Opening address to the 151st (Extraordinary) Meeting of the OPEC Conference

No 16/2008
Oran, Algeria
17 Dec 2008

by HE Dr. Chakib Khelil, Minister of Energy and Mines of Algeria and President of the Conference

Excellencies, ladies and gentlemen,

Welcome to Oran for the 151st Extraordinary Meeting of the Conference. The Government of Algeria is honoured to host this meeting, which is taking place at a particularly challenging time for the oil industry.

The purpose of the meeting is to reassess the outlook for the international oil market. We took the decision to meet today at the last Ordinary Meeting of the Conference, in Vienna on 10 September. On that occasion, we reaffirmed OPEC’s commitment to ensuring sound supply fundamentals and an adequate level of spare capacity, for the benefit of the world at large. And we added the readiness of Member Countries to swiftly respond to any developments which might place oil market stability and their interests at risk.

So severe has been the decline in oil prices since early September, as well as the turmoil in the world financial sector, that we have had to call two extra meetings to assess the evolving situation.

At an Extraordinary Meeting in Vienna on 24 October, we decreased the OPEC-11 production ceiling of 28.8 million barrels a day by 1.5 mb/d, with effect from 1 November.

As prices continued to fall, we held a Consultative Meeting in Cairo on 29 November. There, after careful consideration of recent events, we decided to wait a little longer — that is, until today — before considering whether further action should be taken in the market. This would give us more time to monitor the effect of the October agreement.

Excellencies, this has, indeed, been a very troubled year for the market, with massive swings in the price of crude and extreme volatility.

Our latest market analysis shows that the oil price volatility has increased notably since mid-September, following the deepening of the international financial crisis. In tandem with this, the pace of the decline in oil prices has accelerated.

Prices are now well below levels that could be considered sustainable for the longer term, when we look at the investment climate for the industry.

In the light of all this, decision-makers have had to rapidly reassess the viability of both existing and planned investments, and hard decisions have had to be made. This is bad news for the industry, and for producers and consumers alike.

There is widespread agreement that, in spite of the short-term setbacks, such as those we are witnessing today, world oil demand will continue to rise for decades to come.

The world needs secure, regular supplies of oil, to meet this demand in a timely and sufficient manner. OPEC, with more than three-quarters of the world’s proven crude oil reserves, recognises the big role it has to play here and is committed to it. However, a stable investment climate is needed, to bring on-stream new capacity. And so, when oil prices are very low and there is continued volatility, as we are seeing now, there will be, inevitably, a scaling-back of investment plans.

If this situation continues for too long, it will mean supply shortages in the future, as well as a new round of volatility and uncertainty, from which all parties will suffer.

Unfortunately, the world economic outlook is not expected to improve over the winter. The global economy is slowing down faster than expected, and, increasingly, forecasters are suggesting that oil demand will fall next year.

Therefore, we need to review the situation carefully in this critical period and respond appropriately, in support of market order and stability for the short, medium and long terms. While all time-horizons are important, OPEC prefers to focus on sustainable, longer-term actions, from which the world community as a whole will ultimately benefit.

Importantly, we should ensure that the most vulnerable members of the global community, the least-developed countries, are well-cushioned from the impact of the present global crisis. They should not end up as the biggest victims of the crisis — as is so often the case, on global issues — as they continue their pursuit of the Millennium Development Goals.

Excellencies, ladies and gentlemen,

OPEC has a long-established record in meeting the challenges it faces, however tough they may be. The challenge facing the oil market today is clearly a formidable one. Notwithstanding this, we shall rise to this challenge — as in the past — and achieve our objective of stabilising the oil market through collective discipline and adherence to our decisions. In doing so, we shall reinforce OPEC’s credibility in the market, as an Organization that is prepared to act at all times, in the interests of sustainable order and stability.

However, OPEC cannot be expected to bear alone the burden of restoring equilibrium to the market. We, therefore, call upon non-OPEC producers to contribute to our efforts to restore market stability and eliminate harmful and unnecessary price fluctuations.

Let us now proceed with the meeting.

Thank you.