OPEC : Opening address to the 143rd (Extraordinary) Meeting of the OPEC Conference

Opening address to the 143rd (Extraordinary) Meeting of the OPEC Conference

No 19/2006
Abuja, Nigeria
14 Dec 2006

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

Your Excellency, Mr. President of the Federal Republic of Nigeria
Excellencies, Ladies and Gentlemen,

Nigeria is most honoured to welcome you all to the official opening of the 143rd Meeting of the OPEC Conference, held for the second time in Nigeria. As some of you may recall, Nigeria’s first opportunity to host this prestigious event was in 1972, which occurred in a period when the global energy situation was yet to be a matter of strategic economic concern. OPEC, then in its early and formative stages, needed to consolidate its position of relevance on the global energy scene. OPEC grew since then to a position of dominant market share, before the advent of non-OPEC production, primarily in the North Sea and the Caspian, reduced that dominance to swing status. OPEC now literally finds itself again at a crossroads with global supply and demand at a precarious balance and OPEC poised to increase its share of the market as non-OPEC production declines. Once more, OPEC has to redefine its position as the key vehicle of stabilization of global oil markets for the benefit of both the producing and the consuming countries. It has to find additional reserves and expand capacity to meet the rising demand for energy. It, therefore, gives me great pleasure to welcome you once again to Nigeria, a leading source of the light/sweet grades of the OPEC basket.

Abuja is Nigeria’s new and modern capital city, and it offers, especially for those visiting Africa for the first time, a refreshing new dimension of Africa’s development. A tour of the city and its surrounding communities reveals a natural beauty that, for centuries past, stirred the vivid creations of arts and crafts recognized and appreciated the world over. Besides this endowment, this region also boasts a home-grown agricultural technology that has anchored the existence and proliferation of these communities for centuries. It is no accident, ladies and gentlemen, that the same President, instrumental in the founding of Abuja as the capital city of the Federal Republic of Nigeria in 1976, is again playing the role of Chief Host to OPEC for the first time in this capital city’s history. Mr. President, Chief Olusegun Obasanjo, has worked tirelessly for the development of this city to become everything African and a symbol of the diversity for which Nigeria is known and of which we have all become proud. It is, therefore, my singular honour, on behalf of OPEC, to thank Mr. President for placing at our disposal all the facilities required for a successful meeting and all the social activities that are being lavishly offered.

We recall that OPEC was founded in Baghdad, in September 1960, in recognition of the commanding role of oil in the global energy mix and, thus, the indispensable necessity for producing countries to exercise sovereign control over it. It was also necessary then, as it still is now, to provide stability for world oil markets with fair prices for producers and guaranteed security of supply to consumers. The founding of OPEC has since then remained the principal instrument for security of global oil supplies and the main vehicle for the socio-economic development of the producer countries. Since inception, OPEC Member Countries have met regularly to harmonize views on market trends, related global economic developments, and the actions required to adequately respond to them over all time-horizons.

Given the current uncertainties, surrounding key drivers of future demand for OPEC oil, i.e. consumer countries’ policies, specially with respect to nuclear and other alternatives to oil and gas, future global economic growth and technology development, as well as future non-OPEC production levels, OPEC must continue to champion the call for security of demand as it develops its strategies for future supply adequacy.

Within OPEC itself, it is obvious that the potential for future growth of production capacity as much as of reserves varies between quite wide extremes. OPEC will, increasingly, be expected to evolve internal mechanisms by which its substantial expected future growth in market share can be met by contributions from individual Member Countries in a manner that balances these extremes, without placing undue constraint on investments in future capacity. This is quite a challenge, but one that I am sure OPEC will be able to meet in our traditional spirit of compromise and flexibility.

Looking to the present, it is important to remind ourselves of the price recovery from the upper fifties to the lower sixties (in terms of dollars per barrel), which was achieved through the Doha production cut.

The recovery, however, is still hesitant, against continuing over-supply, high inventories, a mild winter and diminishing geopolitical premium. As Nigeria has complied fully with Doha, so are we ready to support any realistic consensus on the fundamentals and prevailing market sentiment, noting in particular the increasing resilience of global GDP growth to fair energy pricing.

Permit me, at this juncture, to turn our attention briefly to gas. As is now common knowledge among industry players, gas is gaining significant share in the global energy mix and the World Bank estimates that the global demand for gas will outstrip oil as early as 2025. This projected dominance of gas is being driven by an assortment of factors that include accelerated world economic activity growth, changing energy markets, and advances in technology (e.g. gas-to-liquids and compressed natural gas — all of which have combined to transform gas into a cost-competitive and flexible global energy option at a pace few thought possible until recent years. In addition, gas offers significant environmental advantages over oil and coal and, as such, has become the preferred fuel in the power sector.

At the same time, indigenous gas production in Europe and America is on the decline, with nearly half of total supplies to the US and Europe projected to be imported by 2015. Luckily, some 50 per cent of world gas reserves are also domiciled in OPEC Countries, with these countries controlling nearly 20 per cent of traded gas. We must, therefore, draw encouragement from the fact that OPEC is poised to leverage this tremendous opportunity presented by gas to establish a leading market position, just as it did with oil in the 1960s. I am pleased to reaffirm the support that Nigeria has shown for the Gas Exporting Countries Forum (GECF). As with most new initiatives, there is always the tendency to attempt too much too soon. Nevertheless, I think a case can be made to develop the GECF to be effective enough to cope with the changes taking place in gas markets, where, in the meantime, commitments once entered into are binding for years to come.

I am pleased to note the growing profile of OPEC National Oil Companies (NOCs) in the global energy equation. With Member Countries controlling about 80 per cent of world oil reserves, OPEC can be proud of this growing profile achieved against some substantial odds. The familiar history of Anglo-Persian (BP), Total, Elf and ENI brings to the fore the state’s role in guaranteeing oil supplies even in present day EU countries. History has repeatedly shown that strong NOCs are essential for the creation of national wealth, ensuring equitable sharing of revenues and delivering economic and political development to producer nations. We welcome the tremendous strides made by most OPEC Countries, led by Saudi Arabia, Venezuela, Algeria, Kuwait, etc., to position their respective NOCs in controlling positions in their domestic energy scene about 30 years ago.

Please permit me, at this point, to pay special tribute to Mr. President for his legacy and remarkable vision in structuring and positioning the Nigerian National Petroleum Corporation (NNPC) the way we find it today.

Equally significant is the level of both local and international investments that has been achieved by our respective NOCs, in the upstream and, more recently, in the downstream refining and petrochemical sectors, both domestic and international. OPEC, right from its origin and throughout the critical years of 1988 to 2000, created and maintained strong state companies, competent to balance the interests of the state and state revenues against domination by international interests without disruption of their obligation to consumers. The stronger our NOCs are able to hold their own, the better the interests of our respective countries are served, including domiciliation of know-how, technology and enhancement of local content.

On the whole, we must collectively work for stable market conditions that guarantee a fair price to producers without endangering world economic growth. We must sustain our efforts to engage the major consuming countries and producing blocs in this dialogue, first to achieve a better demand forecast and, secondly, to secure additional production capacity. While efforts are ongoing to encourage much-needed energy efficiency in the major consuming countries, we also need to be mindful of the yearning of our peoples, a substantial portion of whom still do not have access to modern sources of energy. An energy system embodying such inequities is neither sustainable nor, in the end, compatible with the global community’s commitment to poverty eradication. I am pleased with the strides we are making with consensus of all members in this regard, particularly with the European Union (EU), China and Russia, as well as the United States. We may note here that HE Abdullah bin Hamad Al Attiyah, Second Deputy Prime Minister and Head of the Delegation of Qatar, is the current President of the 15th Session of the United Nations Conference on Sustainable Development (UNCSD), a role in which he is eminently placed to champion the cause of least developed countries (LDCs) that are hardly able to cope with the rising cost of energy. It is my hope that OPEC will continue this dialogue to further bridge the substantial gap in perception between producers and consumers in all its ramifications.

Delivering sustainability in oil and gas supply has become a clear priority for the global energy sector, and Nigeria, under the able leadership of President Olusegun Obasanjo, has taken far-reaching measures to ensure that our nation contributes its quota as a major oil and gas supplier within the OPEC family. At the commencement of his Administration, Mr. President set a clear agenda to transform the oil and gas sector to take full advantage of our nation’s endowment of abundant oil and gas reserves, our so-far dominant position in the Gulf of Guinea and strategic geographical location with respect to the markets of the US and the EU. Some of the key dividends of Mr. President’s transformation programme include:

1. Nigeria has added extra production capacity totalling some 600,000 barrels per day over the last four years to bring total installed production capacity to 3.1 million barrels per day, on track to achieving four million barrels per day by 2010.
2. Ongoing transformation at the NNPC and the regulatory Agency (DPR) is repositioning the sector for more effective monitoring, as well as huge investments in the oil and gas and non-oil and gas infrastructure, such railways and power.
3. Aggressive LNG development to raise aggregate national output from 22 million tonnes per annum to 44 mtpa by 2010.

Furthermore, an initiative for sub-regional gas distribution network has been put in place by way of the West African Gas Pipeline system, which will convey Nigeria’s gas to neighbours in the Economic Community of West Africa (ECOWAS) states, beginning in the first quarter of 2007. In addition, Nigeria and Algeria have completed feasibility studies on a new 4000 km gas pipeline project that will transmit Nigerian gas through Niger and Algeria to the markets of Southern Europe by 2015. This project will provide a unique avenue for Africa’s regional integration and is another expression of the shared vision of the Presidents of two OPEC Member Countries, namely HE Olusegun Obasanjo and HE Abdulaziz Bouteflika.

As hosts of this prestigious event, we are proud to showcase all of these and more, and reaffirm our belief in an OPEC leveraged to promote the common interests of producers and consumers on the basis of dialogue and equality. Nigeria remains ready to shoulder responsibilities to this end and to contribute its quota in meeting the objectives and aspirations of OPEC.

On behalf of my colleagues, may I finally thank you, Mr. President, for accepting to host this Extraordinary Meeting, the time you have spared to socialize with us, the guiding wisdom you have imparted and the excellent facilities you have placed at our disposal. On a personal note, it is fair to say that, but for the immense support I have enjoyed from you, the consensus decisions to which Nigeria has subscribed would have taken longer to achieve.

Thank you, Mr. President,
Thank you, Excellencies, Ladies and Gentlemen.