Timely Seminar exceeds expectations in crisis period

OPEC Bulletin Commentary May 2009

The Fourth OPEC International Seminar could not have been held at a better time.

By March 18, when key decision-makers and experts from the world oil industry, governments, academia and related areas gathered in the Festsaal, in Vienna’s Hofburg Imperial Palace to begin the two-day Seminar, the dust had more or less settled from the seismic shock that had struck the industry half a year earlier, in the wake of the calamitous events in the financial sector and the widespread economic decline. It was, at last, easier to view the impaired landscape and gain a better perspective of the way forward.

It was time to grasp the nettle. The Seminar provided an ideal place for this, with its top-calibre participants setting aside their regular activities to focus their minds on the leading issues of the day facing the industry.

Everyone was in the same boat, when it came to the need to handle the fallout from the economic crisis in a prompt and effective manner — whether their frontline activity was oil supply, environmental harmony or sustainable development. There was, indeed, common recognition of the fact that, while these three pursuits had their own individual challenges, they were also inextricably linked, as had been made clear at the Third OPEC Summit in Riyadh in 2007, when they were described as the three themes embodying the Organization’s guiding principles.

It did not take long to discover that there was a convergence of views among the informed gathering on key fundamental issues affecting the welfare of the industry in the present troubling and uncertain climate.

First, the industry was under severe pressure and, in the face of repeated downward revisions to demand forecasts, was already suffering project cancellations and delays, staff cutbacks, credit restrictions and so on. It was acknowledged that the short-to-medium-term market outlook was highly uncertain, with no end in sight to the malaise. The longer-term outlook for demand was less affected by the current economic developments and, with demand forecast to rise again after the crisis, would continue to need the timely provision of sufficient production capacity to help ward off future boom/bust cycles.

In the light of all this, it went without saying at the Seminar that the industry should ride out the present crisis as best it could. At the same time, however, participants recognised that the industry should do all it could to ensure that it was well prepared for the recovery in demand growth, as this happened. But there were clear obstacles here, such as companies being forced to cut back on existing production facilities in the present downturn, as well as letting go of valuable resources, particularly highly trained staff. On top of this, producers made a strong case for addressing the fundamental misalignment of current spot prices of crude with the higher levels required for investment in future capacity.

Frank, open and insightful discourse on other key issues, including the build-up to the latest round of climate change negotiations in Copenhagen and petroleum’s role in sustainable development, underlined the OPEC Seminar’s growing reputation on the international energy conference circuit.

Indeed, we believe that this year’s Seminar exceeded expectations, in enhancing knowledge and understanding across the industry in a cogent and pertinent fashion at this very difficult time.

We are confident that — with so many key decision-makers and influential parties present — this will be reflected in the actions of the industry in the coming weeks, months and years, as it gets to grips with the damaging fallout from the global economic crisis and seeks to turn the crisis into a springboard for challenging new opportunities, from which producers and consumers alike will benefit.

This Commentary is taken from the May 2009 edition of the OPEC Bulletin, which can be downloaded free of charge in PDF format from the OPEC website.

OPEC Bulletin (May 2009)

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