OPEC adopts comprehensive long-term strategy

No 16/2005
Vienna, Austria
20 Sep 2005

OPEC has adopted a comprehensive long-term strategy at its Ministerial Conference which ended in Vienna today (20 September).

This strategy, which was prepared over a period of two and a half years, provides a coherent and consistent vision and framework for the Organization’s future.

It recognises the important role of oil in the world economy at large and for the socio-economic development of OPEC Member Countries.

The strategy defines specific objectives, identifies the key challenges that the Organization faces now and in the future, and explores scenarios for the energy scene. It is designed to be robust and adaptive throughout the various possible futures.

When the process of drawing up a long-term strategy began in March 2003, the oil market was experiencing a high level of stability. Recently, however, the market has been more volatile, making a long-term strategy for the Organization all the more relevant.

Meetings of the Member Countries’ Deputy Ministers of Petroleum/Energy were held under the Chairmanship of HRH Prince Abdulaziz Bin Salman Bin Abdulaziz Al-Saud, Assistant Minister of Petroleum Affairs, Kingdom of Saudi Arabia, with HE Dr. Bernard Mommer, Vice-Minister of Hydrocarbons, Bolivarian Republic of Venezuela, as Vice-Chairman, and these were supported by the OPEC Secretariat’s Research Division.

The final proposed strategy was presented to the 137th Meeting of the OPEC Conference, which convened in Vienna on 19–20 September and which gave it its endorsement.

The strategy sets objectives in relation to the long-term petroleum revenues of Member Countries, fair and stable prices, the role of oil in meeting future energy demand, the stability of the world oil market, and the security of regular supplies to consumers, as well as the security of world oil demand. They also relate to the legitimate interests of OPEC Member Countries in multilateral agreements.

The strategy identifies the key challenges that may constitute constraints for OPEC in the attainment of the objectives. These include uncertainties surrounding future oil demand, stemming from, inter alia, the prospects for the world economy, consuming countries’ energy and environmental policies, and technological developments. They also concern the supply side, taking into account the resources, potential non-OPEC production, and the extent and timing of required investment, together with the associated uncertainties.

While considering the wide range of possible futures and the need to be effective across these plausible circumstances, the strategy covers various elements, such as the oil price, upstream and downstream investment, technology, the role of OPEC National Oil Companies, multilateral negotiations, in particular those related to trade and the environment, the important relationships with both producers and consumers, as well as with international organisations and institutions, OPEC’s public information and the strengthening of the OPEC Secretariat. In addition, it also includes elements that are pertinent to specific situations, given the need to be flexible and adaptive.

Regarding oil prices, the strategy builds upon the fundamental recognition that extreme price levels, either too high or too low, are damaging for both producers and consumers, and points to the need to be proactive under all market conditions.

The strategy also re-emphasises OPEC’s commitment to support market stability and, in achieving this, stresses the role of other producers, as well as, especially with regard to the downstream sector, consuming countries.

The strategy recommends that OPEC Member Countries strive to strengthen co-operation in upstream and downstream scientific research and technological development among themselves and with international institutions. It also recommends supporting research in the production and use of cleaner petroleum-based fuels, and taking an active role in the development of technologies that address climate change concerns, while improving and expanding the role of oil in meeting future world energy demand, such as CO2 sequestration.

The strategy also addresses the role of OPEC National Oil Companies and encourages enhancing their competitive performance, as well as developing close co-operation among them in various areas such as technology, industrial networking, knowledge- and experience-sharing, etc.

The strategy maintains that it is important for OPEC Member Countries to continue to have an active role in climate change-related multilateral negotiations, recalling the principle of common but differentiated responsibilities, as well as the obligations of industrialised countries with regard to developing country parties.

The strategy also calls for an active and more co-ordinated role of OPEC in trade-related negotiations, as well as increased co-operation with other developing countries, reinforcing the principle of permanent national sovereignty over natural resources, and recognising the exhaustible and non-renewable character of oil. It also stresses that it is important for OPEC Member Countries to continue enhancing their economic and social development by using the comparative advantage offered by their natural resources.

Dialogue among producers and between producers and consumers constitutes a crucial element of the strategy. It is recommended that such dialogue should be widened and deepened to cover more issues of mutual concern, such as security of demand and supply, market stability, investment, technology and the downstream.

Communication is also recognised as a key element of the strategy and this calls for, inter alia, a strengthening of the Organization’s public information capabilities.

Finally, the long-term strategy recognises the importance of an enabling environment, and recommends the strengthening of the OPEC Secretariat to broaden its research activities and cope with the growing challenges.