Opening address to the 140th Meeting of the OPEC Conference

No 5/2006
Vienna, Austria
08 Mar 2006

by HE Dr Edmund Maduabebe Daukoru, President of the Conference and Minister of State for Petroleum Resources of Nigeria

Excellencies, ladies and gentlemen,

Welcome to the OPEC Secretariat in Vienna for the 140th Meeting of the OPEC Conference. As you can see, it has been a cold winter in the Austrian capital for the past two months. Some would describe this as a good thing for oil producers, since daytime temperatures, most of the time, have been around freezing. Elsewhere in Europe and Asia, there have also been long periods of cold weather. On the other hand, others may point to the unseasonably warm weather for most of the USA, except for a brief period of record snowfalls in New York.

Whichever way we characterise this winter, the truth is that the oil market has remained well-supplied with crude. This has come about very much as a result of OPEC’s consistent, proactive and timely actions in the market in the challenging conditions of the past two years, when we have contributed to raising supply, as well as accelerated our plans to increase production capacity, so as to meet the continuing growth in demand during this decade and beyond.

The OPEC Basket price has fallen by more than US $6 a barrel since our last Extraordinary Meeting five weeks ago, due to our carefully considered decision to maintain the existing OPEC-10 production level. This led to high stockbuilds in the USA and Europe. However, in contrast to the downward pressure from the high OECD stockbuilds and wide sweet and sour differentials, the market rebounded with renewed upward price pressure from unexpected outages and geopolitical developments. The high level of activity of speculative instruments, operating outside existing regulatory mechanisms, continues to amplify market movements.

With regard to my own country, Nigeria, recent developments have seen a production shortfall of over 500,000 barrels a day, and we are doing everything we can to restore this supply to the market as soon as possible.

At today’s meeting, we shall examine carefully the market outlook for 2006 and especially the end of the second quarter, going forward into the third, when world oil demand traditionally dips. This comes at a time when the market is already well-stocked with crude. Also, non-OPEC production is expected to rise notably, after experiencing limited growth in 2005.

At present, the outlook for the world economy remains healthy. It is expected to grow by 4.3 per cent in 2006, maintaining the upward trend of the past two years and showing continued resilience to the high energy costs. However, there is an increasing number of economic and financial uncertainties which cloud the outlook. Among these are tighter monetary policies which may slow growth in the developed economies, while higher fuel taxes and lower subsidies may restrict consumption in the developing economies. In addition, rising international financial imbalances have the potential to hamper economic growth.

Therefore, in our deliberations today, we must accommodate all these factors and seek to ascertain whether our previous Conference decision to maintain the earlier production level needs adjusting, so as to help stabilise the market in the second and third quarters at prices that are reasonable for both producers and consumers, and consistent with the robust forecast economic growth, particularly in the developing countries.

As always, OPEC — together with other producers, including the non-OPEC countries represented here — has made, and will continue to make, the necessary commitments to ensure adequate supplies to the market to help sustain the continued good health of the global economy. However, that is only one side of the energy security coin. Consumers, for their part, must be more open about their energy policies and measures, thus providing adequate notice of anticipated demand. To this end, continuing dialogue is essential, for both the planning of future investment and the building of confidence between producers and consumers in global energy matters.

In this context, I have just returned from a three-day trip to Washington DC, where I was privileged to have high-level discussions with senior US Administration officials, Members of Congress and oil executives — including the Secretary of Energy, Samuel Bodman. The talks were enlightening and constructive and a welcome addition to the big strides we are taking in energy dialogue with the European Union, China and Russia. I shall be reporting back to the Conference on the outcome of my visit, which proved very timely indeed. I shall also brief the Conference on my meeting with Dr Martin Bartenstein, the President of the EU Energy Council, on 1 February, the day after our last Conference. Dr Bartenstein is, of course, also the Federal Minister of Economics and Labour of our host country, Austria, which assumed the Presidency of the European body on 1 January.

Once again, we are pleased to welcome as observers high-level representatives from some leading non-OPEC oil-producing nations — Angola, Egypt, Mexico and Oman. Moreover, it is with much pleasure that we welcome to our Conference, for the first time as an observer, the Director-General of the OPEC Fund for International Development, His Excellency Suleiman J. Al-Herbish. We cannot stress too much the importance of a collective commitment to market stability from all the major players in the market, producing as well as consuming countries. This is essential, since the present emerging energy crisis cannot be the concern of OPEC alone. It has to be the collective responsibility of all producers, consumers, oil companies and multilateral institutions, such as the International Energy Agency and the International Energy Forum, as well as the major economic blocs generally, among others.

Excellencies, ladies and gentlemen,

I am pleased to inform you that this Meeting of the Conference coincides with the launch of our booklet entitled “OPEC Long-Term Strategy”. This contains an overview of the key issues addressed in OPEC’s comprehensive long-term strategy, which was adopted by the Conference at the 137th Meeting in September 2005. As you will recall, the strategy provides a coherent and consistent vision and framework for OPEC’s future, defining specific objectives and identifying key challenges the Organization faces both now and in the future.

Finally, let me extend a special welcome to two Heads of Member Country Delegations at this Conference. Heading the Delegation of Kuwait is His Excellency Sheikh Ahmad Fahad Al-Ahmad Al-Sabah, who was recently reappointed as his country’s Minister of Energy. And Heading the Delegation of the Socialist People’s Libyan Arab Jamahiriya is His Excellency Abdalla Salem El Badri, who many of you will recall was Head of his country’s Delegation between 1990 and 2000. Both have also served with distinction as President of the OPEC Conference.

Thank you for your kind attention.