OPEC : Address by the Secretary General to the OPEC 50th Anniversary Ceremony

Address by the Secretary General to the OPEC 50th Anniversary Ceremony

Delivered by HE Abdalla S. El-Badri, OPEC Secretary General, at the Ceremony organised by the Islamic Republic of Iran's Ministry of Petroleum, Tehran, Iran, 19 April 2011

Excellencies, ladies and gentlemen.

Good morning.

I should like to begin by expressing my appreciation to His Excellency Dr Masoud Mir-Kazemi, the Minister of Petroleum of the Islamic Republic of Iran, for the invitation to attend this Ceremony that marks the happy occasion of OPEC’s 50th Anniversary. His Excellency is also President of the Conference of this esteemed producer-group this year, the Organization of the Petroleum Exporting Countries.

I am deeply honoured to be here in Tehran, the capital city of a Founding Member of the Organization.

Fifty years is a proud milestone for any institution. This is especially the case for OPEC, which has achieved a remarkable amount of success since its creation half a century ago. When OPEC was set up, international companies were the dominant force in the oil market, playing the major roles and deriving the greatest benefit from all segments of the business, from exploration to final distribution. Many predicted that the Organization would not last long.

Fifty years on, however, the initial gathering of five oil-producing developing countries has evolved into a solid group of 12 Members. These come from different parts of the world and have brought more strength, vision and diversity to the Organization. This includes its Members gaining full sovereignty over their exhaustible, non-renewable natural resources.

Of course, in 50 years of existence, the Organization has witnessed its fair share of ups and downs. It has, however, adapted to changes, learned many lessons, advanced dialogue and cooperation, been resilient enough to overcome internal and external challenges, and become increasingly proactive and adaptive in the face of dynamic market conditions.

Excellencies, ladies and gentlemen,

The oil market has been — and will continue to be — an ever-changing arena. This is because oil is so vital to the world economy, it is present in everyone’s daily lives and its market is truly global. After the global financial crisis and economic recession, this past winter has seen a number of significant events that no one could have predicted at the turn of the year. In the Asian region, there has been Japan’s huge earthquake, devastating tsunami and subsequent nuclear crisis. Our sympathies go to all those affected by these catastrophic events. And, in North Africa and the Middle East, unrest has been witnessed in a number of countries. Our thoughts and prayers are with all those civilians who have suffered terribly in their daily lives. Where there is still unrest, it is hoped that peaceful solutions can be found soon.

These events, as well as the continued uncertainties surrounding the global economy, have obviously had an impact on oil and energy markets. However, oil markets — which, as I have said, are global in nature — have adjusted rapidly, in terms of both volume and quality. Consequently, and as OPEC has indicated many times, there is no shortage of oil anywhere in the world. Moreover, stock-levels remain high; OPEC’s spare capacity is around 4.5 million barrels a day, even after the recent disruptions; the refining system has adequate flexibility; and the Organization’s current production is at the level it was in December.

Nonetheless, we have all seen prices rising in the first quarter and speculator activity on the Nymex has surged to record highs. For example, by mid-March, open interest for Nymex WTI exceeded the unprecedented level of 1.5 million futures contracts — this is 18 times higher than the daily traded physical crude. Such an increase has been the result of concern about supply deteriorating further beyond the current situation.

The price rises have been even more pronounced at the consumer end, where the effects of taxation in these countries have been felt greatly. OPEC has played its role by ensuring that the market remains well-supplied with crude. And so it would be helpful at this challenging time if consuming countries, that have high levels of tax on oil products, consider revising down these levels — at least temporarily — to alleviate the impact on end-consumers.

These are exceptional circumstances that need exceptional remedies.

Excellencies, ladies and gentlemen,

These recent market challenges are typical of those faced by OPEC over the past half century. We have a long record of rising to such challenges, as they affect the international oil market, and overcoming them.

In fact, OPEC itself started out as a challenge! In September 1960, our Organization began as a group of five oil-producing developing countries whose domestic oil sectors were dominated by powerful outside interests. We received only minimal financial returns from sales of our crude on world markets.

The founding of OPEC was a commitment based upon the need of these countries to safeguard their legitimate national interests and to ensure order and stability in the international oil market. This included gaining full sovereignty over their exhaustible, non-renewable natural resources.

Today, as a group of 12 independent sovereign states, we are recognised as a mature, responsible member of the international energy community.

We are also recognised for the constructive way we respond to crises in the market, benefiting all parties. Our agreement of December 2008 is a case in point. This was taken at a time when the oil price was plummeting, as financial institutions were collapsing and the world economy was sliding into recession. The agreement, however, helped stabilise the market at a challenging time, for the benefit of all stakeholders.

But we are not just concerned with the oil market. We also address other major challenges affecting mankind. The establishment of the OPEC Fund for International Development in 1976, of course, is a prime example of our Organization addressing the issue of poverty.

More recently, in 2007, the Third Summit of OPEC Heads of State and Government referred to three guiding themes for the ‘economic, energy and environmental endeavours’ of OPEC and its Member Countries: stability of global energy markets; energy for sustainable development; and energy and environment.

We also recognise that the oil industry is now operating in an interdependent world. This is why we go to great lengths to encourage dialogue and cooperation. OPEC’s involvement in the high-level international producer-consumer dialogue is an example of this. So too are the separate energy dialogues we have established with the European Union, Russia, China and institutions such as the International Energy Agency and the International Monetary Fund.

This is all in the interests of stable, secure oil markets and the receipt of steady petroleum revenue. This helps us develop our economies and provide a better life for our people.

Excellencies, ladies and gentlemen,

As a Founder Member of our Organization, Iran has been a key player in OPEC’s achievements throughout its history.

It was directly involved in the formative stages, which date back to as long ago as 1949, when the first approaches were made to set up a producer institution.

And May 1991 saw some important preliminary steps taken at the Isfahan International Conference in the direction of high-level producer-consumer dialogue — this started a process that led to the creation of the International Energy Forum.

Excellencies, ladies and gentlemen,

On such occasions as this 50th Anniversary Ceremony, we recall the vision and the resolve of our five founding fathers to create an oil industry that was fairer, more stable and more truly representative of global interests. They were: Dr Fuad Rouhani, from our host nation today; Dr Tala’at al-Shaibani from Iraq; Ahmed Sayed Omar from Kuwait; Abdullah Al-Tariki from Saudi Arabia; and Dr Juan Pablo Pérez Alfonzo from Venezuela. I believe that, were they alive today, these distinguished gentlemen would have been proud of OPEC’s achievements.

The dedication and commitment of the Governments of our Member Countries have been central to this during the past 50 remarkable years.

At the same time, however, we must not lose sight of the future.

As a group of producers with 80 per cent of the world’s proven crude oil reserves, we are confident of rising to the new challenges — in support of our own domestic development, as well as sound world economic growth. And the Islamic Republic of Iran, without any doubt, will continue to play a key role in this.

Thank you.