OPEC Conference President Address to the National Press Club

Address by HE Dr. Edmund Maduabebe Daukoru, OPEC Conference President, to the National Press Club, Washington DC, Friday, 3 March 2006

Ladies and gentlemen,

I am very pleased to have this opportunity to address you at the National Press Club on the current oil market situation and other matters affecting OPEC, its relations with the United States of America, and the world oil industry.

As you know, I am now approaching the end of my three-day visit to Washington DC to meet senior Administration figures, Members of Congress and the Business Community in general, Oil Executives. Even though the visit has had a very tight schedule, I have been able to engage in enlightening and constructive discussions on a wide range of issues that relate to today’s oil market, as well as that of the future, looking to the years and decades to come. OPEC is as committed to the future welfare of the market as it is to the present.

It has certainly been one of those occasions where it has been as important to listen as well as to talk. On occasions like this, we all have much to learn from each other. Here, I am not referring so much to hard facts, although, of course, these are important in their own right. But I am thinking more of perceptions and attitudes. Perceptions and attitudes play a vital role in shaping policy. They require clear mutual understanding among the respective parties if they are to enhance relationships in today’s fast-moving world.

The past two years have been very challenging ones for the oil market, with prices reaching new highs, in a setting of almost persistent volatility. Here I refer to nominal prices, since real prices are still below the levels witnessed in the early 1980s. I have explained to the Honourable Members of the Administration and Congress, as well as to other distinguished audiences, how OPEC has sought relentlessly to stabilise the market in this very difficult situation and to restore prices to levels acceptable to producers and consumers alike.

Along the way, I have pointed out that OPEC has only been able to achieve so much with its actions, since factors over which our Organization has little or no influence have been primarily responsible for the present volatility. Here I refer, in particular, to downstream bottlenecks in some major consuming nations, as well as to excessive levels of speculation, geopolitical tensions, natural disasters and so on.

In OPEC, we have been acting in three main areas, through increasing crude supply to the market, accelerating the construction of new capacity and investing more heavily in the downstream — even though this latter area is traditionally seen as the responsibility of consumers, rather than producers. We have, what is more, adopted such stabilisation measures, even though the market has remained well-supplied with crude during this period. The market is, indeed, well-supplied with crude today, as is clear from the present high stock levels.

We are also optimistic about the future, as I have endeavoured to explain during the course of this visit. The world has enough oil resources to last for generations to come. The challenge today is deliverability — to ensure consumers receive the oil products they need, of the right kind, in the right place and at the right time.

Incidentally, when I refer to consumers, I mean consumers from across the world and not from just the rich industrialised nations. As we saw at the UN World Summit in Johannesburg in 2002, energy services have a central role to play in sustainable development and the eradication of poverty.

There is therefore, no reason why consumers the world over should not receive their oil on a steady, secure and sustainable basis well into this century. However, this requires careful planning and sound investment strategies. Fundamental to this, as I have been explaining this week, is a clear idea of evolving demand patterns — or rather, as much clarity as possible in an inherently uncertain world. Uncertainty makes investment planning a hazardous business in an industry where the stakes are very high, with long lead-times and substantial upfront capital. Needless to say, over-investment implies heavy costs in future idle capacity to be borne by producers, while under-investment has a similarly disruptive effect elsewhere in the market.

One big area where concrete steps can be taken to reduce uncertainties is in consumer government policies. This is why I took every possible opportunity this week to repeat OPEC’s call for greater consistency and clarity in energy policy-making in the industrialised world. Indeed, this is why we have gone to great lengths over the years to encourage dialogue and cooperation throughout the oil world, involving all the major producers and consumers. We all have to work together towards global energy security. This calls for dialogue to create better understanding of competing energy sources and the relative merits of the investment choices that lie before the international community of producers and consumers.

Ladies and gentlemen, I have tried to capture in my remarks the flavour of the discussions in which I have been privileged to be involved here in Washington DC. Of course, the meetings themselves have looked at these and other issues in greater depth.

This has been a most rewarding visit. I have every reason to believe that a basis exists now for dialogue between OPEC, Corporate America and the Administration. At the same time, it has been reassuring to note that a broad consensus exists in Corporate America, if not yet in the Administration, on fossil fuels, in particular, on oil and gas, as the most cost-effective energy sources for the foreseeable future. OPEC wishes to reaffirm its abiding commitment to a clean environment, stable markets and sustained supplies of oil and gas to the global economy, while acknowledging the niche role of longer-term renewable alternatives.

This consensus is important, as, without it, the huge investments needed to expand supply capacity that are going forward — to avoid a repeat of the current market tightness in the upstream and more so in the downstream — cannot be justified.

Thank you for your attention.