Institutionalizing dialogue

OPEC Bulletin Commentary November-December 2005.

The Organization of the Petroleum Exporting Countries (OPEC) was set up in September 1960 as an inter-governmental organization to safeguard the interests and sovereign rights of its Member States. But from the outset, the five Founding Members, Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, realized one very important fact — that in order to successfully prosecute their activities the relationship with their clients — the consumers — would need to be professional and candid, yet agreeable and cordial. That is why, since that groundbreaking day in Baghdad over 45 years ago, OPEC has been pursuing the road of co-operation with the principal actors that make up the international oil market.

The Organization, now with 11 Members, remains convinced that only through constructive, meaningful and regular dialogue can the necessary awareness and understanding be reached with the relevant parties on what conditions are necessary for attaining a stable oil market with fair and reasonable prices. And, as we embark on another new year, we can safely say that the foundations for such co-operation are now firmly established. In fact, 2005 might prove to be a landmark year with regard to dialogue between OPEC and other producers, and particularly with the consumers.

The ball started rolling in January with the first roundtable of Asian oil and gas ministers in New Delhi, aimed at promoting producer-consumer relations at the heart of the world’s fastest-growing region. In May, the third Joint Workshop between OPEC and the Paris-based International Energy Agency (IEA) was held in Kuwait City. This proved to be a substantive follow-up to the first two workshops held in June 2003 and April 2004. Then, in June 2005, we saw a significant breakthrough in the energy co-operation talks with the first-ever Ministerial-level meeting between OPEC and the European Union (EU). Held in Brussels, the talks were really a means for testing the waters, yet they proved so successful that a second ministerial meeting was held in early December, this time in Vienna. Just before this gathering, the two sides staged their first joint roundtable, which looked at oil market developments.

To cap off an eventful year, OPEC forged a formal energy dialogue with China in Beijing, followed within days by a similar initiative with the Russian Federation in Moscow. Add to all this the inauguration of the official headquarters of the International Energy Forum (IEF) in Riyadh, Saudi Arabia in September, the purpose of which is to promote and expand producer-consumer co-operation, and the choice of Abu Dhabi, the capital of an OPEC Member Country, for the launching of the IEA’s World Energy Outlook 2005, and one can fully appreciate the tremendous strides that have been made in enhancing global energy ties in just 12 months.

Obviously, OPEC is keen to build on last year’s momentum and 2006 promises to be another busy year of relations-building, especially with the consumers. The Organization will attend the third ministerial meeting of the EU-OPEC Energy Dialogue in Brussels in June. The two sides will also hold a meeting on energy technologies and convene a second roundtable on the impact of energy policies on both supply and demand. There are also proposals for a study on refining, another workshop on the role of the financial markets, while moves will be advanced towards setting up an EU-OPEC technology centre, which Kuwait has already indicated it wants to host and sponsor.

All in all, it really is an exciting time, especially when one considers that just a few years ago this kind of initiative was a mere pipedream, such was the extent of the divide between the two sides. But the success of 2005 is testament to the new awareness that such an approach — sitting down together and talking about each other’s needs — is the best way to manage a commodity that is complex, volatile and extremely unpredictable, yet essential for global economic growth.

OPEC, for its part, will continue to pursue the road of co-operation. It is confident that the progress it has been instrumental in bringing about over the past year or so will be sustained and expanded so that the petroleum industry can go from strength to strength and bring stability and prosperity to producers and consumers alike. At the same time, we will finally be able to lay to rest that sense of confrontation and those feelings of mistrust that for so long prevented this kind of initiative from coming to fruition.

This Commentary is taken from the November-December 2005 edition of the OPEC Bulletin, which can be downloaded free of charge in PDF format from the OPEC website.

OPEC Bulletin (November-December 2005)

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