OPEC: Dialogue between Producers and Consumers

Speech delivered by Mr. Mohamed Hamel, Head, Energy Studies Department, OPEC Secretariat, to the Side Event of Vienna-based intergovernmental organisations at the UNCSD-15, New York, 7 May 2007

Ladies and gentlemen,

1. I should like to thank you Excellency, for inviting OPEC to this side event of Vienna-based intergovernmental organisations.

Let me say too that OPEC has enjoyed the excellent hospitality provided by the Federal Republic of Austria and the City of Vienna for more than four decades. We look forward to continuing this relationship well into the future.

2. My contribution is about the dialogue between energy producers and consumers. With three messages:

  • The world is increasingly interdependent and the energy system is more and more global and interconnected, through physical infrastructures and markets. Energy independence is therefore a myth.
  • Energy security is a two-way street: security of supply is matched by security of demand.
  • Dialogue among producers and consumers is now a reality and is expanding; OPEC is playing an active role in this area. I will also highlight the important role of the International Energy Forum in furthering and deepening this dialogue.

3. The world is indeed increasingly interdependent. We are in an era of globalisation, expanding international trade, instant mass communications, interconnected financial markets, rapidly advancing technology and greater mobility. Total world energy exports have more than doubled over the past two decades, rising faster than GDP.

4. Looking ahead, our reference case projections to 2030 show that global energy demand will increase by more than 50%, and around 1.7 per cent annually. It also highlights that fossil fuels will continue to provide more than 90 per cent of the world’s total commercial energy needs, with oil remaining the leading source in the global energy mix, with a 36 per cent share.

5. Our projections also indicate that there will be even greater interdependence in the future. For example, in volume terms, trade in crude and oil products is expected to rise by more than 25 per cent over the years to 2020 alone.

Thus, the energy system, which is already a global one, is even more global, complex and interconnected in the future. This is all the more true that relationships are becoming more complex with the development of bio-fuels, which will create new links between energy supply and food supply, as described in an earlier speech, with the risks of one system being compounded with the risks of the other system. Consequently, there is no room for an independent approach to energy supply.

6. Let me now emphasise my second message, that energy security is very much a two-way street. On the one hand, oil is important to the economic growth and prosperity of consuming/importing countries, but on the other hand it is also crucial to the development and social progress of producing/exporting countries. For example, while net oil imports in OECD countries account for around 60 per cent of their total demand, oil exports from OPEC’s Member Countries account for no less than 77 per cent of their total exports, and for some of them, more than 90%.

The concern of consuming countries for the secure flow of oil at reasonable and stable prices is matched by the concern of producers for predictable demand, at adequate prices for their exhaustible resources, in order to provide the much needed revenues for their socio-economic development, with access to markets and non-discrimination against their products.

7. OPEC is well acquainted with the issue of energy security. It is enshrined in its Statute and refers to the necessity of its Member Countries securing “an efficient, economic and regular supply of (oil) to consuming nations”.

We have seen some successful examples of this recently, with OPEC’s decisions to increase production and accelerate capacity-expansion plans, after the sharp rise in demand in 2004, and following the large and lengthy hurricane-caused supply interruptions from the US in 2005.

8. OPEC’s Member Countries possess around four-fifths of the world’s proven crude oil reserves. As such, they are acutely aware of the role they can play in ensuring that the consumers continue to receive their oil in a timely, efficient and orderly manner. And, OPEC is totally committed to carrying out this role.

9. On the other hand, OPEC is facing large uncertainties over how future oil demand plays out and over the amount that it will eventually need to supply, signifying a heavy burden of risk. For example, up to 2020, our scenarios highlight the fact that these countries’ upstream investment requirements could lie within a huge range of US $230 billion and $500 bn — competing with funds required for such areas as health, education and infrastructure. Furthermore, a large amount of idle capacity would put much downward pressure on prices and be detrimental to vital export revenue.

In fact, the risks have heightened recently. For example, recent policy initiatives, in the European Union and the United States of America, that discriminate against oil, involving subsidies for competing fuels and higher taxes, may see even lower demand for oil products in general, and for OPEC oil in particular.

Many of these policies are packaged as environmentally-driven. But we all know that increased use of fossil fuels is consistent with the protection of the environment, through the development and dissemination of advanced cleaner fossil fuel technologies, and in particular the promising technology of carbon capture and storage.

10. Let me turn to my third message. When we look at all the challenges facing the energy system today and in the future, it is clear that strengthening and deepening the dialogue and cooperation among producers and consumers is extremely important. I am glad to say that much progress has been made with dialogue and cooperation since the early 1990s.

Over the past 15 years, OPEC has also been actively involved in the establishment and development of the foremost producer/consumer dialogue at the political level, the International Energy Forum. It is a process of informal, global dialogue on energy at the level of ministers involving at present some 60 key energy countries. It also involves the industry within the Business Forum.

Moreover, the Forum has set up in 2003 a Secretariat, based in Riyadh, Kingdom of Saudi Arabia. It is also the home of the Joint Oil Data Initiative, which OPEC has helped develop with other five intergovernmental organisations, into an internationally-recognised entity, whose focus is on advancing the transparency, quality, timeliness and flows of energy market data.

11. OPEC has recently expanded and enhanced dialogue with , for example, the EU, China, Russia, Japan and the International Energy Agency.

The EU-OPEC Energy Dialogue has been particularly dynamic. Three Ministerial Summits has been held, up to now. Workshops on oil markets, on the impacts of financial markets on the price of oil have also been held. A joint Roundtable on Carbon Capture and Storage has been organised in Riyadh in September last year, as both groupings consider this technology as an extremely promising mean to reduce GHG emissions in the future. A joint study on refining is also being conducted.

12. With China, regular Roundtables are being held to exchange views on OPEC and Chinese energy policies. Similar Roundtables are also held with Japan.

13. Cooperation with the IEA has also been strengthened, with in particular an annual joint workshop being organised, the forthcoming being held this month in Bali, Indonesia. OPEC is also joining the IEA GHG R&D Programme, a programme which focuses on the technology of carbon capture and storage.

14. Dialogue with other producers is also important. One could mention the annual meetings with Russia as well as the OPEC-non-OPEC producing country meetings.

15. With developing countries, over the years, OPEC’s Member States have sought to ease the plight of such countries in diverse ways and have established many effective bilateral and multilateral cooperation and aid institutions. These include our sister organisation, the OPEC Fund for International Development, also based in Vienna, which is active in no less than 119 developing countries.

It is our belief in OPEC, all members being developing countries, that, as stated in Johannesburg, poverty eradication is the greatest challenge facing the world today.

16. Let me sum up by saying that OPEC is convinced that in this increasingly interdependent world, dialogue and cooperation are the way forward.

Thank you.

 

Dialogue between Energy Producers and Consumers

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