This month’s cover ... shows pipeline construction in Russia, a key element of the country’s future oil export plans (see article on p11). Vol XXXIV, No 5 ISSN 0474-6279 September/October 2003 02 Editorial Information 03 Commentary A shared responsibility OPEC cuts production by 900,000 b/d (p4) 04 Conference Notes OPEC cuts production by 900,000 b/d at 127th Meeting 08 Forum Short- and long-term oil price trends in the aftermath of the conflict in Iraq Post-Soviet oil exports: are the Russians really coming? (p11) Russia to boost oil exports (p11) 24 Newsline High-level Saudi delegation visits Moscow to sign energy pact with Russian Federation Oil and gas news from OPEC (p26) 36 Market Review Covering July/August 60 Member Country Focus Sanctions are lifted on Libya as compensation deal is Reuters/Chip East Reuters/Chip reached over Lockerbie bombing UN lifts sanctions on Libya (p60) Development and economic news from OPEC (p61) 67 Secretariat Notes 68 OPEC Fund News Humana/DAPP Fund supports Children’s Town in Zambia (p68) 74 Noticeboard September/October 2003 1 Publishers Editorial policy OPEC The OPEC Bulletin is published by the Pub- Organization of the Petroleum Exporting lic Relations & Information Department. Countries, Obere Donaustrasse 93, The contents do not necessarily reflect 1020 Vienna, Austria the official views of OPEC or its Member Telephone: +43 1 211 12/0 Countries. Names and boundaries on any Telefax: +43 1 216 4320 maps should not be regarded as authorita- Public Relations & Information tive. No responsibility is taken for claims Department fax: +43 1 214 9827 or contents of advertisements. Editorial E-mail: [email protected] material may be freely reproduced (unless E-mail: OPEC News Agency: [email protected] copyrighted), crediting the OPEC Bulletin Web site: http://www.opec.org as the source. A copy to the Editor-in-Chief Hard copy subscription: $70/year would be appreciated. Secretariat officials Membership and aims Editorial staff Secretary General OPEC is a permanent, intergovernmental Or- Dr Alvaro Silva-Calderón Editor-in-Chief ganization, established in Baghdad, September Dr Omar Farouk Ibrahim 10–14, 1960, by IR Iran, Iraq, Kuwait, Saudi Director, Research Division Editor Arabia and Venezuela. Its objective is to co-ordi- Dr Adnan Shihab-Eldin Graham Patterson nate and unify petroleum policies among Mem- Deputy Editor ber Countries, in order to secure fair and stable Head, Data Services Department Lizette Kilian prices for petroleum producers; an efficient, Dr Muhammad A Al Tayyeb Philippa Webb-Muegge (maternity leave) economic and regular supply of petroleum to Production consuming nations; and a fair return on capital Head, Administration & Diana Lavnick to those investing in the industry. Human Resources Department Design The Organization comprises the five Senussi J Senussi Elfi Plakolm Founding Members and six other Full Mem- bers: Qatar (joined in 1961); Indonesia (1962); Head, Energy Studies Department Contributors to this issue SP Libyan AJ (1962); United Arab Emirates Mohamed Hamel (Abu Dhabi, 1967); Algeria (1969); and Professor Eugene Khartukov, Dr Ellen Nigeria (1971). Ecuador joined the Organiza- Head, PR & Information Department Starostina, Audrey Haylins, Umar Aminu tion in 1973 and left in 1992; Gabon joined Dr Omar Farouk Ibrahim in 1975 and left in 1995. Web site: www.opec.org Head, Petroleum Market Analysis Contributions Department Visit the OPEC Web site for the latest news Mohammad Alipour-Jeddi and information about the Organization and its The OPEC Bulletin welcomes original contri- Member Countries. Recent and back issues of butions on the technical, financial and envi- Legal Officer the OPEC Bulletin are available free of charge ronmental aspects of all stages of the energy Dolores Dobarro on the site in PDF format. industry, including letters for publication, research reports and project descriptions with Head, Office of the Secretary General Indexed and abstracted in PAIS International supporting illustrations and photographs. Karin Chacin Printed in Austria by Ueberreuter Print and Digimedia Advertisements The OPEC Bulletin reaches the decision-makers in Member Countries. For details of its reasonable advertisement rates see the appropriate page at the end of the magazine. Orders from Member Countries should be sent directly to the Editor-in-Chief at the Secretariat address. Otherwise, orders should be placed through the Advertising Representatives, whose contact details are at the end of the magazine. 2 OPEC Bulletin September/October 2003 3 COMMENTARY A shared responsibility The oil market is likely to face the challenge of oversupply in 2004 — making OPEC/non-OPEC co-operation more vital than ever In its constant quest for oil market stability, OPEC has in fact happen. Co-operation between all players in the always emphasized the vital importance of co-operation international oil industry will therefore very probably be between all parties involved in the oil industry, especially a key element in preventing a price collapse next year. between the Organization and non-OPEC oil-produc- One of these key industry players is, of course, Russia. ing nations. Such co-operation has proved essential Like the OPEC Member Countries, Russia is a major oil both in recovering from damaging price slumps (such producer and exporter which is heavily reliant on oil revenues as that which occurred in 1998 and early 1999), and and therefore has an overriding interest in market stability. in preventing them from happening in the first place, In this issue of the OPEC Bulletin, noted Russian academ- as was the case in the months following September 11, ics Professor Eugene Khartukov and Dr Ellen Starostina 2001, when a strong downward price trend was halted take a look at present and future Russian oil production and then reversed by joint OPEC/non-OPEC efforts to and exports, and examine the prospects for co-operation restore stability to the market. with OPEC, while the recent strengthening of ties between Now, as we enter the final months of the year 2003 Russia and Saudi Arabia is also highlighted. and look ahead to 2004, OPEC — and indeed the oil In a related move demonstrating the increasing links be- market as a whole — finds itself facing a new challenge. tween Russia and OPEC, the Organization’s Secretary General, The various supply problems that affected the market Dr Alvaro Silva-Calderón, is scheduled to visit Moscow in earlier this year are behind us. Now, factors such as early November for discussions on stabilizing the market Iraqi oil coming back on stream, the continuing strong with senior Russian officials. This is, of course, just one in upward trend in non-OPEC output, and relatively mod- a series of meetings that have been held in recent years with erate demand growth levels, all mean that if vigilance is the aim of boosting understanding between the two sides, not exercised, the market could soon be over-supplied, and we very much hope this trend will continue. putting downward pressure on prices. A major concern We in OPEC face a constant series of challenges in in 2004 could be low oil prices, not high ones. maintaining market stability. But we do it in order to What this means is that, in order to prevent a repeat keep prices at levels that are both fair and reasonable for of the price slump of 1998–99, co-operation between both producers and consumers of oil. That is why we say OPEC and non-OPEC is likely to assume even greater that although the responsibility of stabilizing the market importance. Although a clear downward price trend is a heavy one, it is one that must be carried. And that has not yet emerged, all the signs are that the market is also why we believe that our friends and partners in is going to be more than well-supplied with oil in the non-OPEC will understand when we ask them to help coming months, and it would be no surprise if this did us in sharing that responsibility. 2 OPEC Bulletin September/October 2003 3 CONFERENCE NOTES CONFERENCE NOTES OPEC decides to reduce production by 900,000 b/d at 127th Meeting of the Conference in Vienna The President of the Conference and Qatari Second Deputy Prime Minister and Energy & Industry Minister, HE Abdullah bin Ha- mad Al Attiyah (centre), addresses the Conference, flanked by OPEC Secretary General, HE Dr Alvaro Silva-Calderón (right), and the Chairman of the Board of Governors for 2003, HE Saif Bin Ahmed Al-Ghafly of the United Arab Emirates (left). OPEC decided to cut production by OPEC supplies and the ongoing recovery duction ceiling prior to the supply disrup- 900,000 barrels/day with effect from in Iraqi production, stocks have been re- tion from Iraq. Noting, also, the gradual November 1, 2003 when it met in Vi- plenished and are rapidly reaching normal return of this Founding Member to the enna, Austria, on September 24. seasonal levels, with the supply/demand market, and in order to ensure balance The closing communiqué from the balance for the fourth quarter 2003 and to the market, the Conference decided to 127th Meeting of the Conference noted first quarter 2004 indicating a contra-sea- return to the ceiling of 24.5 million b/ that “whilst the global economy appears sonal stock build-up. This could have a d and the agreed production levels, with to be improving, only normal, seasonal destabilizing effect on the market which effect from November 1, 2003.” growth in demand is expected for the requires a reduction of supplies from all At the closing press conference, the fourth quarter, and the market contin- producers to ensure stability. OPEC Conference President, Qatari Sec- ues to be well-supplied. “The Conference noted its decisions in ond Deputy Prime Minister and Minister “In view of the continued rise in non- January and April 2003 to adjust the pro- of Energy & Industry, HE Abdullah bin 4 OPEC Bulletin September/October 2003 5 CONFERENCE NOTES CONFERENCE NOTES Photo: Reuters/Heinz-Peter Bader Reuters/Heinz-Peter Photo: Iran’s Minister of Petroleum, HE Bijan Namdar Zangeneh (left) in conversation Saudi Arabia’s Minister of Petroleum and Mineral with Venezuela’s Minister of Energy and Mines, HE Rafael Ramirez.