Opening address to the 120th (Extraordinary) Meeting of the OPEC Conference

No 6/2002
Vienna, Austria
26 Jun 2002

by HE Dr Rilwanu Lukman, President of the Conference and Presidential Adviser on Petroleum and Energy, Nigeria

Excellencies, ladies and gentlemen,

It is a great honour to be able to welcome you, once again, to the OPEC Secretariat in Vienna, for the 120th (Extraordinary) Meeting of the OPEC Conference. As you will recall, the specific purpose of this Meeting — as agreed at our Ordinary Conference on 15 March — is to review the current situation in the international oil market, in the light of OPEC’s present agreement to keep a ceiling on output levels, in support of the price structure.

First, however, I should like to turn our attention to the plight of one of our Member Countries, the Islamic Republic of Iran, following the severe earthquake which caused extensive devastation and loss of life in the north of the country on Saturday. We offer our deepest condolences to all those who have suffered in this tragic event, and we fervently hope that the recovery process can proceed as smoothly and as effectively as is possible on such a sad and deeply moving occasion.

Turning to a happier event, I should like to extend our congratulations to His Excellency Dr Chakib Khelil, who was President of the OPEC Conference in 2001, on his reappointment as Minister of Energy and Mines of Algeria, following the country’s recent general election.

We now come to a development that we had not expected when we met in March. This is the announcement by His Excellency Dr Alí Rodríguez Araque of his appointment to the position of Head of Venezuela’s national oil company, Petroleos de Venezuela, in April. Dr Rodríguez has been Secretary General for only a year and a half. However, during that time, his tireless devotion to duty, his steadfast adherence to a set of well-defined principles, and his warm and approachable manner have won him wide respect and friendship, both within the Secretariat and within the industry at large. I should, therefore, like to express the gratitude of all of us to Dr Rodríguez and to wish him every success and happiness in the future, as he settles into his new, challenging post with PDVSA. We also wish his country well, after the recent troubles, and look forward to Venezuela’s full return to peace and prosperity in the near future. In the context of our Meeting today, therefore, one of our tasks will be the selection of a new Secretary General.

Let us now turn our attention to the international oil market. Prices in the second quarter of 2002 have been much healthier than in the two previous quarters, with the average monthly price of OPEC’s Reference Basket of seven crudes lying in the range of US $23–25 per barrel in April–June. This follows the heavy drop in prices that occurred after September 11, with the Basket price averaging less than $20/b in the six-month period, October 2001 to March 2002. That was directly after the Basket had averaged almost $25/b in each of the first three quarters of 2001. Twenty-five dollars a barrel, of course, is right in the middle of OPEC’s price band of $22–28/b.

In other words, prices are now not too far short of their pre-September 11 levels. Much of the credit for this improvement must go to our Organization, whose actions have helped prices return to levels which, in recent years, have won much acceptance among producers and consumers alike. Here I refer to the decision reached by our Organization late last year, to reduce OPEC output by an additional 1.5 million barrels a day, with effect from 1 January 2002 and for a period of six months. Taken together with earlier OPEC agreements, that decision meant an overall agreed reduction of 5 mb/d in a period of just 11 months, beginning on 1 February 2001. The purpose of those measures was to prevent a damaging downward spiral in the oil price. We renewed our commitment to our decision at our March Meeting.

Let us not forget, at this point, that OPEC is prepared to act in both directions, in order to stabilise the oil market. In the year 2000, for example, when there was excessive upward pressure on the price, OPEC increased output on four occasions, by a total of 3.7 mb/d, to bring prices down to reasonable levels.

However, to be truly effective, our decisions require the support of leading non-OPEC oil producers. When such support was guaranteed for our current decision, through pledges — which were announced prior to our Consultative Meeting in Cairo in December 2001 — for an overall production/export cut of 462,500 b/d by non-OPEC producers, it had an immediate effect on prices; it prevented further falls and provided a base from which prices could strengthen as the economic outlook improved. These non-OPEC producers, like our own Member Countries, renewed their commitment to this action after OPEC’s March Conference.

OPEC/non-OPEC cooperation goes from strength to strength. Only last week, here in the Secretariat, we held a highly productive one-day meeting of senior experts from OPEC and non-OPEC producing countries, to exchange views on recent developments and the short-term outlook for the oil market, so as to reach a better understanding of the current situation. Ten non-OPEC producing countries participated. These included the five countries that contributed to the output cuts in January — Angola, Mexico, Norway, Oman and the Russian Federation — as well as Egypt, Kazakhstan, Malaysia, Syria and Yemen. These countries, like our own Member Countries, are committed to order and stability in the market, and they know that this is best achieved through a successful, sustained process of dialogue and cooperation.

The above-mentioned meeting was the second informal consultation at the senior expert level. The first was held last October. Such meetings are being organised in conformity with our strategic objective of strengthening dialogue, understanding and cooperation among all major producers/exporters, at all levels and through different modalities. We may take time during our Meeting to discuss ways and means by which we can strengthen dialogue and consultation with non-OPEC producers at the Ministerial level.

Now, as we approach the third quarter of the year — which will be dominated by the summer driving season in the Northern Hemisphere — there is some uncertainty about the near-term outlook. This is not just in the oil market, however. It is also in the world economy, at large. It concerns the true extent of the global economic recovery, particularly in the leading industrialised nations. What is the real state of health of the economies of the United States of America, Japan and such major European nations as Germany and the United Kingdom?

Also, and connected with this, is the strength of the US dollar. After a period of ascendancy stretching back years, it appears that the dollar is finally weakening, vis-à-vis other leading currencies, notably the euro and the yen. This could have repercussions right across the global economy. For oil producers, it could easily mean a reduction in the real value of the revenue they receive from sales of petroleum on world markets.

All in all, therefore, there is plenty for us to discuss at today’s Extraordinary Meeting. The decision we reach at the end of it will have the purpose of ensuring order and stability in the international oil market during the long summer months, up to — and beyond — our next Ordinary Conference on 18 September.

However, OPEC’s mandate extends beyond the immediate affairs of the oil market. We are also concerned with broader-based issues that govern the welfare of mankind — in particular, the dire economic problems, the poverty and the hunger affecting many countries in the developing world. This has been a longstanding concern of ours. As long ago as 1976, we established the OPEC Fund for International Development, with the purpose of assisting the poorer, low-income countries of the South in pursuit of their social and economic advancement. Since then, the OPEC Fund has committed well over US $6 billion in assistance to other developing countries across the world. Moreover, OPEC aid extends beyond this, into other global institutions, as well as occurring at an individual Member Country level.

I am saying all of this, because, in the period up to our September Conference, the United Nations World Summit for Sustainable Development will take place in Johannesburg, beginning on 26 August. This is expected to be the largest UN conference ever, with 100 heads of state and 60,000 delegates attending. It will rival, in importance, the landmark Earth Summit in Rio de Janeiro, which, in 1992, put environmental issues on the global political agenda. The two events are closely related, with environmental issues being an integral part of sustainable development. But, in addition to this, the Johannesburg Summit’s agenda embraces such fundamental issues as poverty, health and inequalities in the global trading system.

OPEC and our Member Countries are eager to ensure that the World Summit proceeds in a fair and balanced manner, which is beneficial to mankind as a whole — and not just a partial, dominant segment of mankind. We recognise the need to ensure that the developing world participates as fully as possible in these crucial talks. This may be the best opportunity they have, for many years to come, to cater for the future welfare of their populations in a meaningful, effective and sustainable manner.

The World Summit — as well as other important topics and challenges, such as the World Trade Organization, the Kyoto Protocol and consumer/producer dialogue — is on the agenda of the OPEC’s Third Informal Brainstorming Session. This is an internal meeting which will be held at the Secretariat immediately after this Conference. We are confident that this will be a fruitful exercise and that the deliberations will reveal some valuable insights on major issues of concern to our Organization at the present time.

Excellencies, ladies and gentlemen,

Let me now conclude these opening remarks, so that we can proceed with today’s Meeting.

Thank you for your attention.