Opening address to the 137th Meeting of the OPEC Conference

No 15/2005
Vienna, Austria
19 Sep 2005

by HE Sheikh Ahmad Fahad Al-Ahmad Al-Sabah, President of the Conference and Minister of Energy for Kuwait

Excellencies, ladies and gentlemen,

Welcome to the 137th Meeting of the OPEC Conference.

I should like to extend a special welcome to His Excellency Seyed Kazem Vaziri Hamaneh, who was recently appointed Acting Petroleum Minister for the Islamic Republic of Iran and who is attending our Conference for the first time as Head of his Country’s Delegation. Please join me, also, in paying tribute to the outstanding contribution to the Organization made by his predecessor in office, HE Bijan Namdar Zangeneh.

Let me start this address by offering the sincere condolences of the Conference to the Government and the people of the Kingdom of Saudi Arabia, following the sad death of the Custodian of the Two Holy Mosques, King Fahd Bin Abdulaziz Al-Saud, on 1 August. Our thoughts and our prayers are with the Saudi nation at this time, and, in particular, with his successor as Custodian of the Two Holy Mosques, King Abdullah Bin Abdulaziz Al-Saud.

Turning to another part of the world, it was also my sad task, three weeks ago, to send condolences to the Government and people of the United States of America, following the devastation caused by Hurricane Katrina to the US Gulf Coast. Not only was this a human tragedy of enormous proportions, but it also caused severe damage to the oil installations in the region, with an immediate loss of about 95 per cent of its crude production, at around 1.5 million barrels a day. Gas output also fell by almost similar proportions.

This occurred at a time when the international oil market was experiencing high volatility and soaring prices as a result of a series of refinery outages, along with increasing geopolitical tensions. The situation was further aggravated by the continued high level of speculation in futures markets.

OPEC’s Member Countries have joined other nations in responding to this tragedy, offering generous levels of aid to help relieve the human suffering, as well as pledging provisions of oil and fuel supplies to help deal with the immediate severe problems created by the hurricane.

Despite the impact of the hurricane on the producing and refining facilities in the US Gulf Coast region, an initial assessment indicates that the availability of healthy stocks and the release of government stocks from major consuming countries, as well as OPEC’s assurances of continued supply, helped in preventing this supply interruption from developing into a major energy crisis.

We understand that, already, more than half a million barrels a day of the region’s crude output are restored and that the situation will continue to improve. However, significant damage to the region’s refinery centres may last longer than expected, adding to the already considerable strain on the global refinery system.

OPEC’s response to the hurricane’s impact on the oil market has been consistent with its actions of the past year in dealing with the price increases and volatility. Throughout, OPEC has acted on two broad fronts. First, it has raised its production ceiling several times, by a total of 4.5 million barrels a day. This has, in turn, led to a steady rise in OECD commercial oil stocks, to a level exceeding their five-year average, both in absolute terms and in days of forward cover. And secondly, OPEC’s Member Countries have sought to accelerate their plans to bring new production capacity on-stream. This year, surplus capacity will rise to more than ten per cent above the call on its oil. This additional capacity will be more than adequate to cover oil demand growth throughout this winter and in 2006, providing a comfortable cushion to deal with temporary supply interruptions.

Furthermore, most of the new capacity from both OPEC and non-OPEC will consist of lighter crudes, which are in much demand in the market. Also, since there are signs of slowing oil demand growth, one would expect some price moderation in the future.

In the light of all this, at today’s Meeting, we shall be examining the market outlook very carefully, to determine what additional measures may be taken by the Organization to help stabilise the market and moderate prices at reasonable and sustainable levels. We have long recognised the importance of a stable, orderly oil market to world economic growth and the advancement of global prosperity. The achievement of stability has always been a priority for our Organization and, as such, OPEC remains committed to supply the market with its needs at any time.

It is important that our market-stabilisation efforts receive the full support of non-OPEC producers, in order to be as effective as possible. We therefore welcome to this Conference high-level officials from seven non-OPEC oil-producing countries — Angola, Egypt, Mexico, Oman, Russia, Sudan and Syria. Their presence underlines the importance their Governments attach to constructive dialogue and cooperation with OPEC and its Member Countries.

While the situation for the upstream sector is under control, there is a very different picture downstream, as has been exposed by Hurricane Katrina. We, therefore, repeat our calls for the industry at large to pay close attention to the constraints in the downstream segment of the business, in the interests of overall market stability. In particular, concrete measures should be taken to encourage rapid and sizeable investments in the refining sector, especially in conversion capacity, which has persistently lagged behind market requirements and caused oil price volatility. This is a challenge that should be addressed urgently, and the consuming countries and international oil companies have the primary role and responsibility to play in this.

Indeed, speaking at a more general level, responsible members of the oil industry should continue working together to help stabilise the market, to the benefit of the world community at large, both rich and poor nations. We should do this in a way that is in harmony with the requirements of sustainable development, a cleaner and safer environment in which to live, and the eradication of energy poverty. OPEC will continue to play its part to the full in this.

Excellencies, ladies and gentlemen,

Let me now conclude this opening address on a happy note!

Today’s Meeting of the Conference is a special one, because it is taking place at a time when we are celebrating the 40th anniversary of the relocation of the OPEC Secretariat in Vienna. During this period, OPEC has enjoyed excellent relations with the Federal Republic and with the City of Vienna, as well as with the people of Austria, and we look forward to maintaining this friendly and, at the same time, productive relationship for many years to come. To mark the occasion, the City of Vienna, with support from OPEC and its Member Countries, is organising a special exhibition, entitled “OPEC: 40 years in Vienna”, at the Vienna City Hall (the “Rathaus”).

Thank you.