Speech by Dr Maizar Rahman, Acting for OPEC's Secretary General, to the Ministry of Energy of the Philippines and industry representatives
Manila, 2 December 2004
H.E Vincent S. Perez, Excellencies, distinguished guests, ladies and gentlemen,
It is a great honour to be invited to deliver this address to the Makati Business Forum, on OPEC, its policies and their impact in Asia.
Indeed, it is always a pleasure to address audiences close to home, and one cannot be much closer to home than being with one’s neighbours! As tropical countries consisting of large numbers of islands in what has been a high-growth region of the world in recent decades, with the notable exception of the 1997/98 Asian financial crash, Indonesia and the Philippines share many things in common. However, there is a marked difference with regard to their energy profiles. While Indonesia has, for a long time, been a net exporter of crude oil — up to very recently, at least — and is also the world’s largest exporter of liquefied natural gas, the Philippines has been a net energy importer.
It is with genuine concern that I address you at what is undoubtedly a difficult time for the government and people of the Philippines, as a result of the persistent high international oil prices, the effects of which are now being felt in some quarters. The recent transport protests against the hike in domestic fuel product prices are at one regrettable, yet some would say understandable. When the ordinary man in the street begins to suffer hardship, as a result of factors completely beyond his control, this kind of response can happen. The Philippines only accounts for 0.3 percent of global oil demand, but with the country just producing some 25,000 b/d of its own crude, and having to import most of its oil - running at around 300,000 b/d – I am afraid it is precariously exposed to the full adverse impact of any substantial rise in the price of international crude. I speak on behalf of all OPEC Member Countries when I say that we have every sympathy for you in your dilemma, especially since no one can be apportioned blame for such a situation occurring. The reality is that a combination of factors is responsible for the sustained increase in crude prices, and even though in successive OPEC Meetings our Ministers have tried, and had some moderate success, in cooling the overheated market, prices have remained somewhat higher than in recent years – in particular for light sweet crudes. In this type of scenario, there will, unfortunately, always be some hardship. That has been reflected in the economic projections for the Philippines, where inflation has climbed from 4.2 percent in May, to 5.4 percent in June, and 7.7 percent in October, more than double the 2003 level of 3.5 percent.
But I have to emphasise that the kind of development we are seeing in the Philippines today again demonstrates the need for us to ensure that the global oil market is not only stable, but operates with prices that are fair to both producers and consumers, and especially those countries who rely heavily on our imports. We have been professing this for many years and a few years ago we identified that “fair” price level to be in the range of 22-28 dollars a barrel. Before this latest price surge, we had been very successful in keeping the price within that target. Turning to our only Member Country in this region, Indonesia’s presence in the international oil market has been enhanced by its membership of the Organization of the Petroleum Exporting Countries (OPEC), which it joined in 1962, two years after the group’s establishment. Throughout this time, as a keen and active Member, we have lived through many ups and downs in the international oil market, collectively asserting the sovereign rights of producing nations to determine the destiny of their indigenous hydrocarbons resources, as recognised by the United Nations charter. As the only OPEC Member from this part of the world, we consider ourselves to be in a special position to articulate the attitudes and concerns of this region in OPEC circles, and vice-versa.
With Asia containing over 50 per cent of the global population – my own country is the world’s fourth most populous nation - the region has shown itself to be a key player in global markets for commodities, manufacturing and services. There is no doubt that the accelerating integration into an efficient global economic system offers an abundance of opportunities for national economies of the region. It is also to be assumed that conditions and institutional mechanisms for trade, foreign investment and other forms of international co-operation will be more transparent, secure and prudent than before the economic crisis. Foreign direct investment flows into the region will be greatly enhanced in the years to come. Stabilized world markets for commodities, especially petroleum, will thereby be of major importance to Asia, as well as other global regions. That is where OPEC and oil producers outside the organization are trying to make their mark and, again, cooperation will further those efforts. In this changing system of greater interdependence of economies, policies and actions, the roles of both OPEC and non-OPEC oil-producing countries are converging. The two sides have been working together on successive oil agreements, and several of our non-OPEC colleagues have become familiar faces at our Ministerial Conferences, where their input is seen as invaluable. But it is through these new forms of cooperation that the countries can observe, monitor and consult on development patterns in the energy sector, the driving forces, and implications for the global economy.
The economic development of Asia is crucial to the long-term growth of the international oil market. That becomes clear when you realize that the region forms part of the giant 21-member Asia Pacific Economic Cooperation (APEC) group, which represents some 60 per cent of world economic output, and 45 per cent of global trade. In recent years, the importance of the Asia Pacific region as an outlet for our oil has risen enormously. OPEC crude exports to this market more than doubled to 7.59 mb/d between 1987 and 1998 - before falling back during the regional meltdown of that year. I don’t need to remind you of the effects of that crisis, which was triggered largely by the turbulence and vulnerability of financial markets. It sent alarming shock waves throughout the region, which reverberated throughout the entire world financial and economic system. Consequently, the crash had disastrous knock-on effects for all quarters of the economy, including energy, with the subsequent decline in oil demand, and the slump in global crude prices to near single digit levels. No area of the international oil industry escaped the potentially devastating effects of this collapse. In 1998 alone, OPEC producers lost around 56 billion dollars in petroleum export revenues, threatening essential development programmes. However, OPEC moved quickly to address the situation and implemented cuts in production in successive amounts, until prices were restored to reasonable levels. In fact, I am happy to say that the Organization emerged from this crisis stronger and more consolidated than it had ever been. Of course, for the region, the crisis brought to a sudden halt the runaway economic growth which had been the hallmark of the so-called Asian Tigers for several years. This rapid growth had represented a considerable step forward for the region in production, investment, international trade, and income. But the crisis revealed that growth, however impressive and sustained, can also have its vulnerable and weak links. Demand for Asian oil has now risen again, due to the recovery seen in the region, post 1998. As our latest figures clearly demonstrate, Asia remains a crucial market for OPEC. Economists are actually amazed at the speed of the region’s resurgence, but the overall signal is that consumer confidence is returning. With the Asian recovery in place, it is worth noting that the longer-term prospects for Asian energy demand look good, considering that the region’s per capita energy consumption is well below that of the industrialized countries. The potential for a rapid increase in energy demand, therefore, remains high.
As I have said, within the world’s developing countries, we continue to identify Asian states as the key source of the demand increase in the future. Between 2002 and 2025 they are expected to account for a rise of 18 mb/d in demand, which represents 65 percent of the total in all developing countries. In fact, this increase in Asia is almost half the global expansion expected over this period. China and India are central to this growth, with the boom in the transportation sector a particularly important factor. The huge potential for growth is clear from the low density of vehicles in these two countries, which stands at just over 10 vehicles per 1,000 inhabitants. However, despite this obvious huge potential, there are many factors that may constrain the rise in oil demand in the future, especially regarding the necessary infrastructure, as well as the possible development of policies aimed at limiting growth. We must therefore be fully cognisant of the fact that large uncertainty will always exist when it comes to sustaining expected economic growth levels, as we, and the Asian region, learned to our cost in the past.
Looking in particular at your region - South-East Asia - it averaged impressive economic growth of more than six percent a year over the 10 years before1998, and is again expected to fare well again in the future. Today, together with Latin America, income per capita in South-East Asia is the highest of any of the developing country groups. However, our projections do show that there appears less scope for regional productivity expansion in the longer term, and GDP growth is forecast to increase by just over four percent annually in the medium term, but falling close to three percent in the long run.
As with the entire continent, South-East Asia is a very important market for our Member Countries, accounting for about 46 percent of OPEC’s total output. Major OPEC suppliers to this region are led by Saudi Arabia, followed by the UAE, Iran and Kuwait. The region is especially expected to grow in importance during the first quarter of this century. According to our projections, it will experience annual average oil demand growth of 3.1 percent for the period 2002–25, making it the third-biggest growth region in the world, after South Asia at 5.5 percent, and China at 4.4 percent. As you can imagine, OPEC takes this part of the world very seriously indeed.
The future extent of OPEC’s role in Asia will depend a great deal on ensuring oil price stability and supporting continued growth and equilibrium in the region. As a result of the Asian crisis, OPEC’s commitment has become more focused, with the awareness that Asia’s regional economies remain integral to world markets, and will continue to absorb a large proportion of incremental energy demand in the years ahead.
With all facets of the oil industry working together, I am convinced that we can achieve oil market stability, the effects of which remain crucial for the wellbeing of the global economy, and indeed growth and investment in Asia. Turning to the general oil market situation, my remarks today will be of particular significance, because of the volatile state of the international oil market over the past year and the possible impact of high oil prices on the vulnerable economies of many developing countries, especially if this situation lasts a long time. OPEC is very concerned about this matter and, as I shall elaborate upon later, is doing everything it can to restore order and stability to the market. Indeed, as I speak to you today, prices have fallen considerably from the very high levels of just a few weeks ago, thanks to OPEC’s policy of producing close to its maximum capacity. Hopefully, prices will soon return to levels that are acceptable to producers and consumers alike.
I shall begin this address by examining the fundamentals of the world oil sector, so as to establish that there will be plenty of oil for decades to come. As we shall see, most of the world’s proven oil reserves are located in OPEC’s Member Countries. Therefore, I shall provide some background about our Organization, to seek to assure you of our commitment to the future sound, orderly evolution of the oil market, for the benefit of producers and consumers alike. And I shall devote the final part of the address to the present volatile state of the market. Oil has been the world’s major commercial energy source for many decades and the consensus view is that it will maintain this leading role well into the 21st century.
[Slide 2] The pre-eminence of oil has run in parallel with the massive economic advances made in the 20th century and on into the 21st century. It is estimated that industrial production grew by around 50 times during the last century and that four-fifths of this growth happened in the second half of the century, starting with the reconstruction period after the Second World War.
[Slide 3] This resulted in an enormous increase in energy consumption.
[Slide 4] Most of the consumption has been concentrated in the OECD countries, although this is beginning to change now, with higher growth rates in the developing countries, including China.
[Slide 5] Oil dominated the world energy mix after the Second World War, with the OECD accounting for 60–70 percent of world oil consumption. Total and per capita consumption were much lower in the developing countries throughout this period, although this trend is now beginning to change. In both regions, there has been a steady increase in the use of gas.
[Slide 6] Currently, oil accounts for around 40 percent of the world energy mix. This is because it is a unique commodity, with a combination of attributes which far exceeds that of any other energy source — sufficiency, accessibility, versatility, ease of transport and, in many areas, low costs. These have been complemented by a multitude of practical benefits that can be gained in an established infrastructure from decades of intensive exploitation and use in the industrial, commercial and domestic fields. Advances in technology make oil a cleaner, safer and more efficient fuel, so that it can meet increasingly tighter environmental regulations, as well as conforming to the broader demands of sustainable development.
[Slide 7] There should be plenty of oil around for decades to come. The world’s oil resource base is not a constraint, with regard to meeting future demand. If we look at cumulative production, as a percentage of the estimated resource base, over the past four decades, we see that this has been relatively stable, and this is likely to remain the case for the foreseeable future. Over and above the world’s proven crude oil reserves, there is still plenty of oil that has yet to be discovered, in regions whose geological structures suggest a high probability of commercially viable reserves.
The world’s proven reserves alone — of around 1,100 billion barrels — will be enough to meet demand for around 45 years, at current production rates, in simple mathematical terms. However, in practice, the situation is more optimistic than this. To begin with, production will not suddenly stop at a finite point; instead, there is likely to be a gradual transitional phase lasting many decades, as occurred when the world moved from the coal era to the oil era. Also, while, on the one hand, annual output is forecast to rise steadily in the early 21st century, on the other hand, recovery rates will also improve, through enhanced technology, improved infrastructure and better accessibility. Moreover, there is “unconventional oil”, such as tar sands, oil shale and heavy oil, and exploitation of this is expected to rise steadily in the future.
Let us see now how the situation may develop in the future. For our projections, we shall use the reference case from OPEC’s World Energy Model.
These projections see global oil demand rising by 38 mb/d to 115 mb/d by 2025 — annual average growth of 1.6 mb/d, or 1.7 percent, over the years 2002–25.
[Slide 8] Around four-fifths of the world’s proven crude oil reserves are located in OPEC’s Member Countries, although these 11 states account for only about two-fifths of current world output. Moreover, these reserves are more accessible and cheaper to exploit than those in non-OPEC areas. In 2025, OPEC is projected to meet more than half the world’s oil demand, at 51 percent, with 58 mb/d.
[Slide 9] Oil’s share of the world energy mix will dip slightly during this period, from 40 to 37 percent.
[Slide 10] Turning to the oil supply outlook, in the short-to-medium term, overall non-OPEC supply is expected to continue to increase, rising to a plateau of 55–57 mb/d in the post-2010 period. This represents an increase of 7–9 mb/d from 2002, although the eventual scale of this future expansion is subject to considerable uncertainty. The key sources for the increase in non-OPEC supply will be Latin America, Africa, Russia and the Caspian.
With the forecast gradual depletion of non-OPEC reserves in the first quarter of the 21st century, OPEC will increasingly be called upon to supply the incremental barrel. OPEC has both the capability and the will to do this. [Slide 11] OECD countries will continue to account for the largest share of world oil demand. However, almost three-quarters of the increase in demand of 38 mb/d over the period 2002–25 will come from developing countries, whose consumption will almost double. This will be consistent with the forecast that the average annual economic growth rate of 5.0 percent for the developing countries will be double the OECD’s 2.5 percent, for the period up to 2025. Asian countries will remain the key source of oil demand increase in the developing world, with China and India central to this growth.
[Slide 12] At the global level, the transportation sector accounts for about 60 percent of the rise in demand in 2000–25. This will amount to nearly all the growth in transition economies, almost four-fifths of it in the OECD, and close to half in developing countries. The industrial and household/commercial/agriculture sectors will also be important sources of growth in the developing world.
[Slide 13] OPEC is very much aware of the role it will need to play in the evolving international oil market. It is, indeed, an extension of the role it has been playing, with great effect, for many years and which has its roots in the OPEC Statute, which dates from 1961. This important document defines the Organization’s core values of stable markets, reasonable prices, steady revenues, secure supply and fair returns for investors.
Landmark declarations by OPEC in 1968, 1975 and 2000 extended the Organization’s orbit to cover a broader range of issues, including: the inalienable right of all countries to exercise permanent sovereignty over their indigenous natural resources; the promotion of a more equitable global economic system, with particular emphasis on alleviating poverty and other injustices affecting developing countries; sustainable development; and environmental harmony. As you will recall, these incorporate the qualities I outlined earlier, that are considered to be part of the broad-based mandate of the modern petroleum industry.
An important outcome of OPEC’s broader vision was the establishment of its own specialist multilateral development finance institution in 1976, to help other developing countries, especially the least-developed ones, pursue social and economic advancement. To date, the OPEC Fund for International Development has made total financial commitments of more than $7.22 bn to developing countries worldwide. Of this amount, some $4.8 bn has been disbursed. The Philippines is one of 111 countries that has benefited from OPEC Find assistance. Since the institution’s inception, it has received $83.25 mn in loans. This financing supported projects carried out in the sectors of agriculture, education, energy, transportation, as well as for multi—sectoral purposes. In addition, the Fund extended three grants to the country The Vienna-based Fund is continuing to broaden its activities - a thrust that is proving invaluable to some of the world’s most impoverished nations.
OPEC keeps a close watch, at all times, on energy market developments, as part of its ongoing research activities, at its Vienna-based Secretariat. This covers all reasonable time-horizons — the short term, the medium term and the long term. The purpose is to provide the Organization’s Oil Ministers with the necessary high-quality support material for their decision-making on market issues, whether this be for their short-term production agreements or for their deliberations on important longer-term issues.
One of the most basic issues facing OPEC — and, let us not forget, other oil producers too — is to ensure that sufficient production capacity will be available at all times to help meet the forecast significant rise in oil demand in the coming years and decades. This brings us onto the subject of investment.
[Slide 14] Investment is needed: to meet the forecast absolute increase in demand; to see that exhausted reserves are replaced, as and when necessary; and to ensure that oil-producing nations always have sufficient spare capacity available to cope with sudden, unexpected shortages in supply. Also, the oil must be cleaner, safer and more efficient than ever before, to meet the very high expectations of the modern consumer.
Furthermore, producers need assurances of stable, predictable markets, just as much as consumers require certainty and consistency with supplies — security of demand is as important as security of supply. The required investment will be large, although it will not necessarily be different in magnitude to that observed in the past. Also, the cost of investment in OPEC oil is much lower than in non-OPEC oil.
[Slide 15] However, the magnitude of the required capital injection is far from clear, even in the short and medium terms. This is partly due to the wide range of feasible demand growth scenarios, but it is also reinforced by contrasting views on the potential evolution of non-OPEC production. Uncertainties over future economic growth, government policies and the rate of development and diffusion of newer technologies are among the main factors that lie behind this. To illustrate this, if we reduce our global economic growth projections by just one per cent, this will lower the investment requirement for 2010 from a reference case $95 bn to $70 bn — which is a big difference.
To appreciate the significance of all this, one must consider investment lead times that are measured in years rather than months, as well as the importance of “getting it right” i.e. over-investment may result in excessive, costly, idle capacity and under-investment may lead to a shortage of crude and higher prices. In both cases, the losses, especially for producing countries, and the possible, broader associated damage, such as to the world economy, can be huge. Because of the long lead times, it may take years to correct a situation of heavy over- or under-investment.
Clearly, any sound investment strategy must be built upon a solid base. This underlines the need for market order and stability today, with reasonable prices. This is, sadly, not the case at the present time.
[Slide 16] As I noted at the start of this address, the current market volatility and high prices have been a major cause for concern among OPEC’s Member Countries.
Prices for OPEC’s Reference Basket of seven crudes — which was introduced as a pricing yardstick in January 1987 — rose above US $45 a barrel for the first time in October, before retreating to $36-38 by mid-November. To put this in context, it compares with an average level of just over $25/b that prevailed for several years at the beginning of the 21st century — from the inception of OPEC’s innovative price band in 2000 through 2003. That average was close to the centre of the $22–28/b price band, showing how effective this market-stabilisation device was, as a result of the realistic nature of its upper and lower limits, which were, in turn, considered fair and reasonable by producers and consumers alike. Thus it won wide acceptance in the oil community.
[Slide 17] We see a combination of factors as contributing to the destabilisation of prices this year — even though, throughout, the market has remained well-supplied with crude and fundamentals have been sound: higher-than-expected oil demand growth, especially in China and the United States; refining and distribution industry bottlenecks in some major consuming regions, coupled with more stringent product specifications and compounded by the recent hurricanes in the Americas; and the present geopolitical tensions and concern about adequacy of spare capacity to meet possible supply disruptions. Combined, these factors have led to fears about a possible future supply shortage of crude oil, which, in turn, have resulted in increased speculation in the futures markets, with substantial upward pressure on prices.
[Slide 18] The introduction of stringent new product specifications in refining that came into force in the United States this year, and are scheduled for Europe at the start of next year, have caused considerable problems in this section of the industry. Stricter specifications have also been adopted in some developing states, where local refiners are even less prepared to meet the new requirements, posing quite a challenge. By our calculations, conversion facilities worldwide now stand at about 45 percent of total refining capacity, which does not provide refiners with sufficient operational flexibility to handle heavy sour crudes. The picture in Asia is even more acute, with only 30 percent conversion so far achieved. And most of these conversions are in units that produce gasoline, and not middle distillates which are in higher demand in the winter months. With the seasonal increase for middle distillates already upon us, the shortage of upgrading and desulphurization capacity has intensified refiners’ concerns about the security of light sweet crude. Given strengthening demand, most refineries are now running at near maximum operational capacity in a bid to keep up. At such levels, despite the economic incentive of higher growth, refiners are not able to use heavier crude oil as it might affect operations, due to the conversion bottlenecks and product specification limitations.
[Slide 19] Earlier this year, Hurricane Ivan had a substantial effect on gasoline output in the United States, but the recent re-emergence of American refineries and plants in Europe after their pre-winter turnaround should see an increase in distillate stocks, although this has not happened yet, leaving many traders concerned that a seasonal shortage will occur. Unfortunately, there is this persistent shortage of refining capacity in the United States. This is hardly surprising when you consider that between1981 and 1999 the number of operating plants in the country fell from 324 to 159, with capacity declining from 19 million b/d to just over 16 million b/d. There have been no new plants built, and there are also problems in the country's distribution network, which is both insufficient and inadequate. Combine this situation with the limited upgrading capacity in Asia, and the market is left vulnerable to increased price volatility as speculators in the futures market move to take advantage of any shortfall.
[Slide 20] The new restrictions have come at a time when refinery capacity is already stretched to the limit. In addition to the shortages in refined products, the perception of lower oil inventories - increasingly an industry norm – has also contributed to market volatility. The recent employment of “just-in-time” stocks’ management by the oil industry has almost certainly reduced the amount of stored oil that can be considered “normal”, and this is something the industry seems to have to live with in the future. However, the higher production from OPEC Member Countries of late has contributed to producing a counter-seasonal build in OECD petroleum stocks at the end of the third quarter. This has resulted over the past few weeks in a steady increase in commercial crude oil inventories in the United States to levels that are now considered to be quite healthy. There has also been a massive build-up of stocks of crude oil and middle distillates in Japan, while in Western Europe, even though our latest figures show a slight drawdown in inventories in the last few weeks, stock levels are still around two percent above levels seen at the same time last year.
[Slide 21] It is interesting to see the wide variety of factors that can affect the oil price over a certain period. Taking daily readings of the price for West Texas Intermediate crude on the New York Mercantile Exchange for the first 11 months of this year, we noted more than 30 different factors that were, on one or more occasions, identified by analysts as influencing a daily price movement! The figures in the slide show their net upward or downward effect between January and November 2004.
[Slide 22] To help restore order and stability to the oil market in recent months, OPEC has raised its production ceiling three times, by a total of 3.5 mb/d for OPEC-10 (OPEC, excluding Iraq), to 27.0 mb/d. We did this, even though our assessments had indicated that there was sufficient crude in the market and that Member Countries were already producing well above previous ceilings. Our latest studies show that, for the third quarter, the market was over-supplied by nearly 2 mb/d and that this trend was being continued into the fourth quarter, although to a lesser extent, due to demand seasonality and other factors. However, in reaching our production agreements, it was believed that, as well as the actual physical fact of agreeing to these big increases in supply, such actions, in themselves, would also send a powerful psychological signal that OPEC was ready to act in order to help stabilise prices.
The easing price trend of recent weeks of almost $10/b – with the OPEC Basket down to $36 a barrel by mid-November - can be attributed in great part to the Organization’s continued efforts to restore order and stability. A further Extraordinary Meeting of the Conference is scheduled for 10 December in Cairo, to review market developments and, if necessary, adjust the production ceiling accordingly. The decisions we take will, understandably, be influenced by the outlook for 2005.
Initial forecasts from recognised sources for 2005 assume a moderate slowdown in global economic growth. We project an annual growth rate of 4.1 percent for 2005, compared with the 4.9 percent currently forecast for this year. Growth will be much faster in developing countries than in the OECD — 5.0 percent compared with 2.8 percent — while, separately, China is projected to experience 7.6 percent growth in 2005, and Russia 6.0 percent. Let us look at the impact this will have on oil demand in 2005 — especially at a time when there may be attempts to fill strategic petroleum reserves in China, India and, possibly, the United States. Demand growth forecasts for next year fall within a wide range of 1.4–2.4 mb/d, with an average of around 1.8 mb/d. OPEC itself projects 1.6 mb/d. Asia is expected to account for a significant proportion of this growth.
Looking at supply, forecasts for increases in 2005 non-OPEC supply also cover a wide range, between 0.7 mb/d and 1.6 mb/d, with a mean of about 1.0 mb/d. OPEC’s projections see an increase of 1.2 mb/d. According to various sources, the difference between world oil demand and non-OPEC supply is expected to increase for the third consecutive year. The preliminary market balance forecasts — demand minus non-OPEC supply — are also spread across a wide range, from 27.4 mb/d to 29.4 mb/d, with an average of around 28.1 mb/d. OPEC expects this number, which is, effectively, the call on OPEC oil, to be at the low end of the range.
[Slide 23] With regard to the ability to meet rising demand in the short-to-medium term, OPEC has spare production capacity of around 1.5 mb/d, which would allow for an immediate additional increase in production. Moreover, in response to the expected demand growth in the near future, Member Countries have plans in place to increase spare capacity further in 2005, to over 2.5 mb/d. These are all very big issues that we are facing — short term, medium term and long term. And I say “we”, because I am talking about the oil industry as a whole — producers, consumers, governments, the large oil companies, the financial institutions, and any other party that has a significant role to play in the general welfare, effectiveness, growth, and general evolution of the industry. Market order and stability is a shared responsibility for all parties.
When OPEC makes its production agreements, it does so in the expressed expectation that non-OPEC producers will actively support our measures, since this will make our decisions more effective and we will all benefit from this. When OPEC turns its attention to the future, we envisage this as a collective task for the industry and we seek to get as wide a range of views, opinions, information and data as possible. The challenges facing all of us are too large, too complex and too important to be left to individual, concerned groups.
[Slide 24] Big advances in dialogue and cooperation among producers and consumers have been an encouraging feature of the past couple of decades, from large-scale international ministerial gatherings, such as the meetings of the now-institutionalised International Energy Forum, to bilateral or regional contacts that extend across national boundaries. Indeed, the establishment of the Forum’s Secretariat in an OPEC Member Country, Saudi Arabia, bears witness to OPEC’s commitment to dialogue and cooperation. Recent years have also witnessed the development of a closer working relationship between OPEC and the International Energy Agency, to exchange ideas and information. We are involved in a series of joint meetings among OPEC and non-OPEC producers — the most recent was held in Oman in October. We also engage in annual dialogue with high-level energy officials and research institutes from China, Japan and South Korea.
OPEC welcomes all of this. The industry is much better-off if there is an underlying consensus on the means of handling, at least, the major issues that concern all parties — such as price stability, security of demand and supply, investment, environmental issues and sustainable development.
Excellencies, distinguished guests, ladies and gentlemen, I have tried to provide an overview of the principal issues that we, in OPEC, believe support the present and future viability of the petroleum industry. It is truly a vast and complex business. However, there is a strong sense of optimism about the future.
[Slide 25] We are confident that the industry will successfully rise to the challenges facing it in an increasingly globalised industry, where technology is enabling us to make remarkable advances in every field of activity and where the orderly, equitable provision of cleaner, safer energy services is seen as an integral part of sustainable development, the eradication of poverty and the general enhancement of mankind.
Finally, I would like to stress that we in OPEC hope that this visit by our officials will help to strengthen your country’s diplomatic ties with the oil-exporting countries, a move that would surely lead to an improved mutual understanding of issues important to both OPEC and the Philippines on energy and development. It is only through dialogue and regular contact that the two sides can forge a better understanding of each other’s needs and requirements, which, in the long run may help us to better deal with, and even overcome, the type of situation your country now faces. For us, cooperation, coordination, and collaboration are the key to a successful future.
Thank you.
