crude Girassol, retroactive January 2007. As of January 2006, monthly averages are based on daily quotations (as approved by the 105 Meeting of 11/11 bulletin OPEC the Economic Commission Board). As of June 16, 2005 (ie 3W June), the ORB has been calculated according to the new methodology as agreed by the 136th (Extraordinary) Meeting of the Conference. As of January 2009, the ORB excludes Minas (Indonesia). 79 Upon the request of Venezuela, and as per the approval of the 111th ECB, BCF-17 has been replaced by Merey as of January 2009. The ORB has been revised as of this date. Graph 3 Rotterdam

Table and Graph 3: North European market — spot barges, fob Rotterdam $/b regular premium fuel oil fuel oil naphtha gasoline gasoline diesel jet kero 1 per 3.5 per unleaded 50ppm ultra light centS centS reg unl 87 diesel fuel oil 1%S naphtha prem 100ppm jet kero fuel oil 3.5%S 140 2010 October 83.47 73.65 96.08 96.88 96.35 72.50 68.62 November 86.37 74.36 99.26 98.67 99.07 75.18 74.09 130

December 93.15 75.66 103.44 104.15 105.26 76.54 76.19 120

2011 January 100.10 77.75 104.18 111.35 113.13 78.28 81.73 110 February 103.29 79.10 107.91 116.47 115.17 82.77 84.65 100 March 104.63 80.22 108.35 117.35 115.96 83.16 85.59 April 108.74 84.22 112.96 121.62 118.96 85.36 87.66 90

May 109.28 92.48 121.80 122.62 126.12 88.25 92.83 80 June 107.34 91.18 120.90 120.14 125.19 87.42 90.53 70 July 108.04 92.10 121.09 121.00 125.85 87.74 91.02 August 112.95 92.98 122.21 121.09 130.02 88.10 94.62 60 September 112.77 92.73 121.52 118.46 127.15 85.61 93.34 50 October 112.66 91.76 119.89 118.35 125.48 84.81 91.18 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct 2010 2011 Note: Prices of premium gasoline and diesel from January 1, 2008, are with 10 ppm sulphur content. Graph 4 South European Market

Table and Graph 4: South European market — spot cargoes, fob Italy $/b

premium gasoline diesel fuel oil fuel oil prem 50ppm fuel oil 1.0%S naphtha 50ppm ultra light 1 per centS 3.5 per centS naphtha diesel fuel oil 3.5%S 140 2010 October 81.91 60.22 60.40 72.90 71.76 November 84.55 61.15 60.52 74.36 72.38 130

December 90.81 61.60 60.55 75.98 73.77 120

2011 January 93.16 64.63 67.86 78.79 75.93 110 February 95.86 69.33 70.41 83.19 80.26 100 March 96.09 69.49 71.14 84.82 81.40 April 98.85 75.51 75.15 89.81 83.56 90

May 105.53 85.08 82.59 96.46 92.40 80 June 105.01 84.23 81.28 94.10 90.34 70 July 105.72 84.41 82.14 94.35 90.48 August 109.76 88.62 85.53 97.35 91.48 60 September 108.06 88.35 85.50 95.02 90.17 Graph 5 US East Coast Market 50 October 107.08 87.79 83.52 92.73 88.39 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct 2010 2011

Table and Graph 5: US East Coast market — spot cargoes, New York $/b, duties and fees included

regular fuel oil fuel oil gasoline 0.3 per 2.2 per naphtha jet kero reg unl 87 naphtha unleaded 87 gasoil jet kero centS centS gasoil fuel oil 0.3%S LP fuel oil 2.2%S 140 2010 October 76.05 90.07 84.83 88.71 77.47 68.63 November 75.12 93.72 87.90 90.51 78.83 69.56 130

December 75.74 100.15 103.55 105.38 80.41 76.28 120

2011 January 79.97 109.14 112.07 107.02 88.04 80.43 110 February 83.36 111.45 113.57 110.43 92.65 82.80 100 March 87.41 112.90 114.66 111.77 93.82 83.35 April 89.00 114.02 116.86 114.98 98.72 86.93 90 May 94.69 119.37 118.09 123.22 104.25 95.07 80 June 93.90 118.97 116.39 122.71 101.85 94.95 July 93.96 119.84 117.28 122.80 102.16 95.77 70 August 97.45 120.00 119.94 124.70 106.00 99.28 60 September 97.40 117.08 118.63 124.47 105.95 96.94 50 October 96.62 116.01 117.42 122.26 103.69 94.80 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct 2010 2011 Source: Platts. Prices are average of available days.

80 Graph 6 Caribbean Market

Table and Graph 6: Caribbean market — spot cargoes, fob $/b

fuel oil fuel oil naphtha gasoil jet kero 2 per centS 2.8 per centS gasoil fuel oil 2.0%S naphtha jet kero fuel oil 2.8%S 140 2010 October 83.85 59.70 95.56 68.95 67.49 November 86.27 60.57 98.63 70.47 69.02 130

December 93.71 62.32 104.16 73.13 71.68 120

2011 January 98.29 62.38 104.78 82.79 77.74 110 February 99.77 67.77 106.59 87.31 79.43 100 March 100.55 69.12 107.04 88.24 81.57 April 104.76 74.09 109.96 90.90 83.48 90

May 107.65 77.26 117.36 95.93 86.48 80 June 106.93 76.07 115.87 94.77 85.80 70 July 107.19 76.88 115.89 95.62 85.99 August 108.60 78.98 116.27 99.74 87.00 60 September 106.53 77.25 115.00 98.88 86.07 50 October 105.81 76.12 113.50 98.72 84.50 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct 2010 2011 Graph 7 Singapore

Table and Graph 7: Singapore market — spot cargoes, fob $/b

premium premium gasoline gasoline diesel fuel oil fuel oil prem unl 95 diesel fuel oil 180 Cst naphtha unl 95 unl 92 ultra light jet kero 180 Cst 380 Cst naphtha prem unl 92 jet kero fuel oil 380 Cst 140 2010 October 82.97 89.71 87.66 94.97 94.30 74.42 73.05 November 87.26 93.21 91.15 98.59 97.87 77.71 75.85 130 December 93.83 102.09 100.02 104.40 103.53 80.20 78.57 120

2011 January 96.87 110.17 108.52 108.17 110.43 82.59 82.95 110 February 97.39 112.20 110.97 111.46 112.29 84.69 86.62 100 March 98.13 113.95 111.25 112.94 113.07 85.17 87.14 April 100.83 118.36 113.13 115.79 115.55 87.09 89.71 90

May 104.41 120.14 113.49 122.91 117.39 94.34 91.92 80 June 102.96 117.89 111.76 122.40 115.28 91.96 89.89 70 July 103.25 118.79 112.37 122.64 115.41 92.77 90.66 August 103.72 122.66 112.41 124.96 117.60 97.35 91.15 60 September 101.06 122.62 110.69 123.26 114.68 96.17 90.87 50 October 99.14 121.14 109.17 121.21 114.09 95.70 90.55 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Graph2010 8 Middle2011 East Gulf Market

Table and Graph 8: Middle East Gulf market — spot cargoes, fob $/b

fuel oil naphtha gasoil jet kero 180 Cst naphtha jet kero gasoil fuel oil 180 Cst 140 2010 October 83.91 90.99 82.65 71.55 November 86.82 94.47 82.99 74.43 130

December 93.59 100.43 83.05 76.78 120

2011 January 95.46 102.94 86.08 80.18 110 February 97.39 104.97 90.62 83.73 100 March 99.00 105.74 91.12 84.97 April 102.29 110.09 94.49 87.10 90 May 109.72 110.92 102.06 94.48 80 June 109.17 109.54 100.21 92.31 July 109.64 109.94 100.40 93.04 70 August 113.76 110.76 101.20 95.32 60 September 112.59 108.72 98.75 93.25 50 October 110.92 108.43 97.78 93.14 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct 2010 2011 Source: Platts. Prices are average of available days.

81 Forthcoming events

Gasoline and diesel blending technology and economics, December Pipe tech Americas summit, January 18–19, 2012, Houston, TX, 5–7, 2011, Singapore. Details: Conference Connection Administrators Pte USA. Details: World Trade Group, 6th Floor, 211 Yonge St, Toronto M5B Ltd, 105 Cecil Street #07–02, The Octagon, 069534 Singapore. Tel: +65 1M4, ON, Canada. Tel: +1 416 214 3400; fax: +1 416 214 3403; e-mail:

Noticeboard 6222 0230; fax: +65 6222 0121; e-mail: [email protected]; website: [email protected]; website: www.pipetechamericas.com. www.cconnection.org. Flow assurance forum 2012, January 23–24, 2012, Aberdeen, UK. Renewable energy integration and storage congress Asia, December Details: IQPC Ltd, Anchor House, 15–19 Britten Street, London SW3 3QL, 5–7, 2011, Beijing, PR of China. Details: SINOMORE Investment UK. Tel: +44 207 368 9300; fax: +44 207 368 9301; e-mail: enquire@ Management Co, Ltd, Room 1115, No. 2449, Gong He Xin Road, Zha Bei iqpc.co.uk; website: www.iqpc.co.uk. District, Shanghai, PR of China. Tel: +86 21 61 48 33 81; fax: +86 21 61 80 70 11; e-mail: [email protected]; website www.isgcc.org/reis/. Middle East unconventional gas conference, January 23–25, 2012, Abu Dhabi, UAE. Details: Society of Petroleum Engineers, Dubai Pacific gas insiders, December 8–9, 2011, Singapore. Details: Knowledge Village, Block 17, Offices S07-S09, PO Box 502217, Dubai, Conference Connection Administrators Pte Ltd, 105 Cecil Street #07–02, UAE. Tel: +971 4 390 3540; fax: +971 4 366 4648; e-mail: spedub@ The Octagon, 069534 Singapore. Tel: +65 6222 0230; fax: +65 6222 0121; spe.org; website: www.spe.org. e-mail: [email protected]; website: www.cconnection.org. 3rd annual smart grids summit, January 24–25, 2011, Stockholm, Gas Arabia summit, December 11–14, 2011, Muscat, Oman. Details: Sweden. Details: World Trade Group, 90 Union Street, London SE1 0NW, The Exchange Ltd, 5th Floor, 86 Hatton Garden, London EC1N 8QQ, UK. UK. Tel: +44 207 202 7500; fax: +44 207 202 7600; e-mail: info@ Tel: +44 207 067 1800; fax: +44 207 242 2673; e-mail: marketing@the- wtgevents.com; website: www.gridsummit.eu. energyexchange.co.uk; website: www.theenergyexchange.co.uk. 8th annual shale gas and oil symposium, January 24–25, 2012, 9th Annual advanced contract risk management for oil and gas, Calgary, AB, Canada. Details: Canadian Institute Energy Group, 1329 December 12–14, 2011, Aberdeen, UK. Details: IQPC Ltd, Anchor House, Bay Street, Toronto M5R 2C4, ON Canada. Tel: + 1 416 927 7936; fax: 15–19 Britten Street, London SW3 3QL, UK. Tel: +44 207 368 9300; fax: +1 416 927 1563; e-mail: [email protected]. +44 207 368 9301; e-mail: [email protected]; website: www.contrac- website: www.ShaleGasSymposium.com. triskmanagement.com. Shale gas and tight oil Argentina 2012, January 24–26, 2012, POWER-GEN international 2011, December 13–15, 2011, Las Vegas, Buenos Aires, Argentina. Details: London Business Conferences, First NV, USA. Details: PennWell Corporation, 1421 S. Sheridan Road, Tulsa, OK floor, 44–46 New Inn Yard, London EC2A 3EY, UK. Tel: + 44 207 033 74112, USA. Tel: +918 835 31 61; fax: +918 831 94 97; e-mail: blewis@ 4970; fax +44 207 749 0704; e-mail: info@london-business-conferences. pennwell.com; website: www.power-gen.com/index.html. co.uk; website: www.shale-gas-tight-oil-argentina.com.

International conference on energy, economy and environ- Oil and gas water management strategies, January 30–31, 2012, ment, December 28–30, 2011, Calicut, India. Details: Department of Calgary, AB, Canada. Details: Canadian Institute Energy Group, 1329 Bay Mechanical Engineering, National Institute of Technology Calicut, NIT Street, Toronto M5R 2C4, ON Canada. Tel: + 1 416 927 7936; fax: +1 416 Campus (PO), Calicut, Kerala 673601, India. Tel: +495 228 64 08; fax: 927 1563; e-mail: [email protected]; website: +495 228 72 50; e-mail: [email protected]; website: www.iceee2011. www.CanadianInstitute.com/watermanagement. nitc.ac.in. Middle East and North Africa energy 2012, January 30–31, Offshore production technology summit, January 16–18, 2012, 2012, London, UK. Details: Chatham House, 10 St James’s Square, London, UK. Details: World Trade Group, 90 Union Street, London SE1 London SW1Y 4LE, UK. Tel: +44 207 957 5700; fax: +44 207 957 0NW, UK. Tel: +44 207 202 7500; fax: +44 207 202 7600; e-mail: info@ 5710; e-mail: [email protected]; website: www.chatham- wtgevents.com; website: www.offshore-summit.com. house.org.uk.

Information governance and ediscovery for energy, January 17–19, Brazil gas congress, January 31–February 2, 2012, São Paulo, Brazil. 2012, London, UK. Details: IQPC Ltd, Anchor House, 15–19 Britten Street, Details: IQPC Ltd, Anchor House, 15–19 Britten Street, London SW3 3QL, London SW3 3QL, UK. Tel: +44 207 368 9300; fax: +44 207 368 9301; UK. Tel: +44 207 368 9300; fax: +44 207 368 9301; e-mail: enquire@ e-mail: [email protected]; website: www.iqpc.co.uk. iqpc.co.uk; website: www.iqpc.co.uk. OPEC bulletin 11/11 bulletin OPEC

82 The 20th World Petroleum Congress 4-8 December 2011, Doha, Qatar

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Feature Article: Vol. XXXIV, No. 3/4 Product markets ahead of winter Vol. XXXIV, No. 3/4 September/December 2010

Oil market highlights 1 Speculation without oil Axel Pierru and Feature article stockpiling as a signature: Denis Babusiaux 3 a dynamic perspective Crude oil price movements 5 Determinants of the Maxwell Umunna Nwachukwu Commodity markets 10 dynamics of demand for and Harold Chike Mba highway transportation fuel World economy 16 in Nigeria World oil demand 28 Russia’s oil and gas policy Gawdat Bahgat World oil supply 39 Product markets and refinery operations 49 Published and distributed on behalf of the September/December 2010 Tanker marketOrganization55 of the Petroleum Exporting Countries, Vienna Oil trade 58 Stock movements 64 Balance of supply and demand 69

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