May 2001 1

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P u b l i s h e r sOrganization of the PetroleumExporting Countries, Obere Donau-strasse 93, 1020 Vienna, Austria.

Telephone: +43 1 211 12/0;Telefax: +43 1 216 4320;Public Relations & InformationDepartment fax: +43 1 214 9827.E-mail: prid@opec.orgE-mail: OPEC News Agency: opecna@opec.orgWeb site: http://www.opec.org. Hard copy sub-scription: ATS 850 ( 61.77)/12 issues.

M e m b e r s h i p a n d a i m sOPEC is a permanent, intergovernmental Or-ganization, established in Baghdad, September10–14, 1960, by IR Iran, Iraq, Kuwait, SaudiArabia and Venezuela. Its objective is to co-ordinate and unify petroleum policies amongMember Countries, in order to secure fair andstable prices for petroleum producers; an effi-cient, economic and regular supply of petro-leum to consuming nations; and a fair returnon capital to those investing in the industry.

The Organization comprises the fiveFounding Members and six other Full Mem-bers: Qatar (joined in 1961); Indonesia (1962);SP Libyan AJ (1962); United Arab Emirates(Abu Dhabi, 1967); Algeria (1969); andNigeria (1971). Ecuador joined the Organiza-tion in 1973 and left in 1992; Gabon joined in1975 and left in 1995.

S e c r e t a r i a t o f f i c i a l sSecretary General Dr Alí Rodríguez Araque

Director,Research Division Dr Shokri M Ghanem

Head,Energy Studies Department Dr Rezki Lounnas

Head, Petroleum MarketAnalysis Department Javad Yarjani

Head, Data ServicesDepartment Dr Muhammad A Al Tayyeb

Head, PR & InformationDepartment Farouk U Muhammed, mni

In charge of Administration &Human Resources Department Sugeng Haryanto

Head, Office of theSecretary General Karin Chacin

Legal Officer Dolores Dobarro

W e b s i t eVisit the OPEC Web site for the latest news andinformation about the Organization and itsMember Countries. The URL is

http://www.opec.org

T h i s m o n t h ’ s c o v e r . . .shows pipelines in Algeria, which has just launched anew oil and gas licensing round (see Newsline story onpage 11).Photo courtesy Sonatrach.

2 N O T I C E B O A R DForthcoming conferences and other events

3 C O M M E N T A R YBuilding a better futureThe Third UN Conference on LDCs has adopted admirablegoals, but positive action will be needed to realize them

4 P R E S S R E L E A S EOPEC Secretary General expresses sympathy overUS refinery problems

5 F O R U MOPEC and the geopolitics of the international 5oil and gas industryBy HE Dr Alí Rodríguez Araque, OPEC Secretary General

Future challenges for OPEC and its Members in the 8global petroleum sectorBy Dr Shokri Ghanem, Director of OPEC’s Research Division

11 N E W S L I N EEnergy stories concerning OPEC and the Third World

22 M A R K E T R E V I E WOil market monitoring report for April 2001

40 M E M B E R C O U N T R Y F O C U SFinancial and development news about OPEC Countries

47 A D V E R T I S I N G R A T E SHow to advertise in this magazine

48 O R D E R F O R MPublications: subscriptions and single orders

49 O P E C P U B L I C A T I O N SInformation available on the Organization

Indexed and abstracted in PAIS International

Vol XXXII, No 5 ISSN 0474-6279 May 2001

2 OPEC Bulletin

N O T I C E B O A R D

Forthcoming events

Phuket, Thailand, June 25–26, 2001, Evalu-ating International Acreage & Projects. Details:Conference Connection Administrators PteLtd, 212A Telok Ayer Street, Singapore068645. Tel: +65 226 5280; fax: +65 2264117; e-mail: info@cconnection.org; Website: www.cconnection.org.

Boston, MA, USA, June 25–29, 2001, Cur-rent Developments in International Oil, Gasand Power. Details: IHRDC Headquarters,535 Boylston Street, Boston, MA 02116,USA. Tel: +1 617 536 0202; fax: +1 617 5364396; e-mail: corporate@ihrdc.com; Web site:www.ihrdc.com.

Phuket, Thailand, June 27–29, 2001, Pro-duction Sharing Contracts and InternationalPetroleum Fiscal Systems. Details: ConferenceConnection Administrators Pte Ltd, 212ATelok Ayer Street, Singapore 068645. Tel:+65 226 5280; fax: +65 226 4117; e-mail:info@cconnection.org; Web site: www.cconnection.org.

Copenhagen, Denmark, July 2–6, 2001,European Wind Energy Conference and Exhi-bition. Details: WIP, Sylvensteinstrasse 2, D-81369 München, Germany. Tel: +49 89 7201235; fax: +49 89 72012 91; e-mail: wip@wip-munich.de; Web site: www.wip-munich.de.

Lucerne, Switzerland, July 2–6, 2001, FuelCell 2001, 2nd international fuel cell confer-ences with exhibition. Details: European FuelCell Forum, Morgenacherstrasse 2F, PO Box99, CH-5462 Oberrohrdorf, Switzerland. Tel:+41 56 496 7292; fax: +41 56 496 4412; e-mail: info@efcf.com; www.efcf.com.

London, UK, July 3–4, 2001, Capitalizingon the opportunities of an integrated gas andelectricity portfolio: learn how to integrate andmanage risk in a multi-commodity portfolio.Details: Maria Nilsson, Energy Forum. Tel:+46 8 20 90 95; fax: +46 8 20 90 73; e-mail:maria@energyforum.net; Web site: www.energyforum.net.

Singapore, July 24–25, 2001, Oil, gas &power plant insurance — a win-win for opera-tors & insurers. Details: Asia Insurance Re-view, Ins Communications Pte Ltd, 55–58Amoy Street, Singapore 069 881. Tel: +653723187; fax: +65 224 1091; e-mail: sheela@asiainsurancereview.com; Web site: www.asiainsurancereview.com.

Rio de Janeiro, Brazil, September 3–4, 2001,6th annual Latin Upstream 2001. Details:Global Pacific & Partners. Tel: +27 11 7784360; fax: +27 11 880 3391; Web site: www.petro21.com.

Aberdeen, UK, September 4–7, 2001, Off-shore Europe 2001. Details: The OffshoreEurope Partnership, Ocean House, 50 King-ston Road, New Malden, Surrey KT3 3LZ,UK. Tel: +44 20 8949 9222; fax: +44 208949 8193/8186/8204; e-mail: oe2001@spearhead.co.uk; Web site: www.offshore-europe.co.uk.

Houston, USA, September 10–11, 2001, 5th

annual Worldwide Independents Forum 2001.Details: Global Pacific & Partners. Tel: +2711 778 4360; fax: +27 11 880 3391; Web site:www.petro21.com.

Singapore, September 10–12, 2001, 17th

Dubai, UAESeptember 15–18, 2001

Arab Oil & Gas Show

Details: International Conferences& Exhibitions Ltd2 Churchgates, TheWilderness, Berkhamsted,Herts HP4 2UB, UKTel: +44 (0)1442 878222Fax: +44 (0)1442 879998E-mail: general@ice-ltd.demon.co.ukWeb site: www.araboilgas.com

Tripoli, SP Libyan AJSeptember 23–26, 2001

LIOGE 20011st Libyan international oil

and gas exhibition andprojects conference

Details: Dan CobermanITE Group PLC105 Salusbury RdLondon NW6 6RG, UKTel: +44 (0)20 7596 5225Fax: +44 (0)20 7596 5111dan.coberman@ite-exhibitions.com

Asia-Pacific Petroleum Conference. Details:APPEC 2001, Times Conferences &Exhbitions, 1 New Industrial Road, TimesCentre, Singapore 536196. Tel: +65 3801420;fax: +65 2865754; e-mail: tcecfe@tpl.com.sg.

Boston, MA, USA, September 10–21, 2001,International Petroleum Business ManagementProgramme. Details: IHRDC Headquarters,535 Boylston Street, Boston, MA 02116,USA. Tel: +1 617 536 0202; fax: +1 617 5364396; e-mail: corporate@ihrdc.com; Web site:www.ihrdc.com.

Boston, MA, USA, September 10–October 5, 2001, International PetroleumManagement Certificate Programme. Details:IHRDC Headquarters, 535 Boylston Street,Boston, MA 02116, USA. Tel: +1 617 5360202; fax: +1 617 536 4396; e-mail:corporate@ihrdc.com; Web site: www.ihrdc.com.

London, UK, September 24–25, 2001, IBC’s3rd Annual North African Oil and Gas Sum-mit. Details: IBC Global Conferences, KarenBligh, Gilmoora House, 57–61 MortimerHouse, London W1N 8JX, UK. Tel: +44(0)20 7453 2058; e-mail: karen.bligh@informa.com.

Call for papers

Hong Kong, August 16–17, 2001, interna-tional conference on Asian Energy in the NewCentury: Issues and Policies. Papers can dealwith the general energy situation of an Asiancountry, focusing on current issues and poli-cies based on data pertaining to the last dec-ade. Submission of abstracts and full paper to:Dr Larry C H Chow, Director, Hong KongEnergy Studies Centre, Hong Kong BaptistUniversity, Kowloon Tong, Hong Kong. Tel:+852 2339 7103; fax: +852 2339 5990;e-mail: emily@hkbu.edu.hk.

Tehran, IR IranSeptember 22–24, 2001

Middle East Energy Strategyto the Year 2014

Details: APS ConferencesPO Box 23896Nicosia, CyprusFax: +357 2 350265

May 2001 3

C O M M E N T A R Y

Building a better futureThe Third UN Conference on LDCs has adopted admirablegoals, but positive action will be needed to realize them

E d i t o r i a l p o l i c yOPEC Bulletin is published by the Public

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mental aspects of all stages of the energy indus-

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E d i t o r i a l s t a f fEditor-in-Chief Farouk U Muhammed, mni

Editor Graham Patterson

Assistant Editor Philippa Webb

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At the conclusion of the recent ThirdUnited Nations Conference on Least Developed Countries (LDCs) in

Brussels, the 193 countries in attendanceadopted a declaration committing them-selves, inter alia, to the eradication of pov-erty in the world’s poorest countries. Thistype of commitment from countries on bothsides of the North-South divide has beenseen many times over the years — and yetdespite all these good intentions, it some-times appears that the gap between theworld’s rich and poor is not shrinking, butbecoming more pronounced.

The OPEC Member Countries, them-selves developing nations, have always be-lieved that the issue of economic and socialdevelopment in the world’s LDCs and theeradication of poverty should be an over-riding global priority. Accordingly, the is-sue was initially addressed in 1975 at thefirst Summit of OPEC Heads of State inAlgiers where the Organization, as an ex-pression of solidarity with non-OPEC de-veloping nations, decided to establish theOPEC Fund to provide financial resourcesto assist these countries in their economicand social development. In the first quartercentury of its existence, the OPEC Fundhas extended development assistance worthover $5.8 billion to more than one hun-dred countries in Africa, Asia, Latin Americaand the Caribbean, the Middle East andparts of Europe. The individual OPECMembers have also established a number ofother aid institutions with similar aims.

And yet the gap between the world’srich and poor nations remains a yawningone. So much so, in fact, that twenty-fiveyears later, OPEC once again deemed itnecessary to emphasise this issue in the Or-ganization’s Solemn Declaration at the sec-ond Summit of Heads of State Summit,held in Caracas, Venezuela, last year. TheSolemn Declaration stressed the need forthe industrialized countries to recognise theirresponsibility in helping to alleviate thecrushing poverty that afflicts the LDCs.OPEC’s stance on the eradication of pov-erty is not designed to relieve the world’s

poorest countries of their responsibilities.Rather, it points to the genuine commit-ment that is needed from both developedand developing nations to find practicalsolutions to the problems they face.

In that context, the concluding state-ment of the UN Conference on LDCs notedclearly that a fairer, more inclusive system ofglobal trade is essential for the growth anddevelopment of LDCs. It stated that a “trans-parent, non-discriminatory and rules-basedmultilateral trading system is essential” inorder to enable LDCs to reap the benefits ofglobalization. The continued marginalizationof these nations through their exclusion fromthe global trading system and the WorldTrade Organization (WTO) can only serveto widen the gap between the haves and thehave-nots. The accession of LDCs to theWTO should be facilitated, and the nextWTO meeting, scheduled for Novemberthis year in Doha, the capital of OPECMember Qatar, will provide an opportunityto make progress on this front.

Other issues facing LDCs that wereaddressed by the UN Conference includedthe massive debt burden and the threat ofthe HIV/AIDS pandemic — in fact theOPEC Fund has recently set up a specialaccount with an initial allocation of $15million to help combat the HIV/AIDSthreat. These problems have already in-flicted serious damage on the vulnerableeconomies of the world’s poorest countries.They must not be swept under the carpet.They must be tackled head on, and now.The situation could get much worse unlessconcrete action is taken urgently.

And it is precisely such concrete actionwhich OPEC strongly supports. The Or-ganization is always mindful of the impor-tant role it plays in the world economy, andis committed to promoting global growth.It is with these principles in mind that OPECand the OPEC Fund, as well as the indi-vidual Member Countries and their aidinstitutions, will continue to support theworld’s poorest nations so that the lattercan, in the words of the UN Conference,“build a better future for themselves.”

4 OPEC Bulletin

P R E S S R E L E A S E

Press Release No 9/2001Vienna, Austria, May 9, 2001

OPEC Secretary General Dr Alí

Rodríguez Araque has reaffirmed

the Organization’s awareness of the

refinery problems facing the United

States, which are widely recognized

as being responsible for inflated

gasoline prices in that country.

“OPEC is doing all in its power

to guarantee regular crude oil sup-

plies to the world energy market,”

he said, in expressing sympathy

with the US situation.

Unfortunately, he added, the US

problems had resulted from factors

not directly related to the level of

global crude oil supplies, which

were adequate.

“This has been made clear by

the fact that prices for refined prod-

ucts in the US have been climbing

at the same time that domestic

OPEC Secretary Generalexpresses sympathy over

US refinery problems

crude oil stocks have been increas-

ing.”

Rodríguez said the US problems

had resulted from a sharp decline

in domestic refining capacity over

the past two decades, combined

with increasingly stringent environ-

mental regulations. An inadequate

and insufficient pipeline network

had made the situation worse.

All these problems were now ac-

centuated, as the summer driving

season was entering its peak period,

he noted.

“Over the past few weeks, sev-

eral leading US Administration

officials have recognized the reasons

behind the present US difficulties.

They have gone out of their way to

point out that OPEC’s policies are

not to blame for the current situ-

ation, and we welcome their sin-

cerity with the US public,” he said.

This, he noted, was in sharp

contrast to the attitude of politi-

cians in European countries, some

of whom continued to attempt to

blame OPEC for high petrol prices,

despite the fact that taxes accounted

for around three-quarters of the

pump price in those nations.

Rodríguez noted that, addition-

ally, the situation in the US was

having a knock-on effect on Euro-

pean markets, which were experi-

encing higher prices.

He pointed out that some

OPEC Member Countries were

looking towards increasing their

refining capacity and this could

eventually help alleviate the US

problems.

May 2001 5

F O R U M

have gone as far as threatening its veryexistence, but the strength generated bythe common interests of its membershiphas allowed our Organisation to continueto progress.

Furthermore, several non-OPEC pro-ducers are presently co-ordinating their oilpolicies with our Organization, as theyshare similar goals. Such a reality placesboth oil and OPEC in a pivotal positionin international relations, regarding eco-nomic, political, legal, military and ideo-logical interests.

Historical backgroundEverything in life comes as a conse-

quence of historical developments. Thepresent reality of the energy world is noexception. The turbulent development ofcapital markets in the nineteenth andtwentieth centuries, plus the invention ofthe internal combustion engine — whichin turn led to a rapidly growing thirst forfuel — brought about a violent expansionof oil drilling and development. This proc-ess was further fed by technologicalprogress.

Since oil is a natural resource, its loca-tion is the exclusive result of nature’swhims. Thus, it is simply due to fate thatthe main oil reservoirs have been largelyfound in countries with low economic,social and technological development. Andinternational capital has moved in their di-rection, in the search for profits. In casessuch as that of Venezuela, the developmentof its oil industry created massive turbu-lence, as the nation struggled to define itsown economic, political, social and cul-tural model.

Thus, Venezuela and other countriesfacing a similar situation saw the develop-ment of an economic relationship ce-mented on diverging interests. On the onehand, the owners of oil reserves were in-terested in obtaining the greatest possible

The strategic nature of oil pointsto greater interdependencebetween all parties involved inthe industry as being the bestway forward, according toOPEC Secretary General,HE Dr Alí Rodríguez Araque,in this article.*

OPEC and the geopolitics of theinternational oil and gas industry

share of the income generated by thebusiness. On the other hand, investorswere interested in maximizing profits, andthis involved, naturally, transferring thelowest portion of such profits to hostgovernments.

This reality has remained unchangedover the years. But in spite of the implicitcontradiction in the interests of host coun-tries and international investors, the twogroups are bound by something muchmore powerful — their common goal ofobtaining the largest benefit from an ever-expanding, highly profitable business.Consumers constitute a third party whichadds complexity to the relationship. Theirmain interest has always been the lowestpossible prices.

However, these economic inter-relationships do not simply concern own-ers, investors and consumers. State inter-ests are also involved. In the case of oil,states act not only as owners of the naturalresource who charge royalties, but they alsoact as sovereigns that charge taxes. Addi-tionally, when states become shareholdersin national oil companies, they also turnthemselves into investors. Thus, the in-creasing weight of oil income in nationalbudgets has made oil more and more amatter of national interest for producingcountries.

From the perspective of consumingcountries, oil is also a strategic resource,given its decisive importance in industrialand military operations, equally in timesof peace and war. Additionally, industrialcountries provide both the capital andtechnology necessary for the oil industry’sdevelopment.

The decisive importance eventuallyaquired by the countries that possessedlarge oil reserves, added to the develop-ment of their national identities, and al-lowed them to take advantage of severalfavourable circumstances. This led them

* Based on Dr Rodríguez’s opening addressto the Dundee International Oil and GasConference, held at the University of Dun-dee, Scotland, on April 30–May 4, 2001.

Unlike many other commodities, oilhas become a key factor for theworld economy. This is because

oil remains the world’s main energy source.Until now, no cheaper and more accessi-ble source of energy has been found.

Moreover, the specific importance ofoil in international economics has allowedOPEC to survive as the only Organiza-tion of developing countries which hassucceeded in defending its Members’ rightsover their natural resources. On manyoccasions, OPEC has confronted quitepowerful pressures and challenges, which

F O R U M

6 OPEC Bulletin

to make progress in identifying their com-mon interests. Such a process broughtabout the birth of OPEC in 1960 and awave of oil industry nationalizations in the1970s. From that wave of nationalizationsto the present, new developments havefurther complicated the world’s economicand political reality, particularly in whatconcerns energy matters.

In the 1970s, international oil com-panies understood that they had to with-draw temporarily from the main oil-pro-ducing countries. This move was forcedby pressure from consumers, given thehigh oil price levels reached in those years,plus the increasing demands of host gov-ernments for a greater share of profits.

However, their return started in the1980s. And in some cases — such as thatof Venezuela — they have come backunder better fiscal and contractual condi-tions than the ones they had enjoyed priorto the nationalizations. Among these im-proved conditions, we must highlight astark reduction in royalties and taxes, anexpansion of the areas assigned, and theexclusion of Venezuelan courts as the in-stance where disagreements and contro-versies should be decided, under the coun-try’s constitutional principles.

Thus, the relationships between states,between these and international and na-tional oil companies, and between the in-stitutions that represent producers andconsumers, have defined and continue todefine the shape of the world’s oil industry.

Present situationThe general situation of the world oil

industry at present is defined by greatermaturity on the part of the different play-ers. They have repeatedly stated theirwillingness to co-operate, in order to reachgreater market stability. By doing this, theywould be overcoming the problems gen-erated by price volatility, which has badlyhurt the economies of both producers andconsumers.

As far as OPEC is concerned, aftermore than 40 years of experience, we re-main deeply convinced that we must worktirelessly to attain market stability. Wehave not only reiterated this conviction onnumerous occasions, but have alsolaunched ideas and initiatives aimed atachieving this goal. Our price band mecha-nism has been one of these initiatives. It

ensures the greatest possible contributionfrom OPEC to maintain the balance be-tween oil demand and supply. It is a cor-rection mechanism, under which OPECMember Countries provide the crudevolume that results from the differencebetween world demand and the suppliesof non-OPEC producers.

However, a balanced market is not

sufficient. Enough crude supplies to sat-isfy demand do not always bring stableprices. There are several other factors in-volved, which affect final prices and there-fore deserve to be looked at in detail.

The first factor that distorts prices isspeculation in the futures markets. There,the volumes traded often exceed 150million barrels/day of oil, which is twicethe world’s daily crude demand. Massivepaper purchases may lead to strong pricerises at times when the physical market,where tangible barrels are traded, remainsin equilibrium or is even oversupplied.This occurred last year, from April, whensupplies exceeded demand by 1.5m b/d.In spite of this, the price for WTI passedthe $30/b mark.

Oil’s nature as a strategic resource al-lows speculators to take advantage ofpolitical and military conflicts to makeprofits. Thus, political and military insta-bility, and the uncertainty it generates, isimmediately reflected on futures marketsvia significant price spikes. But, by devis-ing ways of ensuring that marker crudesbetter reflect the reality of the physicalmarket, we will be advancing to correctthe strong price distorsions allowed by thecurrent benchmarks. A research effortcurrently being pursued by OPEC andother institutions, will likely producepositive results in the not too distant fu-ture. This will be an additional contribu-tion to market stability.

Infrastructure problemsA second factor is represented by the

situation in the United States, which is, aswe know, the largest energy consumer inthe world. Its refining, transportation anddistribution infrastructure has seriousproblems, which lead to true bottlenecks.In fact, US refining capacity has declinedsignificantly over the past 25 years, whilethe US pipeline network for the transpor-tation of crude oil and products is inad-equate and insufficient. Thus, even whenhaving enough supplies, the USA can faceshortages throughout its national territory.This has led to increases in product prices,which in turn have an impact on crudeprices.

This reality has been recognised by thenew US Energy Secretary. Without doubt,reticence on the part of the new US Ad-ministration to subscribe to the KyotoProtocol is directly linked to this problem.Stringent environmental regulationsclearly collide with the recently-announcedpolicy of attempting to expand domesticoil production, thus curbing the increas-ing importance of oil imports.

Transportation and distribution prob-lems in the domestic US market are com-pletely beyond OPEC’s area of action. Butas far as refining capacity is concerned, itwould be highly positive if the US andOPEC Member Countries could reachagreements, under which the latter wouldincrease their own refining capacity, inorder to supply products according to USspecifications. Thus, the producers wouldbe obtaining greater added value for theirexports, and the US would be dealing with

‘After more than

40 years, we

remain deeply

convinced that

we must work

tirelessly to

attain market

stability.’

F O R U M

May 2001 7

the serious problem represented by oilproduct shortages.

A third factor is represented by prob-lems pertaining to high sea transportationfees. They result from the fact that a largeportion of the world tanker fleet is obso-lete. Strict environmental regulationsmandate that all new tankers must bedouble-hulled, and their construction isquite costly.

A fourth factor has to do with the hightaxation levels imposed on refined prod-ucts by the governments of consumingnations. These lead to significantly higherpayments by the final consumer. For in-stance, in the European Union, an aver-age 60 per cent of the price paid by thefinal consumer for fuel products goes totaxation. In some cases, taxes are as highas 80 per cent of the final price. Naturally,this is a matter of fiscal sovereignty, but itis undeniable that such policies are alsoaimed at restricting the consumption ofoil products, and putting downward pres-sure on the market.

Here, there is quite a strange contrast.While consuming countries continue toincrease their taxes on oil products, inter-national investors pursue efforts to reducetheir fiscal contributions to the govern-ments of producing countries. They areexercising pressure aimed at reducingor eliminating royalties, while also askingfor radical changes in the fiscal structuresof oil-producing countries. Such policieshave become more intense through sev-eral bilateral agreements and multilateralaccords.

Greater dialogueThe key to solving problems lies, to a

large degree, in expressing them correctly.Thus, we will never find a solution to theseissues, if OPEC continues to be blamedfor situations that are attributable to themarket. We must first acknowledge a verysimple fact: consumers are our customers.The lion’s share of OPEC’s oil productionis dedicated to exports, which are used to

satisfy world demand. More than 75 percent of the world’s oil reserves are locatedin our Member Countries. To a large ex-tent, the performance of our economiesdepends on oil sales.

We all know that oil is the main andmost abundant energy source in the world,and it will continue to be so for many moreyears. The interdependence of oil produc-

ers and consumers is unavoidable. We needeach other.

Having said that, it is easy to concludethat international institutions such asOPEC, the International Energy Agency,as well as the corresponding authoritiesof the European Union, which have ac-cess to key information and are highly pro-fessional, must do their utmost to findways and means of solving the complex

‘International

institutions must

do their utmost

to find ways

and means

of solving the

energy problems

facing us.’

energy problems facing our world today.Another effort aimed at the achieve-

ment of the same goals, which must behighlighted here, is that represented by theSeventh International Energy Forum, heldin Riyadh, Saudi Arabia in late 2000. Themeeting served to identify important fac-tors which, when applied and developed,could lead to concrete results, such as theones we all are looking for.

International relationsAll the problems of the energy world

are closely intertwined with internationalrelations. Oil matters have a scope muchbroader than that of mere economic andmarket affairs. The fact that oil is a vitalcommodity for both producers and con-sumers places it on top of the political anddiplomatic agenda of our countries.

Thus, after several decades of confron-tations and instability, the most rationalapproach is to recognize the legitimaterights of each party, which must be in-cluded as part of equitable agreements. Ifthe oil owners are guaranteed a level ofincome sufficient to enable them to attendto the problems of their populations, todevelop an adequate infrastructure anddeal with other key problems, investors willdefinitely see benefits in the form of therequired levels of economic, political andsocial stability.

If, additionally, technological progressallows for new ways of enhancing produc-tivity and reducing costs, consumers arebound to enjoy lower prices. At the sametime, if the governments of consumingcountries moderate their fiscal voracity,they will also be contributing to reducingpressure on the prices paid by their owncitizens and will be helping to stimulatethe world energy market.

In a nutshell, if we progress towards atype of relationship where the rights ofeach party are equally respected, and weall give up the use of pressure and force toimpose our own interests, we will all endup winning.

8 OPEC Bulletin

F O R U M

The Organization co-ordinated the pe-troleum production and pricing policiesof its Member Countries, brought abouta more rational use of energy resources,and encouraged exploration activities,leading to increased oil reserves. Throughmore realistic crude oil pricing, the diver-sification of energy mix has been encour-aged. More importantly, OPEC has be-come a crucial actor in stabilizing theworld oil market at critical momentsduring the last decade, such as during theprice turmoil seen in 1998 and early 1999.

The 1960s and 70s were years of con-solidation for OPEC, reflecting suchchanges as the establishment of the na-tional oil companies, who took over con-trol of production from the oil majors, andplayed an increasing role in crude oil pric-ing. The last two decades were equallychallenging, as the Organization was con-fronted with increased competition, beingsubjected to pressure both on the demandand the supply side, in the face of whichit strove to maintain its Members’ oilearnings despite fluctuating market sharesand eroding price levels.

Although in the early 1970s, OPECcontributed substantial amounts of oil toaccommodate sharp rises in world oil de-mand, in later years it had to face stagnat-ing production and the onset of a sustainedloss in its market share. By 1985 reducedoil demand, mainly caused by conserva-tion and fuel substitution, along with acontinued upward trend in non-OPECproduction levels, caused a slide in OPEC’sproduction and export market shares frompeak highs of 54 per cent and 87 per cent,to 29 per cent and 51 per cent, respec-tively.

In other words, during a period of oilglut OPEC had to accept growing rates ofsurplus capacity and a further shrinkagein its market share. The structural changesthat took place in the market increased the

OPEC has grown into amature and cohesive group,but despite all its achievements,there are still numerouschallenges to be tackled in thenew century, notes the Directorof OPEC’s Research Division,Dr Shokri Ghanem*, in thisarticle.

Future challenges for OPEC and its Membersin the global petroleum sector

number of market participants and, there-fore, made it more difficult for the Or-ganization to introduce a reverse trend inthe oil price path. The introduction ofproduction quotas and Member Coun-tries’ adherence to their production ceil-ings was not always successful in combat-ing the pressure on oil prices. OPEC, asa residual market supplier, was at one stageconfronted with the serious double chal-lenge of plunging oil prices and a reduc-tion in its oil market share to below 30per cent.

In 1986 and the years which followed,OPEC responded with major and decisivepolicy changes. It abandoned fixed pricesand adopted a more dynamic market-shareapproach, in order to re-establish its po-sition in the world oil market, as a resultof which it achieved gains both in termsof volume and market share, despite hav-ing had to face growing competition. Inthe 1990s, a more balanced developmentof prices and OPEC output managementcontributed to a further improvement inworld oil market conditions.

Today’s market challengesOf all the challenges encountered

during the last four decades the major one— which continues to persist today — isachieving oil price stability. How detri-mental and destabilizing its absence inthe market can be was once again dramati-cally demonstrated just a couple of yearsago. When prices plunged to less than$10/barrel in 1998, through its concertedefforts OPEC efforts played a crucial rolein restoring a more balanced and stablemarket. But the struggle to return to theprice-recovery path during 1998 and 1999was more difficult and costlier than hadbeen experienced in 1986.

The pain of the price slump was feltseverely in OPEC Member Countries,who lost billions of dollars in oil revenues,

* Based on Dr Ghanem’s address to a meetingof the Associations of the United NationsCorrespondents and Arab Journalists in Vi-enna, Austria, on May 23, 2001.

Throughout its 40-year history,OPEC can be credited with anumber of major accomplish-

ments. At the same time it has also facedenormous pressures. Despite this, it hasgrown into a mature and cohesive group,which plays an essential role in the inter-national oil market by contributing to-wards its stability. But, as well as the suc-cesses it has demonstrated over the years,the difficulties that the Organization hashad to overcome should not be underes-timated. Its achievements are also reflec-tions of the many challenges it has faced.

F O R U M

May 2001 9

amounting to around $50bn–$60bn. Theconsequential economic hardship and cutsin investments were felt not only in OPEC,but also in non-OPEC oil producers suchas Russia and Mexico, as well as marginaldomestic producers in the United States.International oil companies could notescape the impact of low prices either andwere forced to reposition themselves to facethe new market realities. Therefore,OPEC, together with several non-OPECcountries, agreed to curtail substantialcrude volumes and re-balance the marketthrough effective supply management.

Similarly, the same group last year de-cided on an opposite course of action, in-creasing their production by more than 4.0million barrels/day, in order to curb ex-cessively high prices and prevent themslipping beyond a reasonable range. Twoimportant aspects of these accomplish-ments ought to be emphasized.

Calming the marketFirstly, OPEC acted repeatedly either

to eliminate the oil glut in the marketthrough production restraint, or to stemthe price hikes with additional supplies andby calming market perceptions. In otherwords, OPEC’s efforts towards marketstabilization entail taking actions at bothextremes when prices are either too low ortoo high, and are thus detrimental to theglobal economy. Moreover, OPEC has alsobeen looking into ways to sustain oil priceswithin a reasonable range of $22–28/b.

Secondly, there has been broader par-ticipation in these efforts. A series of con-sultations and meetings has been instru-mental in enhancing this successfulplatform of co-operation. These jointmoves between OPEC and non-OPECcountries not only strengthen trust andconfidence among the producers, but alsohighlight a new spirit of co-operationwithin the oil industry — somethingwhich OPEC has been advocating for along time.

Since the challenge of oil-price andmarket stability will, as in the past, alwayscontinue to shadow us, these two achieve-ments have become critically important tosustaining stability. While through itspolicies OPEC gives assurance that it willcontinue to support this aim, it cannotachieve it alone, and cannot be expectedto shoulder all difficulties as they arise. The

increasingly complex nature of the presentoil market requires effective co-operationas well as participation among partiesinvolved, including the governments of themajor consuming nations, for examplethrough flexible and less biased fiscalpolicies on downstream oil. Additionally,the exorbitant and discriminatory natureof oil product taxation in OECD coun-tries, as it now stands, has become a chal-lenge both to consumers and to produc-ers in terms of their steady rise.

Tomorrow’s challengesSometimes the volatile international

dimension of oil, entwined with the manyvaried interests and strategic considera-tions, makes the longer-term perspectivesin the world oil market difficult to ascer-tain. In fact, the right prediction of future,global oil demand and supply is in itselfa challenging task, due to the uncertain-ties associated with future economic-growth paths, efficiency-improvementpotential, technology, possible OECDenvironmental-policy implications, andother factors.

Nevertheless, when referring to thefuture outlook for the oil industry, it isuseful to examine some of the recent re-sults generated by the OPEC World En-ergy Model (OWEM), a large-scale econo-metric model in the Secretariat, in whichscenarios for the period up to 2020 are setout on the basis of various assumptions.These assumptions include the following:oil prices at $25/b in nominal terms until2010, thereafter rising with averageOECD inflation; world economic growthof around 3.3–3.5 per cent/year over thenext two decades, and the value for au-tonomous energy efficiency improvementsat around 1 per cent/year; neutral assump-tions regarding energy taxation and regu-latory policies in OECD countries; a lim-ited role for nuclear energy in futureincreases in global energy supplies; a con-stant share for oil in the transportationsector constant over the forecast period,and so forth.

In the latest OWEM report (March2001), the reference case scenario seesworld oil demand growing at an averagerate of 1.5m b/d per year over the periodto 2020, with corresponding growth ratesof 1.8 per cent and 1.5 per cent duringthe following ten-year periods up to 2010

and 2020 respectively. Total world oildemand is, therefore, expected to be at106m b/d by 2020, an increase of 30mb/d in absolute terms over 2000, yet witha decline in its share of the energy mix to39 per cent during the same period.During the next two decades the majorincremental oil demand will be seen in thenon-OECD area, accounting for over 74per cent of the total demand increase. Thedeclining share of the OECD in global oildemand (52 per cent in 2020) will becompensated by a major increase in theAsia Pacific region (from 14 per cent in2000 to 21 per cent in 2020).

Taking the low and high price sce-narios into account, the bulk of these in-cremental oil requirements — between29m b/d and 32m b/d — is expected tocome from the OPEC Countries. Theseprojections put OPEC crude oil produc-tion in the range of 51m b/d to 57mb/d, of course reflecting the comparativeadvantage enjoyed by our Members withtheir huge, low-cost reserve base.

On the supply side of the equation,with abundant oil supply potential sur-rounding us for many decades to come,there is no reason to worry about theavailability of oil resources. Last year, worldproven oil reserves stood at over one tril-lion barrels, enough to satisfy the world’sneeds for nearly 40 years at the present rateof consumption. Moreover, technologicaldevelopments and price adjustments willalways bring about solutions that with-stand the risk of resource constraints.

Large-scale investmentsHowever, the challenge here is to se-

cure large-scale investments in time tosatisfy the growing oil demand in comingyears. The incremental oil imports re-quired from the OPEC area in order tomatch the rising oil requirements in otherregions would in return necessitate con-siderable capacity expansion, and thattranslates into investments of many bil-lions of dollars. Now, if OPEC strives tosustain oil prices at around $25/b, this isnot only geared towards short-term mar-ket stability, but also attempts to ensurecontinuity of investment for supply secu-rity.

During the 1990s the internationalclimate change negotiations caused muchconcern to oil producers — concerns

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10 OPEC Bulletin

which are still valid today. Therefore, whendiscussing the long-term oil market out-look, it is impossible to overlook the po-tential impact of environmental measuresbased on current discussions and negotia-tions at the international fora. As is wellknown, the Kyoto Protocol foresees thatAnnex I Parties will, as agreed, lower overallgreenhouse gas (GHG) emissions to be-low 1990 levels between 2008 and 2012.Although it is not clear how and throughwhich policy instruments and measuresthis target is going to be achieved, anylikely impact of ‘green taxation’ on oildemand prospects under the Kyoto Pro-tocol scenarios would be significant.

In one scenario, the effect in terms ofthe actual fall in OPEC oil productioncompared to the reference case is put at4m–10m b/d in 2010. Annualized revenuelosses vary accordingly between $22bn–63bn, equivalent to a welfare loss of be-tween 1.7 per cent and 3.5 per cent ofGDP. Other independent studies alsoconfirm this with similar results. Both forOPEC Members and for other oil produc-ers whose economies are largely depend-ent on their resource bases, this representsyet another challenge, and one must betaken very seriously.

Environmental issuesThe recent remarks of the US Presi-

dent on Kyoto have indeed highlighted theimportance of the global environmentalissue for all concerned, thus stressing theneed for a fresh approach to the ongoingdebate. Given the dramatic impact thatenvironmental policy decisions could haveon the world oil industry in the long-term,we are firmly of the opinion that all par-ties involved should seek fair, balanced andequitable solutions in their ultimate ob-jectives. Instead of further aggravating thedisproportionate energy tax structure inthe OECD, both within and among prod-ucts, OPEC suggests more equitable en-ergy taxation using a pro-rata tax systembased on carbon content and targeted atall GHGs.

Other positive concepts aimed at mini-mizing the direct effects of mitigation meas-ures on oil exporters, as put forward byOPEC in the ongoing negotiations underthe umbrella of the United Nations Frame-work Convention on Climate Change,should be seriously considered. Some such

ideas are: the establishment of broaderinvestment funds, increased investment incleaner oil products, energy-efficiency im-provements in the use of fossil fuels; andthe enhanced transfer of technology.

Challenges facing MembersBesides challenges of a short-term and

longer-term nature for OPEC, there are anumber of others that are directly relatedto our Member Countries. OPEC, as anOrganization, has proved itself to be astrong and reliable body, demonstratedthrough its recent market-managementpolicies. These have been coherent, effec-tive, and successful. Our Member Coun-tries should take advantage of this momen-tum and continue to preserve the unityand spirit of co-operation in the Organi-zation also in the future.

Despite continuing uncertainty in thecoming years, investment in the oil indus-try becomes a highly crucial element forall of us, and this requires enhanced co-operation in an environment of rapidly-changing industry dynamics. Looking atthe large, low-cost reserve base of theOPEC Member Countries with their com-paratively low market shares, it wouldmake economic sense to have more invest-ments channeled into those highly produc-tive producing regions. In that respect,co-operation and partnership are growingas more Member Countries announceprojects involving foreign oil companies.On the other hand, the expansion of pro-duction capacities should follow soundinvestment-management principles, toavoid policies being followed that couldimpede price stability in the market.

One common feature of all OPECMember Countries, like other developingcountries, is that they are all striving toachieve increased development and sus-tainable growth. Over the years theireconomies, having dominant resource-based characteristics, have made significantcontributions to infrastructure develop-ment, and increased purchasing power fortheir populations. In spite of these dra-matic changes and substantial progressamong Member Countries, their econo-mies are still very sensitive to price fluc-tuations and the risks of such a high levelof dependence have always been felt attimes of oil market downturns, such as in1986 and more recently during 1998 and

early 1999. Therefore, the export base oftheir economies should be further diver-sified in order to reduce their vulnerabil-ity to oil price slumps. In addition to anexpanded export base, more technical co-operation and partnership among Mem-ber Countries could be established to shareand complement areas of strength andexpertise.

As part of the economic-diversificationdrive, the ‘added value’ in the hydrocar-bon industry could be enhanced by invest-ments in the natural gas and petrochemi-cals industries. For example, as is the casewith oil, the present shares of MemberCountries in the gas market do not ad-equately reflect their natural gas potential.Although 44 per cent of world provennatural gas reserves are in OPEC MemberCountries, their output constitutes only15 per cent of world marketed production.OPEC Members are now attaching higherpriority to gas projects as complementaryto oil, opting for investment opportuni-ties to develop their huge gas resources.

Many of them are already expandingour gas production and export potentialto diversify our economic activities andsources of income, and to satisfy our grow-ing domestic needs, at the same timecontributing to meeting world gas de-mand. Gas expansion programmes andpetrochemical projects could also bolsterregional co-operation. The intra-Gulf gaspipeline network, known as the Dolphinproject; and potential co-operation andjoint investment opportunities in the pet-rochemical sector between the Saudi Ba-sic Industries Corporation and Iran’s Na-tional Petrochemical Company, andbetween Egypt and the United ArabEmirates, are just a few such examples.

The list of challenges could of coursebe extended to other areas such as the glo-balization process, the advancement ofregional trading blocs, the impact of tech-nology and communications revolutions,and others. As we move with the times,the scope and importance of challenges willundoubtedly vary, but oil market stabil-ity, as has always been the case, is going toremain a major challenge for us all. Thegrowing complexity of this challenge callsfor closer and more effective co-operationboth within OPEC and among otherparticipants, be they consuming govern-ments or the industry.

N E W S L I N E

May 2001 11

N E W S L I N E f r o m t h e O P E C N A N e w s D e s k

oha — Qatar’s Ras Laffan Liq-uefied Natural Gas Company II

(RasGas II) has awarded a contractfor the engineering, procurement andconstruction of an LNG train and relatedonshore facilities at the RasGas site, on thenorthern tip of the Qatari peninsula.

The contract was awarded to a con-sortium of two Japanese firms, ChiyodaCorporation and Mitsui, andSnamprogetti of Italy. A separate contractwas signed between RasGas and J RayMcDermott Middle East (Indian Ocean)to build the offshore facilities and a 90-km pipeline to shore.

The project consists of offshore pro-duction, transportation and liquefactionfacilities to produce 4.7 million tonnes/year of LNG for export to Petronet LNG ofIndia, under a previously-signed sale andpurchase agreement.

“This represents the largest single LNG

sale to a customer in the industry,” saidthe Chairman of RasGas, Yousef Kamal.

The agreement with Petronet coversdeliveries of 5m t/y to a planned importterminal at Dahej in Gujarat State, andanother 2.5m t/y to a second plannedterminal at Cochin in Kerala State.

Deliveries to Dahej are slated to beginin late 2003. The gas will initially be sup-plied from the existing LNG trains at theRasGas site, until the RasGas II train iscompleted, added Kamal, who is alsoQatar’s Minister of Finance, Economy andTrade.

Work had already started on the newtrain and production would begin in 2004,he went on, noting that the constructionof the RasGas II train would cost severalbillion dollars.

“The dedication over the past two yearsto make this happen has been an extraor-dinary achievement and we are certain thisdeal will serve as a model for future LNG

deals in India and other emerging mar-kets,” Kamal said.

With a capital of $548 million, RasGasII is a joint venture formed recently by stateoil firm Qatar Petroleum (70 per cent) and

Qatar’s RasGas II awards contracts to buildanother liquefied natural gas train for the

supply of LNG to Indian firm PetronetMobil QM Gas, an affiliate of ExxonMobil(30 per cent). Petronet has an option toobtain five per cent equity at a later stage.

RasGas II is an offshoot of Qatar’sRasGas, the country’s second LNG venture,which was established in 1993. The par-ent company is jointly owned by QatarPetroleum (63 per cent), and ExxonMobil(25 per cent), while the rest is in the handsof Japanese and Korean companies.

Qatar’s first LNG venture is QatarGas,which is a joint venture between QatarPetroleum (65 per cent), France’sTotalFinaElf (10 per cent), and the Japa-nese companies Mitsui and Marubeni,each with a 7.5 per cent stake.

Qatar has the third largest natural gasreserves in the world, after Russia and Iran.

Algeria launches newlicensing rounds for oiland gas explorationAlgiers — The Algerian Energy andMines Ministry and the state oil companySonatrach have launched an internationallicensing round for oil and gas explorationon 10 blocks in various different basins inthe country, it was officially announcedlast month.

The blocks are located in the CheliffBasin (10,000 sq km), the TimimounBasin (15,000 sq km) and the Basins ofTouggourt and Saddle, which cover 8,500sq km and 6,366 sq km, respectively. Therest of the blocks are situated in the BerkineBasin (five blocks) and the Illizi Basin, withareas ranging from 1,100 sq km to 4,800sq km.

Technical information and the maincontractual terms for the blocks on offerwas made available in early May. Theopening of the sealed tender will take placeon October 1, while contract signing withthe successful companies will follow 15days after the selection is made.

This licensing round is the second ina programme of operations for the pro-

motion of around 60 blocks that theEnergy and Mines Ministry proposes toput out to tender within the frameworkof the country’s new policy on awardinghydrocarbon contracts.

The first licensing round involved theaward of two blocks, one to Gulf KeystonePetroleum of the United Arab Emiratesand to a Russian association of Rosneft andStroyTransgaz.

A third block was originally awardedto US firm Anadarko, but Sonatrach latersaid it would re-auction this block becauseAnadarko had requested changes to thecontract after the award had been made.

In a related development last month,Sonatrach and the Ministry also launchedan international bidding round for thedevelopment of five oil and gas fields, alllocated in the prolific Illizi Basin, in theeastern Sahara.

The projects involve the developmentof the oil fields of Zarzaitine and El-Adeb-Larache, the Tinhert gas field, the RhourdeNouss hydrocarbons pool, and the explo-ration and development of the oil and gasfields of the south-east Illizi Basin.

The bidding round process involvestwo phases — the first covering technicalproposals, and the second comprisingeconomic proposals. A general presenta-tion of the projects was held in May.

In the second phase, the Ministry willevaluate the different proposals receivedand define a technical programme, follow-ing a review of the submitted offers. It willthen forward the results to the biddersbefore December 30.

The opening of the sealed tenders isdue to be held on March 31, 2002, whilethe contract signing with the successfulfirms will be staged within 15 days of thatdate.

Venezuela’s PDVSAposts net earnings of$7.35bn for year 2000Caracas — State oil corporationPetroleos de Venezuela has reported con-solidated net earnings for 2000 amount-ing to $7.35 billion, almost double thelevel in 1999.

PDVSA said its gross consolidatedincome for 2000 totalled $53.23bn, up 63

D

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12 OPEC Bulletin

feasibility studies for the construction oftwo new units with the China Oil and GasDevelopment Corporation and Enel ofItaly. PDVSA has signed Orimulsion sup-ply contracts with both companies.

In the coal sector, PDVSA said itssubsidiary Carbozulia exported some8.09m tonnes of coal last year, about 28.7per cent more than in 1999, which wentto Europe, the United States, Canada, theCaribbean and Latin America. Carbozulia’snet profits for last year totalled $7.06m.

Indonesia’s Pertaminaannounces fuel pricehike for industrial sectorJakarta — In a move to cut governmentsubsidies, Indonesian state oil and gascompany Pertamina announced significantfuel price rises for the industrial sector lastmonth.

However, Pertamina spokesmanRidwan Nyak Baik stressed that the priceswere set at half of international marketprices and would move according to glo-bal oil price trends.

The move is in accordance with presi-dential decree no 45/2001, dated March30, which specifies that fuel prices are tobe set at 50 per cent of internationalmarket prices for the industrial and com-mercial sectors, including fishing trawlers,tankers and barges.

Pertamina raised the price of automo-tive diesel by 65 per cent to 990 rupiahsper litre from Rp600; industrial diesel by76 per cent to Rp970, from Rp550; kero-sene by 200 per cent to Rp1,080, fromRp350; and bunker oil by 92 per cent toRp770, from Rp400.

Retail prices of fuel for households,small industries, land and water transpor-tation, and for the state electricity com-pany PLN remained unchanged.

Foreign ships, vessels with interna-tional destinations, foreign mining, and oiland gas companies would pay fuel pricesat the full international market rates, saidPertamina.

These are Rp1,950/lt for premiumgasoline, Rp2,150 for kerosene, Rp1,990for automotive diesel, Rp1,940 for indus-trial diesel and Rp1,540 for bunker oil.

Pertamina will fix fuel prices every

month, based on forecasts, but regardlessof market fluctuations. The new prices willbe announced a week ahead of the begin-ning of every month.

UAE says new cars musthave catalytic convertersfrom start of next yearDubai — Automobile distributors in theUnited Arab Emirates have been told thatall new cars imported starting next Janu-ary must be fitted with catalytic convert-ers, and that all cars on the roads fromJanuary 1, 2007 must be installed withthese devices.

The Assistant Under-Secretary forIndustrial Affairs at the Ministry of Fi-nance and Industry, Mohammed Ali BinZayed, addressing a meeting of car deal-ers, said that in addition, petrol stationswould only pump unleaded fuel from2007.

“We are also working on setting dieselemission standards, which could be im-plemented as early as next year,” Zayed toldthe gathering.

He added that the three domesticpetrol suppliers would gradually increasethe proportion of unleaded fuel they selluntil it becomes the only petrol on offer.

The Directorate of Standardisationand Metrology has also met with repre-sentatives from local petrol companies todiscuss the phase leading up to the Janu-ary 2007 target date. The Directorate hassaid that petrol with 0.013 grammes perlitre or less of lead tetra alkyl compoundswould meet unleaded requirements.

A number of petrol stations in thecountry already offer unleaded fuel, whichis available in an estimated 30 per cent ofthe UAE.

NNPC boss says Nigerianrefineries are processing330,000 b/d of crudeAbuja — Nigeria’s refineries have nowreached a combined processing capacityof 330,000 barrels/day of crude oil, ac-cording to the Group Managing Directorof the Nigerian National Petroleum Cor-

per cent from 1999 levels as a result ofhigher oil prices and the placement oflarger volumes of products on the market.

The corporation also reported that itsfiscal contribution during 2000 was$10bn, while its total contribution, includ-ing dividends to its shareholder, was$12bn.

Production capacity for last yearreached 3.58 million barrels/day, of which84 per cent resulted from PDVSA’s directactivities and 16 per cent from operationalcontracts.

If strategic associations in the Orinocooil belt were taken into consideration, thecountry’s production capacity would standat 3.85m b/d, PDVSA said.

Crude oil and condensates reserves areestimated at 77.68bn b, an increase of833m b compared with 1999, while natu-ral gas reserves stand at 148 trillion cubicfeet, PDVSA said.

The firm also said it processed a totalof some 2.61m b/d of crude at its refin-eries at home and abroad. Crude andproduct exports for last year averaged2.82m b/d, fetching an average price forthe Venezuelan export basket of $25.91/b,an estimated $9.87/b higher than the 1999average price.

As part of the strategy to diversify itsclients and consolidate markets with ahigher return, sales to Latin America andthe Caribbean increased by some 80,000b/d compared with 1999, PDVSA said.Additionally, 7.5m b of crude in fourshipments were delivered to India, thecompany said.

In the petrochemical sector, PDVSAsaid the market strengthened as a result ofhigher prices and demand. Pequiven,PDVSA’s petrochemical subsidiary, re-ported net earnings last year amountingto $10.34bn, compared with a loss in1999. Pequiven and its joint ventures re-ported gross production last year of some7.4m t and sales of 7.1m t.

The PDVSA subsidiary Bitor, whichis responsible for the sale of the powerplant fuel Orimulsion, reported exportsof 6.23m t, about 28 per cent higher thanin 1999, fetching an average price of$29.50/t. Bitor’s consolidated net earningsfor 2000 were estimated at $60m.

PDVSA also said that the developmentof the Orimulsion sector moved forwardduring the year with the launching of

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May 2001 13

poration (NNPC), Jackson Gaius-Obaseki.

The country’s four refineries at Warri,Kaduna and Port Harcourt I and II havea combined installed capacity to process445,000 b/d of crude oil.

Gaius-Obaseki told Imo State Gover-nor Chief Achike Udenwa, who visitedhim in Abuja last month, that the refin-ing production level was the highest levelachieved in more than a decade.

He added that the improved state ofthe nation’s refineries had resulted in morethan enough production of kerosene anddiesel, adding that some of the productswould soon be exported.

However, he lamented that due toincreased consumption and the smugglingof available petrol, the refineries could notmeet local demand, which had risen from18 million litres/day to about 25m lt/d.

“It is in order to meet the increasinglocal demand that the country is import-ing petrol to augment local production,”he explained.

Gaius-Obaseki added that with therestoration of power to the Port Harcourtrefinery, local production of petrol wouldincrease to meet demand in the south-eastern part of the country.

In response, Udenwa implored theNNPC management to site a fuel depotin Imo State, adding that, in the interim,the corporation should increase suppliesto the Aba depot, which supplied his statewith petroleum products.

“As an oil-producing state with abun-dant gas reserves, we are desirous of beingincluded in downstream joint-venture gasprojects, petrochemicals and refinery op-erations,” he said.

Saudi Minister meetsEuropean Union TradeCommissioner for talksRiyadh — Saudi Arabian Minister ofPetroleum and Mineral Resources, Ali INaimi, has held talks with the EuropeanUnion (EU) Trade Commissioner, PascalLamy, the official Saudi Press Agency(SPA) reported last month.

During the talks, which focused on avariety of subjects, Naimi underlinedRiyadh’s keenness on maintaining stabil-

ity in the international oil market in theinterests of producers and consumers.

The Kingdom was committed tostabilizing oil prices at a level of around$25/barrel, the Minister reaffirmed.

SPA noted that, as well as discussingthe situation in the international oil mar-ket, the two sides also considered thequestion of Saudi Arabia joining the WorldTrade Organization.

Lamy also held a separate meeting withthe Saudi Minister of Industry and Elec-tricity, Dr Hashem Yamani, at which theydiscussed various ways of improving eco-nomic co-operation between the Kingdomand the EU.

Kuwait’s KNPC shutsAl-Shuiba oil refineryfor regular maintenanceKuwait — The Kuwait National Petro-leum Company (KNPC) announced lastmonth that its 200,000 barrels/day Al-Shuiba oil refinery would be shut down atthe end of April for maintenance, accord-ing to the official Kuwaiti News Agency(KUNA).

KNPC’s Deputy Chairman and ChiefExecutive Officer, Sami Al-Resheid, wasquoted by KUNA as saying that the main-tenance took place every five years andwould last 40 days.

“It has all been arranged and prepara-tions have been conducted by KNPC’smarketing department to deal with itsclients and customers,” he said.

Preparations started over a year ago asall materials, spare parts and the trainingneeded were arranged. At peak times,around 2,000 people would be workingon the maintenance.

The aim of the regular maintenance,said Al-Resheid, was to double check onall joint systems serving the refinery thatoperated all units. KNPC would also seizethe opportunity to conduct maintenanceand repairs in other projects at the refin-ery.

The company’s two other refineries,Al-Ahmadi and Mina Abdullah, could notundergo complete maintenance becausethey were built in several stages, he noted.

The Al-Ahmadi plant, with a produc-tion capacity of 450,000 b/d, consisted of

Pakistan plans oil, gas explorationISLAMABAD — Pakistan plans to undertakelarge-scale oil and gas exploration in the coun-try in the next six months, it was reportedlast month by the Associated Press of Paki-stan news agency. Sources at the Oil and GasDevelopment Corporation were quoted assaying that the company was planning to drillat least eight oil and gas wells. “All the com-pany’s resources will be utilized to their opti-mum capabilities for the planned large-scaleoil and gas exploration and drilling activitiesin the coming six months,” said one source.In a separate development, the first shipmentof 15,000 tonnes of unleaded motor gaso-line, produced by Pakistan’s Pak-Arab Refin-ery Company (Parco), has left Karachi for anunknown Middle East port. According to anofficial announcement, Parco’s refinery wasthe only facility in the country able to pro-duce this grade of motor gasoline.

UNCTAD sees slower demand growthGENEVA — The United Nations Conferenceon Trade and Development (UNCTAD) haspredicted that world demand for oil couldease over the next 12 months, depending onthe extent of the slowdown in the UnitedStates and its impact on world economic ac-tivity. In its annual Trade and DevelopmentReport, UNCTAD noted that oil stocks hadincreased, but remained at relatively low lev-els, which would continue to contribute toprice volatility. “In the absence of any seriousdisruptions in supply, average oil prices in2001 may fall to below $20/barrel,” it said.However, UNCTAD noted that the outlookfor oil prices depended to a large extent onthe production policies of OPEC. “With theexception of Kuwait, Saudi Arabia and theUnited Arab Emirates, whose combined spareproduction is estimated to be about 3m-4mb/d, all other countries have been producingat full capacity,” it observed.

US drilling activity up in 1Q01NEW YORK — Estimated completions of oil,natural gas, and dry wells in the USA in-creased by 63 per cent in the first quarter ofthis year, compared with the same period in2000, according to the American PetroleumInstitute (API). Oil well completions rose by21 per cent, while natural gas completionssurged by 106 per cent, the API said in itsquarterly well completion report for the firstthree months of this year. It noted that a to-tal of 9,539 oil, natural gas and dry wells werecompleted in the first quarter, compared with5,839 in the first three months of last year.For the first quarter of 2001, gas completionsamounted to 6,119, oil well completionsstood at 2,260, while dry holes rose by 16per cent to 1,160.

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�������� several units that were maintained accord-ing to a specific schedule, but without acomplete shutdown, he explained.

Maintenance was conducted at theMina Abdullah refinery, which has a pro-duction capacity of 265,000 b/d, everythree or four years, he added.

KNPC is the downstream unit of thestate-owned Kuwait Petroleum Corpora-tion.

Three new gas refineriesbeing built in Iran withcapacity of 100m cu m/dTehran — The National Iranian GasCompany (NIGC) is building three newgas refineries with a total capacity of 100million cubic metres/day, the official Is-lamic Republic News Agency (IRNA)reported last month.

NIGC Managing Director,Hamdollah Mohammadnejad, told report-ers on the sidelines of an industry confer-ence that feasibility studies on the estab-lishment of the first refinery were com-pleted.

The ordering of equipment and designwork on the refinery, which would belocated 35 km from Ilam in western Iranand have a capacity of 10m cu m/d, werealready under way. The plant would takethree years to build, he said.

The second project, the Parsian gasrefinery, located in the southern provinceof Fars, was also under construction,Mohammadnejad noted.

When completed, it would have a totalcapacity of 50m cu m/d, and operationsfor construction of the first phase of theproject, with a capacity of 21m cu m/d,had started. The refinery will process gasfrom the Tabnak, Shanol and Varavi gasfields.

The third plant is to be built inBidboland, and will have a productioncapacity of 40m cu m/d. It will refine gasfrom the South Pars gas field. The totalcost of the three plants will be $1.5 bil-lion.

The IRNA report added that the coun-try’s total gas output last year stood at192m cu m/d, and this year, an additional1,200 km of high-pressure gas pipelinewould be laid.

Apicorp’s net profitup by 16 per centto $40.4m in 2000

Dammam — The net profit of the ArabPetroleum Investment Corporation(Apicorp) increased to $40.4 million lastyear, 16 per cent higher than the 1999 levelof $34.9m, the firm has announced.

Apicorp, which is an affiliate of theOrganization of Arab Oil ExportingCountries, said that total shareholders’assets amounted to $1.57m.

The rise in profit was mainly attrib-uted to an increase in project and tradefinance activities, said Apicorp in a state-ment.

The firm’s general assembly endorseda board recommendation for the distribu-tion of $30m as dividends to shareholdersfor the year 2000.

The statement added that, during theyear, Apicorp was able to maintain itsposition in the project finance markets andsuccessfully completed 18 new financingtransactions.

Net project and trade finance loansoutstanding at the end of 2000 amountedto $851.6m, showing a 25.1 per centincrease over the 1999 level, which stoodat $680.5m.

Established in 1975, Apicorp is ownedby OPEC Members Algeria, Iraq, Kuwait,Libya, Qatar, Saudi Arabia, and the UnitedArab Emirates, as well as non-OPECBahrain, Egypt and Syria.

It has participated with other regionaland international financial institutions inarranging and managing loans for petro-leum-related projects and industries total-ling $49.5 billion, mainly in shareholderstates.

Algeria’s Khelil has talkswith European officialon natural gas marketAlgiers — Algerian Energy and MinesMinister, Dr Chakib Khelil, has held talkswith the European Commission’s (EC)representative in Algeria, Lucio Guerrato,to discuss latest developments in the Eu-ropean gas market.

UK North Sea output at four-year lowLONDON — Oil production from the Britishsector of the North Sea fell to 2.2 millionbarrels/day in February, its lowest level sinceJune 1997, according to the latest index is-sued by the Royal Bank of Scotland. Febru-ary’s output was 64,000 b/d less than in Janu-ary, but despite the fall, daily oil revenue roseby $3.1m to $61.7m, due to average crudeprices rising to $27.5/b. The bank said thatalthough Britain’s oil production was likelyto rise later this year, average output was un-likely to exceed 2.4m b/d. However, in a sur-vey of Scottish companies servicing oil andgas operators, the report found a “significantimprovement in levels of business confidence,compared with 12 months ago,” which it saidresulted from “increased volumes of businessand improving prices and margins.”

OAPEC sees rise in oil demandKUWAIT — The Organization of Arab Petro-leum Exporting Countries (OAPEC) hasforecast that world oil demand this year willreach 77.5 million barrels/day, an increase of1.9m b/d over last year’s 75.6m b/d. In thelatest issue of its monthly Bulletin, OAPECalso anticipated that average world demandfor oil and natural gas liquids this year wouldamount to 78.1m b/d, an increase of 1.3mb/d, compared with 2000. The Kuwait-basedOrganization said that global demand for oiland NGL in the 1Q01 saw a 1.9m b/d hike to77.4m b/d. 2Q01 demand would total 75.7mb/d, a rise of 1.9m b/d from 2Q00. Demandin 3Q01 would reach 76.9m b/d, an increaseof some 1.1m b/d over 3Q00. Finally, de-mand in 4Q01 would witness a large increaseto 79.5m b/d, a rise of 2.2m b/d from 4Q00.

Middle East to export more plasticsDUBAI — By 2005, the Middle East will havethe highest growth rate in petrochemical in-vestment and will become the largest plas-tics-exporting region, according to a Swissindustry expert. An article in Dubai’s dailyGulf News quoted the President of MaackBusiness Services, Horst Maack, as saying thatin 1980, global production capacity of thefour major thermoplastic resins (polyethylene,polypropylene, polyvinyl chloride and poly-styrene) was about 53 million tonnes, withthe Middle East’s share being less than twoper cent. However, by 2005, global capacityfor these products was forecast to reach 168mt, of which the Middle East would accountfor more than 15m t, giving the region a nineper cent share. The main reasons for the in-crease in the Middle East’s share were theavailability of cost-competitive raw materi-als, including gas and oil, an investment-friendly environment, and political stabilityand financial security.

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��������According to a Ministry statement, thetwo officials looked at restrictive arrange-ments related to the import of natural gas.

Khelil said he deplored the lack ofconsultation that had prevailed during theformulation of these arrangements.

Guerrato promised to heighten Euro-pean awareness of the need to establish acycle of consultations aimed at attainingthe approval of all partners involved.

Earlier in the week, Khelil had urgedthe EC to be “pragmatic” in energy mat-ters and to take decisions that took intoaccount the interests of producers andconsumers.

In another gas-related development lastmonth, the Algerian state electricity andgas company Sonelgaz reported a turno-ver of about $750 million for 2000, up by13.8 per cent over the previous year.

According to Sonelgaz Managing Di-rector Abdelkrim Benghanem, this posi-tive result was possible thanks to the re-forms carried out in the country since1995.

These reforms permitted the start ofthe turnaround of the firm’s performancein 1998, and also allowed Sonelgaz to reg-ister good profits, which enabled the com-pany to partially self-finance investments.

For the next decade, Sonelgaz is fore-casting investments of about $12 billion,noted Benghanem, adding that the sharedevoted to electricity operations would be$10bn.

Of this amount, $5.4bn would beinvested in power generation, while theremaining $4.6bn would be earmarked fortransport and distribution activities.

Also in the investment plan, Sonelgazis projecting investment of $2bn for therealisation of domestic gas projects.

BP expects to startwork on IndonesianLNG plant next yearJakarta — Oil and gas giant BP expectsto start building the Tangguh liquefiednatural gas plant in the east Indonesianprovince of Irian Jaya in the second quar-ter of next year, it was announced lastmonth.

BP would start building the plant af-ter completing an environmental assess-

ment of the project, said the firm’s SeniorVice-President for External Affairs, JohnO’Reilly. The study had been under waysince last year.

The greenfield plant, located at BerauBay, would utilize 14.4 trillion cubic feetof natural gas reserves from the offshoreWiriagar, Berau and Muturi fields. Pro-duction is due to start in 2006.

O’Reilly said a key element of thescheme was to find a long-term buyer forTangguh’s LNG to ensure the project hadsufficient return on investment. However,due to a lack of buyers, the project hadbeen postponed from its original sched-uled date this year.

O’Reilly said that among the poten-tial buyers of Tangguh LNG was China,which recently started building a receiv-ing terminal in the southern province ofGuangdong. BP is one of the partnersinvolved in the building of the terminal.

China would be inviting internationalbids for the supply of LNG, and BP, togetherwith Indonesian state oil and gas companyPertamina, would submit an offer, notedO’Reilly.

He added that efforts were also beingmade to increase supplies of IndonesianLNG to Taiwan. The gas would be suppliedfrom the Tangguh complex.

More than 30 companiesshow great interest inVenezuelan gas auctionCaracas — More than 30 internationaland domestic corporations have registeredto bid for 11 gas zones, located in fourVenezuelan regions, it was reported lastmonth by the state news agency Venpres.

The biding process is being jointlyhandled by the Energy and Mines Minis-try and state oil firm PDVSA. The dead-line for the submission of bids was May4, and the contracts will be assigned be-fore the end of the year.

Venpres quoted the President of theConstruction Chamber, Andres Azpurua,as attributing this positive reaction to areform of the laws controlling the gassector.

Since 1999, private investment hasbeen allowed in gas exploration, produc-tion and marketing.

UK could see new petrol price riseLONDON — Fears mounted in the UK lastmonth of a widespread rise in fuel costs inthe run-up to the general election, with Shellputting up the price of its petrol by a penny alitre. The company has blamed the price hikeon the cost of crude oil. The rise is being in-troduced in 800 of its 1,100 UK filling sta-tions to bring them into line with the remain-ing 300, which saw a similar rise earlier. TheShell move came as the UK Petrol Retailers’Association warned that all major oil com-panies may increase prices by a penny a litrein the next few weeks, which would wipe outthe cut in fuel duty announced in the recentbudget by Chancellor of the Exchequer (fi-nance minister) Gordon Brown. The warn-ing of price hikes came on top of fears thatan explosion at Conoco’s Humber refineryin northern England could fuel petrol pricerises in the UK over the next month.

US oil imports hit new highNEW YORK — United States imports of crudeoil and refined products reached a record highfor the first quarter of 2001, according to thelatest figures from the American PetroleumInstitute (API). Imports of 11.6 million bar-rels/day exceeded year-ago levels by more than12 per cent, the API said in its monthly sta-tistical report. This accounted for 59 per centof domestic deliveries, a key measure of de-mand. For the month of March, the US re-lied on foreign nations for slightly more than60 per cent of its petroleum needs. Crude oilimports of 9.66m b/d were 11.5 per centabove the level for March last year. However,the first quarter did see a rise of one per centin domestic crude oil production, the firstsuch increase in three years. A near three percent decline for Alaskan production was morethan offset by an increase in output for thelower 48 states, which reached 4.89m b/d inMarch 2001.

Premier starts output from Kyle fieldBRUSSELS — The United Kingdom oil explo-ration and production group, Premier Oil,has announced that production has startedat the Kyle field, in the central part of theUK sector of the North Sea. Output fromthe field is expected to stabilise at around20,000 barrels/day of oil. The company’sChief Executive Officer, Charles Jamieson,said: “Kyle is a significant field for Premierand is an important element in the substan-tial increase in Premier’s worldwide produc-tion over the next two years.” Premier holdsa 35 per cent stake in the field, while RangerOil is the operator. The Malaysian state oilfirm, Petronas, and the United States-basedAmerada Hess, each hold a 25 per cent sharein the field.

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�������� “The number of participating compa-nies proves that this auction will be quitesuccessful, and will have a positive effecton the Venezuelan industrial environ-ment,” Azpurua said.

“The construction industry has thegoal of participating in several stages (ofthe projects), including civil engineeringworks, such as pumping systems,” he wenton, adding that this process would have apositive impact on economic growth.

According to PDVSA figures, Ven-ezuelan gas reserves were estimated at 227trillion cubic feet in 1998. Of this total,91 per cent is associated gas. The coun-try’s reserves are thus ranked in seventhplace worldwide and are the largest in LatinAmerica.

Domestic gas demand currently standsat 1.91bn cu ft/y, with an estimated growthrate of 7.5 per cent per year over the nextdecade, which is fully covered by domes-tic production.

Present laws provide for the establish-ment of association agreements and jointventures for the exploration and develop-ment of gas, and for the construction andoperation of equipment.

ADNOC plans to sellrefined products oninternational marketAbu Dhabi — The Abu Dhabi NationalOil Company (ADNOC) is preparing tosupply gasoil and low-sulphur diesel fuelto the international market, according toa company official.

“In the United Arab Emirates, refin-ers continue to invest to supply gasoline,which will essentially be all unleaded by2005, following the trend elsewhere,” saidthe Head of the firm’s Business Planningand Market Studies Department, SalmanShibli.

Dubai’s Gulf News quoted him as say-ing that the recent commissioning of twocondensate splitters at Ruwais would al-low ADNOC to more than double exportsof refined products.

The paper also quoted ADNOC’sHead of Marketing Information, Ali AlYabhouni, as projecting that world oildemand would average 77.3 million bar-rels/day this year, with the Asian region

reaching around 21.5m b/d and account-ing for 27 per cent.

“Oil demand is projected to be sup-plied by just under 47m b/d from non-OPEC sources and a little under 31mb/d from OPEC, including natural gas liq-uids,” he said.

Nigeria holds seminaron deregulation ofdownstream oil sectorAbuja — Nigeria’s Presidential Techni-cal Campaign Committee on proposed re-forms in the oil industry organized a one-day workshop in Lagos last month tounderline the desirability of deregulation.

A statement from the secretariat of thecommittee noted that the seminar wouldscrutinize the advantages and implicationsof the initiative on the Nigerian economy.

The event would throw more light onthe subject, in view of the uproar it hadgenerated in Nigeria, the statement said.

The seminar would articulate properlythe government position on the matter,since there were misgivings surroundingits intention.

Leading experts and stakeholders in theoil industry, including the former Man-aging Director of the Kaduna refinery, BA Soyede, and the former Group Manag-ing Director of the Nigerian NationalPetroleum Corporation (NNPC), AretAdams, were expected to deliver papers tothe gathering.

The government has promised to re-vamp the country’s four refineries beforederegulating the downstream sector.

The Chairman of the Warri refinery,Gambo Lawan, noted that if the govern-ment rejuvenated the refineries to theirinstalled capacity before the reforms in theindustry, there would be no more fuel crisisin the country.

The government was ready to continueto maintain the refineries, pipelines anddepots, even after the deregulation policyhad been implemented, he said.

Lawan blamed marketers of petroleumproducts for the present persistent short-age of oil products plaguing the country.The activities of the marketers were “un-patriotic” and responsible for the severehardship facing the populace, he said.

IEA trims demand growth forecastPARIS — The International Energy Agency(IEA) has again scaled back its forecast for oildemand growth this year, based on assump-tions of a continued economic slowdown inthe United States and the impact this will haveon the global economy. In its latest Oil Mar-ket Report, the Agency said that worldwidedemand for crude in 2001 would increase by1.325 million barrels/day to 76.7m b/d, adownward revision of 85,000 b/d. “The dropreflects weaker than expected January deliv-eries in some countries, as well as expecta-tions that the US economic slowdown, com-pounded by relatively high oil prices, will fur-ther reduce oil demand growth in those coun-tries most dependent on US markets and onthe strength of their communications andcomputer industries,” the IEA said. However,it added that despite signs that the economicslowdown in the US “will be more protractedthan expected”, the level of demand in NorthAmerica was “surprisingly buoyant”.

India to import $17bn of crudeNEW DELHI — India’s crude oil import billfor fiscal 2001-02 is likely to be around$17.39 billion, largely unchanged from 2000-01, according to the English-language dailyAsian Age. However, this is a considerable riseon the 1999-2000 figure of $11.3bn. India’scrude oil imports were likely to rise by a mar-ginal four per cent to 78 million tonnes in2001-02, as against about 75m t for 2000-01, according to figures from the Ministry ofPetroleum. Public sector refining companiessuch as the Indian Oil Corporation, BharatPetroleum, and Hindustan Petroleum, wereexpected to import about 45m t in 2001-02,while private firm Reliance Petroleum wasslated to import its nameplate capacity of27m t. Domestic crude production was likelyto remain stagnant at 33m t in 2001-02,mostly unchanged from 2000-01.

Shell to invest $5.8bn in MalaysiaKUCHING — Royal Dutch/Shell plans to in-vest $5.8 billion in the Malaysian oil and gassector over the next five years, according tothe Chairman of Shell Malaysia, Lim HawHuang. A further $7.9bn was being soughtfrom the group to further explore businessopportunities in the country, he said. Thefive-year investment would cover develop-ment activities in the upstream oil and gasbusiness, downstream gas, refining, retailingand information technology, as well as finan-cial support services for the region, Lim ex-plained. “The huge investments demonstrateShell’s confidence in Malaysia,” he said at asigning ceremony to award a platform fabri-cation contract to Brooke Dockyard andEngineering Works.

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��������As long as there were profits to be madefrom doing so, the diversion, hoarding andsmuggling of petroleum products wouldcontinue.

He suggested that the monitoring ofpetroleum products should be made moreeffective, in order to tame what he calledthe “monster of fuel shortages”.

Algerian field HassiMessaoud to producefor another 40 yearsAlgiers — Algeria’s Hassi Messaoud oilfield, which has been producing for almost50 years, still has 2 billion tonnes of re-serves in place, it was officially announcedlast month.

A scientific seminar held by the re-search and development centre of thenational oil company, Sonatrach, was toldthat at the current recovery rate of 30 percent, the field would be able to produce18 million t/year for at least 40 years.

At an enhanced recovery rate of 50 percent, the life of reserves of the field, whichis situated in the central southern regionof the country, could be raised to 70 years.

Hassi Messaoud would thus remainthe country’s largest oil field, ahead of theOughroud field in the Berkine Basin, inthe south-east of Algeria.

Sources said that a number of interna-tional oil companies, notably Chevron ofthe United States, were interested in in-vesting in Hassi Messaoud.

The field produces more than half ofAlgeria’s oil output, which is expected torise to 1.5m barrels/day by the year 2005.

Kuwaiti and EgyptianOil Ministers discussaspects of co-operationKuwait — Kuwaiti Oil Minister, DrAdel K Al-Sabeeh and his Egyptian coun-terpart, Sameh Fahmi, discussed variousaspects of oil co-operation between the twocountries in Kuwait last month.

Speaking to reporters upon his arrivalat the airport, Fahmi said that he woulddiscuss several joint oil projects withKuwaiti officials.

The Kuwaiti News Agency quoted himas saying that plans for oil projects andways for their application would be dis-cussed.

One of these plans was for a Kuwaiti-Egyptian pipeline manufacturing plant, atwhich production was scheduled to startin two years’ time.

The factory would mainly producepipelines to carry Egyptian gas to Syria,Lebanon, Jordan and Turkey, he noted.

Fahmi added that Egypt’s reserves ofnatural gas amounted to some 51 trillioncubic feet, and Cairo had agreed to exportgas to the countries mentioned.

Al-Sabeeh pointed out that joint oilventures already existed between the pri-vate sectors of both countries, aside fromthe oil exploration operations in Egypt bythe Kuwait Foreign Petroleum ExplorationCompany, which is a subsidiary of thestate-owned Kuwait Petroleum Corpora-tion.

Iran needs more shipsto transport growingpetrochemical exportsKish, Iran — More than 80 ships areneeded to transport the growing volumeof Iranian petrochemical exports, whichare expected to exceed 20 million tonnesin 2006, the official Islamic Republic NewsAgency (IRNA) reported last month.

IRNA quoted the Managing Directorof the National Iranian Oil Tanker Com-pany, Mohammad Hussein Souri, as tell-ing a gathering of Iranian shipping indus-try officials that the country’s petrochemi-cal production would exceed 36m t in thenext 10 years.

Given the bright prospects for trans-porting petrochemicals and oil and gasproducts, he invited all transportationcompanies to invest in the sector.

Souri also said that exploration effortsat the South Pars gas field would consti-tute yet another opportunity to expand thetransportation sector.

The Petroleum Ministry’s plans calledfor the South Pars field to be explored in12 phases, with each phase yielding up to25m cubic metres of gas and 40,000 bar-rels of liquids.

The amount of the produced gas was

API says effective energy policy vitalNEW YORK — The energy-related problemsfaced by the United States during the pastyear have forced the nation to start thinkingcomprehensively about the energy issues itfaces, according to the President of the Ameri-can Petroleum Institute (API), Red Cavaney.In an address to the US Congress, Cavaneylisted some of these issues as logistical prob-lems getting supplies of heating oil to NewEngland, tight gasoline supplies in the Mid-west, infrastructure unable to cope with de-mand for natural gas and electric power dis-ruptions in California. “The only way we canrealistically address these issues is by forging,together, an effective national energy policy,”Cavaney said. “The nation must have the af-fordable, reliable energy that fuels its economyand supports improvements in the quality oflife that Americans have come to demand,”he said.

EU could take over UK oil reservesBRUSSELS — The United Kingdom could seeits entire North Sea oil reserves being takenover by the European Union in times of an“international energy crisis”, according to leg-islation being drafted in Brussels. Documentsleaked to the UK press revealed a proposedplan which would mean that, instead of sell-ing their oil on the open market, UK oil firmswould be required to divert supplies to a cen-tral European pool to help EU countries expe-riencing problems. The proposed legislationalso said that reserves must be brought intothe community framework so that suppliesin an emergency can be equally shared, inaddition to calling on EU member states to“maintain minimum stocks of crude oil andpetroleum products, so that where necessaryoil reserves may be released in the event of aprice crisis”. However, the proposal has run-ning into powerful opposition in the UK,with one MP saying: “The EU has an impor-tant role to play, but harmonising Britain’soil reserves is not one of them.”

BP sells stakes in two gas fieldsBRUSSELS — BP is understood to have final-ized the sale of two stakes in the southern gasbasin of the United Kingdom sector of theNorth Sea to the Houston-based ATP oil andgas corporation. The value of the deal, thefirst acquisition by the US company in theUK North Sea, has not been disclosed. ATP’sManaging Director, John Tschirhart, said hisfirm had bought BP’s 100 per cent stake inthe block 47/10 discovery area and a 50 percent working interest in a Conoco-operatedventure field, located on block 49/12A North.“These first properties establish a strong cor-nerstone for future expansion by the com-pany,” said Tschirhart.

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18 OPEC Bulletin

��������Oil exploration resumes in BaluchistanISLAMABAD — The Pakistani government an-nounced last month that oil explorationwould soon be resumed in Baluchistan Prov-ince, according to a report by the AssociatedPress of Pakistan. It quoted a senior officialof the Ministry of Petroleum and NaturalResources as saying that obstacles to oil ex-ploration in the area would be removed, witha view to increasing the country’s oil produc-tion capacity. This would enable a reductionon the country’s dependence on oil imports.The Pakistani government has already con-stituted a three-member committee to resolveproblems relating to oil exploration inBaluchistan, which has remained suspendedfor many years, because of conflicts amongvarious local tribes.

API says US must invest in energyNEW YORK — The American oil and naturalgas industry is willing to make enormous in-vestments to increase domestic production ofoil and natural gas, and to do so in a mannerthat minimizes the environmental impact,according to a senior official of the AmericanPetroleum Institute. The API’s General Man-ager for Upstream, Mark Rubin, told the Sen-ate Energy and Natural Resources Commit-tee last month that, in order to do so, pro-ducers needed assurances that they would beallowed greater access to government landthat had been designated for multiple use, in-cluding oil and natural gas activities, by Con-gress. Rubin said that the USA could meetits future energy needs and protect the envi-ronment at the same time.

Angola to increase oil productionBRUSSELS — Angolan crude oil output is setto top the one million barrels/day markwithin 12 months, according to the coun-try’s Minister of Petroleum, Jose MariaBotelho De Vasconcelos. One of the mainreasons for this was that the large Girassolfield was expected to come online in Novem-ber this year, and achieve a plateau of 200,000b/d, he said. “The idea is that we will prob-ably be able to increase production by Janu-ary next year, provided we do not hit anytechnical glitches, by about 250,000 b/d,” theMinister noted. The $2.5m Girassol deep-water development is operated by France’sTotalFinaElf, with partners ExxonMobil ofthe US, BP of the UK, and two Norwegianfirms, Statoil and Norsk Hydro. The Kuitofield, operated by Chevron, will also contrib-ute to the rise, as it is running 40 per centbelow its planned capacity of 100,000 b/d.Angola is sub-Saharan Africa’s second largestoil producer, after Nigeria, with proven re-serves of 7bn b and probable reserves of about12bn b.

expected to reach about half of the totalcrude oil produced in the country.

With an expansion of oil companyactivities in the region, resulting in higheramounts of oil needing to be transported,shipping lines would need to grow accord-ingly, he added.

Souri quoted estimates of an increaseof up to 750,000 b/d in the oil flowingvia pipeline to Iran from Azerbaijan,Turkmenistan and Kazakhstan, beforereaching international markets.

Algeria’s Sonatrach signstwo pipeline contractsworth $185 millionAlgiers — Algerian state oil and gas com-pany Sonatrach has signed two contractsfor work on the 822-km OZ2 oil pipelinelinking the south-eastern oil fields ofHaoud El Hamra to the north-westernport of Arzew.

The project, worth $185 million, hasbeen divided into two phases, covering 419km and 403 km of the line, respectively.

The first stage, from Haoud El Hamrato Laghouat, has been assigned to a con-sortium comprising Algeria’s Cosider (theIron and Steel Company) and Brown andRoot Condor of the United States for anamount of $95m.

The construction of the second stage,Laghouat to Arzew, is worth $90m andwas signed with the Russian company,StroyTransgaz.

Sonatrach awarded these contracts lastNovember, following the issue of tenderswhich attracted other international firms,such as Bechtel of the USA, France’sEntrepose, Saipem of Italy, and the Argen-tine company, Techint.

The contracts were signed bySonatrach Vice-President AbdelhamidZerguine and representatives fromCosider, Brown and Root Condor, andStroyTransgaz, in the presence of Energyand Mines Minister Dr Chakib Khelil.

The Minister stressed the importanceof the project, which, he said, fell withinthe five-year plan of Sonatrach and whichallowed more transparency, greater com-petition, and the timely launch of suchprojects.

He noted that the pipeline project

should create 2,200 direct jobs and manymore employment opportunities indi-rectly, adding that the scheme would raisethe country’s transport capacity of crudeto 1.5 million barrels/day, starting in 2005.

Khelil also announced the signing ofa separate contract with French engineer-ing firm SpieCapag and Italy’s Saipem forthe realisation of the pumping stations forOZ2.

Venezuelan forumanalyses effects ofoffshore oil spillsCaracas — The analysis and conse-quences of oil spills in the waters aroundVenezuela was the subject of a forum heldin the country’s capital last month.

The gathering was attended by anumber of ecological experts, who dis-cussed the latest cases of oil spills affectingVenezuela.

Navy Commander Jorge SierraltaZavarce said the government was takingprecautions against accidents, and anyspills were backed by the CompensationFund.

Delegates heard that spills had resultedin substantial damage to the sea environ-ment all around the world.

Zavarce pointed out that the Venezue-lan administration was alert to the dan-gers, especially because the country hadconsiderable maritime traffic.

The forum looked at a number oftopics, including compensation offered ininternational arrangements, and civil re-sponsibility agreements.

Debates were led by the President ofthe Compensation Fund, Mans Jacobson,as well as PDVSA’s Emergency and Con-tingency Plans Manager, Nestor Chirinos.

ADNOC joins with oilmajors to set up newpetroleum instituteAbu Dhabi — The Abu Dhabi NationalOil Company (ADNOC) is joining withfour international oil majors to establisha pioneering petroleum institute, it wasreported last month.

N E W S L I N E

May 2001 19

��������BP, Shell, TotalFinaElf and the JapanOil Development Company have agreedto join ADNOC in setting up the insti-tute in Abu Dhabi.

The institute will bring together thebest from education and industry to cre-ate a world-class regional centre in engi-neering, applied science and research.

A governing council will direct thebusiness and affairs of the institute, whoseboard members will be approved by theSupreme Petroleum Council.

The Colorado School of Mines isadvising on programme and curriculumdesign and the means of achieving accredi-tation.

A permanent campus is currentlyunder construction, and the first studentsare expected to enroll in September.

Nigerian committee toinvestigate adulteratedoil product importsAbuja — The Nigerian Senate has setup a nine-member committee, led bySenator Madu Sharif, to investigate theproblem of adulterated petroleum prod-uct imports.

“We expect maximum co-operationfrom the executive branch, especially theNigerian National Petroleum Corporation(NNPC), its subsidiaries and allstakeholders,” Sharif said at a news con-ference in the capital Abuja last month.

“Our purpose is to prevent the recur-rence of these unfortunate events, espe-cially when the economic space and ourborders are opened to competition by allthrough impending deregulation,” he said.

Sharif added that the Senate would,through the findings of the committee,correct any inefficiency or waste in theexecution or administration of the relevantgovernment policies.

The committee has been mandated toinvestigate the health hazards and physi-cal damage done to the country, loss oflife traceable to the adulterated products,and the need to establish stringent guide-lines for the import of petroleum prod-ucts before planned deregulations.

The Pipelines and Products Market-ing Company was in charge of petroleumproduct distribution between 1995-97.

Iran’s NIOC signs$2 billion gas supplydeal with UAE firm

Tehran — The National Iranian OilCompany (NIOC) has signed a $2 billionagreement to supply gas to Crescent Pe-troleum of the United Arab Emirates,according to a report in the Iran News lastmonth.

“The gas will be supplied from Iran’sSalman field, which is located on themaritime border of Iran and Abu Dhabi.The sector in Abu Dhabi waters is calledthe Abolbokhoush field,” the paper quotedan industry source as saying.

The source added that the major por-tion of the purchased gas would come fromthe Dalan-Kangan gas reservoir.

Abu Dhabi had been exploiting its sideof the reservoir (Abolbokhoush) since1992, but this was the first time that Iranwas going to exploit its side (Salman), thereport went on.

The Salman gas would be transportedthrough a pipeline to the Mobarak plat-form near Abu Musa island, where itwould be pressurized and sent to thenorthern Emirates and Dubai in two pipe-lines.

The report said that Crescent Petro-leum had already obtained the necessarypermits for the import of Iranian gas tothe UAE.

Crescent reportedly planned to sell thegas to the UAE Ministry of Power andElectricity, to be used in power plants inthe northern Emirates owned by AbuDhabi, as well as in Dubai.

Indonesia hopeful thatExxonMobil will resumegas production in AcehJakarta — The issue of presidential in-structions on security and law enforcementin the Indonesian province of Aceh is ex-pected to encourage ExxonMobil toresume operations there, it was announcedlast month.

“We hope that (the move) will encour-age ExxonMobil to normalize its opera-tions (in Aceh),” said the Co-ordinating

EU seeks new proposals on GHGsBRUSSELS — The European Union is urgentlytrying to broker new proposals to help achievethe goal of reductions in greenhouse gas emis-sions, following the rejection by US PresidentGeorge W Bush of the Kyoto Protocol. DutchEnvironment Minister Jan Pronk was due topresent the new proposals at a meeting inNew York at the end of April. “It’s an ambi-tious package with perhaps a greater chanceof being adopted,” he said at a meeting ofEU Environment Ministers, adding that hehoped that the new proposals for implement-ing the 1997 Kyoto accord would be moreacceptable to the US than those mooted lastNovember. However, EU Environment Min-isters say that they are pledged to pursue rati-fication of the Kyoto treaty with or withoutthe US. Pronk said that the treaty’s target ofcutting greenhouse gases by an average 5.2per cent below 1990 levels by 2012 was onlya start. He cited scientists who say levels mustbe cut by up to 60 per cent in the next 50years or so.

EC sees Brent at $26.30 in 2002BRUSSELS — The European Commission ex-pects the average price for Brent crude tohover around $26.30/barrel during next year,compared with $24.40/b in 2001, a seniorEuropean Union official said last month. TheEU’s Envoy for Economic and FinancialAffairs, Pedro Solbes, told a news conferencein Brussels that European economic growthand the rate of inflation in EU member stateswere linked with retreating oil prices, whichfluctuated during 1999-2000 to average$24.40/b. Solbes added that EC experts ex-pected inflation rates among EU memberstates to shrink from this year’s 2.2 per centto less than two per cent in 2002, due prima-rily to the stabilization of oil prices.

US firms unable to develop leasesNEW YORK — Vast stretches of governmentland technically available for explorationthroughout the western United States are ac-tually off limits to oil and natural gas pro-ducers, according to the President of theAmerican Petroleum Institute, Red Cavaney.Industry critics glossed over the reality thatthere were major obstacles to developing thetrillions of cubic feet of natural gas that liedbeneath nearly half of all federal lands in west-ern states, Cavaney said in a letter to the Chairof the House Resources Subcommittee onEnergy and Mineral Resources, BarbaraCubin. He went on to say that opponents ofgreater access to government land for oil andnatural gas exploration and production hadsignificantly distorted the facts in their testi-mony before the panel in March, when itheard from industry representatives.

N E W S L I N E

20 OPEC Bulletin

�������� Minister for Social, Political and SecurityAffairs, Susilo Bambang Yudhoyono.

ExxonMobil suspended its gas opera-tions in troubled northern Aceh in March,due to threats by from the separatist FreeAceh Movement.

The closure has led to Indonesia los-ing $100 million a month in natural gasexport revenues.

Yudhoyono said the local authoritiesand the military had been working closelyto create a conducive situation that wouldenable ExxonMobil to resume its activi-ties in Aceh.

“ExxonMobil did not set a specific dateas to when it would restart operations,”he was quoted by the Indonesian NewsAgency (Antara) as saying.

The government had likewise notgiven the company any deadline, due tothe uncertainty surrounding the securitysituation in Indonesia’s westernmost prov-ince, he added.

The suspension of gas production inAceh has forced the government to boostoutput at the Bontang field, in EastKalimantan, in order to cover its commit-ments to Japan and South Korea.

Kuwait’s KOC inauguratespetroleum gathering centrebuilt by Chinese firmKuwait — The Kuwait Oil Company(KOC) has inaugurated its twenty-eighthpetroleum gathering centre, the officialKuwaiti News Agency (KUNA) reportedlast month.

The centre, which has a capacity of210,000 barrels/day, is located in the westof the country, and covers an area of303,000 square metres.

Built by the Chinese Petroleum Engi-neering and Construction Company, thecentre began operations on March 22 tomark the occasion of 30 years of diplo-matic relations between Kuwait andChina, said KUNA.

The inauguration was sponsored byKOC Chairman and Managing Director,Abdellatif Hamad Al-Toura and attendedby Oil Ministry and other governmentofficials.

KOC inaugurated its twenty-seventhoil gathering centre last January. It has a

190,000 b/d capacity and covers an areaof 600,000 sq m. Both centres have beenconstructed utilizing the latest technology.

KOC is the upstream unit of the state-owned Kuwait Petroleum Corporation.

Drilling resumes atIran’s Soroosh wellafter brief suspensionDubai — Drilling has resumed at thefirst Soroosh well in Iran, following a sus-pension in operations, the Dubai-basedGulf News reported last month.

The suspension was caused by delaysin importing materials and equipment, aswell as difficulties in transporting person-nel to and from the drilling rig.

Shell, which is involved in the project,has reached an agreement with the Na-tional Iranian Oil Company (NIOC) toutilize the associated gas from the Sorooshand Nowrouz fields to minimize flaringduring production.

“It has been agreed that the gas fromthe Soroosh and Nowrouz fields will betreated offshore and subsequently exportedinto Iran’s gas-gathering system,” said theGeneral Manager of Shell Exploration,Ingo Dijksma.

The work will be done by the IranianOffshore Oil Company, which will alsocollect gas from other fields in the area.

The first Soroosh well was spudded inearly February and work was on schedulefor production to begin in the third quar-ter, Dijksma was quoted as saying.

“The problems have been overcomeand drilling is in full progress. Construc-tion of the facilities for the early produc-tion system commenced in the Saff yard,in Bandar Abbas, in February,” he said.

“Modification work on part of theearly production facilities is also underwayon EPS-1, formerly known as Muna,” theShell official added.

Meanwhile, Shell has reached an agree-ment with the National Iranian DrillingCompany and Maersk Drilling to refur-bish the Shahid Rajaie rig. The contractwas awarded to the Lamprell yard atSharjah in the UAE.

Work is due to be completed in Sep-tember and the rig will be deployed at theNowrouz field.

Australian firm hikes LNG investmentPERTH — Australia’s North West Shelf Ven-ture has announced a $1.18 billion projectto increase LNG production from its complexin western Australia. It said that work wouldstart at the plant this September on the world’slargest LNG train, which would cost over $791million. It would also be building a $395msecond trunkline for gas fields, some 130 kmoffshore from Karratha on the Burrup Penin-sula, to supply gas to the train, which wouldbe completed by mid-2004. An additionalLNG carrier has been ordered from SouthKorea’s Daewoo Shipbuilding & Marine En-gineering Company to transport LNG fromthe new train, which is designed to produce4.2m tonnes/year. NWSV said that it had sofar signed letters of intent with five Japanesecustomers to supply 2.9m t/y of LNG fromthe new train, and more were expected, itadded.

Technology to boost Ecuador’s outputQUITO — State oil company PetroEcuador isto utilize the latest technology to reactivateoil fields in the country, it was reported lastmonth. The company’s plan entails reachinga production level of 400,000 b/d by Decem-ber. Current output from the fields is 265,000b/d. PetroEcuador has announced that it willdrill 23 oil wells in the Shushufindi and Sachaoil fields, both located in the Amazon region.Petroproduccion, a unit of PetroEcuador, isto shoot 3-D seismic in the area of SouthSacha, a project that will cover an area of1,630 km in the search for potential reservesof 1.5 billion barrels. These projects have aninvestment budget of $134 million.

Enterprise records record profit in 2000BRUSSELS — UK firm Enterprise Oil has an-nounced a record profit of $713.9 million for2000, compared with $258.6m the previousyear. The company said the increase was dueto stronger crude oil prices and higher pro-duction. Enterprise was able to capitalise onthe rise in the price of crude by bringing fournew oil fields onstream, raising output by 31per cent. Enterprise’s output last year aver-aged some 280,563 barrels/day, comparedwith 214,647 b/d in 1999. However, ChiefExecutive Pierre Jungels warned that outputwas likely to fall back soon to between250,000 b/d and 260,000 b/d because of de-lays in Italy and under-performance at thePierce and Banff fields in the North Sea. En-terprise is the last significantly-sized inde-pendent UK exploration and productioncompany after Italy’s ENI acquired bothLasmo and British Borneo last year. Enter-prise is also said by industry analysts to be apossible takeover target, but ENI’s Chief Ex-ecutive Vittorio Mincato denied this.

May 2001 21

For an in-depth lookat the oil marketand related issues

the OPEC Reviewcontains research papersby experts from across

the world

Now in its 25th annual volume, the

OPEC Review is published quarterly.Its content covers the international oil

market, energy generally, economic

development and the environment.

Subscription enquiries to: Blackwell

Publishers Journals, PO Box 805, 108Cowley Road, Oxford, OX4 1FH, UK.

Free sample copies sent on request.

Organization of the Petroleum Exporting Countries

Energy economics and related issues

Vol. XXV, No. 1 March 2001

People wishing to submit a paper forpublication should contact the Editor-in-Chief of the OPEC Review, Farouk UMuhammed, at the Public Relations andInformation Department, OPEC Secre-tariat, Obere Donaustrasse 93, A-1020Vienna, Austria.

“The principal objective of the OPEC Review is tobroaden awareness of (energy and related) issues,enhancing scholarship in universities, researchinstitutes and other centres of learning”

Recent issuesDecember 2000

Global energy outlook: an oil price sce-nario analysis — Shokri Ghanem, RezkiLounnas and Garry BrennandThe hybrid permit cum price ceiling policyproposal: intuition from the prices versusquantities literature — Gary W YoheWorld oil reserves: problems in definitionand estimation — Ghazi M HaiderA vector autoregressive analysis of an oil-dependent emerging economy — Nigeria— O Felix Ayadi, Amitava Chatterjee andC Pat ObiThe closure of European nuclear powerplants: a commercial opportunity for thegas-producing countries — Jean-PierrePauwels and Carine Swartenbroekx

September 2000Energy taxes and wages in a general equilib-rium model of production — HenryThompsonResource windfalls: how to use them —Rögnvaldur HannessonEnergy consumption in the Islamic Republicof Iran — A M Samsam Bakhtiari and FShahbudaghlouOil and non-oil sectors in the Saudi Arabianeconomy — Masudul A Choudhury andMohammed A Al-Sahlawi

June 2000The case for conserving oil resources: thefundamentals of supply and demand — Doug-las B ReynoldsVicissitudes in the Hong Kong oil market,1980–97 — Larry Chuen-ho ChowEconomic theory and nuclear energy —Ferdinand E BanksThe economic cost of low domestic productprices in OPEC Member Countries — NadirGürer and Jan Ban

March 2000Energy and interfactor substitution in Tur-key— Carol Dahl and Meftun ErdoganDomestic demand for petroleum in OPECcountries — Ujjayant Chakravorty, FereidunFesharaki and Shuoying ZhouCyclical asymmetry in energy consumptionand intensity: the Japanese experience —Imad A Moosa

Before demand-side management is dis-carded, let’s see what pieces should be kept— Clark W Gellings

December 1999Energy in the Caspian Sea region in the late1990s: the end of the boom? — Christianvon Hirschhausen and Hella EngererHousehold energy demand in Kuwait: anintegrated two-level approach — M NagyEltony and Mohammad HajeehThe economics of the Nigerian liquefiednatural gas project — M Eghre-Ohgeneand O OmoleIncome determination in the GCC memberstates — Richard G Zind

September 1999The Caspian Sea geopolitical game: prospectsfor the new millennium — Gawdad BahgatAn analysis of Libya’s revenue per barrelfrom crude oil upstream activities, 1961–93— Mustafa Bakar Mahmud and Alex RussellEnergy use and productivity performancein the Nigerian manufacturing sector(1970–90) — Adeola F Adenikinju andOlumuyiwa B AlabaBasis risk: an expository note — FerdinandE Banks

June 1999The impact of emissions trading on OPEC— Shokri Ghanem, Rezki Lounnas andGarry BrennandTechnology, oil reserve depletion and themyth of the reserves-to-production ratio— Mamdouh G SalamehDoes devaluation improve the trade bal-ance of Iraq? — T M ZaidanWagner’s law and public expendituregrowth in Kuwait — Nadeem A Burneyand Nadia Al-MussallamThe economic cost of oil or gas production:a generalised methodology — Thomas Stauffer

March 1999The price of crude oil — A M SamsamBakhtiariElectricity demand by the commercial sec-tor in Kuwait: an econometric analysis —M Nagy Eltony and Mohammad HajeehThe oil and gas links between Central Asiaand China: a geopolitical perspective —Xiaojie XuThe development and acquisition of oillicences and leases in Nigeria — LawrenceAtsegbua

Estimating oil product demand inIndonesia using a cointegrating error

correction model

The gas dimension in the Iraqi oilindustry

The Russian coal industry in transition:a linear programming application

The future of gaseous fuels in HongKong

Carol Dahl and Kurtubi

Thamir Abbas Ghadhbanand Saadallah Al-Fathi

Bo Jonsson andPatrik Söderholm

Larry Chuen-ho Chow

22 OPEC Bulletin

M A R K E T R E V I E W

Table A: Monthly average spot quotations of OPEC Reference Basket and selectedcrudes including differentials $/b

Year-to-date averageMarch April 2000 2001

Reference Basket 23.70 24.38 25.36 24.37Arabian Light 23.77 24.24 24.87 23.70Dubai 23.67 24.06 23.84 23.70Bonny Light 24.35 25.43 26.19 25.64Saharan Blend 24.82 25.65 26.44 26.09Minas 25.64 27.64 25.65 25.63Tia Juana Light 21.08 20.79 24.56 22.03Isthmus 22.60 22.86 25.96 23.79

Other crudesBrent 24.42 25.37 25.89 25.67WTI 27.27 27.37 28.14 28.45

DifferentialsWTI/Brent 2.85 2.00 2.25 2.78Brent/Dubai 0.75 1.31 2.05 1.97

M A R K E T R E V I E W

Crude oil price movements

The monthly OPEC Reference Basket2

averaged $24.38/b in April, an increase of68¢/b over its March value, and partlyrecovered its earlier losses. Minas scoredthe highest gain of $2.00/b. Brent-relatedcrudes followed, with Bonny Light in-creasing by $1.08/b and Saharan Blend by83¢/b. Arabian Light’s gain was 47¢/b,slightly higher than Dubai’s 39¢/b. Isth-mus gained the least, at 26¢/b, while TiaJuana Light lost 29¢/b (see Table A).

In the first week, the average priceof the Basket decreased by 29¢/b to$23.20/b, in a continuation of thedowntrend of the previous week that wascaused by a huge build-up of crude oilstocks in the USA. Support for prices camelater in the week from comments by Ven-ezuela that the price band mechanismwould be activated if prices fell below$22/b. Additional support materialized,as a draw on gasoline stocks again raisedconcern about the adequacy of gasolinesupplies for the summer season. Suchconcern was the main factor causing theprice of the Basket to gain $1.45/b in thesecond week, in addition to some short-covering in the futures markets. The rallyin prices continued into the third week,during which the Basket price rose by

62¢/b to $25.27/b, as an explosion atConoco’s Humber refinery in north-eastEngland, which exports gasoline blendingstocks to the USA, further heightenedconcern over gasoline stock adequacy. Therally, however, was capped by a build-upof US crude oil stocks, which reached 315million barrels (m b), a level not seen sinceAugust 1999, and also by the developmentof an overhang in North Sea crudes. TheBasket price finally retreated in the fourthweek by 56¢/b, in a very volatile market.Prices first moved sharply lower on theprevious week’s heavy build in crude oilstocks. This, in turn, induced heavy tech-nical selling in the futures markets. Pricesthen received support from comments byOPEC’s Secretary General, Dr AlíRodríguez Araque, that production wasnot expected to be cut before September.Additional support came from renewedconcern about gasoline.

US and European marketsGasoline was the main driver in the US

market during April. It increased the valueof NYMEX West Texas Intermediate(WTI) and also pulled the value of Colom-bian Cuisiana (rich in naphtha and gaso-line) higher. It encouraged refiners toincrease their runs to capitalize on thehigher gasoline margins. Despite this, crudestocks in the USA rose, reaching 70m b in

April1

1. This section is based on the OPEC MonthlyOil Market Report prepared by the ResearchDivision of the Secretariat — published inmid-month and containing up-to-date analy-sis, additional information, graphs andtables. Researchers and other readers maydownload the publication in PDF formatfrom our Web site (www.opec.org), providedOPEC is credited as source for any usage.

2. An average of Saharan Blend, Minas, BonnyLight, Arabian Light, Dubai, Tia JuanaLight and Isthmus.

the mid-continent, their highest level for19 months. This rise depressed the WTI/Brent spread towards the end of the month.On the other hand, sour grades were de-pressed, due to the ample availability ofBasrah Light, which was sold at a discountof more than $6/b to WTI in the US GulfCoast. However, Basrah Light was sold atWTI minus $3/b in the West Coast, as theseasonal fall in Alaskan North Slope causedtightness in that region’s spot supply. SomeWest African grades rich in gasoline, likeBrass River, also benefited from the gaso-line situation in the USA; however, distil-late-rich grades suffered.

In Europe, high prices for Brent earlyin the month, which were seen as a resultof OPEC’s tighter supply filtering throughthe system, added extra support. Higherrefinery runs were anticipated, after theend of the maintenance season. However,these high prices caused refiners to refrainfrom buying, as they awaited a sharp de-crease. This, in turn, caused an overhangof end-of-April cargoes and a contangodeveloped in the Brent pricing system.The contango supported prices of otherNorth Sea grades.

In the Mediterranean, the Urals differ-ential to Brent narrowed, due to tightsupply caused by loading delays at BlackSea ports and the absence of rival sour Iraqicrude.

May 2001 23

M A R K E T R E V I E W

Far Eastern marketsMiddle East crudes made heavy gains

in April, due to tight supply and as Japa-nese and South Korean refiners pushed tobuy June loading cargoes to meet theirrequirements when they come out of theirturnarounds in July. However, towardsthe end of the month, prices eased, asrefiners’ margins narrowed and refinersreassessed the availability of supply. Heavysweet Minas was at high levels, due to tightavailability and strong Japanese buying;however, the lighter sweet grades cameunder pressure, due to the weak naphthamarket. Potential buyers expected weakpetrochemical demand in the comingmonths.

Product markets andrefinery operations

US and European gasoline markets movedto centre stage in April, due to unexpectedrefinery outages, dwindling stocks and,most importantly, the beginning of strin-gent summer gasoline specifications. Thisled to large gains in refiners’ margins and,therefore, enhanced refinery throughputs(see Table B).

US Gulf marketIn April, the regular gasoline market

reached an all-time monthly high of$42.03/b, which constituted a sharp in-crease of $9.46/b from the previousmonth’s figure for several reasons. First,there was renewed concern over a gasolinesupply shortage in the forthcoming driv-ing season, amid a fall in gasoline inven-tories for six consecutive weeks from lateFebruary to early April, at a time usuallyallocated for product stockpiling. Therewas, however, a stock-build for the rest ofthe month, by a volume exceeding theprevious month’s level by about three percent, but still representing a fall of almosttwo per cent below the correspondingperiod a year earlier. This was despitestrong import flows that indicated a 22 percent increase, compared with April’s levellast year, as reported by the US Depart-ment of Energy. The second supportingfactor was a string of unplanned refineryshut-downs in the USA, Europe and LatinAmerica. And thirdly, higher reformu-lated gasoline production costs, caused by

the vapour pressure range for regionalreformulated gasoline and, consequently,there was the prospect of a boost to supply.Seasonal refinery operational modes, infavour of gasoline over distillates, whichresulted in lower gasoil supply, and healthyagricultural demand from PADD II con-stituted the main reasons for a surge of$1.90/b in the gasoil price. Meanwhile,fuel oil plunged by $3.44/b, on the con-tinued absence of Mexican demand, aswell as lacklustre trading (see Table B).

Refiners’ margins in the US Gulfmade record gains, exceeding $6/b forboth WTI and Brent (the highest level forat least five years), on the back of soaringgasoline prices and easing tanker rates.

Improved refiners’ margins pushed USrefinery throughput to 15.48m b/d, a rise

Table C: Refinery operations in selected OECD countries

Refinery throughput (m b/d) Refinery utilization (%)1

Feb 01 Mar 01 Apr 01 Feb 01 Mar 01 Apr 01

USA 14.99 14.84 15.48 90.6 89.7 93.6France 1.81R 1.60R 1.65 95.4R 84.5R 87.3Germany 2.19R 2.00 2.08 97.1R 88.6 92.1Italy 1.68R 1.74 1.92 71.3R 73.9 81.5UK 1.54R 1.54R 1.42 87.3R 87.1R 80.4Eur-162 12.18R 11.54 11.92 89.2R 84.5R 87.3Japan 4.70 4.46 na 94.7 89.8 na

1. Refinery capacities used are in barrels per calendar day. na Not available.2. European Union plus Norway. R Revised since last issue.Sources: OPEC Statistics, Argus, Euroilstock Inventory Report/IEA.

tight MTBE availability on the back of a firmnatural gas price, together with the Unocalpatent, which has been upheld by the USSupreme Court, continued to preventmany refineries and blenders from pro-ducing reformulated gasoline, which ac-counts for a third of the US gasoline marketand is mandatory in some states, and thelandlocked Midwest. There was the expec-tation of a repeat of last summer’s pricespikes, due to lower regional stocks, com-bined with reduced supply; this followedthe closure of Premcor’s 80,000 b/d BlueIsland, Illinois, refinery at the end of Janu-ary, because of the high level of investmentthat had been incurred, in order to meetnew product specifications. Nonetheless,bullish sentiment existed after the US En-vironment Protection Agency had relaxed

Table B: Selected refined product prices $/b

ChangeFebruary 01 March 01 April 01 Apr/Mar

US GulfRegular gasoline (unleaded) 34.28 32.38 42.03 +9.64Gasoil (0.2%S) 32.32 29.03 30.93 +1.90Fuel oil (3.0%S) 20.62 18.63 15.19 –3.44

RotterdamPremium gasoline (unleaded) 32.49 31.52 37.57 +6.05Gasoil (0.2%S) 30.88 29.38 30.37 +0.99Fuel oil (3.5%S) 18.21 17.58 17.05 –0.53

SingaporePremium gasoline (unleaded) 31.33 29.88 32.76 +2.88Gasoil (0.5%S) 27.57 26.83 29.80 +2.97Fuel oil (380 cst) 19.69 20.04 20.47 +0.43

24 OPEC Bulletin

M A R K E T R E V I E W

and hedgers began buying after the CFTCreport showed that the non-commercials’net position had changed from short tolong. Technical selling and a build in UScrude stocks pulled prices down again. Butprices once more corrected their path inthe next two days, amid rekindled worriesabout the gasoline situation.

The tanker market

OPEC area spot-chartering declined by5.43m b/d to a monthly average of 9.70mb/d in April. The combination of OPEC’soil production cut, which came into forceon April 1, and seasonal refinery mainte-nance in South Korea and Japan, withcontinued throughput at relatively lowlevels, constituted the main reasons for thedecreased OPEC spot fixtures. The vol-ume was 3.57m b/d lower than year-agofixtures. Global spot-chartering also de-creased, by 5.50m b/d, to a monthly av-erage of 20.35m b/d, affected mainly bythe decline in OPEC fixtures. The volumewas 1.32m b/d below the year-earlier fig-ure.

The OPEC area’s share of global spot-chartering stood at 47.67 per cent; this was10.88 percentage points below its Marchshare and 13.57 percentage points lessthan last year’s level, reflecting the reduc-tion in OPEC supply, in accordance withthe March agreement. Middle East east-bound and westbound long-haul charter-ing moved down by 2m b/d to 2.54mb/d and by 1.37m b/d to 1.42m b/d,respectively. Consequently, the shares ofeastbound and westbound long-haul char-tering of OPEC’s total fixtures dropped by3.83 and 3.77 percentage points to 26.15per cent and 14.67 per cent, respectively;together, they accounted for 40.82 percent of total chartering in the OPEC area,which was 7.60 percentage points lowerthan that observed in March.

Preliminary estimates of sailings fromthe OPEC area show a decline of 520,000b/d to a monthly average of 21.75m b/d,which was 2.4 percentage points below theprevious month’s level. Sailings from theMiddle East, which were 15.65m b/d inApril, revealed a slight improvement of20,000 b/d over the previous month’sfigure and accounted for 72 per cent oftotal OPEC sailings. Arrivals in the US

of 640,000 b/d from the previous month’sruns (see Table C). The refinery utiliza-tion rate, therefore, also increased to 93.6per cent, which was one per cent above lastyear’s figure.

Rotterdam marketIn Rotterdam, gasoline shot up by

$6.05/b, largely on intensified trans-atlantic arbitrage to the USA, coupledwith a fall in supply, caused by refineryglitches. Heavy demand from Germanyand France, to replenish their stocks, to-gether with efforts by refiners to producemore gasoline at the expense of distillates,tightened the gasoil market and, therefore,the average price for gasoil rose by 99¢/b.A surge in Russian supply, at a time oflimited fuel oil cargoes to the Far East,together with a spate of refinery restartsand consequently a better-supplied mar-ket, outstripped Brent gains which gener-ally drive up the fuel oil price; hence, fueloil lost 53¢/b (see Table B).

Refiners’ margins continued theiruptrend since last month, with Brent dis-playing a margin of $2.30/b, thanks tosoaring gasoline markets and an elevatedgasoil price that offset modest Brent gains.

Refinery throughput in Eur-16 coun-tries rose by 380,000 b/d to hover around11.92m b/d in April, following the end ofthe European refinery maintenance season(see Table C). The refinery utilization rateof 87.3 per cent, however, was 2.8 per centbelow the previous year’s level.

Singapore marketLight product markets rebounded in

April, after the previous month’s losses, onthe back of the termination of a six-monthcrude processing deal at the end of Marchbetween Shell’s Singapore refinery andIndonesia, which, in turn, bought heavilyfrom the spot market, despite the restartof the 125,000 b/d Balongan refinery.This coincided with regional refiners slash-ing runs, on top of some South Korean andJapanese refineries starting their mainte-nance seasons, and resulted in squeezedsupply.

Gasoline soared by $2.88/b, withstrong support from a robust US WestCoast market, which continued to attractAsian blending materials. Gasoil also ex-perienced a spike of $2.97/b. Fuel oil rosemoderately by 53¢/b, in tandem with

improving crude markets (see Table B).Refiners’ margins in Singapore regained

the previous two months’ losses and ap-proached $1/b for Dubai in April, bol-stered by tight light product markets.

In Japan, refinery throughput in Marchdeclined to 4.46m b/d (see Table C). Theequivalent utilization rate of 89.8 per centwas, nevertheless, barely one per cent lowerthan in the corresponding period last year.

The oil futures market

During the first week of April, NYMEXWTI reached its lowest level in a year,under pressure from the prospects of aslower economy and a build in US crudeoil stocks. Weak product markets alsocontributed to the slide. On the technicalside, the Commodity Futures TradingCommission (CFTC) report showed thatnon-commercials had reduced their shortpositions, but were still 23,185 contractsshort, and open interest was higher whenprices moved down. However, as soon asthe API reports showed a draw on gaso-line, the market surged on two consecutivedays in a correction to the downtrend.

The CFTC report was again an impor-tant element in a NYMEX WTI rallyduring the second week. The increase inthe net short positions of non-commer-cials supported the rally, as the chances ofshort-covering increased. Also drivingprices higher was concern about the gaso-line situation. The only factor that cappedprices was an unexpected build in crudeoil inventories. WTI reached $29.25/b atthe end of the week, on fund-buying.

NYMEX WTI increased sharply at thebeginning of the third week, on the newsof the fire at Conoco’s Humber refineryin the UK. However, prices moved lowerin the next two days, due to an unexpectedbuild in US crude oil stocks, whichwas attributed to high imports. Crudeprices kept slipping, since there was afeeling that there was enough oil in themarket, while gasoline prices continuedmoving up, thereby widening the gasolinecrack spread.

At the beginning of the fourth week,NYMEX WTI moved 54¢/b lower, inresponse to a product sell-off and contractpre-expiration pressure; however, it recov-ered quickly in a corrective move, as banks

May 2001 25

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Gulf Coast, the East Coast and the Car-ibbean declined for the second consecu-tive month, plunging by a further 1.44mb/d to a monthly average of 6.37m b/d.Also, arrivals in NW Europe and Euromeddecreased by 730,000 b/d and 300,000b/d to 5.61m b/d and 4m b/d, respec-tively. The estimated oil-at-sea on April 22was 490m b, which was 53m b above thelevel registered at the end of March.

The VLCC market in the Middle Eastwas generally quiet in April with low ac-tivity, which resulted mainly from thesignificant reduction in OPEC spot-char-tering, causing plentiful tonnage availabil-ity, and therefore owners were willing tomake a discount to fix their ships. As aresult, freight rates on eastbound andwestbound long-haul routes declined stead-ily during the course of the month, withdrops of 17 points and 19 points to monthlyaverage levels of Worldscale 83 and W82,respectively.

Suezmax freight rates on the WestAfrica—US Gulf Coast route fluctuatedwithin a narrow band during the month,with a low of W123 at the beginning ofthe month and a high of W131 during theEaster holiday period. However, the aver-age spot rates of W127 were 15 pointslower than those of the previous month,affected by the availability of VLCC ton-nage on the route across the Atlantic. Theshort-haul Aframax market experiencedweaker rates in most trading areas, due tothere being sufficient tonnage supply,especially the older units. The Caribbeanmarket was relatively active, supported bysteady enquiries from the US market, al-though the rates on the Caribbean—USEast Coast route eased by seven points toW229.

In the Mediterranean, freight rates fellconsiderably, by 55 points to W170, forcargoes to NW Europe and they plungedby 16 points to W204 for voyages withinthe Mediterranean, affected by concernover the restrictions on single-hull vessels.Freight rates for 70–100,000 dwt tankerson the route from Indonesia to the USWest Coast continued to decline signifi-cantly, plummeting by 54 points to W172.

The clean tanker market enjoyed apositive upward trend on all major routesin April, except for the Far East destina-tions where the rates declined consider-ably, under pressure from weak seasonal

demand and a sufficient level of invento-ries. Freight rates from the Middle East tothe Far East plunged by 69 points toW228 and by 100 points to W285 on theSingapore—Far East route.

On the positive side, they appreciatedsignificantly on the Caribbean—US GulfCoast route, helped by the tight gasolinemarket in the USA, and surged by 30points to W287. Rates edged higher by 24points to W286 and ten points to W279on the routes within the Mediterraneanand to NW Europe, respectively, sup-ported by a tight regional product market,following several refinery glitches.

World oil demand

Figures for 2000

WorldIn the last report, revisions to the data

for the year 2000 and before were notincorporated, due to their unavailability atthe time of publication. In this issue,however, we have compiled all the avail-able data up to 2000.

The latest estimate shows that totalworld oil demand grew by 690,000 b/d in2000 (a downward revision of 40,000b/d, compared to the previous estimate).Nonetheless, the absolute value for worlddemand remains unaltered at 75.71mb/d. The two figures can be reconciled bypointing out that the demand level for1999 underwent a small adjustment.

At the regional level, the biggest revi-sions took place in North America and thedeveloping countries (DCs), while minoradjustments occurred in Western Europe.Within the North American region, thetotal revision was concentrated in the USA.According to the latest estimates, petro-leum product deliveries rose by 0.9 percent, or 190,000 b/d, compared with thezero per cent growth presented in the lastreport.

The demand revision involves upwardadjustments in most major product cat-egories. The most important change hasbeen a revision to gasoline consumption,which is now estimated to have grown by0.5 per cent, compared with 1999, incontrast with the 0.6 per cent decline ofthe previous assessment. As for the devel-oping countries, previous estimates have

been revised down considerably. TotalDC consumption is now assessed at18.70m b/d, displaying a growth rate of1.5 per cent or 280,000 b/d, which is farbelow the previous 18.88m b/d or 2.8 percent growth rate. This revision, althoughlarge by any standards, is the result of theincorporation of all the changes in the datafor the last two months.

Finally, Western Europe’s total con-sumption has been revised up slightly to14.99m b/d, from the previous 14.97mb/d. This is the result of a smaller contrac-tion in oil consumption in the ‘bigfour’ European economies and an upwardrevision to petroleum product deliveriesfor the remaining 18 countries of theregion.

Projections for 2001The world oil demand forecast for

2001 continues to be revised down, thistime by 110,000 b/d, and now stands at76.86m b/d, which translates into a growthrate of 1.5 per cent or 1.15m b/d. Mean-while, as stated in previous issues of thereport, there is a high probability that thisdemand forecast will need to be reviseddown further in the months to come.

One major concern, which we haveaddressed on previous occasions, is China.According to the latest preliminary tradedata, crude imports have declined consid-erably during 1Q of the year (with themost pronounced falls occurring in De-cember 2000 and January 2001). At thesame time, crude and product exportshave increased, resulting in a combinednegative effect on the level of apparentconsumption, which shows a worryingseven per cent decline for 1Q.

Another major concern is the persist-ent economic slowdown in the USA.Nonetheless, some encouraging signs haveemerged recently. On the one hand, thedelivery of petroleum products, accordingto preliminary data, rose by a solid two percent during 1Q and, on the other hand,economic growth prospects look morefavourable. The Federal Reserve Boardappeared determined to jump-start theeconomy by cutting the interest rate fur-ther.

With regard to Western Europe, be-sides the structural factors underminingthe consumption of fossil fuels, which wehave mentioned many times before, there

26 OPEC Bulletin

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exists a further deceleration in the region’seconomic growth, as measured by GDP.GDP estimates for the ‘big four’ Europeaneconomies have been revised down onceagain and now stand at 2.4 per cent (0.1per cent lower than last month’s figure).

Germany and Italy account for thelower growth in the group. Latest GDP

figures call for a 0.2 per cent reduction inGermany’s expected GDP growth rate, whileItaly’s GDP has been revised down by 0.1per cent. Likewise, the rates of economicexpansion in some OECD Pacific coun-tries have been revised down further, as inthe cases of South Korea and New Zea-land.

Finally, trying to determine the levelof apparent demand in the FSU seems animpossible task. The latest data on indig-enous production and trade suggest thatdemand grew by an astonishing 11 percent during 1Q. A closer look at the figuresshows that the hike in consumption is theresult of a surge in production of almost600,000 b/d, which outpaced the rise innet exports of just 140,000 b/d. Despitethis abnormal 1Q behaviour, we believethat apparent demand in the FSU willcontract or, at best, remain flat for the year.High international crude prices continueto cap internal demand, encouraginggreater use of natural gas and coal, in orderto maximize export volumes and revenue.

World oil supply

Non-OPEC

Historical data, including 1999There are no revisions to non-OPEC

supply historical data, compared with thelast report.

Figures for 2000The 2000 non-OPEC supply figure

remains unchanged at 45.80m b/d, asdo the quarterly distributions of 45.83mb/d, 45.48m b/d, 45.67m b/d and46.21m b/d, respectively, compared withthe last report. The yearly average in-crease over 1999 is estimated at around1.21m b/d.

Expectations for 2001The 2001 non-OPEC supply forecast

figure has been revised down by around10,000 b/d to 46.14m b/d, which is350,000 b/d more than the revised esti-mate for 2000. The expected 2001 non-OPEC quarterly distribution figures havebeen revised down by around 90,000b/d to 46.21m b/d and up by around50,000 b/d to 46.96m b/d and by around60,000 b/d to 46.03m b/d, respectively,for 1Q–3Q, while 4Q remains unchangedat 46.37m b/d, compared with the lastreport.

The FSU net oil export figure for 2001has been revised down by around 30,000b/d to 4.52m b/d, compared with the lastreport (see Table D).

OPEC natural gas liquidsOPEC NGL data for the 2000 estimate

and the 2001 forecast remain unchanged,at 2.91m b/d and 2.95m b/d, respectively.

OPEC NGL production — 1997–2001m b/d

1997 2.811998 2.781999 2.841Q00 2.912Q00 2.913Q00 2.914Q00 2.912000 2.91Change 2000/1999 0.072001 2.95Change 2001/2000 0.04

OPEC crude oil productionAvailable secondary sources indicate

that, in April, OPEC output was 27.74mb/d, which was 520,000 b/d lower thanthe revised March level of 28.26m b/d.Table E shows OPEC production, as re-ported by selected secondary sources.

Stock movements

USAUS commercial onland oil stocks

showed a build for the second consecutivemonth, rising by 38.5m b, or 1.13m b/d,to 962.0m b during the period March 30–May 4. ‘Other oils’ and crude oil were themain contributors to this build, when theyincreased by 18.6m b to 160.7m b and by

Table D: FSU net oil exports m b/d

1Q 2Q 3Q 4Q Year

1997 2.81 2.92 2.88 2.88 2.871998 2.77 3.02 3.18 3.20 3.041999 3.12 3.62 3.52 3.49 3.4420001 3.97 4.13 4.47 4.03 4.1520012 4.13 4.74 4.90 4.29 4.52

1. Estimate.2. Forecast.

Table E: OPEC crude oil production, based on secondary sources 1,000 b/d

Apr 01/1999 4Q00 2000 Mar 01* 1Q01 Apr 01* Mar 01

Algeria 766 841 808 806 821 802 –5Indonesia 1,310 1,286 1,280 1,246 1,252 1,208 –37IR Iran 3,509 3,803 3,671 3,780 3,805 3,680 –100Iraq 2,507 2,363 2,551 2,735 2,200 2,916 181Kuwait 1,907 2,207 2,101 2,092 2,135 2,005 –87SP Libyan AJ 1,337 1,438 1,405 1,390 1,409 1,367 –23Nigeria 1,983 2,129 2,031 2,141 2,137 2,066 –75Qatar 641 726 698 693 709 677 –16Saudi Arabia 7,655 8,653 8,236 8,147 8,251 7,952 –196UAE 2,077 2,386 2,265 2,279 2,327 2,218 –61Venezuela 2,808 3,001 2,897 2,954 2,980 2,849 –105

Total OPEC 26,499 28,833 27,943 28,262 28,027 27,739 –524

* Not all sources available.Totals may not add, due to independent rounding.

May 2001 27

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Table F: US onland commercial petroleum stocks1 m b

Change Sept 29, 00 Dec 29, 00 Mar 30, 01 May 4, 01 Apr/Mar May 4, 00

Crude oil (excl SPR) 286.7 288.7 303.2 318.8 15.6 302.8Gasoline 195.6 193.8 193.0 200.0 7.0 207.8Distillate fuel 114.2 116.1 104.0 103.1 –0.9 100.6Residual fuel oil 36.5 34.7 39.8 41.4 1.6 35.0Jet fuel 43.1 43.9 40.1 40.8 0.7 41.4Unfinished oils 88.0 87.1 101.3 97.3 –4.0 96.6Other oils 195.9 165.8 142.1 160.7 18.6 155.9Total 959.9 930.0 923.5 962.0 38.5 940.1SPR 570.7 541.2 542.3 542.8 0.5 569.4

1. At end of month, unless otherwise stated. Source: US/DoE-EIA.

Table G: Western Europe onland commercial petroleum stocks1 m b

ChangeSeptember 00 December 00 March 01 April 01 Apr/Mar April 00

Crude oil 424.4 420.6 451.7 447.2 –4.4 424.0Mogas 152.8 152.9 158.3 157.8 –0.5 150.5Naphtha 26.0 24.6 22.0 24.2 2.2 25.9Middle distillates 325.7 342.8 330.8 324.8 –5.9 325.4Fuel oils 124.2 125.8 123.6 125.1 1.4 123.3Total products 628.7 646.2 634.7 631.9 –2.8 625.1Overall total 1,053.0 1,066.7 1,086.3 1,079.1 –7.3 1,049.1

1. At end of month, and includes Eur-16. Source: Argus Euroilstocks.

Table H: Japan’s commercial oil stocks1 m b

ChangeSeptember 00 December 00 February 01 March 01 Mar/Feb March 00

Crude oil 101.2 105.1 110.2 118.7 8.5 99.3Gasoline 13.4 12.7 14.6 14.6 0.0 14.8Middle distillates 43.5 40.3 32.0 31.4 –0.6 25.0Residual fuel oil 18.9 20.4 20.1 20.2 0.1 18.6Total products 75.8 73.4 66.7 66.3 –0.4 58.4Overall total2 176.9 178.5 176.9 185.0 8.1 157.7

1. At end of month. Source: MITI, Japan.2. Includes crude oil and main products only.

28 OPEC Bulletin

M A R K E T R E V I E W

15.6m b to 318.8m b, respectively. In-creasing imports were the major reasonbehind the build in crude oil stocks, de-spite higher refinery runs.

Gasoline also showed a substantial in-crease of 7.0m b to 200.0m b, on the backof increasing gasoline output ahead of thedriving season. Residual fuel oil and jetkerosene moved in the same direction, asthey picked up by 1.6m b to 41.4m b andby 700,000 b to 40.8m b, on lower de-mand for fuel oil and higher output of jetkerosene.

The exception was for distillates, whichwitnessed a slight draw of 900,000 b to103.1m b, due to higher demand, espe-cially from the agricultural sector in themid-continent area, supported by the re-finers’ policy, which was aimed at increas-ing gasoline output over distillateproduction, in preparation for the sum-mer season.

Total oil stocks were 21.9m b, or abouttwo per cent, higher than the level regis-tered a year earlier.

During the same period, the US Stra-tegic Petroleum Reserve rose by 500,000b to 542.8m b (see Table F).

Western EuropeIn April, commercial onland oil stocks

in Eur-16 (EU plus Norway) registered acontra-seasonal draw of 7.3m b, or 240,000b/d, to 1,079.1m b. Most of the declinetook place in middle distillates and crudeoil, which decreased by 5.9m b to 324.8mb and by 4.4m b to 447.2m b, respectively.Stronger demand and lower output were

Table I: Estimated stock movements in OECD* in first quarter of 2001 m b

Change Mar 01/Dec 00December 00 March 01 m b m b/d

USA 930.0 923.5 –6.5 –0.07Eur-16 1,066.7 1,086.3 19.6 0.22Japan 178.5 185.0 6.5 0.07OECD total 2,175.2 2,194.8 19.6 0.22

* Includes USA, Eur-16 and Japan only; data at end of month.

the reasons behind the draw on distillates,while higher refinery runs and increasingexports of North Sea grades, especially tothe US market, were due to crude oilstock-draws.

The overall decrease was partially coun-tered by increases in other product inven-tories, particularly naphtha, which rose by2.2m b to 24.2m b, and, to a lesser degree,fuel oil, which moved up by 1.4m b to125.1m b.

Despite the increase in gasolineproduction, gasoline stocks remainedmostly at the previous month’s level, slip-ping by 500,000 b to 157.8m b, due tohigh export volumes to the US market.The overall level was 30.0m b, or aboutthree per cent, above last year’s level (seeTable G).

JapanCommercial onland oil stocks in Japan

witnessed a seasonal build of 8.1m b, or260,000 b/d, to 185.0m b in March. Crudeoil was the principal contributor to thisbuild, rising by 8.5m b to 118.7m b, onthe back of lower refinery runs, since themaintenance season had already startedeven earlier than usual, due to low refiners’margins.

Major product inventories capped thisbuild, when they declined by 400,000 bto 66.3m b, with middle distillates de-creasing by 600,000 b to 31.4m b, due tohigher demand and lower production. Thetotal stock level was 27.3m b, or about 17per cent, higher than last year’s figure (seeTable H).

OECDDuring 1Q01, OECD commercial

onland oil stocks (the USA, Eur-16 andJapan) are estimated to have registered aslight contra-seasonal build of 19.6m b, or220,000 b/d, to 2,194.8m b, comparedwith the end of last year’s level. This esti-mated stock-build resulted solely from arise of 19.6m b, or 220,000 b/d, to 1,086.3mb in Eur-16 stocks, with crude oil showinga substantial increase of 31.1m b, due torising imports and lower refinery runs. Theestimated build of 6.5m b to 185.0m b inJapan’s total stocks during 1Q was balancedby a draw of 6.5m b to 923.5m b on thoseof the USA (see Table I).

Balance of supply/demandThe non-OPEC supply and world oil de-mand estimates for 2000 remain unchangedat 48.7m b/d and 75.7m b/d, comparedwith the last report. The difference item,therefore, remains unchanged at 27.0mb/d (see Table J). The yearly average bal-ance remains unchanged at 27.9m b/d,while the quarterly distributions have beenrevised up by more than 100,000 b/d to–300,000 b/d for 1Q, up by more than100,000 b/d to 2.1m b/d for 2Q, down bymore than 300,000 b/d to 1m b/d for 3Qand up by less than 100,000 b/d to 1mb/d for 4Q. The 1999 balance has beenrevised down from last month’s report byless than 100,000 b/d to –1.1m b/d.

For 2001, non-OPEC supply has beenrevised down this month by less than100,000 b/d to 49.1m b/d, while world oildemand has been revised down by morethan 100,000 b/d to 76.9m b/d; the annualdifference is estimated at 27.8m b/d, downby more than 100,000 b/d from the lastreport. The different quarterly distributionforecasts have been revised down by lessthan 100,000 b/d to 27.8m b/d for 1Q, lessthan 100,000 b/d to 26.1m b/d for 2Q,more than 200,000 b/d to 28.0m b/d for3Q and more than 100,000 b/d to 29.2mb/d for 4Q, compared with the last report.The balance for 1Q has been revised up byless than 100,000 b/d to 300,000 b/d.

May 2001 29

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Table J: World crude oil demand/supply balance m b/d

1997 1998 1999 1Q00 2Q00 3Q00 4Q00 2000 1Q01 2Q01 3Q01 4Q01 2001

World demandOECD 46.7 46.8 47.6 48.1 46.5 47.9 48.6 47.8 48.9 46.8 48.3 49.2 48.3

North America 22.7 23.1 23.9 23.7 23.9 24.5 24.5 24.2 24.2 24.1 24.8 24.9 24.5Western Europe 15.0 15.3 15.1 15.1 14.5 15.1 15.3 15.0 15.1 14.6 15.2 15.5 15.1Pacific 9.0 8.4 8.6 9.3 8.0 8.3 8.8 8.6 9.6 8.1 8.3 8.8 8.7

Developing countries 17.7 18.1 18.4 18.2 18.8 19.1 18.7 18.7 18.7 19.3 19.4 19.5 19.2FSU 4.3 4.2 4.0 3.7 3.6 3.5 4.2 3.8 4.1 3.5 3.4 4.1 3.8Other Europe 0.7 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8China 4.0 3.8 4.2 4.7 4.4 4.9 4.7 4.7 4.4 4.7 5.1 5.0 4.8(a) Total world demand 73.4 73.7 75.0 75.5 74.1 76.2 77.0 75.7 76.9 75.0 77.0 78.6 76.9

Non-OPEC supplyOECD 22.1 21.8 21.3 22.2 21.8 21.7 21.8 21.9 21.8 21.6 21.5 21.7 21.6

North America 14.6 14.5 14.1 14.4 14.4 14.3 14.2 14.3 14.2 14.2 14.2 14.2 14.2Western Europe 6.8 6.6 6.6 7.0 6.6 6.5 6.8 6.7 6.8 6.5 6.5 6.7 6.6Pacific 0.7 0.7 0.7 0.9 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8

Developing countries 10.3 10.6 10.8 10.9 10.9 11.0 11.2 11.0 11.1 11.1 11.1 11.2 11.1FSU 7.2 7.2 7.5 7.7 7.8 8.0 8.2 7.9 8.2 8.2 8.3 8.4 8.3Other Europe 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2China 3.3 3.2 3.2 3.3 3.2 3.2 3.2 3.2 3.2 3.2 3.2 3.2 3.2Processing gains 1.6 1.6 1.6 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7Total non-OPEC supply 44.6 44.5 44.6 45.8 45.5 45.7 46.2 45.8 46.2 46.0 46.0 46.4 46.1OPEC NGLs 2.8 2.8 2.8 2.9 2.9 2.9 2.9 2.9 3.0 3.0 3.0 3.0 3.0(b) Total non-OPEC supply and

OPEC NGLs 47.5 47.2 47.4 48.7 48.4 48.6 49.1 48.7 49.2 48.9 49.0 49.3 49.1

OPEC crude oil production1 27.2 27.8 26.5 26.5 27.8 28.6 28.8 27.9 28.0Total supply 74.7 75.0 73.9 75.2 76.2 77.2 78.0 76.6 77.2Balance2 1.3 1.3 -1.1 -0.3 2.1 1.0 1.0 0.9 0.3

Closing stock level (outside FCPEs) m bOECD onland commercial 2643 2725 2471 2445 2527 2566 2548 2548 2548OECD SPR 1207 1249 1228 1234 1232 1237 1210 1210 1213OECD total 3850 3974 3699 3679 3760 3803 3758 3758 3761Other onland 1030 1063 989 984 1005 1017 1005 1005 1006Oil on water 812 859 808 829 852 835 864 864 naTotal stock 5692 5896 5497 5492 5618 5655 5627 5627 na

Days of forward consumption in OECDCommercial onland stocks 56 57 52 53 53 53 52 53 54SPR 26 26 26 27 26 25 25 25 26Total 882 83 77 79 78 78 77 78 80Memo itemsFSU net exports 2.9 3.0 3.4 4.0 4.1 4.5 4.0 4.1 4.1 4.7 4.9 4.3 4.5[(a) — (b)] 25.9 26.4 27.6 26.8 25.7 27.6 27.9 27.0 27.8 26.1 28.0 29.2 27.8

Note: Totals may not add up due to independent rounding.1. Secondary sources.2. Stock change and miscellaneous.

Table J above, prepared by the Secretariat’s Energy Studies Department, shows OPEC’s current forecast of world supply and demand foroil and natural gas liquids.

The monthly evolution of spot prices for selected OPEC and non-OPEC crudes is presented in Tables One and Two on page 37, whileGraphs One and Two (on pages 36 and 38) show the evolution on a weekly basis. Tables Three to Eight, and the corresponding graphson pages 39–44, show the evolution of monthly average spot prices for important products in six major markets. (Data for Tables 1–8 isprovided by courtesy of Platt’s Energy Services).

30 OPEC Bulletin

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Graph 1:Evolution of spot prices for selected OPEC crudes,

January to April 2001

15

20

25

30

35

40

OPEC Basket

Tia Juana Light

Dubai

Arab Heavy

Arab Light

Bonny Light

Brega

Kuwait Export

Iran Light

Minas

Saharan Blend

AprilMarchFebruaryJanuary111 222 333 444 111 222 333 44 111 222 33 444 111 222 33 44

$/barrel

555

May 2001 31

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1. Tia Juana Light spot price = (TJL netback/Isthmus netback) x Isthmus spot price.2. OPEC Basket: an average of Saharan Blend, Minas, Bonny Light, Arabian Light, Dubai, Tia Juana Light and Isthmus.Kirkuk ex Ceyhan; Brent for dated cargoes; Urals cif Mediterranean. All others fob loading port.Sources: The netback values for TJL price calculations are taken from RVM; Platt’s Oilgram Price Report; Reuters; Secretariat’s calculations.

Table 1: OPEC spot crude oil prices, 2000–2001 ($/b)

2000Member Country/ April May June July Aug Sept Oct Nov Dec Jan Feb Mar Apriltype of crude (API°) 4Wav 5Wav 4Wav 4Wav 5Wav 4Wav 5Wav 4Wav 4Wav 5Wav 4Wav 4Wav 1W 2W 3W 4W 4Wav

AlgeriaSaharan Blend (44.1) 22.91 28.02 29.94 28.76 29.25 33.18 31.19 33.06 26.11 26.08 27.80 24.82 24.15 25.70 26.69 26.07 25.65

IndonesiaMinas (33.9) 24.15 28.26 31.30 30.44 30.33 33.36 32.30 31.07 24.87 24.03 25.62 25.64 25.68 27.59 28.99 28.30 27.64

IR IranLight (33.9) 22.86 26.10 27.99 27.09 27.12 30.45 30.42 29.75 22.66 22.63 24.65 23.58 22.89 24.16 24.74 24.40 24.05

IraqKirkuk (36.1) — — — — — — — — — — — — — — — — —

KuwaitExport (31.4) 22.29 25.60 27.44 26.39 26.21 29.05 28.87 28.20 21.11 21.08 23.10 22.03 21.34 22.61 23.19 22.85 22.50

SP Libyan AJBrega (40.4) 22.86 27.84 30.14 29.36 29.44 32.64 30.98 32.99 25.40 25.93 27.79 24.69 24.15 25.50 26.50 26.00 25.54

NigeriaBonny Light (36.7) 22.91 27.87 29.86 28.75 29.06 32.65 30.67 32.86 25.47 25.43 27.40 24.35 23.84 25.44 26.50 25.95 25.43

Saudi ArabiaLight (34.2) 22.95 26.27 29.09 27.19 27.12 30.60 30.17 29.81 22.65 22.31 24.82 23.77 23.08 24.36 24.94 24.59 24.24Heavy (28.0) 22.00 25.27 27.09 25.99 25.52 28.00 28.21 27.94 20.83 20.74 23.32 22.57 21.88 23.31 23.89 23.54 23.15

UAEDubai (32.5) 22.14 25.69 27.24 26.35 26.79 30.05 30.57 30.25 22.27 22.56 24.79 23.67 23.02 24.38 24.50 24.33 24.06

VenezuelaTia Juana Light1 (32.4) 22.16 25.50 27.99 26.32 26.84 29.33 28.34 30.01 23.11 23.18 22.79 21.08 20.09 21.21 21.29 20.57 20.79

OPEC Basket2 22.93 26.94 29.12 27.94 28.30 31.48 30.42 31.22 24.13 24.06 25.41 23.70 23.14 24.57 25.19 24.63 24.38

Table 2: Selected non-OPEC spot crude oil prices, 2000–2001 ($/b)

2000Country/ April May June July Aug Sept Oct Nov Dec Jan Feb Mar Apriltype of crude (API°) 4Wav 5Wav 4Wav 4Wav 5Wav 4Wav 5Wav 4Wav 4Wav 5Wav 4Wav 4Wav 1W 2W 3W 4W 4Wav

Gulf AreaOman Blend (34.0) 22.75 25.65 27.74 26.83 27.24 30.55 29.88 28.97 22.76 22.43 24.29 23.26 22.54 23.73 24.78 24.25 23.82

MediterraneanSuez Mix (Egypt, 33.0) 19.90 25.03 26.64 24.24 26.24 28.59 26.18 29.06 21.11 22.09 22.61 19.73 19.65 21.40 22.85 22.40 21.58

North SeaBrent (UK, 38.0) 22.66 27.60 29.74 28.96 29.74 32.94 30.86 32.67 25.07 25.60 27.30 24.42 23.94 25.55 26.33 25.65 25.37Ekofisk (Norway, 43.0) 22.74 27.91 29.85 28.44 28.57 32.75 30.77 32.66 25.50 25.51 27.49 24.34 23.86 25.41 26.42 25.85 25.38

Latin AmericaIsthmus (Mexico, 32.8) 23.31 26.95 29.45 27.74 28.75 31.19 29.73 31.47 24.40 24.80 24.63 22.60 22.08 23.32 23.41 22.62 22.86

North AmericaWTI (US, 40.0) 25.81 28.78 31.93 30.19 31.04 34.05 33.00 34.65 28.39 29.42 29.48 27.27 26.62 28.03 28.11 26.72 27.37

OthersUrals (Russia, 36.1) 21.20 26.35 27.39 24.75 27.00 30.30 28.04 31.23 24.06 24.40 24.78 21.72 21.52 23.64 24.94 24.30 23.60

32 OPEC Bulletin

M A R K E T R E V I E W

Graph 2:Evolution of spot prices for selected non-OPEC crudes,

January to April 2001

15

20

25

30

35

40

OPEC Basket

Urals

West Texas

Isthmus

Ekofisk

Brent

Suex Mix

Oman

AprilMarchFebruaryJanuary1 2 3 4 5 1 2 3 4 1 2 3 4 1 2 3 4

$/barrel

May 2001 33

M A R K E T R E V I E W

Table 3: North European market — bulk barges, fob Rotterdam ($/b)regular gas premium gas fuel oil

1999 naphtha unleaded 87 unleaded 95 gasoil jet kero 1%S 3.5%SApril 15.59 18.23 18.93 17.10 19.29 11.53 10.61May 17.50 18.11 18.93 16.01 18.51 12.40 10.42June 17.34 18.18 19.14 16.58 19.02 12.56 12.03July 20.38 21.66 22.69 19.97 22.35 14.13 14.05August 22.34 25.51 26.39 22.22 24.42 16.97 16.76September 23.21 25.83 26.75 24.29 26.41 17.77 17.53October 24.78 25.88 26.61 24.19 26.04 19.16 18.78November 25.54 27.20 27.72 26.77 29.32 19.40 19.15December 24.73 28.41 28.93 28.18 33.07 19.69 18.672000January 27.41 27.81 28.23 28.96 32.24 19.85 18.83February 29.87 31.63 32.32 29.85 32.72 21.52 19.81March 31.06 35.71 36.27 30.28 34.01 22.67 22.12April 24.83 32.90 33.42 28.23 32.81 19.44 18.12May 28.39 37.01 38.99 29.87 32.07 20.02 18.70June 30.41 40.57 44.28 31.40 34.40 23.79 21.23July 29.89 36.51 37.67 33.02 36.07 24.13 19.79August 29.79 34.82 36.20 36.46 38.69 21.47 19.69September 33.28 36.87 37.70 42.09 43.84 24.29 23.04October 33.15 34.72 35.28 40.06 43.64 27.06 23.82November 32.51 32.72 33.46 40.68 43.61 25.61 22.18December 29.27 27.77 28.05 34.25 37.50 23.24 18.312001January 27.36 29.44 29.85 30.15 32.03 20.54 15.48February 29.23 32.11 32.49 30.88 33.41 20.48 18.21March 27.19 30.69 31.52 29.38 31.72 20.56 17.58April 27.86 36.47 37.57 30.37 32.45 20.49 17.05

Sources: Until September 2000 Platt’s Oilgram Price Report & Platt’s Global Alert; as of October 2000 Reuters. Prices are average of available days.

1999 2000 2001

0

10

20

30

40

50

fuel oil 3.5%S

fuel oil 1%S

jet kero

gasoil

premium

regular

naphtha

AprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJanDecNovOctSepAugJulJunMay

$/barrel

Graph 3: North European market — bulk barges, fob Rotterdam

34 OPEC Bulletin

M A R K E T R E V I E W

Table 4: South European market — bulk cargoes, fob Italy ($/b)gasoline fuel oil

1999 naphtha premium unleaded 95 gasoil jet kero 1%S 3.5%SApril 14.49 18.82 15.32 18.30 10.71 9.85May 16.38 18.88 14.52 16.63 11.44 9.52June 16.39 19.19 15.73 17.26 11.85 10.23July 19.45 23.12 19.06 21.04 14.26 12.65August 21.45 27.05 21.81 22.73 17.08 15.48September 22.37 26.90 23.36 25.18 17.34 16.55October 23.88 26.46 23.56 24.51 18.42 17.65November 24.68 27.77 26.25 27.67 17.76 17.53December 23.83 28.82 27.86 32.52 18.23 17.442000January 26.26 27.55 28.06 31.43 20.48 17.85February 28.57 32.11 29.97 31.28 22.12 19.05March 29.65 36.27 29.63 32.31 22.40 21.27April 23.41 32.77 26.69 31.16 19.28 17.09May 27.01 38.38 29.15 29.67 20.52 16.51June 28.93 44.06 30.14 31.99 24.50 19.95July 28.26 38.25 32.92 34.18 23.20 18.76August 28.14 36.67 36.09 36.60 20.85 17.85September 31.58 37.87 41.97 41.89 25.00 21.49October 32.48 37.20 41.53 41.85 27.16 23.58November 32.47 33.57 40.44 40.33 24.71 19.47December 27.74 27.79 34.92 35.99 23.46 17.962001January 26.35 28.76 27.32 28.73 20.13 14.35February 26.04 31.89 31.32 29.11 18.80 16.86March 24.13 30.53 27.55 27.89 18.39 16.28April 27.07 36.43 29.00 28.28 19.23 14.96

Sources: Until September 2000 Platt’s Oilgram Price Report & Platt’s Global Alert; as of October 2000 Reuters. Prices are average of available days.

0

10

20

30

40

50

fuel oil 3.5%S

fuel oil 1%S

jet kero

gasoil

premium

naphtha

AprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJanDecNovOctSepAugJulJunMay

$/barrel

1999 2000 2001

Graph 4: South European market — bulk cargoes, fob Italy

May 2001 35

M A R K E T R E V I E W

Table 5: US East Coast market — New York ($/b, duties and fees included)gasoline fuel oil

1999 regular unleaded 87 gasoil jet kero 0.3%S LP 1%S 2.2%SApril 20.61 17.85 18.84 15.18 13.06 11.78May 20.30 17.27 17.88 16.41 13.82 12.95June 20.28 17.88 19.37 16.85 14.61 13.22July 24.30 20.77 22.56 18.60 16.39 14.65August 26.64 22.79 24.51 21.11 18.62 17.24September 28.67 25.04 26.66 22.22 19.48 18.85October 26.13 24.27 25.76 22.00 19.44 18.75November 28.87 26.90 28.78 22.73 19.52 18.95December 29.35 27.91 30.92 24.88 19.21 18.702000January 29.41 34.21 39.42 30.08 21.76 20.42February 33.91 34.64 35.50 31.74 22.90 21.22March 37.10 32.01 34.31 27.07 21.06 20.87April 30.35 30.16 32.20 26.81 20.98 19.85May 37.17 31.39 33.26 28.66 24.59 21.86June 40.12 32.62 33.69 30.69 27.11 23.20July 36.04 32.53 34.42 29.28 24.44 22.20August 36.33 37.17 38.59 29.48 24.50 21.57September 39.90 41.25 43.80 37.21 29.42 25.39October 39.83 41.04 42.86 36.86 29.51 25.96November 39.56 43.46 45.52 35.43 28.66 25.26December 30.96 39.52 40.97 34.59 25.63 22.042001January 34.81 35.51 36.03 33.09 25.40 22.34February 34.68 32.99 34.90 31.51 23.38 19.73March 32.96 31.12 32.91 27.61 23.31 20.30April 39.78 32.83 33.92 27.82 22.80 17.47

Sources: Until September 2000 Platt’s Oilgram Price Report & Platt’s Global Alert; as of October 2000 Reuters. Prices are average of available days.

0

10

20

30

40

50

fuel oil 2.2%S

fuel oil 1%S

fuel oil 0.3%S LP

jet kero

gasoil

regular

AprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJanDecNovOctSepAugJulJunMay20001999 2001

$/barrel

Graph 5: US East Coast market — New York

36 OPEC Bulletin

M A R K E T R E V I E W

Table 6: Caribbean cargoes — fob ($/b)fuel oil

1999 naphtha gasoil jet kero 2%S 2.8%SApril 16.70 17.34 18.36 10.85 10.01May 17.53 16.87 17.73 11.97 11.26June 18.03 17.44 19.18 12.21 11.40July 21.60 20.45 22.12 13.68 12.91August 23.50 22.65 24.57 16.45 15.95September 25.09 24.54 26.18 18.34 18.13October 23.16 23.83 25.32 18.20 17.91November 26.23 26.31 28.01 18.45 17.88December 25.96 27.38 29.93 18.20 17.872000January 28.17 30.61 32.85 19.82 18.46February 33.52 31.85 32.95 20.57 19.36March 32.74 30.82 33.01 20.17 19.70April 28.25 29.44 30.74 19.15 18.50May 32.59 31.11 31.84 21.16 19.39June 36.24 32.27 32.78 22.27 21.40July 31.06 32.35 33.38 20.84 19.67August 32.92 36.63 37.80 19.78 18.54September 35.32 41.01 42.78 23.59 20.46October 34.77 39.90 41.32 23.95 21.71November 34.37 40.93 43.64 22.96 17.96December 29.73 34.63 36.40 19.89 16.902001January 34.10 35.56 36.17 20.21 16.48February 29.87 31.85 32.42 18.14 16.31March 28.63 28.97 30.11 18.26 17.16April 33.63 30.50 31.29 15.81 15.03

Sources: Until September 2000 Platt’s Oilgram Price Report & Platt’s Global Alert; as of October 2000 Reuters. Prices are average of available days.

1999 2000 2001

$/barrel$/barrel$/barrel

0

10

20

30

40

50

fuel oil 2.8%S

fuel oil 2.0%S

jet kero

gasoil

naphtha

AprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJanDecNovOctSepAugJulJunMay

Graph 6: Caribbean cargoes — fob

May 2001 37

M A R K E T R E V I E W

Table 7: Singapore cargoes ($/b)gasoline fuel oil

1999 naphtha premium unleaded 95 gasoil jet kero 0.3%S 180C 380CApril 16.19 19.74 16.73 19.29 13.07 11.93 11.71May 17.42 18.58 16.99 17.81 14.02 12.65 12.48June 17.69 18.49 17.19 18.82 14.17 12.58 12.49July 20.75 22.63 19.22 22.10 15.50 14.45 14.46August 23.16 25.99 21.30 24.81 17.23 17.03 17.27September 24.49 26.86 23.04 26.37 18.91 18.42 18.83October 24.70 24.78 23.60 25.90 20.46 19.98 20.46November 25.86 25.88 24.74 27.56 21.23 20.68 21.19December 25.03 25.46 25.63 29.53 21.47 20.47 20.982000January 25.02 28.36 28.14 31.30 21.58 19.66 19.95February 27.09 31.16 29.90 31.14 23.43 20.76 21.15March 29.08 32.58 32.94 32.37 25.85 24.66 24.69April 25.01 28.01 26.73 27.99 24.54 22.13 22.39May 27.27 31.90 28.12 29.09 26.62 23.62 23.60June 28.13 33.08 30.69 31.23 26.78 25.30 25.31July 27.80 36.05 31.86 33.25 25.45 22.00 22.09August 30.19 38.31 37.46 37.98 27.08 21.57 21.64September 34.53 35.05 40.13 42.21 28.44 24.81 24.87October 33.50 33.03 38.96 43.30 26.77 26.35 26.55November 30.43 32.96 34.85 39.88 26.50 24.36 24.49December 25.52 29.97 29.61 32.92 24.45 19.78 19.742001January 25.50 30.02 28.41 29.70 22.54 18.37 17.99February 27.83 31.33 27.57 30.48 22.68 19.91 19.69March 27.43 29.88 26.83 28.72 22.43 20.08 20.04April 28.14 32.76 29.80 30.25 22.60 20.48 20.47

Sources: Until September 2000 Platt’s Oilgram Price Report & Platt’s Global Alert; as of October 2000 Reuters. Prices are average of available days.

0

10

20

30

40

50

fuel oil 380C

fuel oil 180C

fuel oil 0.3%S

jet kero

gasoil

premium

naphtha

AprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJanDecNovOctSepAugJulJunMay1999 2000 2001

$/barrel$/barrel$/barrel

Graph 7: Singapore cargoes

38 OPEC Bulletin

M A R K E T R E V I E W

Table 8: Middle East— fob ($/b)fuel oil

1999 naphtha gasoil jet kero 180CApril 16.25 15.68 18.29 11.17May 17.15 15.78 16.67 11.96June 17.32 15.86 17.56 11.95July 20.49 17.91 20.86 13.87August 22.84 19.99 23.57 16.30September 24.29 21.73 25.13 17.53October 24.40 22.33 24.68 19.15November 25.61 23.50 26.39 19.88December 24.85 24.34 28.30 19.412000January 24.62 26.63 29.87 18.47February 26.75 28.32 29.64 19.59March 28.42 31.28 30.79 23.40April 24.42 25.01 26.36 20.66May 26.84 26.39 27.46 22.06June 27.63 28.76 29.40 23.60July 27.07 29.73 31.24 20.27August 29.12 35.24 35.88 19.49September 33.03 37.79 40.01 22.98October 31.51 36.62 40.97 24.39November 28.88 32.42 37.38 22.05December 24.19 26.46 29.73 17.062001January 24.29 25.05 26.38 15.68February 26.86 24.40 27.31 17.58March 26.28 24.31 26.41 17.93April 27.42 28.05 28.49 18.83

Sources: Until September 2000 Platt’s Oilgram Price Report & Platt’s Global Alert; as of October 2000 Reuters. Prices are average of available days.

0

10

20

30

40

50

fuel oil 180C

jet kero

gasoil

naphtha

AprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJanDecNovOctSepAugJulJunMay1999 2000 2001

$/barrel

Graph 8: Middle East — fob

May 2001 39

The 1999 edition of the OPEC Annual Statistical Bulletin(ASB), which has established itself as the standard reference work on the oil and gas

industries of OPEC Member Countries, is now available from the Secretariat.

Compiled by a team of statistical experts, the ASB contains an unrivalled wealth of data covering the period until end-1999 on the oil and gas sectors of OPEC’s 11 Member

Countries, as well as comprehensive coverage of the rest of the world.

For ease of reference, the ASB is divided

into five sections, which are:

Summary tablesand basic indicators

Basic economicindicators in OPECMember Countries (GDP,population, trade, etc)from 1979-99. Side-by-side comparisons offundamental informationon the oil and gasindustries of OPECMember Countriesand the rest of theworld cover thesame period.

Oil and gas data

More detailedinformation on thehydrocarbon industriesof OPEC and non-OPEC countries,including oil and gasreserves, explorationand production outputand consumption ofrefined products,exports and imports.Most tables cover1995-99.

Transportation

A breakdown by size ofthe oil tanker and liquidgas carrier (LPG) andLNG) fleets of OPEC

Member Countries andthe rest of the world, aswell as freight rates for1995-99. Also includes

data on oil, gas andproduct pipelines in

OPEC MemberCountries.

1Prices

Monthly average pricesof the OPEC Reference

Basket of crudes andits components for

1997-99 and annualaverages for 1990-99,

plus selected majorcrudes (OPEC andnon-OPEC) for the

same periods. Spotrefined product prices

and a breakdown of thecomposite barrel are

also featured.

Major oil companies

Data on theoperations of

six oil majors:BP Amoco,

ExxonMobil,TotalFinaElf,

Royal Dutch/Shell,Chevron

and Texaco.Tables show revenue,

operating costs,taxation, net income

and much more.

23

4

5

The OPEC Annual Statistical Bulletin 1999 plus diskette costs ATS 940 for a hard copy. To order, just fill in the form at the back of the issue, and fax it to OPEC’s PR & Information Department

at +43 1 214 98 27. A PDF version can be downloaded free of charge at www.opec.org.

Packaged with the ASB is a 3.5-inch computer diskette (for Microsoft Windows only) containing all the data in the book and more. Many of the time series in the summary tables in Section 1 are extended back to 1960, the year of OPEC’s founding, while much of the data in Sections 2-5 extends back to 1980. The application is simple to install and easy to manipulate and query. The data can also be exported to Microsoft Excel or other spreadsheets.

Available exclusively from OPEC:

40 OPEC Bulletin

M E M B E R C O U N T R Y F O C U SM E M B E R C O U N T R Y F O C U S

opecna news desk ... from the opecna news desk ... from the opecna

UK keen to expand long-termco-operation with Iran

Tehran — The Permanent Under-Secretary of State of theForeign and Commonwealth Office and Head of the BritishDiplomatic Service, Sir John Kerr, said last month that theUnited Kingdom was eager to foster its long-term co-operationwith Iran.

Kerr told a press conference on the sidelines of the SixthInternational Oil, Gas and Petrochemical Exhibition held inTehran last month that Iran presented itself as having a higheconomic potential for investment and that the UK was readyto assist the country with its development projects.

He was quoted by the official Islamic Republic News Agency(IRNA) as saying that Britain was ready to help Iran achievediversification, should the country be willing to do so.

Kerr noted that the UK’s presence so far in Iran had beento help the government expand its non-oil exports and createjobs.

He spoke of his talks with Iranian officials, including withthe country’s Minister of Petroleum, Bijan Namdar Zangeneh,and said that Britain was also keen to assist Iran develop its energysector.

Britain planned to help Iran in such areas as investment, Kerrsaid, adding that the UK companies present at the exhibitionwanted to establish a long-term investment partnership with thecountry.

Kerr pointed out that there were various means for invest-ment in Iran, but direct investment was the best of its kind.

On the wider commercial front, British business activity inIran continued to go from strength to strength, he said, stressingthe presence of leading oil and gas enterprises such as BP, RoyalDutch/Shell, Enterprise Oil, BG and Lasmo, which were alreadywell established in the country.

Other prominent British interests in the country includedHSBC, Standard Chartered Bank, Standard Bank, Lloyds TSB,SmithKlineBeecham, British Mediterranean, Corus, FosterWheeler, Lloyd’s Register, Rio Tinto, Pilkington and Xerox.

Kerr affirmed that the UK was keen to build on its currentlevel of presence in the country, with many more companiesparticipating in the fair keen to develop contracts and to formnew, mutually beneficial partnerships.

“We look forward to further development of the commercialrelationship with Iran,” he added.

Some 65 UK companies participated in the exhibition, thelargest national presence at the fair.

Kerr said the UK exhibitors, sponsored by the BritishGovernment’s trade and industry arm, Trade Partners UK,represented the very best of the country’s oil and gas industry,including operators, consultants, contractors, equipment sup-pliers, and process engineers.

“This significant participation clearly demonstrates Britain’s

commitment to Iran and overwhelmingly supports the UKgovernment’s decision to make Iran its number one priority oiland gas market,” he said.________________________________________________

Indonesia to re-opentrade centre in Dubai

Dubai — Indonesia’s bilateral trade with the United ArabEmirates (UAE) is set to receive a further boost with the re-opening of the country’s trade centre in Dubai in comingmonths.

According to the Indonesian Ambassador to the UAE,Ibrahim Yusuf, the move to re-open the centre three years afterit was closed after the Asian economic downturn was promptedby the increasing potential to boost two-way trade with theemirates, Dubai’s Khaleej Times reported last month.

Indonesian exports to the UAE grew from a value of $836million in 1998 to $874m in 1999, while the country’s importsfrom the UAE improved from $50m to $55m.

“We see a great potential to increase bilateral trade andfurther strengthen economic co-operation between our coun-tries,” Yusuf said.

“To facilitate this, the Indonesian government is also con-sidering the opening of a consulate office in Dubai to cater toDubai and the Northern Emirates,” he added.

As part of the plan to increase trade to the Middle East andGulf countries, Indonesia will feature as a strong participant atthe international spring trade fair in Dubai next month.

The fair will represent 24 Indonesian companies, including18 firms taking part through the official pavilion, sponsored bythe Indonesian Ministry of Trade and Industry.

The pavilion is being organized by the National Agency forExport Development, a government agency that representsIndonesian exporters.________________________________________________

Iran begins programme topromote solar energy

Tehran — Iran’s Ministry of Energy, in a bid to promoterenewable sources of power, will soon install solar panels in someregions in the south of the country.

An official from the Iranian Ministry of Energy, MajidSafarnia, was quoted by the official Islamic Republic NewsAgency (IRNA) as saying that the panels for heating water wouldbe installed in the cities of Yazd, Bojnourd Tabas, and Zahedan,some of the hottest areas in the south and north-east of thecountry.

He said that the design, manufacture and installation of thepanels for residential units was now under way.

May 2001 41

M E M B E R C O U N T R Y F O C U S

Iran has one of the world’s highest levels of energy consump-tion per capita, especially in fossil fuels, which could be partiallyexplained by the fact that electricity, petrol, natural gas and otherfuels are subsidized by the government.

However, these subsidization policies are gradually beingphased out, due to the heavy financial burden they impose onthe public treasury.

Safarnia said the solar heating systems would also help curbenvironmental degradation and the consumption of fossil fuelsand encourage people living in the hot regions to use environ-mentally friendly and renewable sources of energy.________________________________________________

SABIC studies joint-venturechemical plant project in Iran

Dubai — The Saudi Arabian Basic Industries Corporation(SABIC) is considering setting up a polymer plant in Iranthrough an agreement with the National Petrochemical Com-pany of Iran (NPC), Dubai’s Khaleej Times reported last month.

The President of SABIC’s polymers group, Ahad Al Sheaibi,was quoted by Khaleej Times as saying: “We would be interestedin plant ownership opportunities,” as part of SABIC’s ambitionsto expand, either through strategic alliances, or acquisitions.

“We already have a good business relationship with the NPCthrough product swaps and marketing arrangements, and havefor some time been in dialogue with Iran about joint co-operation in chemical facilities,” he added.

Al Sheaibi was speaking on the sidelines of the three-dayplastics processing and applications congress, Dubai Plast Pro2001.

No concrete proposal has been made yet and key details, suchas feedstock prices and operational facilities, must be decided,he explained.

Al Sheaibi earlier dismissed rumours about SABIC’s ambi-tions to acquire a European company.

“Like other global players, we are looking at striking upstrategic alliances, but talk about any acquisitions in Europe ismere market speculation.”

However, he stressed the need for further consolidation,saying there was room for mergers and for integration amongGulf Co-operation Council (GCC) producers.

“We ourselves took the lead in this respect and talked to someregional producers,” but they had their own agenda to pursueregarding expansion, at least for now.

“Eventually, however, I see this happening,” he elaborated.On the issue of lower regional tariffs, Al Sheaibi said he did

not see reduced levels in any way posing obstacles for Gulfproducers to export to Europe.

“Even within the GCC, lower customs duties for somecountries will eventually boost intra-regional and inter-regionaltrade, and so prove to be beneficial,” he maintained.

He agreed that with the Gulf region poised to become theworld’s major petrochemical exporter, within a few years, trans-porting the products might prove to be a logistical bottleneck.

But Al Sheaibi felt that the fulfillment of the existing plans

to further upgrade the infrastructure in the region would accom-modate future challenges.________________________________________________

Algeria seeks observer statusto Latin America’s OLADE

Algeria — Algeria is negotiating its observer status to the LatinAmerican Energy Organization (OLADE), according to thePresident of the OPEC Conference and Algerian Minister ofEnergy and Mines, Dr Chakib Khelil.

In a statement carried by the Algerian Press Service (APS)last month, Khelil indicated that the necessary protocol wouldbe signed by the end of June.

He noted that Algeria would be in a position to exchangeenergy industry experience with OLADE and its member states,before considering undertaking joint projects, both in Algeriaand Latin America.

The Minister pointed out that it would be the first time thata non-Latin American country had received observer status tothe organization.

Meanwhile, Khelil announced the convening in Algiers in2002 of the first Africa-Latin America conference on energy.

The conference would focus on experience and data ex-change in the sector, Khelil said, adding that Latin Americancountries were quite advanced in the different branches of theenergy industry.

“Together, we would elaborate on operational and func-tional mechanisms that would better serve the development ofour respective countries,” he said.________________________________________________

Nigeria signs poverty eradicationdeal with the World Bank

Abuja — As part of a new move to tackle widespread poverty,Nigeria last month signed a community-based poverty allevia-tion programme with the World Bank.

The programme replaces an earlier scheme introduced bythe government, which failed to make any meaningful impacton poverty because of mismanagement.

Under the terms of the new programme, funds will beprovided to communities to allow residents to engage in pro-ductive activities to improve their standard of living.

The World Bank’s Country Director in Nigeria, MarkTomlinson, said at the signing of the development credit agree-ment that the programme would cost about $97 million toimplement.

Tomlinson said the International Development Association(IDA) had provided $60m towards the fund.

Although the IDA credit does not accrue interest, it doesrequire the payment of a service charge of 0.75 per cent, overa repayment period of 35 years, he explained.

He noted that the programme, which would become effec-tive in 60 days after the signing, was also being partly funded

42 OPEC Bulletin

M E M B E R C O U N T R Y F O C U S

by the African Development Bank, which would provide $27m.The Japanese government would extend $560,000, while

the Nigerian federal and state governments and the communitieswould provide a counterpart funding of $10m.

Nigerian Minister of Finance, Adamu Ciroma, said thegovernment would adopt a ‘bottom-to-top’ approach in itsimplementation of the programme.

This was necessary as previous programmes on povertyalleviation had not yielded the expected results.

“What we will have now is a situation where the differentcommunities will be given the opportunity to draw up their ownpoverty alleviation programmes and also play a major role intheir implementation,” he explained.

The Minister said that since the communities would beinvolved in the formulation and implementation of the pro-gramme, they would take ownership of it and would, therefore,do everything possible to ensure that it succeeded.

A pilot scheme in six states — Kogi, Kebbi, Cross River,Abia, Ekiti and Yobe — would be used to evaluate the effec-tiveness of the programme’s approach to poverty eradication inthe country, he added.

Ciroma explained that this first stage of the programmeinvolving the six states, which were chosen for their high povertylevels, was important, because future plans would depend on thesuccess or failure of these projects.

Widespread poverty in Nigeria has been blamed on themismanagement of the country’s oil resources by the military,which ruled the country for many years until the return todemocracy two years ago.

In addition, corruption and the inequitable distribution ofthe country’s wealth has helped worsen the high rate of povertyin the country.________________________________________________

Venezuelan President attendsSummit of the Americas

Caracas — Venezuelan President, Hugo Chavez, travelled toQuebec last month to attend the week-long Summit of theAmericas 2001, which brought together some 34 heads of statefrom north, south and central America and the Caribbean todiscuss setting up a free trade area by the end of 2005.

Chavez travelled to Canada directly from Cartagena, Co-lombia, where he took part in an Andean nations’ presidentialmeeting that dealt with regional trade issues.

In Quebec, Chavez was accompanied by the VenezuelanForeign Minister, Luis Alfonso Davila, the Minister of Finance,Jose Rojas, and Minister of Planning and Development, JorgeGiordani.

During the summit, the Venezuelan leader held a series ofbilateral meetings with other heads of state, including UnitedStates President, George W Bush.

Chavez also held talks with the Argentine President, Fernandode la Rua; the Brazilian President, Fernando Henrique Cardoso;the El Salvadorian President, Francisco Flores; the ParaguayanPresident, Luis Angel Gonzalez Macchi; the Chilean President,

Ricardo Lagos; the Jamaican Prime Minister, Percival Patterson;the Guyanan President, Bharrat Jagdeo, and the Bolivian Presi-dent, Hugo Banzer.

Prior to his departure for the summit, Chavez said he hadread “with much attention and optimism” the most recent reportof the Economic Commission for Latin America that underlinedhow foreign investment had increased in Venezuela over the pasttwo years.

“Last year, Venezuela’s economic recovery began after arecession of more than a decade. The construction, agriculture,mining, telecommunications and other sectors began growing,”he said.

“In the last quarter of 2000, there was growth of more thanfive per cent of gross domestic product,” he noted.

Regarding the summit, Chavez reiterated his call for strongerintegration among Latin American nations before implement-ing a Free Trade Agreement of the Americas (FTAA), which wasdiscussed in Quebec.

“First, we must integrate ourselves. There will be no success-ful FTAA if we do not shape a good integration mechanism here.For that reason, it is a priority for us to accelerate negotiationsand the strength of the Andean community of nations, on theone hand, Mercosur on the other, and the Caribbean states,”he maintained.

“We have to move swiftly in a firm way towards increasedintegration, strengthen ourselves, and then contribute in thatway to a successful FTAA,” he added.________________________________________________

Indonesian government movesto stabilize current deficit

Jakarta — The Indonesian government hopes to maintainthe projected 2001 budget deficit of about 3.7 per cent of grossdomestic product by adjusting revenue and expenditure targets.

Stating this last month, the Co-ordinating Minister for theEconomy, Rizal Ramli, said several measures were being con-sidered to limit the deficit level.

These included raising tax revenue, particularly income taxfrom wealthier citizens, pressing on with the sale of assets underthe Indonesian Bank Restructuring Agency (IBRA), askingmultilateral lenders to agree to lower the rupiah financing costrequirement in foreign-funded government projects, and get-ting resource-rich provinces to buy shares in state-owned enter-prises.

Tax revenue would account for nearly 60 per cent of the totalexpenditure, while IBRA was expected to raise funds from thesale of assets of companies that had run into financial trouble,as well as from the privatization of state-owned companies.

The government also hoped to reduce the local financingcost requirement of around 40 per cent of foreign-fundedprojects to help ease pressure on the state budget, he said.

Rizal said the government was proceeding with plans to issueasset-backed bonds, despite protestations from the Paris Clubof creditor nations, which had last pledged to provide $5.8billion.

May 2001 43

M E M B E R C O U N T R Y F O C U S

He noted that the Paris Club, made up of rich nations andthe World Bank, had told Indonesia to drop the plan to raisebonds backed by income from natural gas sales to Singaporebecause this would encourage creditors to cancel the currentrestructuring of the country’s $5.8bn debt.

There was widespread concern that the deficit could be morethan five per cent of GDP, pressing the government for addi-tional funding, which is exacerbated by the weakness of therupiah, which had fallen to around 11,095 to the US dollar fromthe budget assumption of 7,800.

Interest rates on Bank Indonesia’s one-month promissorynotes had also increased to almost 16 per cent, compared withthe 11.5 per cent estimated in the budget.________________________________________________

Oil price increase helps liftKuwait’s GDP by 28 per cent

Kuwait — A report released by the National Bank of Kuwait(NBK) last month indicated that the country’s gross domesticproduct for the year 2000 grew by 28 per cent to an estimated$38.25 billion.

The report attributed the jump to the increase in oil and oilby-product prices as the industry yielded about 55.7 per centof domestic returns.

It pointed to a 56.8 per cent increase in total oil GDP, dueto a 54 per cent hike in the average price of Kuwaiti crude oil,and a six per cent rise in the level of crude production, theKuwaiti News Agency (KUNA) reported.

Other contributing factors included a 15 per cent increasein refining value-added returns, in spite of a 20 per cent dropin production, caused by the shutdown of Kuwait’s largestrefinery, Al-Ahmadi, due to a fire last year.

The nation’s non-oil GDP decreased by 3.8 per cent, dueto capital spending cuts and a decrease in the foreign population.

As to non-oil’s contribution to GDP, the report noted thatthe social, community and personal services’ sector was strong-est, representing over 43 per cent of total non-oil GDP. Thissector did, however, register a reduction in year-on-year growthof 4.8 per cent in 1999 to 4.4 per cent in 2000. Finance, realestate, and business services followed with an estimated 25 percent.

Government spending was said to have risen by 4.1 per centin 2000, the highest increase since 1995, and after years ofgovernment efforts to cut expenditure and the overall deficit.

The report also revealed a 29 per cent increase in thecountry’s gross national product, estimated at $45.24bn.________________________________________________

Algeria’s hydrocarbon exportreceipts down by 4.7 per cent

Algiers — Algeria’s hydrocarbon export receipts stood at $5.39billion in the first quarter of this year, down by 4.7 per cent fromthe same period in 2000, it was reported last month.

According to the National Statistics Centre, situated in thecountry’s capital, Algeria’s total global exports during the periodunder study were worth $5.55bn, as against $5.83bn in the firstquarter of last year.

Imports in the first three months of 2001 cost the nation$2.40bn, up by $200 million over the January to March 2000period.

During the first quarter, the country’s balance of tradeshowed a surplus of $3.15bn, compared with a surplus of$3.55bn registered in the first three months of last year.________________________________________________

Iran, Germany sign protocolson economic co-operation

Berlin — The fourth session of the Iran-Germany JointEconomic Commission culminated in the signing of threememoranda of understanding last month.

Iranian Minister of Economics and Finance, Hossein Namazi,and his German counterpart, Werner Mueller, signed a corner-stone agreement on encouraging and protecting mutual invest-ments.

“The most important result of this fourth joint session wasthe signing of an agreement to promote and protect mutualinvestments,” Mueller commented during a joint press confer-ence with Namazi, held at the Ministry of Economics.

“Iranian President Khatami’s visit to Germany last year andthe successful conclusion of the fourth joint economic sessionafter a break of 10 years signals that a new chapter in German-Iranian ties has started,” Mueller was quoted by the officialIslamic Republic News Agency (IRNA) as saying.

He noted that a general agreement on “all aspects of eco-nomic co-operation,” along with another agreement on housing,were signed between the two countries.

Mueller called on German and Iranian industry “to helprealize and implement” the agreements signed.

He referred to Iranian requests for a “more flexible policy”with regards to insurance guarantees for German exports to Iranand said his country would also support such reforms.

Mueller reiterated that his country would co-operate withIran in helping to downgrade Iran’s risk level in the Organizationof Economic Co-Operation and Development (OECD).________________________________________________

Saudi Arabia best option forforeign investors, says official

Riyadh — Overall investment in Saudi Arabia since theintroduction of new economic procedures for attracting foreigncapital into the Kingdom 12 months ago has reached $30 billion,according to the Governor of the Saudi Arabian General Invest-ment Authority (SAGIA), Prince Abdallah Bin Faisal Bin Turki.

In an interview with the Kuwaiti News Agency (KUNA) lastmonth, Turki said the measures for encouraging both nationaland foreign investors to establish and run schemes had turned

44 OPEC Bulletin

M E M B E R C O U N T R Y F O C U S

Saudi Arabia into the “best haven and option for investors”.Since the establishment of SAGIA in April 2000, the author-

ity had licensed 82 new projects and released 32 licences forexpanding already existing projects with total investments upby $8.15bn, up to end of April this year.

Turki said many measures had been implemented to encour-age foreign investors, including removing obstacles, pinpointinginvestment opportunities, as well as providing investment pro-tection.

He underscored the need for the privatization of someeconomic sectors in the Kingdom to develop the domesticmarket and to build up a developed economy that could reactwith change.

Privatization would lead to an upgrading of the absorptivecapacity of the domestic economy, as well as boosting the in-flow of domestic and foreign investment, he maintained.

The Saudi Supreme Economic Council has formed aneconomic committee to oversee the implementation of theprivatization programme.

Turning to other economic issues, Turki said Saudi Arabia’sinclusion in the World Trade Organization (WTO) wouldrealise many direct and indirect benefits.

Joining the WTO would soften restrictions imposed oncommodities and services in world markets, support competi-tiveness, increase investment possibilities, and rid the domesticmarket of the problem of dumping.________________________________________________

Venezuelan, Chinese leaderssign several bilateral accords

Caracas — Chinese President, Jiang Zemin, was due toconclude a three-day state visit to Venezuela last month withthe signing of a series of bilateral agreements aimed at fosteringbroader trade and co-operation between the two countries.

Jiang, who arrived in Caracas on the last leg of a six-nationLatin American tour, and Venezuelan President, Hugo Chavez,were due to sign the accords, which included an energy agree-ment.

Under the terms of the energy accord, Venezuela will supplyChina with its trademark power plant fuel, Orimulsion, andChina will fund the construction of a new Orimulsion produc-tion plant.

Other accords include the opening of a Chinese line of creditfor Venezuela, the promotion and protection of Chinese invest-ments in Latin American country, along with agreements ontaxation, mining, agriculture, culture and scientific research.

The Chinese and Venezuelan leaders held a working meetingto put the final touches to the agreements.

Separately, Jiang laid a wreath at the tomb of Venezuela’sindependence hero, Simon Bolivar, and visited the NationalAssembly, Venezuela’s legislative body.

Chavez expressed wide satisfaction with Jiang’s visit and toldreporters that he was planning to visit China by late May, orearly June, to further expand Chinese-Venezuelan co-operation.The Venezuelan leader last visited Beijing in October 1999.

Algeria, UAE to sign accordson double taxation, investment

Dubai — Accords on the prevention of double taxation andprotecting investments will be signed by Algeria and the UnitedArab Emirates (UAE) later this month, according to officialsfrom the UAE Ministry of Finance and Industry.

A memorandum of understanding will also be signed be-tween the two respective chambers of commerce and industryon the sidelines of the second UAE in Algeria exhibition, whichwas due to be held on May 25-28.

The UAE Ministry’s Assistant Under-Secretary for Indus-trial Affairs, Mohammed Bin Zayed, said the Dubai PortsAuthority and the Jebel Ali Free Zone were considering signinga free zone and ports co-operation MOU with the AlgerianMinistry of Trade.

Zayed said the two agreements would open the door to animportant phase in Algerian-UAE relations.

They were part of the UAE’s policy to support relations withthe Arab world, in preparation for the Arab free trade zoneagreement.

The Dubai Chamber of Commerce and Industry’s AssistantDirector General for Studies and International Relations, AhmedAl Banna, said the MOU would support trade, which now stoodat around $190 million.

“The agreement covers exchanges of information, expertiseand collaboration in exhibitions, seminars and visits of tradedelegations,” he noted. Around 50 UAE companies are takingpart in the exhibition.________________________________________________

UOG receives nine bids forFujairah desalination project

Dubai — The United Arab Emirates Offsets Group (UOG)has received nine bids from four international companies for the$1 billion Fujairah desalination and pipeline project.

The technical bids have already been opened, while thecommercial bids were due be opened at the end of May.

The bidders are Hanjung of South Korea, with three pro-posals, Fisia Italimpianti of Italy, with four, and Siden of Franceand Weir Westgarth of the United Kingdom, with one each.

The proposals related to a range of desalination technologies,including multi-stage flash, multiple effect distillation, andreverse osmosis.

UOG has been mandated by the Abu Dhabi governmentto implement the project on a fast-track basis to meet the risingdemand for water at Al Ain and in the Northern Emirates,Dubai’s Khaleej Times reported last month.

The desalination and power plant package, estimated at avalue of $500 million–550m, involves the engineering, procure-ment and construction of a 100m gallons/day plant and a captivepower unit in excess of 100 megawatts.

The plant is to be built at Qidfa, next to the existing powerand water generation plant being run by the Federal Electricity

May 2001 45

M E M B E R C O U N T R Y F O C U S

and Water Authority in northern Fujairah. It will have the designcapacity to run on both diesel oil and gas.

Technical and commercial bids for the $400m–450m trans-mission package, which entails the construction of storage tanks,associated facilities, and a 185-km pipeline to Al Ain and theNorthern Emirates, were due on May 30, after a three-weekextension.

Both packages were due to be awarded by the end of July.The project is scheduled for completion in 24 months.

The Abu Dhabi government will initially fund the scheme.At a later stage, a foreign partner will be selected, in line withthe ongoing privatization of the power and water sector in thecountry.

Fichtner of Germany is the technical consultant, while theUK’s Allen & Overy and the local firm, Hadaf Al Dhaheri, arethe legal advisers on the project. Washington-based TaylorDejongh are acting as the financial advisors to the Abu Dhabigovernment.________________________________________________

Qatar Shipping Company ordersnew vessel from Korean shipyard

Doha — The Qatar Shipping Company has signed a contractwith the South Korean firm, Shina, for a new vessel costing $25million, with a capacity of 27,000 tonnes, to transport petro-leum and chemicals.

Communications and Transport Under-Secretary and theQatar Shipping Company Board Chairman, Salem Bin ButtiAl-Noaimi, said a contract was signed last September with Shinafor the building of two similar vessels, adding that the newestship would be handed over in June 2003.

It would be built in accordance with the standards of theAmerican Bureau for Maritime Transport, he explained.

Meanwhile, the Qatari company’s General Manager, NasserAl-Rumeihi, said the firm had noticed an increasing demandfor petroleum product carriers with loads ranging between35,000–44,000 tonnes.

He added that the company’s fleet, except for one ship,included vessels with loads ranging between 90,000–135,000 t.

After the three new additions, the company would be ableto draw up a strategy aimed at further expanding its fleet, hesaid.________________________________________________

Iranian President signs accordswith Indian Prime Minister

Tehran — Iran and India last month signed seven agreements,including the Tehran Declaration, which was initialled byIranian President, Mohammad Khatami, and visiting IndianPrime Minister, Atal Bihari Vajpayee.

The accords covered various topics, such as energy, water,trade and science, which were signed by the respective Iranianministers and the Indian delegation accompanying Vajpayee.

The purpose of the visit to Tehran was aimed at rebuildingrelations with Iran, Indian officials said, stressing that no accordwas expected on the stalled Iran-India gas pipeline project.

The scheme was shelved amid Indian concern over a poten-tial security risk in routing the pipeline through Pakistan, whichfor its part had given an assurance over the safety of the line.India proposed a sea route instead.

Vajpayee, the first Indian Prime Minister to visit Iran since1993, was due to address the Iranian Parliament and have wide-ranging discussions with President Khatami on regional andinternational issues during his four-day stay in the country, theofficial Islamic Republic News Agency (IRNA) reported.

Indian Foreign Minister, Jaswant Singh, visited Iran in Maylast year when the two sides set up a joint committee to considerall aspects of bilateral relations.

The first meeting of the committee was held in Tehran inAugust when the two countries discussed the gas pipelineproject.

Trade between India and Iran has been growing. Indianexports to Iran were estimated at $165 million for fiscal 1999-2000, while imports totalled roughly $1.0 billion.

Meanwhile, Indian Minister of Petroleum and Natural Gas,Ram Naik, has said that India was the biggest consumer ofenergy in the world with consumption growing at about six-seven per cent a year.

Inaugurating a two-day international conference on Indianenergy security issues in New Delhi, Naik said: “The issueswhich would be discussed are the sourcing of energy and itspricing.”

Referring to the visit of Vajpayee to Iran, he said: “The PrimeMinister will discuss various issues in Tehran and the oil andthe gas pipeline issue will be the most important topic on theagenda”.________________________________________________

Algerian energy sector needsprivate investment, says Khelil

Algiers — The Algerian energy and mines sector greatly needsthe commitment of private investors for it to flourish, accordingto the President of the OPEC Conference, and Algeria’s Min-ister of Energy and Mines, Dr Chakib Khelil.

Addressing a conference in the Algerian capital last monthon the relations between local public and private companies,Khelil noted that such investment commitments would onlyenhance the existing potential of the sector and would help toassure the country of lucrative and stable revenues.

Khelil pointed out that the process of reforms being under-taken in the hydrocarbon, electricity, and mining sectors hada direct implication on public services.

He stressed that no future prospects in these sectors couldbe materialized without the participation of private investment.

“We have to establish the whole mechanism of a moderneconomy to preserve the Algerian economy from the negativeconstraints that are being imposed by globalization,” Kheliladded.

May 2001 47

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