OPEC’s welcoming address to the 2nd Joint IEA-OPEC Workshop on Oil Investment Prospects

Delivered by Dr Adnan Shihab-Eldin, Director of OPEC's Research Division - Paris, France, 28 April 2004

Distinguished guests, ladies and gentlemen,

Let me begin by expressing, on behalf of the OPEC Secretary General, HE Dr Purnomo Yusgiantoro — who is also President of the OPEC Conference and Indonesia’s Minister of Energy and Mineral Resources — our sincere thanks to Mr Mandil and his colleagues for the highly professional manner in which they have organised this workshop and for their generous hospitality. We are pleased to have had the chance to renew old friendships, as well as establish new ones.

It seems like only yesterday that our two organisations held our first-ever joint workshop on a theme of mutual interest, namely oil investment prospects. In fact, ten months have passed since that historic occasion, which we had the honour of hosting at our Secretariat in Vienna. Now it is the turn of our counterparts at the International Energy Agency to perform this weighty, but worthy task at their headquarters in Paris.

The investment landscape for our discussions this year remains very similar to the investment landscape of last year. There have, without doubt, been developments since June 2003 which have had the potential to affect the investment profile — influenced by emerging trends and events in different parts of the energy world — but these are of minor significance to our overall calculations when we are looking ten, 20 or even 30 years ahead. However, the international community’s understanding of this complex and challenging landscape has improved during this period, thanks in part to the work of our two organisations.

Last year’s workshop demonstrated that there is common understanding on many of the important issues that lie before us, in the area of oil investment. Indeed, the decision to hold this second workshop is a reflection of the success of that meeting. Today, we shall be talking about either digging deeper or digging in slightly different places to last year, as we set about our deliberations. At the same time, we will be able to benefit from fresh new insights provided by our speakers and participants.

The broad objective of this workshop remains similar to last year’s, namely to analyse the investment needs of the oil sector, particularly the challenges that will have to be overcome in order to obtain the necessary investment to fund sectoral expansion over the longer term.

These challenges cover many issues of both a short- and a long-term nature, in a world that is more complex and interdependent than ever before. We all face these challenges, regardless of whether we are producers or consumers, OPEC or non-OPEC. Moreover, we need to handle these challenges — or, at least, most of them — in a manner that stretches across all participating groups.

We have been greatly helped in this process by the closer working relationship that has been established between OPEC and the IEA in recent years. Here, I refer not only to the success of last year’s joint workshop. Nine months before that, in September 2002, there was the first-ever joint press conference between our two organisations at the 17th World Petroleum Congress in Rio de Janeiro. There have also been many fruitful areas of informal contact, to exchange ideas and information, and we have all benefited from them. It is no secret that such exchanges prior to the war in Iraq last year made a significant contribution towards stabilising the oil market at a time when it was subjected to enormous pressure.

We welcomed the opportunity to contribute to the IEA’s major reference publication, “World Energy Investment Outlook — 2003 Insights”. We congratulate the agency on producing such a comprehensive and valuable study on investment. This work demonstrates the clear need to continue to focus our attention upon these important topics. As the IEA study clearly shows, the subject of investment embraces a multitude of dimensions, covering the whole chain of activities in the oil sector, as well as other primary energy sources and applications.

The study confirms the OPEC view that the resource base is sufficiently abundant to satisfy expected demand growth over the coming decades and that large levels of investment will be required. I am sure that this meeting today will spend time looking at the expected scale of these investment needs, and how this relates to past experience within the industry. But we need to be fully aware of the large uncertainties that we will have to deal with, and, indeed, this will be a major focus of attention in this afternoon’s session.

Such common ground provides us with much to build on, since there are still some understandable areas of difference between OPEC and the IEA, as one might expect in the light of their respective agendas. But such areas, I am glad to say, have been reduced with the passing of the years, as it has become clearer that, while we have the same broad objectives with regard to achieving a secure, stable market, we are looking at the situation from a different angle. This has been helped by a steadily growing sense of collective responsibility for the state of the market within the international petroleum community, which is very welcome. The benefits of this can be felt throughout the industry, not only upstream, but also downstream, including transportation and distribution. Indeed, it has become widely acknowledged that the downstream industry should feature prominently in our assessments both now and in the future, so as to avoid it becoming a source of price volatility.

The proven value of cooperation between consumers and producers is reflected in the evolution of the International Energy Forum (IEF), and the establishment of its permanent Secretariat in Riyadh, Saudi Arabia. The 9th IEF will be held in Amsterdam in less than a month’s time and its theme will be closely related to that of today’s workshop. Both our organisations will be well-represented there. So today’s workshop will have the added benefit of helping all of us to prepare for that important event.

Also, the fact that senior officials and experts from OPEC and the IEA are meeting under one roof this week means that we are having the opportunity to discuss other important issues, including an exchange of views on the current difficult market conditions. I am confident that such exchanges, as in the past, will improve understanding of each other’s positions on these matters. Even if the scope for actual agreement remains limited, this is nevertheless bound to send a positive signal to the market. To this end, a high-level team from OPEC’s Petroleum Market Analysis Department will be paying a working visit to their counterparts in the IEA tomorrow.

Let me conclude by re-emphasising that OPEC remains committed to its fundamental objectives of seeking order and stability in the international oil market, with secure supply, reasonable prices and fair returns for investors. As has been made clear at this workshop, however, OPEC’s perspective is not just the immediate time-horizon; it also extends well into the future. This is why we attach so much importance to such workshops as the one we are holding today.

Thank you.