Long-Term Strategy: A timely document

OPEC Bulletin Commentary October 2005.

When the founding Members of the Organization of the Petroleum Exporting Countries met in Baghdad to formally establish OPEC in September 1960, the international politico-economic system was significantly different from what it is today. It was a bi-polar world, where the cold war between the East and the West, to a large extent, dictated the course of international politics and economics. The international oil industry, back then, was dominated by a few powerful firms from the developed countries of Europe and the USA. The oil producing developing countries themselves had little control over the industry. Although they owned the resources, they had little say in how much of it was produced, and at what price it was sold.

It was against this background that OPEC was founded, with the following modest objectives: the co-ordination and unification of the petroleum policies of its Member Countries and the determination of the best means for safeguarding their interest, individually and collectively; devising ways and means of ensuring the stabilization of prices in international oil markets with a view to eliminating harmful and unnecessary fluctuations; and giving due regard at all times to the interests of the producing nations and to the necessity of securing a steady income to the producing countries, an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on their capital to those investing in the petroleum industry.

For 45 years OPEC has remained faithful to these founding objectives and has pursued them with all diligence. But the international politico-economic system has not remained the same. Neither has the oil industry. Major changes have taken place on the world political scene as well as in the oil industry. New and powerful non-state international actors have emerged on the world scene, bringing to the fore of international political discourse issues that some 45 years ago, were non-existent. Similarly, the balance of economic power has not remained the same since 1960. The world is no more bi-polar. The developing economies of Asia, particularly China, Japan and India, are poised to undergo the same phenomenal growth that today’s developed economies underwent especially in the last century, assisted by abundant supplies of oil. At the industry level, many national oil companies that did not exist in 1960, have today become huge success stories with international operations in both the upstream and downstream sectors of the industry.

These changes have brought with them new challenges, and new opportunities. It is to clearly identify these new challenges with a view to addressing them, as well as to explore the new opportunities with a view to effectively exploiting them, that the OPEC Ministerial Conference assigned the deputy ministers of petroleum/energy of its Member Countries to produce a comprehensive Long-Term Strategy for the Organization in early 2003.

The adoption of the LTS by the 137th Meeting of the Conference could not have come at a more opportune time. While remaining faithful to the statutory objectives of the Organization, the LTS reflects on the changes that have taken place in the international oil industry, and the challenges they pose now and in the future, as well as the opportunities they provide to the oil industry, the global economy and OPEC Member Countries.

The comprehensive document outlines steps Member Countries should actively pursue with a view to achieving agreed objectives. The Strategy defines specific objectives, identifies 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. The adoption of this document at this critical time is testimony of OPEC’s determination to play its part in addressing the challenges of the oil industry in the 21st century. The challenge before OPEC now is to ensure that the recommendations in the document that has been unanimously adopted are implemented faithfully.

This Commentary is taken from the October 2005 edition of the OPEC Bulletin, which can be downloaded free of charge in PDF format from the OPEC website.

OPEC Bulletin (October 2005)

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