October 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 subscription: $70/12 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 Adnan Shihab-Eldin

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

Head, Administration &Human Resources Department Senussi J Senussi

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 the speakers at the closing session of the OPECSeminar on OPEC and the Global Energy Balance (seeOPEC Seminar beginning on page 12). Inset is Presi-dent Hugo Chávez of Venezuela during his visit to theOPEC Secretariat (see article on page 8).

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 YHarnessing global synergyWith the threat of a worldwide recession looming ever larger, thepoorer members of the global community should not be forgotten

4 F O R U MThe outlook for world oil prices and the impact on the gas industryBy Javad Yarjani, Head, OPEC’s Petroleum Market Analysis Dept

8 P R E S I D E N T I A L V I S I TVenezuelan President Hugo Chávez visits OPEC and OPEC Fund

12 O P E C S E M I N A ROPEC and the Global Energy Balance

20 P R E S S R E L E A S EResolutions of the 117th Meeting of the OPEC Conference

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

31 M A R K E T R E V I E WOil market monitoring report for September 2001

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

53 O P E C F U N D N E W SRecent loans and grants made by the OPEC Fund

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

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

57 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 10 ISSN 0474-6279 October 2001

2 OPEC Bulletin

N O T I C E B O A R D

SP Libyan AJ appoints newChairman of theNational Oil Corporation

The SP Libyan AJ has appointed HE DrAbdulhafid Mahmoud Zlitni (pictured)

as the newChairman ofthe country’sNational OilCorporation(NOC). DrM a h m o u dZlitni, whotakes overfrom HEA h m e dAbdulkarim

Ahmed, was born in 1938 in the Libyancapital Tripoli. He holds a BSc in eco-nomics and commerce from the Univer-sity of Libya in Benghazi, and an MScand PhD in economics from the VictoriaUniversity of Manchester in the UK.The new NOC Chairman has held vari-ous high-level positions in Libya, includ-ing Minister of Education (1980-86),Co-Chairman of the Arab-African Un-ion (1986-87), Governor of the CentralBank (1990-95) and Minister of Na-tional Economy and Trade (1996-2000).Dr Mahmoud Zlitni, who has also heldseveral academic posts through his dis-tinguished career, is married with fivechildren.

Forthcoming events

London, UK, December 3–4, 2001, 16th

Annual Conference & Exhibition: Floating Pro-duction Systems. Details: Bookings Depart-ment, IBC Gulf Conferences, GilmooraHouse, 57–61 Mortimer Street, LondonW1N 8HS, UK. Tel: +44 (0)1932 893851;fax: +44 (0)1932 893893; e-mail:cust.serv@informa.com; www.ibcfps.com.

Luanda, Angola, December 3–4, 2001, Oiland Gas in Angola 2001. Details: CWC Asso-ciates, 3 Tyers Gate, London SE1 3HX, UK.Tel: +44 (0)20 7089 4200; fax: +44 (0)207089 4201; e-mail: bookings@thecwcgroup.com; www.thecwcgroup.com.

Houston, USA, December 3–4, 2001, andTrinidad & Tobago, December 6–7, 2001,Buying and Selling Oil and Gas Assets. Details:Conference Connection Administrators PteLtd, 212A Telok Ayer Street, Singapore

Dhahran, Saudi ArabiaFebruary 4–7, 2002

SOPEC 20025th International Oil, Gas,Petrochemical and Power

Exhibition and Conference

Details: ITE Group PLC105 Salusbury RdLondon NW6 6RG, UKTel: +44 (0)20 7596 5092Fax: +44 (0)20 7596 5106E-mail: tariq.mohammed@ ite-exhibitions.comwww.ite-exhibitions.com

068645. Tel: +65 226 5280; fax: +65 2264117; e-mail: info@cconnection.org; Website: www.cconnection.org/bsoahome.htm.

Trinidad & Tobago, December 3–5, 2001,Production 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/pschome.htm.

Rome, Italy, December 3–5, 2001, WorldLNG Summit. Details: CWC Associates, 3Tyers Gate, London SE1 3HX, UK. Tel: +44(0)20 7089 4200; fax: +44 (0)20 7089 4201;e-mail: bookings@thecwcgroup.com;www.thecwcgroup.com.

London, UK, December 6–7, 2001, TheIntegrated European Gas Network: Investmentsin Infrastructure. Details: Monica Gahlin,Energyforum.net. Tel: +46 8 20 90 95; fax:+46 8 20 90 73; e-mail: info@energyforum.net; www.energyforum.net/gas.

Ankara, Turkey, December 6–9, 2001, 1st

International Energy Exhibition: Enexp Türkiye.Details: Farshid Bagherian, General Man-ager, Akart, 28/1, Ayten sok. Mebusevleri,Tandogan, Ankara, Turkey. Tel: +30 3122138530; fax: +90 312 2138532 or 4829372;e-mail: farshid@superonline.com.

Oslo, Norway, December 10–11, 2001, Fi-nancial Mathematics and Energy Derivatives.Details: Energyforum.net, ChristopherWaldén. Tel: +46 8 20 90 95; fax: +46 8 2090 73; e-mail: christopher@energyforum.net.

London, UK, December 13–14, 2001,Training course on Custody Transfer of CrudeOil — Trading & Loss Control Issues. Details:IP Training, Institute of Petroleum, 61 NewCavendish Street, London W1G 7AR, UK.Tel: +44 (0)20 7467 7100; fax: +44 (0)20

Houston, TX, USADecember 3–4, 2001

Nigeria Oil and Gas Summit

Details: Bookings DepartmentIBC Gulf Conferences57–61 Mortimer StreetLondon W1N 8JX, UKTel: +44 (0)1932 893851Fax: +44 (0)1932 893893E-mail: cust.serv@informa.comwww.ibcenergy.com/nigeria

7255 1472; e-mail: nwilkinson@petroleum.co.uk.

New Delhi, India, January 14–16, 2002,Indian Oil and Gas Conference. 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/iogchome.htm.

Dubai, UAE, January 20–23, 2001, Inter-national Oil Trading and Price Risk Manage-ment. Details: Conference ConnectionAdministrators Pte Ltd, 212A Telok AyerStreet, Singapore 068645. Tel: +65 226 5280;fax: +65 226 4117; e-mail: info@cconnection.org;www.cconnection. org/oiltradinghome.htm.

Singapore, January 24–25, 2002, and Dubai,UAE, January 27–28, 2002, Buying andSelling Oil and Gas Assets. Details: ConferenceConnection Administrators Pte Ltd, 212ATelok Ayer Street, Singapore 068645. Tel:+65 226 5280; fax: +65 226 4117; e-mail:info@cconnection.org; www.cconnection.org/bsoahome.htm.

Madrid, Spain, January 28–29, 2002, In-vestment Opportunities in Spain’s Energy In-dustry. Details: CWC Associates, 3 TyersGate, London SE1 3HX, UK. Tel: +44 (0)207089 4200; fax: +44 (0)20 7089 4201; e-mail: bookings@thecwcgroup.com;www.thecwcgroup.com.

London, UK, May 2–3, 2001, 3rd AnnualConference on Oil and Gas Investments inNigeria 2002. Details: CWC Associates, 3Tyers Gate, London SE1 3HX, UK. Tel: +44(0)20 7089 4200; fax: +44 (0)20 7089 4201;e-mail: bookings@thecwcgroup.com;www.thecwcgroup.com.

October 2001 3

C O M M E N T A R Y

Harnessing global synergyWith the threat of a worldwide recession looming ever larger, the

poorer members of the global community should not be forgotten

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For most of the 1990s, it seemed as ifnothing could stop the worldeconomy. People in the industrial-

ized nations talked endlessly of the neweconomy and the supposed death of theold boom-bust cycle. Tech stocks boomed,making the young founders of manyInternet start-ups multi-millionaires almostovernight. A new phrase — the ‘Goldilockseconomy’ — was even coined to describethe US economy, which, like the soup inthe popular children’s fairy tale of thatname, was not too hot and not too cold, butjust the right temperature. The old eco-nomic paradigms, it seemed, had been aban-doned, rotting away like empty, disusedfactories, mere relics of the industrial revo-lution.

Meanwhile, in world’s poorer countries,nothing much appeared to change. In thedeveloping nations, countless millions ofpeople remained mired in poverty, withbarely adequate nourishment and watersupplies, and without access to proper healthcare, education, and many other things thatthe citizens of the industrialized world takefor granted. It seemed as if the acceleratingeconomic success of the developed nationswas merely leaving the world’s poor furtherand further behind, widening the alreadyyawning chasm between the haves and thehave-nots.

Realistically speaking, there is no pros-pect that the existing gap between Northand South will be bridged any time soon.However, global economic prospects, whichhad begun to darken even before the eventsof September 11, have altered drastically.The talk is still of a world economy thatcannot be stopped — but this time thedirection is not upward, but downward. Adifferent buzzword is on the lips of thosegurus who, until not so long ago, wereproclaiming the discovery of some kind ofeconomic Holy Grail. The ‘Goldilockseconomy’ has been replaced by a ‘synchro-nous recession’ — one in which the world’smajor economies, including the US, Japan,

Germany and perhaps other Europeancountries as well, all register negative growthsimultaneously.

Such a scenario, warn some economists,could lead to a global downturn on a scalenot seen since the 1930s. If one region ofthe world sinks into recession, growth inother areas can help contribute to recoveryin the afflicted region. But if everybodysinks together, who will pull who out of theswamp? And if this nightmare scenario doescome to pass, it is not just the industrializednations that will suffer. Developing coun-tries, many of them heavily reliant on ex-ports of raw materials — including, of course,oil and natural gas — will find their marketsshrinking and could be dragged under.Trade and foreign direct investment mightwell be hit simultaneously.

The starkness of the reality we are nowfacing ought to give us pause for thought.It is becoming ever more apparent that thevarious elements and regions that make upthe global economy are now intertwined soclosely and interact in ways so complex thatwe may never fully understand them. Glo-balization is not an option that humanitycan either choose or discard. It is simply afact of 21st century life. That does not mean,however, that we must accept the world theway is — inequalities and all. We can, in-deed we must, try to change it for the bet-ter.

The noted science fiction authorWilliam Gibson is often quoted as saying:“The future is already here — it’s justunevenly distributed.” What is needed now,in seeking to combat the threat of a syn-chronous recession, is greater synergy be-tween all nations of the world, developingand developed alike. The intense scrutinythat is currently being focused on the worldeconomy in this time of crisis offers us anexcellent opportunity to re-evaluate, and totry to redress, some of the basic structuralflaws that have led to the North-Southdivide. It is an opportunity that should befirmly grasped.

4 OPEC Bulletin

F O R U MF O R U M

Globalization is actually widening,deepening and speeding up the world’sability to interconnect in a variety of ways,from finance and trade to computeriza-tion and modern technology. It has led tothe liberalization and privatization of theglobal energy sector, which has seen amajor restructuring of the leading oil andgas players, through mergers and acquisi-tions.

Environmental concerns have come tothe fore, necessitating wide-rangingchanges throughout the petroleum indus-try. The dimensions and complexity of thecontemporary challenges facing all of us inthe energy industry, whether oil producersor consumers, are considerable and everchanging.

As far as the energy industry is con-cerned, we all know that global economicgrowth drives demand for oil. The OPECSecretariat has forecast that growth in glo-bal gross domestic product will averagemore than three per cent annually over thenext 20 years. Oil is, therefore, set tomaintain its leading position in supplyingthe world’s energy needs for at least theforeseeable future.

OPEC, in accounting for 76 per centof global proven oil reserves, will continueto play a fundamental role in the worldenergy scene, especially as the key supplierof the incremental barrel. In fact, Figure 1shows that by 2020 world oil demandcould be in excess of 100 million barrels/day and with non-OPEC oil productionlikely to remain relatively stable, OPECMember Countries will be relied upon tosupply the lion’s share of the new demand,which will mostly come from developingnations.

Both oil and gas will play asignificant role in the energyindustry of the early 21st cen-tury, writes the Head ofOPEC’s Petroleum MarketAnalysis Department, JavadYarjani,* in this article.

* Based on Mr Yarjani’s presentation to the7th Annual Middle East Gas Summit, Mus-cat, Oman, October 15–17, 2001.

The global economy of the new mil-lennium is indeed far removed fromthe world economic order OPEC

encountered at its creation some 41 yearsago. Globalization is proving to be a pow-erful force of transformation, opening upborders to trade and capital. Rapid social,political and economic changes are com-bining to reshape the world we live in,although not always to the benefit of all,with a number of social and economicproblems rising to the surface.

In tandem with this oil growth comesnatural gas, which OPEC Members alsohave in abundance. Over the years, gas hasbeen increasing its profile as a fuel ofchoice. It is safe, reliable and a highlyefficient source of power generation. It isnow relatively cheap to produce, althoughcostly to transport to the consuming mar-kets.

Environmental awarenessPerhaps what is most significant in

these days of environmental awareness isthe fact that gas is a cleaner burning fuelthan oil, and substantially more so thancoal. Given the continued market pen-etration of combined cycle gas technologyin power generation, as well as the increas-ing effects of environmental concerns, thispopular resource is expected to be a grow-ing source of energy for fuelling the globaleconomy.

Gas turbine plants have lower capitalcosts, are quick to build, are more efficientand emit fewer pollutants than other fossilfuel based power units. That is why amajor share of new electricity generatingcapacity will be based on gas.

Again, looking at our estimates, theyshow that, globally, the share of gas in thetotal energy mix is expected to rise from22.7 per cent in 2000 to 25.5 per cent in2010 and still further to 29.1 per cent in2020. At the same time, the share of oil inthe mix will slip to 39.9 per cent in 2010from 41 per cent last year, declining againto 38.8 per cent in 2020.

Looking just at the OECD region, theshare of gas in the energy mix is set to risefrom 21.3 per cent last year to 24.3 percent in 2010. By 2020, this figure is ex-

The outlook for world oil pricesand the impact on the gas industry

October 2001 5

F O R U M

pected to have reached 27.6 per cent.Again, compare this with oil, and you seea decline in the mix from 44 per cent in2000 to 42.7 per cent in 2010 and to 41.4per cent in 2020.

In non-OECD countries, the upwardpath for gas is again similar, with its sharein the mix expanding from 24.7 per centin 2000 to 26.9 per cent 10 years later. In2020, the figure is slated to reach 30.4 percent. Here the picture for oil is more stablewith the share falling from 36.8 per centlast year to 36.3 per cent by 2020.

It certainly is an intriguing time to bein the petroleum business, and the gassector is proving to be no exception. Greatstrides have been made since the time gasdiscoveries were only made in associationwith crude exploration activities — a by-product of the oil, as it were.

Unlike the oil market, there is, as yet,

no global market for natural gas, due mainlyto its costly and difficult transportation,coupled with the uneven distribution ofgas reserves throughout the world. How-ever, today’s natural gas market is becom-ing increasingly structured and holdstremendous opportunities for the future.It is a relatively young industry and, evenwith current known reserves, productionis expected to increase significantly.

Untapped gas reservesJudging by the latest research, there is

a lot of untapped gas still waiting to beproduced. Some analysts maintain that,worldwide, natural gas may have up tofour times the resource potential of crude.That spells good news for our MemberCountries, who together possess over 75.5trillion cubic metres of proven gas re-serves, almost 46 per cent of the global

total. For example, Iran, which has thesecond largest gas reserves in the worldafter Russia, has seen its proven depositsrise from 17tr cu m in 1990 to 26.6tr cu min 2000.

In fact, virtually all OPEC MemberCountries have seen expansions in theirgas reserves over the years. Moreover, manyof them have now become established asmajor players in the world gas markets.Algeria, Indonesia, Libya, the United ArabEmirates, and more recently, Qatar andNigeria, are all exporters of gas.

Other Member Countries, such asSaudi Arabia, have gas projects planned,while there is an ambitious scheme be-tween two of our Members for Qatar tosupply gas to the UAE. All these develop-ments have led to an increasing outputcapability within OPEC. The Organiza-tion’s marketed natural gas production in

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20202015201020052000

Figure 1: World oil demand and non-OPEC oil production outlook

m b/d

6 OPEC Bulletin

F O R U M

2000 stood at almost 395 billion cu m,compared with 225bn cu m in 1990.However, last year’s output only repre-sented some 16 per cent of the worldwideproduction figure, which shows thefavorable reserves-to-production ratio thatexists within our Organization. This willhold us in good stead for the future as gasdevelopment projects are expanded.

Expanding gas marketApart from the global benefits of an

expanding gas market, especially from theenvironmental standpoint, the fuel alsorepresents a valuable additional asset inrevenue generation for our Member Coun-tries. However, fluctuations in crude oilprices are detrimental to those of gas, giventhe link between the prices of the twofuels, and this subsequently affects theamount of revenue we can earn from gas.

has been learned from past experience isthat an oil price that is too high or too lowdoes not benefit either the producer or theconsumer. Of course, there will always besections of the economy that will prosperunder the different price scenarios, butoverall, large swings in the price of oil aregenerally counterproductive.

An oil market that is stable, with a fairand equitable price, is the way forward forglobal economic prosperity. This is some-thing that OPEC has been professing formany years. And just as a stable, fair priceis essential to the welfare of the oil sector,so the same is true for the gas industry. Ina situation of perpetual instability, it isvery difficult to budget for the years aheadand earmark sufficient investment for gassupply projects, which, by their very na-ture, are costly.

An unstable oil market does not, of

Generally, as more investment isploughed into gas projects, the scope fordeveloping this additional source of in-come will increase. In addition, gas is fastbecoming a substitute for oil products insatisfying our domestic consumption,which ultimately leaves more crude avail-able for export.

Throughout its history, OPEC hashad to overcome numerous difficult chal-lenges, both politically and economically.In fact, it has lived with the spectre of bothhigh and low oil prices, which, in the past,had profound effects on the globaleconomy. Today, the changed worldeconomy is clearly less sensitive to sharpoil price movements, compared with theboom and bust cycles experienced over thepast two decades.

Nevertheless, the simple fact is thatfluctuating oil prices benefit no one. What

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010098969492908886848280787674721970

Figure 2: OPEC spot Reference Basket price 1970–2001

$/b

October 2001 7

F O R U M

‘When we talkabout marketstability, it isvery importantto put today’scrude prices intotheir properhistoricalcontext.’

course, just affect the oil and gas industry.It can also have an adverse effect on theglobal economy, which, in turn affectsdemand for petroleum. It is a vicious cir-cle. With projected demand for oil and gasincreasing in the years ahead, there is anever-greater need to achieve — and sustain— stability in the international petroleummarket.

Deeper understandingNo one is more aware than OPEC of

the need for market stability. Over theyears, the Organization has undertakencountless measures to stabilize the market,often making a substantial sacrifice.Throughout these roller-coaster years, wegained a much deeper understanding ofhow the market works, of its complexmechanisms and its underlying psychol-ogy, as well as a clear appreciation of howother parties in the market react.

OPEC has undoubtedly grown in sta-tus as a key international player, with theproven ability to be innovative and con-structive in the decisions it takes. Themost notable recent example of this hasbeen the successful introduction of ourprice band mechanism last year, whichcombines the flexibility to cope with day-to-day market fluctuations with the needto keep prices within a manageable rangeof $22–28/b that balances the interests ofproducers and consumers.

Discounting the unfortunate events ofthe past few weeks, which have put pricesunder renewed pressure, the average priceof the OPEC Basket so far this year hasremained mostly around the centre of theband, which is widely deemed acceptableto most parties in the oil industry as beingfair. The price band mechanism has beena timely innovation, since it is acting as avaluable barometer for market movementsand can help us chart the direction weshould take in the future.

Maintaining a balanceToday, due to the tragic events of

September 11 in the United States, we arefacing a strong challenge of maintaining abalance in the oil market, while the globaleconomy weakens. This requires very care-ful monitoring of economic trends in the

leading industrialized nations as we seek togauge how this will impact on oil demand.

So far this year, OPEC has felt itnecessary to reduce output by 3.5m b/d, inorder to keep prices within its prescribedband, but our Member Countries are con-

stantly reviewing market trends to try andstay one step ahead of developments.

When we talk about market stability,it is very important to put today’s crudeprices into their proper historical context.Even in nominal terms, the so-calledhigh prices of the past two years are stillwell below those of two decades ago.Even the highest recent monthly averageof $31.48/b in September last year isbelow the annual average of $32.38/b in1982.

It is also important to note that nomi-nal oil prices do not reflect the erosion inthe value of the barrel with time. This isdue mainly to inflation and, depending onthe period under consideration, on cur-rency fluctuations. Thus, we can see fromFigure 2 that the average price of theBasket in the first nine months of this yearof $24.60/b would, in real terms, havebeen equivalent to just over $8/b at mid-

1970s prices. This is well below the nomi-nal level of oil prices in that period ofaround $11–12/b.

Measured in year 2000 US dollars, theprice of oil today is only about 40 per centof its average trend level of 20 years ago.Put simply, consumers are paying far lessfor their crude now, in real terms, thanthey were two decades ago. It is also inter-esting to draw comparisons with OPEC’starget prices over the years, compared withcurrent levels. In December 1986, theOrganization was pursuing a price targetof $18/b. Today, adjusted for inflation,that figure would be around $27/b, which,interestingly enough is within the priceband. By July 1990, OPEC had increasedits price target to $21/b. Again, if trans-lated into 2001 terms, that would alsostand at around the $27/b mark.

Also worth mentioning is the first min-isterial meeting of the Gas Exporting Coun-tries’ Forum, which was held in Iran inMay. This initiative to bring the world’sleading gas exporters together stemmedfrom the inaugural meeting of high-levelexperts from these nations in March.

Resounding successThe Forum proved to be a resounding

success in creating a unique opportunityfor a variety of views and ideas to beexchanged. The gathering firmly plantedthe roots for further co-operation amongthe leading gas players in the future and welook forward to the next meeting, to beheld in another OPEC Member Country,Algeria, next year.

This move is indeed a welcome devel-opment for all associated with the gasindustry, since, as with oil, co-operation atall levels is essential if the gas sector is tosuccessfully meet the challenges that lieahead in the early 21st century.

With a stable and equitable oil price,coupled with a suitable and enabling envi-ronment, today’s gas industry will go fromstrength to strength and most importantly,offer an alternative and strong source ofincome for our Member Countries’ devel-oping economies. Oil will still be the pre-dominant energy source of the future, butgas is set to remain close on its heels in theyears to come.

8 OPEC Bulletin

P R E S I D E N T I A L V I S I TP R E S I D E N T I A L V I S I T

Venezuelan President Hugo Chávez visitsOPEC Secretariat and OPEC Fund

Venezuelan President Hugo Chávezvisited the OPEC Secretariat andthe OPEC Fund in October, dur-

ing the Austrian leg of his tour of Europe,Africa and the Middle East, reports theOPEC News Agency.

Addressing staff at the OPEC Secre-tariat, President Chávez pointed out thatthe Organization and its Member Coun-tries were facing difficult times, as a result ofunforeseen events, and stressed the need forsecuring a “fair and equitable” oil price oninternational markets.

“The oil market is facing a difficultsituation and prices are threatened by im-

balance,” he said in his early morning speechto the OPEC Secretariat in Vienna.

Chávez, who was accompanied on histour by a number of high-ranking govern-ment officials, said that during his talkswith world leaders he had stipulated that oilprices could not be allowed to fall to verylow levels again.

“We need to have a balanced and fairlevel. We don’t want to see them too high,but we must not allow them to come downtoo low,” he asserted.

The Venezuelan President said OPECwould continue to work towards maintain-ing market equilibrium, adding that hisgovernment was firmly committed to the

Right: OPEC Secretary General Dr AlíRodríguez Araque (second r) introduces Ven-ezuelan President Hugo Chávez (second l).Flanking them are Minister of Energy andMines, Alvaro Silva Calderón (r) and Minis-ter of Foreign Affairs, Luis Alfonso Davila (l).

Left: Theaudience, whichincluded Ven-ezuela’s Ambassa-dor to Austria,Gustavo Márquez(front row, centre)listens to PresidentChávez’s speech.

October 2001 9

P R E S I D E N T I A L V I S I T

organization and its policies and objectives.In paying tribute to the work of the

Organization, its Member Countries andthe employees of the Secretariat, he notedthat OPEC had played a very importantrole in the 20th century.

However, it had faced some difficulttimes throughout its history, and was oftenseen as an enemy of the West and the worldeconomy.

Chávez said that in the 21st century,OPEC needed to become very strong andadopt a more geopolitical role, bridging theglobal regions of Africa, Asia, Latin America

and the Caribbean and promoting co-op-eration between North and South.

Turning to his tour, he said that it hadactually been planned in January this year,but following the attacks on New York andWashington on September 11, his visits tothe different countries had taken on a newprofile.

Chávez maintained that although nocorner of the world had been unaffected bythose events, “we will continue going for-ward and our Organization must remainsolid,” he said.

Chávez said that although his countryhad condemned the attacks on the UnitedStates and was “raising its flag” against the

current events, he was concerned about thebombing of innocent people in Afghani-stan and very fearful of war.

“If we have to make war, it should be awar against debt, a war against hunger anda war against injustice. We must think moredeeply. If we want peace, we must havejustice,” he said.

Chávez said he had made very closecontacts with other Member Countries ofthe Organization and had reached a betterunderstanding of their cultures and ways oflife.

The Second OPEC Summit of Sover-eigns and Heads of State, held in Venezuelalast year, had gone a long way in developingrelations among OPEC nations and hadoffered a “wonderful opportunity to showour people to the world.”

Right: PresidentChávez makes apoint during his

address.

Above: PresidentChávez showsoff the com-memorativesalver presentedto him byDr RodríguezAraque.

Right: PresidentChávez in

discussions withDr Rodríguez

Araque.

10 OPEC Bulletin

P R E S I D E N T I A L V I S I T

OPEC Secretary General, Dr AlíRodríguez Araque, in welcoming Presi-dent Chávez, said the Secretariat was hon-oured by his visit and the “importantmission that brings you here today.”

The Venezuelan President then movedon to OPEC’s sister Organization in Vi-enna, the OPEC Fund for InternationalDevelopment. He was received by theFund’s Director General, Dr Y SeyyidAbdulai and other senior officials.

A Fund press release noted that the visitby Chávez represented the first time that aHead of State of an OPEC Member Coun-try had been to its premises.

In his welcoming statement, Dr Abdulaiacknowledged Chávez’s recognition of, andallegiance to, the cause of OPEC and, inparticular, the work of the OPEC Fund.

He recalled the President’s “untiring

Left: The President and his entourage withDr Rodríguez Araque and OPEC manage-ment.

Right: Chávez took time to answer journal-ists’ questions.

Below: Chávez and the Ambassador arewelcomed by the OPEC Fund’s DirectorGeneral, Dr Y Seyyid Abdulai (r).

Right: The President signsthe Fund’s guest book

October 2001 11

P R E S I D E N T I A L V I S I T

efforts” in organizing and hosting the hugelysuccessful Second OPEC Summit.

“The meeting clearly met the set chal-lenge of revitalizing our Organization andreaffirming the commitment to develop-ment made by the generation of leadersbefore us,” he said.

Referring to the ties between Venezuelaand the OPEC Fund, Dr Abdulai noted thedeeply-rooted longevity of the relationship.

Praising Venezuela for its “unflinch-ing” dedication to the Fund, he expressed

hope that such support would continue.In his own address, Chávez spoke of his

personal interest in the development co-operation activities of the OPEC Fund.

“The Fund may be modest in size, butits achievements are great and of immenseimportance to millions of poor peoplearound the world,” he said.

Chávez urged fellow Member Countriesto provide more support to the institution.

“As Members of the OPEC Fund, wehave a responsibility to strengthen and en-large it,” he asserted.

It was also the duty of OPEC MemberCountries “to help build a better world andseek justice and peace,” he affirmed.

Chávez concluded his address by pay-ing tribute to the efforts of Fund manage-ment and staff, who, he said, were “deservingof recognition” for their work.

The Venezuelan President’s official tourinvolved visits to four OPEC Members(Algeria, Saudi Arabia, Iran and Libya),seven European nations (Switzerland,France, Italy, Belgium, Austria, Portugaland Great Britain), and Russia.

His entourage included Minister ofForeign Affairs, Luis Alfonso Davila; Min-ister of Planning and Development, JorgeGiordani; Minister of Energy and Mines,Alvaro Silva Calderón; Minister of Healthand Social Development, Maria LourdesUrbaneja; and Minister of the Office of thePresident, Dios Dado Cabello.

Above right: Dr Abdulai presents Chávezwith a memento of his visit.

Below: Chávez bids farewell to Dr Abdulai.

12 OPEC Bulletin

O P E C S E M I N A RO P E C S E M I N A R

The OPEC Seminar on the theme ‘OPEC and the Global Energy Balance: Towardsa Sustainable Energy Future’ was held at the Intercontinental Hotel, Vienna,Austria, on September 28-29, 2001. Keynote speeches were delivered by many of theOPEC Oil and Energy Ministers, while a broad range of renowned industry experts,high-level government officials from non-OPEC nations and respected academicscompleted the line-up. The event was organized by OPEC in conjunction withCWC Associates, part of the London-based CWC Group.

OPEC holds two-day Seminar on the theme:

“The worldis going throughimmensechanges that arebeing pushedforward by anoverwhelmingglobalizationprocess.”

OPEC and the Global Energy Balance:Towards a Sustainable Energy Future

Opening address byOPEC Secretary General, HE Dr Alí Rodríguez Araque

October 2001 13

O P E C S E M I N A R

I would like to start by once againextending our heartfelt condolences tothe relatives of the victims and the

American people in general for the tragicevents of September 11. Our deepest sym-pathy is with all those grieving after thisappalling catastrophe, which has left us allfeeling moved beyond words.

There are, however, important issuesthat we have gathered together to address.Allow me to start by pointing out that theworld is going through immense changesthat are being pushed forward by an over-whelming globalization process, whichtouches nearly every sphere of daily life,naturally also involving the productionand consumption of energy.

This seminar, entitled OPEC and theGlobal Energy Balance: Towards a Sustain-able Energy Future, will be taking a look atthe ongoing changes in society and howthey affect the energy industry. Addition-ally, we must take into account that thereare factors generated by the actions ofsectors and groups that may accelerate ordisturb these ongoing changes. The eventsof September 11 are an example of this.

In such situations, it is mandatory for

all those in positions of leadership, bothnationally and internationally, to calmlyanalyze all factors, in order to take thedecisions that may best contribute to apeaceful transition. One of the goals ofsuch efforts must be to attack the greatinequalities that presently exist in the world,which condemn hundreds of millions ofpeople to poverty and undernourishment,preventing them from exercising the mostelemental right to a dignified life.

Reaching this objective requires worldstability. And OPEC has been making animportant contribution in terms of help-ing to maintain stability. It will continueto do so, now with even greater emphasis.

Today, as never before, dialogue isrequired. In our case, it means an encoun-ter between producers and consumers, inorder to progress from mere coincidencesin speeches to concrete agreements andresults.

At the same time, it is imperative toremember that the majority of our coun-tries fundamentally depend on oil rev-enues for their development, and thoserevenues are determined not only by oilprices. They also depend on the share that

the owners of the resource obtain from thebenefits generated by oil activities.

Therefore, fiscal policy continues to begreatly important. It must be designed in away aimed at guaranteeing that each oneof the parties involved may obtain the justbenefits generated by this precious energysource.

Another very important factor is theongoing international environmental de-bate and the resulting measures to beadopted, aimed at reducing carbon diox-ide emissions and their possible effects onclimate change.

The problem lies in how to minimizethe environmental impact of energy. Sucha goal, naturally, has its own cost — toapply new technologies for the extractionof oil, to develop new technologies to buildnew refineries, and to offer products ofbetter quality. The problem is — whobears the cost? No single group should beexpected to carry this burden on its own.

Thus, let me conclude by pointing outthat for stability to be possible, we needpeace. To attain peace, we need dialogue.And for a positive dialogue to be a reality,we need equity. Thank you.

Opening address by Algerian Minister of Energy & Mines andPresident of the Conference, HE Dr Chakib Khelil

“OPEC hasachieved anastonishingdegree of successfor a group ofdevelopingcountries.”

14 OPEC Bulletin

O P E C S E M I N A R

It is a great honour to deliver this open-ing address to such an illustrious gath-ering of experts from the energy indus-

try. It is also somewhat of an awe-inspiringexperience, for assembled among us is adazzling array of expertise about energymatters, including government ministers,leading industrialists and acclaimed aca-demics. Their extensive knowledge of theissues that will form the basis of our discus-sions at this seminar promises a lively andstimulating exchange of views, from whichwe shall all undoubtedly benefit.

This two-day seminar, entitled OPECand the Global Energy Balance: Towards aSustainable Energy Future, is the first fullOPEC seminar to be held for almost adecade. Its purpose is to provide the inter-national energy industry with a specialopportunity to examine in depth topicalissues that concern all of us, particularlywith regard to the way the industry is likelyto evolve in the coming decades.

The seminar can be envisaged as theconcluding event in OPEC’s protracted40th anniversary celebrations. It comes ex-actly one year after the historic SecondSummit of OPEC Heads of State, whichwas held in Caracas, Venezuela, on Sep-tember 27-28, 2000.

Guiding principlesAt the Summit, our 11 Member Coun-

tries reaffirmed their commitment to theguiding principles of the Organization, asset out in the time-honoured OPEC Stat-ute, to achieve sustainable order and sta-bility in the international oil market, withreasonable prices and fair returns to inves-tors. They examined oil’s enhanced role infuture world energy demand, emphasisedthe strong link between security of supplyand the security and transparency of oildemand and stressed the need for im-proved dialogue and co-operation amongall parties in the industry. They also revis-ited the issue of oil’s service to mankindgenerally and of the need to tie in energysupply with economic development andenvironmental harmony, so as to helpreduce hardship and poverty in develop-ing nations and stimulate their economies.

Since its establishment in Baghdad,Iraq, in September 1960, OPEC hasachieved an astonishing degree of successfor a group of developing countries. TheOrganization provided these countries with

the support and the confidence to asserttheir legitimate rights in the petroleumindustry, particularly in terms of the ex-ploitation of their indigenous resources, aswell as commanding an influential role inthe pricing of their oil on world markets.OPEC now is respected, far and wide, asan established part of the internationalpetroleum community.

At the same time, oil remains theworld’s premier energy resource. After theturbulent events of recent decades, oil’sintegrity remains intact. We now have anindustry that functions at the cutting edgeof technology and is cleaner, safer, moreunited and better organised than ever be-fore. Many parties can quite fairly claimcredit for this, at all levels of the industry.But it is also, to a great extent, OPEC’sachievement. Who would have thoughtthat a small group of five developing coun-tries, meeting in Baghdad in the middle ofSeptember 41 years ago, would haveevolved into an Organization of such in-fluence and standing in the world energycommunity today?

And so, what of the future? Our pro-jections show that oil will comfortablyremain the world’s frontline energy re-source for the foreseeable future. The ref-erence case from OPEC’s World EnergyModel projects that, even though oil’sshare of world energy demand will declinefrom 41.0 per cent in 2000 to 38.8 percent in 2020, it will still be about tenpercentage points higher than that of thenumber two energy resource, gas. Themarket share of gas will overtake that ofsolids, with gas rising from 22.7 per cent in2000 to 29.1 per cent in 2020, and solidsfalling from 25.9 per cent to 23.6 per centin the same period. Hydro/nuclear com-bined will dip slightly to 8.6 per cent in2020.

The model forecasts a rise in world oildemand from around 76 million barrels/day in 2000 to 106m b/d in 2020. OPEC,with more than three-quarters of theworld’s proven recoverable crude oil re-serves, will watch its market share growfrom around 40 per cent in 2000 to justover 50 per cent in 2020. During thisperiod, Asia will emerge as the world’sdominant oil consumer, with demand over-taking that of North America. In order tomeet the rising level of global oil demand,the investment requirement is staggering,

if consumers wish to receive an orderlysupply of oil at reasonable prices in thefuture.

Unpredictable factors, however, havethe potential to overturn the most rigor-ously conceived projections and signifi-cantly affect the world oil industry in theyears ahead. Areas which require our con-stant attention include the ongoing cli-mate change negotiations, the world tradetalks, the growth of regionalism, and itsinterplay with globalisation, the greenlobby and changes in domestic legislationand consumer behaviour.

Speculative forcesIf we turn our attention to prices now,

we are all familiar with the oil market’sobserved volatility. It is by no means unu-sual for there to be a dramatic change inthe price of crude over a matter of days,weeks or months, generally in response tosome external incident, whose impact isthen greatly exaggerated by speculativeforces. We can find vast anomalies inpricing trends that stretch across decades.There has been much comment in con-suming countries about the price levels ofthe past year or two. But, when today’scrude prices are put in their proper historicperspective, it can be seen that, in realterms, they are well below the levels ofnotable past reference points, such as themid-1970s, December 1986 and July1990. All this instability in the price struc-ture explains OPEC’s efforts over the pastyear to keep prices at a level, $25/b, which,according to our judgement and our sound-ings across the industry, strikes an accept-able balance between the requirements ofproducers and consumers. Our efforts inthis regard have already met with consid-erable success and suggest the future direc-tion of OPEC’s agreements.

Moreover, on top of all this price insta-bility lies the distorting, inequitable phe-nomenon of excessive taxation on oilproducts. For example, an average 68 percent of the final product price paid byconsumers in the European Union goes tothe taxman, while producing countriesattract only a meagre 15 per cent. Acrossthe Atlantic, in the USA, there have beenother factors affecting oil prices, princi-pally a shortage of refinery capacity, strin-gent product specifications, transportproblems, such as an inadequate pipeline

October 2001 15

O P E C S E M I N A R

structure, and just-in-time stock-manage-ment policies.

All in all, for those responsible mem-bers of the global oil community, there ismuch work that needs to be done, if we areto achieve sustainable order and stabilityin the market in the years ahead, so as tomeet the projected rising oil requirementin a smooth and harmonious manner. Inthis regard, the industry stands to benefitfrom the advances that have been made inthe area of co-operation in recent years,among OPEC and non-OPEC producersand also, increasingly, between producersand consumers.

Since OPEC’s establishment in 1960,our Organization and its Member Coun-tries have gained a unique understandingof the way the international oil marketworks, from the perspective of the devel-oping world producer. We have been anintegral part of the development of the

industry during what has been a highlyeventful period.

But this unique experience is still notenough, if we are to continue to play aneffective role in the decades ahead. Some-times, it is necessary to sit back and take adetached look at events and carefully re-evaluate some of the fundamental issuesthat are of concern to us all. That is why weare holding this seminar. That is why weare indebted to all of you who have hon-oured us with your presence — ministers,industrialists and academics, as well asthose who do not fit neatly into thesecategories. We are all here to learn fromeach other. You all have a role to play inensuring that the seminar is a success. Soplease feel free to articulate your views asand when appropriate.

We hope, at the same time, that theseminar will also enable us to form newfriendships and strengthen existing ones.

This will undoubtedly be of benefit to theindustry for years to come

Finally, I should like to express a wordof thanks to all those involved in organis-ing this historic event. Gratitude is due inthe first instance to those national oilcompanies who have generously sponsoredour seminar. Their gracious contributionhas been instrumental in producing anoutstanding forum.

The staff members of the Secretariatand the CWC Group, who together haveworked tirelessly over the past few months,deserve to be applauded. Their profes-sionalism and commitment have, un-doubtedly, been unsurpassed. Theirpursuit of perfection has been particu-larly impressive. I am sure that our discus-sions over the next two days will provethat the efforts of all of you have been wellworthwhile and that the seminar is a greatsuccess.

Seminar sponsored by NOCs of six OPEC MembersThe OPEC Seminar was generously sponsored by the national oil companies of six OPEC MemberCountries. They were Algeria’s Sonatrach, the National Iranian Oil Company, the KuwaitPetroleum Corporation, Qatar Petroleum, Saudi Aramco and Petróleos de Venezuela.

Sonatrachwww.sonatrach-dz.com

National Iranian Oil Companywww.nioc.org

Kuwait Petroleum Corporationwww.kpc.com.kw

Qatar Petroleumwww.qp.com.qa

Saudi Aramcowww.saudiaramco.com

Petróleos de Venezuelawww.pdvsa.com

N.I.O.C.sonatrach

PD

16 OPEC Bulletin

O P E C S E M I N A R

Left: Listening to Dr Manouchehr Takin of theCentre for Global Energy Studies address thesecond session are (l-r) Professor of Economics atthe University of Grenoble, Sadek Boussena;Iranian Minister of Petroleum, HE BijanNamdar Zangeneh; Algerian Minister of En-ergy & Mines and OPEC Conference President,HE Dr Chakib Khelil; Royal Dutch/ShellChairman, Philip Watts; and independentgeologist, Jean Laherrere.

“Future developments in the energymarket will alter the geography of energy

economics fundamentally.”HE Bijan Namdar Zangeneh

Left: BP Vice-President and Chief Economist,Peter Davies, addresses the seminar. Also in thefirst session were (l-r) Director of the IEA’sOffice of Oil Markets and Emergency Prepared-ness, Dr Masaaki Mishiro; Director Emeritus ofthe Centre for International Energy Studies atRotterdam’s Erasmus University, Peter Odell;Iraq’s Dr Abdulilah M Al-Tikriti (representingthe Oil Minister, HE Dr Amer MohammedRasheed); Nigeria’s Presidential Adviser on Pe-troleum and Energy and former OPEC Secre-tary General, HE Dr Rilwanu Lukman; andHead of the Russian Energy Ministry’s ExternalEconomic Activities Department, AlexanderMisyulin.

“I look forward to an expanding dialogue

with OPEC, in a spirit of realism,

transparency and the search

for mutual advantage.”

Dr Masaaki Mishiro, IEA

October 2001 17

O P E C S E M I N A R

Left: Norwegian Minister of Petroleum andEnergy, Olav Akselsen, addresses the third ses-sion, watched by (l-r) Director of the OxfordInstitute for Energy Studies, Professor RobertMabro; the Chairman of Libya’s National OilCorporation, HE Ahmed Abdulkarim Ahmed;Algerian Minister of Energy & Mines andOPEC Conference President, HE Dr ChakibKhelil; and Nigeria’s Presidential Adviser onPetroleum and Energy and former OPEC Sec-retary General, HE Dr Rilwanu Lukman.

“It is the difficulty … of identifyingreference crudes that meet the criteria fora rational oil pricing regime that damns

the pricing formulae system.”Professor Robert Mabro, OIES

Left: Speaking during the fourth session is theHead of UNCTAD’s Trade Analysis and Sys-temic Issues Branch, Murray Gibbs. Also on thepanel were (l-r) Director of the WTO’s CouncilDivision, Paulo Barthel-Rosa; Qatari Ministerof Energy and Industry, HE Abdullah binHamad Al Attiyah; and Algerian Minister ofEnergy & Mines and OPEC Conference Presi-dent, HE Dr Chakib Khelil.

“Globalisation and national economicsovereignty are and will be at the forefront

of political debates nationally andinternationally.”

HE Abdullah bin Hamad Al Attiyah

18 OPEC Bulletin

O P E C S E M I N A R

“We believe it is very important that oilproducers and consumers work together in

a co-ordinated fashion.”HE Alvaro Silva Calderón

Left: Professor Richard Falk of the Centre forInternational Studies at Princeton Universityaddresses the sixth session. Listening are (l-r)Kazakhstan’s Vice-Minister of Energy and Natu-ral Resources, HE Bolat Yelemanov; UNEPExecutive Director, Klaus Topfer; Nigeria’sPresidential Adviser on Petroleum and Energyand former OPEC Secretary General, HE DrRilwanu Lukman; the UAE’s Minister of Petro-leum and Mineral Resources, HE Obaid binSaif Al-Nasseri; and Venezuelan Minister ofEnergy and Mines, HE Alvaro Silva Calderón.

Left: Saudi Arabian Minister of Petroleum andMineral Resources, HE Ali I Naimi, addressesthe fifth session. Watching him are (l-r) Profes-sor Herman Daly of the University of Mary-land’s School of Public Affairs; Sudanese Ministerof Energy and Mining, HE Dr Awad AhmedAl Jazz; Algerian Minister of Energy & Minesand OPEC Conference President, HE DrChakib Khelil; UN Under-Secretary for Eco-nomic and Social Affairs, Nitin Desai; andMelanie Kenderdine of the Gas Research Insti-tute’s Washington Operations Office.

“The United Nations would support aregular dialogue between consumers and

producers which would include developingcountries that have no access to energy.”

Nitin Desai, UN

October 2001 19

O P E C S E M I N A R

lofty ideals which we, as producers andconsumers, must champion. Make nomistake, the old days, when political andeconomic powerhouses are thought to becapable of single-handedly managing themarket, are gone — pure and simple.

It was in this spirit of mutuality thatOPEC decided to organize the Seminar.The mission was to enable us to take a freshlook at many issues facing the industry.The mission was also to navigate the newcentury with a new vision, and a greatersense of responsibility toward the globalcommunity.

Let us not forget that neither oil ex-porters, nor consumers can now work inisolation from the others living in ourshrinking world. As countries become in-creasingly interdependent, transparencyand openness go a long way in maintain-ing economic growth and preserving thewellbeing of humanity.

We were very honoured to be able toattract some of the most senior and re-nowned figures from the petroleum indus-try and other prominent internationalorganizations to take part in our historyand this forum.

The OPEC Seminar: a quest for unity

It goes without saying that it has beenOPEC’s aim, for a long time now, togenerate a continual dialogue with otherproducers. To realize our increasingly re-ciprocal ambitions, a lot of hard work,compromises and true goodwill must comeinto play. Co-operation, not confronta-tion, is the best strategy for the bettermentof our generations and posterity.

A great deal of dedication by the staffmembers of the Secretariat brought thisevent to fruition. It is no hyperbole to saythat arranging the Seminar was a horren-dous race against time.

The massive amount of correspond-ence to Member Countries, speakers andparticipants, as well as hundreds of phonecalls and follow-ups would have been, tosay the least, a nerve-racking experiencefor even the most seasoned staff member.

Nevertheless, those who made theSeminar possible have demonstrated a re-markable sense of professionalism and anunsurpassed commitment. I feel proudand in fact blessed to be teaming up withonly the best. To be successful, it takeshard work and dedication. It was a sweetvictory for all of us.

That sentiment was also echoedacross the corridors of the Seminarvenue. Speakers and attendees who

came from different parts of the world,and who represented the industry’s creamof the crop, found the seminar a truemarketplace of highly intellectual debateson some of the most pressing issues facingthe oil and energy sectors.

Addressing a packed conference room,Their Excellencies the Ministers fromMember Countries and other oil-produc-ing countries demonstrated how adamantthey are about breaking new ground inbridging the gap between producers andconsumers.

This historic event has shown that theOrganization is tirelessly reaching out forthe rest of our global village in search ofmutual objectives. As the custodian of themajority of the world’s oil reserves, OPEC’smessage throughout was compellinglyclear: our quest for a pragmatic partner-ship and for greater interdependency ne-cessitate enormous self-discipline from allparties concerned.

A spirit of goodwill, mutual trust andcollaboration are, undeniably, some of the

Nothing succeeds likesuccess, according to the

English saying, writesOPEC’s Media Relations

Officer, Dr AbdulrahmanAl-Kheraigi (pictured here).This speaks eloquently of theOPEC Seminar, which the

Organization diligentlyorganized last month.

20 OPEC Bulletin

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

of Governors for a period of one year fromJanuary 1, 2002; and

appoints

Mr Mohammed D Al Hamli, Governorfor the United Arab Emirates, as AlternateChairman for the same period.

Resolution No 117.389

The Conference,

upon the recommendation of the Board ofGovernors,

in accordance with Article 38 of the Stat-ute and the Financial Regulations,

approves,

1. The Budget for the year 2002, totallingEUR 16,665,225 (ATS 229,318,501),of which an amount of EUR 3,465,225(ATS 47,682,541) is to be financed bya transfer from the Reserve Fund Ac-count, with the balance being contrib-uted by the Member Countries.

2. That the contribution payable by eachMember Country shall be EUR1,200,000 (ATS 16,512,360) payablein one instalment not later than March31, 2002.

Resolution No 117.390

The Conference,

upon the recommendation of the Board ofGovernors,

approves,

the appointment of TPA ControlWirtschaftsprüfung GmbH to act as audi-

Press Release No 21/2001Vienna, Austria, October 27, 2001

The 117th Meeting of the Conference ofthe Organization of the Petroleum Ex-porting Countries, held in Vienna, Aus-tria, from September 26–27, 2001,adopted the following Resolutions, which,in accordance with customary procedures,have been ratified by the Member Coun-tries and are issued herewith:

Resolution No 117.387

The Conference,

upon the recommendation of the Board ofGovernors,

approves,

that the Secretariat withdraw an amountup to $3 million from the Reserve FundAccount, at the discretion of the Board ofGovernors, in order to cover legal feesincurred during 2001 and 2002 in con-nection with the on-going litigation in theUSA.

Resolution No 117.388

The Conference,

having regard to the rules laid down in theStatute of the Organization, in particularArticle 21; whereas in accordance with theprovisions of Resolution 111.380, the termof office of the Governor for Qatar asChairman of the Board of Governors ex-pires on December 31, 2001;

appoints

Mr Suleiman J Al-Herbish, the Governorfor Saudi Arabia, as Chairman of the Board

tors for the financial year 2001 and tosubmit a report thereon.

Resolution No 117.391

The Conference resolves that the nextOrdinary Meeting of the Conference shallbe convened in Vienna, Austria, on March12, 2002. Done in Vienna this Twenty-Seventh Day of September 2001.

Head of the Delegation of AlgeriaDr Chakib Khelil

Head of the Delegation of IndonesiaRhousdy Soeriaatmadja

Head of the Delegation of theIslamic Republic of IranBijan Namdar Zangeneh

Head of the Delegation of IraqDr Amer Mohammed Rasheed

Head of the Delegation of KuwaitDr Adel K Al-Sabeeh

Head of the Delegation of the SocialistPeoples Libyan Arab JamahiriyaAhmed Abdulkarim Ahmed

Head of the Delegation of NigeriaDr Rilwanu Lukman

Head of the Delegation of QatarAbdullah Bin Hamad Al-Attiyah

Head of the Delegation of Saudi ArabiaAli I Naimi

Head of the Delegation of theUnited Arab EmiratesObaid Bin Saif Al-Nasseri

Head of the Delegation of VenezuelaAlvaro Silva Calderon

Resolutions of the117th Meeting of the OPEC Conference

N E W S L I N E

October 2001 21

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

ew York — OPEC was praisedlast month for its swift response

to calm nervous international oilmarkets in the wake of the September 11attacks on the World Trade Center in NewYork and the Pentagon in Washington.

Shortly after the attacks, OPEC Sec-retary General, Dr Alí Rodríguez Araque,issued a statement confirming that theOrganization’s Members remained com-mitted to “strengthening market stabilityand ensuring that sufficient supplies areavailable to meet market needs,” and were“prepared to use their spare capacity, ifdeemed necessary, achieve these goals” (seePress Release No 18/2001 on this page fordetails).

The European Commissioner forTransport and Energy, Ms Loyola dePalacio, told reporters that the EU wasgrateful for OPEC’s firm pledge to keepmarkets adequately supplied with oil.

“I would like to thank OPEC,” Ms dePalacio was quoted as sayingby the official Kuwaiti NewsAgency (KUNA).

The pledge by the Organi-zation to boost production, ifnecessary, had assured thatthere was no lasting speculation-driven price increase on inter-national markets, she said.

“OPEC slowed down theprice rise. This is a clear andresponsible position,” shepointed out, adding that Eu-rope would not see a shortageof crude oil.

The European Commis-sioner for Economic andMonetary Affairs, PedroSolbes Mira, added that he didnot expect an oil crisis as aresult of the attacks.

The fact that prices hadfallen again the next day dem-onstrated that the increaseseen in prices on September11 was due to psychologicalreasons and market nervous-ness, he said.

OPEC praised for swift response to calm oil marketsafter September 11 attacks on World Trade Center and Pentagon

Later in the month, the Paris-basedInternational Energy Agency (IEA) saidin a statement that it welcomed OPEC’sdecision at its 117th Conference to leaveits production ceiling unchanged.

The IEA’s Executive Director, RobertPriddle, described the OPEC decision asa “display of moderation” and expressedhis appreciation of the statements byOPEC and its Member Countries to keepoil flowing in the event of any supplydisruption.

Across the Atlantic, the President ofthe American Automobile Association,Bob Darbelnet, attributed the short-termnature of the spikes seen in gasoline pricesin the wake of September 11 to OPEC’smarket-calming comments and decisiveaction on the part of the oil industry andthe US government.

“Preparations necessary for a responseto the terrorist attacks makes many Ameri-cans understandably nervous about future

energy supplies and prices,” Darbelnetnoted.

“However, the co-ordinated responseby OPEC, US oil companies and govern-ment agencies shows co-ordinated actioncan be extremely effective in calmingpublic worry about this vital commodity,”he said.

Meanwhile, individual OPEC Mem-ber Countries also reaffirmed their deter-mination to ensure market stability in thedays following the attacks.

Venezuelan President, Hugo Chávez,assured the US that his country wouldcontinue to supply it with a steady flow ofoil. The Venezuelan leader also expressedhis “profound regret” at what he describedas “cowardly (and) murderous” attacks.

“I have given instructions to Petróleosde Venezuela, and in particular to Citgo,that in addition to increasing securitymeasures at our oil installations in the US,we make an effort to guarantee the supply

of petroleum, fuel, gasoline,and other derivatives to thepeople of the US,” he said.

“This is one of the ways wehave to demonstrate our soli-darity and our firm supportand co-operation,” addedChavez.

The US is the biggest buyerof Venezuelan crude. US-based Citgo is a wholly-ownedsubsidiary of PDVSA,headquartered in Tulsa, whichoperates some 14,000 gasolineoutlets throughout America.PDVSA also has interests in sixUS oil refineries.

Shortly after the September11 attacks, Citgo President,Oswaldo Contreras Maza,confirmed that security meas-ures had “been increased at allinstallations around the US.”

“Citgo has put in placeemergency plans for situationsof this kind. Also, it is work-ing closely with national andlocal organizations to guaran-

N

OPEC Press Release No 18/2001Vienna, Austria, September 11, 2001

OPEC committed to ensuringadequate oil supplies — Rodríguez

OPEC Secretary General, Dr Alí Rodríguez Araque, thisafternoon stated that the Organization was monitoring de-velopments, following the series of tragic events that oc-curred in the United States earlier today.

“All Member Countries remain committed to continu-ing their policy of strengthening market stability and en-suring that sufficient supplies are available to satisfy marketneeds,” he said.

“Furthermore, OPEC’s Members are prepared to usetheir spare capacity, if deemed necessary, to achieve thesegoals,” he emphasized.

Rodríguez Araque categorically refuted suggestions thatsome of the Organization’s Members could use oil as aweapon, stressing OPEC’s continued commitment to se-curing a stable market.

The OPEC Secretary General concluded by extending“the Organization’s heartfelt sympathy to all those affectedby this tragedy”.

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22 OPEC Bulletin

inquiring into the fate of the documents,held by an LNG trustee borrowing agencyat its office in the World Trade Center.

The WTC collapsed on September 11,killing thousands of people, after twopassenger jets were hijacked by terroristsand flown into the twin towers.

Despite the building having been to-tally destroyed, Yusgiantoro said he washopeful the documents would be recov-ered because the office that handled themwas a large operation and there must havebeen a backup of the documentation.

He also dismissed suggestions thatIndonesia’s LNG business would be affectedif the documents disappeared in the dis-aster.

Although Purnomo did not name theagency, the media reports, quoting otherofficials, said it was a syndicate of Ameri-can banks that handled the financing ofIndonesia’s LNG developments and trade,including receiving payments from buy-ers in Japan, South Korea and Taiwan.

Indonesian LNG trade has been con-ducted for more than three decades andits contracts with Far Eastern buyers havegenerated annual revenue of around $3.0billion.

The long-term contracts, averagingmore than 20 years each, were all in USdollars. Earnings from these deals wereused to settle long-term project borrow-ings, according to sources familiar withIndonesian LNG trade.

Iranian MP urges oilproducers to take actionagainst crude surchargesTehran — Iranian Member of Parlia-ment, Mohammad Kianoosh-Rad, saidlast month that OPEC and other oil-pro-ducing countries should take actionagainst insurance companies that imposedsurcharges on Gulf crude in the wake ofthe September 11 terrorist attacks on theUnited States.

Immediately after the attacks, Londonunderwriters quoted war-risk surchargesfor vessels sailing to the Middle East thatadded as much as 50¢/barrel to the costof Iranian or Iraqi crude, according to shipmanagers.

Some sources said that the price of

crude oil exports from other countries inthe region could be pushed up by as muchas 25¢/b.

“We are talking war-risk additionalpremiums getting into millions of dollarsfor loading in some parts of the Gulf, say,Mina Al-Bakr (in Iraq), or Kharg Island(in Iran),” one leading tanker managercommented.

Quoted by the Tehran Times dailynewspaper, Kianoosh-Rad said the insur-ance companies had the right to imposesurcharges in critical situations, but un-derlined that the region was calm and thata fake crisis had been created after Sep-tember 11.

According to the MP, the illusion of acrisis in the Middle East was totally un-founded and the terrorist attacks on theUnited States had had no effect on theGulf region.

“There is no reason to declare thatthere is a crisis in the region, especially asfar as it concerns ships passing throughIranian waters,” he noted.

He pointed out that some insurancecompanies were merely taking advantageof the situation, and added that OPECMember Countries and other oil-export-ing nations should take a firm standagainst such tactics.

European companiesmay get US firms’ oiloperations in LibyaBrussels — European oil companies areexpecting a significant boost to their ac-tivities in Libya, following an announce-ment by the Libyan government that UScompanies had one year to return to theiroil blocks in the country, or lose theiroperating licences.

Libyan Foreign Minister, AbdelRahman Shalgam, announced in Septem-ber that Libya could ill afford to leave itsoil fields idle until the United States de-cided to lift sanctions against the country.

“We have agreements with the Ameri-can companies, and those agreements needour co-operation,” Shalgam said. “Eitherthey will come and work, or we will givetheir rights to other companies. If theydon’t decide next year, we are going tomake our decision,” he explained.

tee the security of its personnel and its op-erational facilities,” Contreras Maza com-mented.

Meanwhile, Saudi Arabian Petroleumand Mineral Resources Minister, Ali INaimi, said in a statement carried by theSaudi Press Agency that the Kingdomattached special importance to stabilizingthe oil market.

He reaffirmed that Saudi Arabia wascommitted to the provision of supplies ona continual basis, in various circumstances,and in co-operation with fellow OPECMember Countries, to fill any shortagethat might arise in the market, for anyreason.

The Minister added that the King-dom’s exports to the US and to all otherimporters of Saudi oil were stable andbeing carried out according to ordinaryexport schedules.

The official United Arab EmiratesNews Agency (WAM) quoted the coun-try’s Minister of Petroleum and MineralResources, Obaid bin Saif Al-Nasseri, assaying that the price fluctuations seen afterSeptember 11 would be temporary andwould soon disappear.

Condemning the attacks in a speechdelivered at the Zayed Centre for Co-or-dination and Follow-up in Abu Dhabi, theMinister also stressed OPEC’s determina-tion to ensure a steady flow of oil to worldmarkets, in co-ordination with other pro-ducers.

The Kuwaiti Oil Minister, Dr Adel KAl-Sabeeh, also underlined his country’skeenness to stabilize the market, and saidthat it would take all necessary measuresto tackle any shortage in oil supplies,according to KUNA.

Indonesian Minister saysattack on WTC won’tdisrupt LNG businessJakarta — The destruction of NewYork’s World Trade Center on September11 raised concerns in Jakarta about the fateof documents related to Indonesia’s lique-fied natural gas (LNG) deals, according tomedia reports.

The Indonesian Minister of Energyand Mineral Resources, Dr PurnomoYusgiantoro, said that the government was

N E W S L I N E

October 2001 23

In briefOne casualty of this move would be

the Oasis Group, a US consortium thatincludes Amerada Hess and USX Mara-thon, which suspended its operations in1986 when the US, under PresidentRonald Reagan, issued a series of sanctionsagainst Libya, which banned Americanfirms from working in the country.

Even though the 1992 UN sanctionson Libya were suspended — but notentirely lifted — in 1999, the US hascontinued with its unilateral sanctionsunder the revamped 1996 Iran-LibyaSanctions Act.

The European Union followed the UNand suspended sanctions against Libyaafter two Libyans accused of the 1988bombing of Pan Am flight 103 overLockerbie in Scotland were handed overto be tried in the Netherlands.

Accordingly, industry sources said thatthose likely to gain from Libya’s ultima-tum were European companies, such asSpain’s Repsol-YPF, Austria’s OMV,France’s TotalFinaElf, and Italy’s ENI.

Libya has said that it expects these non-US companies to raise their output capac-ity by one-third over the next five years.Repsol-YPF is involved in pumping oilfrom the country’s Murzuk Basin with itspartners, OMV and TotalFinaElf.

Meanwhile, Shalgam said Italy andLibya have recently agreed on a $5.0 bil-lion dollar gas project, without givingfurther details. Libya is also Italy’s mainsupplier of crude oil.

Kuwait, Saudi Arabiareach accord on NeutralZone activities in 2003Riyadh — Under-Secretary at the Ku-waiti Ministry of Oil, Eissa Aloun, an-nounced recently that Kuwait and SaudiArabia had agreed on how to run opera-tions in the divided Neutral Zone afterFebruary 2003.

The Neutral Zone includes the Khafjioil field, the Kuwaiti portion of which iscurrently operated by the Arabian OilCompany (AOC) of Japan.

Aloun was quoted by the Kuwait NewsAgency (KUNA) as saying Saudi Arabiahad agreed to hand over the administra-tion of the operations in the Neutral Zone

over to Kuwait, after the contract expiresbetween Kuwait and the Japanese-ownedAOC in 2003.

Aloun said that both Kuwait and SaudiArabia had also agreed to continue gasexploration at the offshore Aldurra gas fieldin the Neutral Zone, adding that bothcountries needed the gas to use as fuel andin their respective petrochemical indus-tries.

Concerning the Khafji oil field in theSaudi sector of the Neutral Zone, the AOCis reportedly currently seeking to renewits contract with the Kingdom to operatethe field, after its contract expired in Feb-ruary last year and was not renewed. Priorto that, the AOC had exploited the Saudisector of the Khafji field since 1960.

The AOC still operates the Kuwaitisector of the Khafji oil field, and currentlyproduces 140,000 b/d of crude.

However, separately, KUNA reportedthat Kuwait and Japan had agreed to endthe exploration rights of the AOC in theKhafji oil field when they expire in Janu-ary 2003.

Both countries released a statement lastmonth saying the two parties had signeda memorandum containing basic guide-lines for future detailed negotiations toregulate the relationship between the AOCand Kuwait, KUNA reported.

The contents of the memorandumwere released only nine days after a priorstatement was issued from the AOC an-nouncing it had reached an agreementwith the Kuwaiti government to extendits operational and drilling rights forKhafji, the exploration rights of which theJapanese company has had since 1958.

The second statement released by bothcountries invalidated any supposed dealhaving been brokered, as was suggested bythe AOC, and instead said “an agreementwill be reached that will secure the desiredco-operation, in keeping with the Kuwaiticonstitution’s stipulation concerning theuse and preservation of its resources.”

The memorandum indicated that theguidelines were to be approved by theconcerned authorities. It cited goals forfuture talks that included Kuwait benefit-ing from Japanese technical, research, anddevelopment expertise, which involved thetraining of national labour to take over 100per cent of the operation of all facilities,to replace foreign labour.

Oil supplies unaffected by US attacksNEW YORK — Overall United States and glo-bal oil supplies were only minimally affectedby the attacks on the World Trade Center andthe Pentagon on September 11, according tothe US Energy Information Administration(EIA). It said the attacks occurred against abackground of already tight crude oil andproduct markets in the country and world-wide. Crude prices were likely to remain sev-eral dollars lower than the very high pricesseen a year ago, noted the EIA, adding thatthis assumed normal weather, a sluggisheconomy, no Iraqi outages, compliance byOPEC to its output ceiling, and no unusuallogistical or refinery problems. However, itcautioned that any unforeseen event (such ascontinued stockdraws, refinery outages, se-vere weather, or Middle East tensions) couldact as a catalyst to alert markets to the poten-tial for tight supplies this winter, and oil pricescould swing back upward.

Gas prices steady post-September 11NEW YORK — The nationwide average priceof self-serve regular unleaded gasoline rose byless than one cent in the days following theattacks on the World Trade Center and thePentagon, according to the American Auto-mobile Association (AAA). “This barely per-ceptible rise in gasoline prices to $1.54/gallonindicates motorists and nearly all gasoline sta-tions have reacted calmly and responsiblywith regard to fuel consumption and pricingsince the attacks,” said AAA Vice-Presidentof Public Affairs, Susan Pikrallidas. Immedi-ately after the attacks, a few gas station own-ers reacted by raising prices to extreme levelsin some areas, the Association noted. How-ever, as more information became availableand the US Department of Energy and theoil majors made it clear that the nation’s en-ergy supplies were never threatened, gas pricescame down at the few offending stations.

DoE staff mobilized to help operationsNEW YORK — Staff of the US Department ofEnergy (DoE) were mobilized to help dealwith the situation after the events of Septem-ber 11. Following the attacks on the WorldTrade Center and the Pentagon, DoE employ-ees assisted in the search for survivors by us-ing ground-penetrating radar equipment,adapted with motion detection devices, to aidin the search for survivors. Other DoE teamsoperated with sophisticated, remotely-con-trolled equipment, including infrared cam-eras, robotic equipment, and fiber-opticcameras, to aid the search for victims andevidence. US Energy Secretary, SpencerAbraham, commented that the Americanpeople had “suffered a great loss as a nation.”

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In briefKuwait, it said, maintained the right

to secure financing and capital from theAOC for its projects in the divided areafor less than market interest rates.

Previously, an official from the Japa-nese Ministry of Economy, Trade andIndustry had said that any future involve-ment in operating a portion of the Khafjioil field in the divided zone would have tosecure the AOC’s profits, which wouldmean an involvement in drilling and se-curing a stable crude oil supply to Japan.This had reportedly been the contentiousissue between the two parties.

The AOC is Japan’s largest oil pro-ducer. Saudi Arabia and Kuwait both havestakes in the firm, while other investorsinclude Japanese power companies suchas the Tokyo Electric Power Company andthe Kansai Electric Power Company.

Venezuela inauguratesCerro Negro heavycrude upgrading plantBarcelona — Venezuelan governmentofficials and private sector representativeshave formally inaugurated a new upgrad-ing plant of the Cerro Negro joint ven-ture, designed to produce, upgrade andexport extra-heavy crude from the coun-try’s Orinoco oil belt.

The venture, which has a 35-year life-span, is one of four strategic associationsoperating in the belt involving Venezue-la’s state oil company, Petroleos de Ven-ezuela (PDVSA), and several private for-eign oil companies.

PDVSA holds a 41.67 per cent stakein the Cerro Negro venture, along withExxonMobil (41.67 per cent), and Ger-many’s Veba Öl (16.67 per cent).

“With our partners, ExxonMobil andVeba, we had the privilege of creating astrategic economic, technological andmarketing alliance to take on the devel-opment of highly productive wells in theOrinoco belt,” said PDVSA President,Guaicaipuro Lameda, who attended theinauguration of the project.

He noted that the design of the schemeguaranteed a role in the entire chain ofdownstream commercialization and en-sured a premium market that was the Gulfof Mexico, with a total investment of some

$2.46 billion over a development horizonof 35 years.

The Cerro Negro upgrading plant,located at Jose, in Anzoategui State, east-ern Venezuela, has a capacity to convertan estimated 120,000 barrels/day of ex-tra-heavy, 8.5° API crude into a lighter16.5° API synthetic crude.

The crude will then be shipped mostlyto the Chalmette refinery (jointly ownedby PDVSA and ExxonMobil) in the US,where it will be further refined and con-verted into products for the Americanmarket.

New Indonesian oiland gas bill due tobe passed shortlyJakarta — The Indonesian bill encom-passing a new law for the oil and gas sec-tors will soon be passed by Parliament, theEnglish-language Jakarta Post newspaperreported last month.

Following this, an executive body willbe established to manage the country’s hy-drocarbons sector, while the state-ownedoil firm, Pertamina, will be de-monopo-lized.

Legislators said they were confident theHouse of Representatives would pass thelaw towards the end of the year, as debateon it was coming to a close after more thantwo years.

The debate was focused at the time ofreporting on establishing the executivebody, which would become the mostpowerful authority in the oil and gas sec-tors in Indonesia, the paper reported,quoting top legislators.

The legislators noted that the new lawwould liberalize the energy sector anddismantle the three-decade old monopolyheld by Pertamina, which would becomea commercial company.

The new legislation would replace lawno 44/1960 on the oil and gas sector andlaw no 8/1971 on Pertamina.

Legislator, Husni Thamrin, said debatewas focused on the placement of the ex-ecutive body under the President, ratherthan under the Minister of Energy andMineral Resources.

Legislators were also deliberating onthe transitional period for the dismantling

Clough wins West Seno field dealJAKARTA — Australia’s Clough Group said lastmonth that it has won a $70 million con-tract for engineering work on Indonesia’sWest Seno field, which is due to start pro-duction in the first quarter of 2003. The com-pany said it would carry out engineering,procurement and installation of the subma-rine pipelines and all other installation work,including mooring, piles and tension legs inthe field, which is located in the MakassarStrait between Kalimantan and Sulawesi.Clough said it has commenced work on thetwo 62-km pipelines to transfer oil and gasfrom the field platform to onshore facilitiesat Santan on the Kalimantan coast of Bor-neo island. The firm also announced that itsIndonesian subsidiary, PT Petrosea, has beenawarded a $10m contract to build onshorefacilities and carry out terminal modificationsat Santan.

Ecuador plans heavy crude pipeline networkQUITO — Ecuador is to begin the construc-tion of a heavy crude oil pipeline network bythe end of October, it was officially an-nounced last month. The project will involvethe construction of a series of pipeline seg-ments: from Lago Agrio to Quito; from LaVirgen to Quito; from Mindo to La Virgen;around Mindo; and finally a section linkingMindo to the Pacific port of Balao. The net-work is expected to be operational by Febru-ary 2003. It will supply crude to fill fivestorage tanks with a capacity of 750,000 bar-rels each. The 500-km pipeline networkproject is being constructed by the govern-ment of Ecuador in collaboration with fivedomestic oil exploration firms and the Ar-gentine company Techint.

US gasoline demand flat in AugustNEW YORK — Gasoline deliveries, a key meas-ure of consumer demand in the US, were es-sentially flat in August, rising only 0.1 percent to 8.93 million barrels/day compared toa year ago, according to the latest figures fromthe American Petroleum Institute. Probablereasons for this were the generally sluggisheconomy, a one month 25 per cent run-upin Midwest retail prices, overall tight gaso-line markets, limited spare refining capacityand the continued complexities of makingdifferent types of gasoline for 15 markets, inorder to adhere to the requirements of thefederal Clean Air Act, said the API’s monthlystatistical report. On the supply side, domes-tic crude oil production averaged 5.79mb/d, the same as a year ago. After posting aslight gain in July, production in the lower48 states averaged 4.83m b/d, down one percent from last year.

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In briefof Pertamina, with the military-backedGolkar party asking for one year and theIndonesian Democratic Party for Strug-gle (PDI) suggesting less than a year.

In a separate story, Indonesian Presi-dent, Megawati Sukarnoputri, visited theUnited States last month where she wasdue to offer 15 new oil and gas blocks tointernational companies during her 12-day visit.

The Indonesian Minister of Energyand Mineral Resources, Dr PurnomoYusgiantoro, said the 15 blocks would beoffered to international investors becauseIndonesia needed to attract considerablecapital to manage the blocks.

Yusgiantoro explained that the sectorneeded at least $5.0 billion a year in newinvestment to maintain its current oilproduction of about 1.3m b/d of crude andnatural gas output of 3.0bn cubic feet/d.

He added that Indonesia had, on av-erage, signed 10 production-sharing con-tracts with international oil companies fordeveloping oil and gas reserves in the1990s.

The Indonesian President was sched-uled to address an energy conference inHouston, where details of the blocks wereto be presented.

Megawati was also due to hold meet-ings with the US President, George WBush, US congressmen, the InternationalMonetary Fund (IMF), the World Bank,and investors to explain the changes be-ing made by her administration to rebuildthe country’s economy.

The United States is Indonesia’s larg-est export market, importing hydrocar-bons, minerals, electronics, textiles andfood products.

Nigeria signs purchaseagreement for gaswith ChevronTexacoAbuja — The Nigerian Gas Company(NGC) has signed a sales and purchaseagreement for 130 million cubic feet/dayof gas with the Nigerian unit ofChevronTexaco, Chevron Nigeria Ltd(CNL).

The accord, signed in Lagos lastmonth, involves an annual contractamount of 47.45m cu ft/d of natural gas.

Maximum gas off-take expected from thegas supply system is about 240m cu ft/d,although the system is capable of supply-ing up to 265m cu ft/d.

Speaking at the signing ceremony,CNL Chairman and Managing Director,Ray Wilcox, said ChevronTexaco regardedthe contract as an important step to meetthe challenge of gas utilization initiativeswhich meant complying with the Nige-rian government’s plan to end gas flaringin all of the company’s operations.

These efforts, he said, began in theearly 1990s when “we embarked on theimplementation of the Escravos gas project(EGP), Nigeria’s first major gas utilizationprogramme.”

The operation of the first phase of thisproject in 1997 made available for the firsttime in Nigeria clean, dry processed gasfor use in power generation and for in-dustry, as well as for liquefied petroleumgas exports.

EGP-1, he said, had now been fol-lowed by EGP-2, bringing the gas process-ing capacity of the plant to almost 300mcu ft/d.

“This figure will further increase toabout 700m cu ft/d when the third phaseof the project comes onstream in 2005,”Wilcox said. He stressed that gas was onenatural resource that Nigeria had in abun-dance and therefore it was of absolute im-portance that the country took maximumadvantage of the commodity.

He continued that ChevronTexaco wascommitted to its gas utilization goals andwould continue to work in projects dedi-cated to them.

“This, of course, means we will con-tinue to explore and target markets herein Nigeria, the West African sub-regionand the international market,” he con-cluded.

Also at the signing ceremony was theNGC Managing Director, E A Olukoga,who said the sales and purchase agreementwas a major milestone in the NGC’s ef-forts to provide flexibility of gas supply tofulfil its commitments to its various con-sumers, particularly those connected to theEscravos-Lagos pipeline system.

Olukoga said that first gas supplies intothe system were achieved in August 1997,even though some major contractual is-sues were outstanding.

“Today we are delighted that all these

European oil firms see continued growthBRUSSELS — The major European oil compa-nies still see oil production growing in thenext few years despite the current economicdownturn, according to industry sources. BPhas dismissed concerns that it will fail to meetits 5.5 per cent average annual volume growthto 2005, with Chief Executive Lord Brownesaying that he had great confidence thatprojects would come onstream as scheduled.Meanwhile, France’s TotalFinaElf has said itwill boost lift production by 10 per cent in2002. Anglo-Dutch giant Royal Dutch/Shell,however, has cut its forecasts for productiongrowth from five per cent to three per cent ayear over the five years to 2005, citing longerthan expected access to major sources of re-serves. The CEO of Shell Exploration andProduction, Walter van de Vijver, said thatwhile his company was likely to meet its tar-get of lifting production to the equivalent of3.8 million barrels/day by the end of this year,output in 2002 would be flat. He blameddelays to projects in Angola and Nigeria, aswell as the Kashagan project in the Caspian.

Statoil bids for South Pars projectTEHRAN — Norwegian state oil companyStatoil has participated in a tender for phasesnine and 10 of the South Pars gas develop-ment plan in Iran, according to the English-language Iran Daily. A Statoil officialconfirmed the news report, but would notelaborate on the move. The paper said thatStatoil would probably sign a buy-back con-tract with Iran’s Pars Oil and Gas Company,and added that the companies participatingin the tender had presented proposals on theengineering, purchasing and constructionphases of the project. Final agreement for thetwo phases was scheduled to be signed in earlySeptember, but was subsequently postponed,for unspecified reasons. When operational,phases nine and 10 of South Pars will pro-duce 2 billion cubic feet of gas for domesticconsumption and liquefied natural gas forexport.

Ecuador refinery shuts for maintenanceQUITO — Ecuador’s Esmeraldas refinery hastemporarily suspended operations for main-tenance of its units, according to governmentsources. Due to the maintenance programme,the authorities will import around 400,000barrels of diesel and gasoline to help meetnational demand. The refinery has a capacityto process 110,000 barrels/day of crude oil.The sources added that the industrial centreat La Libertad, located in Guayas province,which had a refining capacity of 44,000 b/d,would help in the technical maintenance ofthe Esmeraldas plant.

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In briefissues, especially the gas purchase price,have been amicably resolved, culminatingin this signing ceremony,” he observed.

“The bulk of the CNL gas supplyconstitutes part of the NGC’s total gassupply to the National Electric PowerAuthority thermal plant at Egbin.”

Olukoga urged other gas-concessionholders to explore ways of integrating theirgas supply systems into the NGC’s exist-ing facilities, to allow maximum utiliza-tion of associated gas.

“In this way, our target of eliminatinggas flaring in the country before 2008, setby the federal government, will be at-tained,” he said.

Olukoga said the Escravos-Lagos gaspipeline formed the backbone of the net-work for supply to the southwest, whilethe major trunk line towards the north-ern axis — the Oben-Ajaokuta pipeline— would serve as the backbone of gassupply to consumers north of the Niger.

Studies were currently being under-taken on the feasibility of extending thissegment of the network to Abuja andKaduna, respectively, he said, as the firstphase of the project.

The NGC also had plans to link itseastern and western gas supply systems toprovide flexibility and better managementof its supply and demand schedule.

“All these efforts are geared towardsachieving our long-term objectives of in-tegrating the nation’s gas supply systemsto ensure optimum utilization of its gasresources, enhancing the development ofthe gas industry and allowing for effectiveand efficient use of government resources,”he maintained.

Pertamina starts workon South Sumatranatural gas programmeJakarta — The Indonesian state oil andgas company, Pertamina, is due to startwork on a $500 million gas field develop-ment programme in South Sumatra andthe output is intended to supply thedensely populated West Java region from2005.

The 22 fields in the Prabumulih re-gion, with accumulated reserves of 3.8trillion cubic feet, would supply at least

50m cu ft/day of gas to West Java for thenext 20 years, Pertamina President,Baihaki Hakim, said.

The field development programmefollowed an internal agreement betweenPertamina and state gas distributor, PTPerusahaan Gas Negara (PGN), he noted.PGN would build a 640-kilometre gaspipeline from South Sumatra to West Java,he added.

According to PGN sources, Europeanbanks were keen to finance the project,which they saw as one of the most lucra-tive businesses in the gas sector of south-east Asia, capable of earning revenue.

Baihaki noted that West Java remainedthe main domestic energy market in In-donesia for the South Sumatra fields,adding that Pertamina was also intensify-ing exploration activities in the fields toraise reserves to 5.0tr cu ft.

Meanwhile, provincial officials haveasked the government to allow them to berepresented on the independent executivebody, which would be formed under thenew oil and gas law to manage the coun-try’s hydrocarbon resources.

Under the new government approachof sharing mineral wealth with localpopulations, provinces with hydrocarbonresources will be allowed to participate inoil and gas exploration projects.

Algerian Minister holdstalks on deregulation ofEuropean energy marketAlgiers — Algerian Minister of Energy& Mines and President of the OPEC Con-ference, Dr Chakib Khelil, held talks lastmonth with the Belgian Minister of Trade,Didier Gosuin, to discuss issues related tothe liberalization of the energy sector inEurope.

According to an official statementdetailing the contents of the talks, Khelilhighlighted the obstacles involved in sup-plying energy products to European cus-tomers, and the impact of these barrierson countries like Algeria, where incomewas chiefly reliant on the export of hydro-carbons.

The two officials also examined waysand means of developing bilateral co-op-eration in energy and mines. In this re-

US Gulf of Mexico sales go aheadNEW YORK — The US Department of theInterior’s Minerals Management Service(MMS) has published a notice in the federalregister requesting information for 10 tenta-tively-scheduled outer continental shelf leasesales in the western and central Gulf ofMexico in the proposed 2002-07 leasing pro-gramme. Western sales 184, 187, 192, 196and 200, as well as central sales 185, 190, 194,198 and 201, are covered in this multi-salecall for information and nominations. Thenotice of intent to prepare an environmentalimpact statement covers all sales, except west-ern Gulf sale 184. “As always, we seek an openand frank exchange of views and informationas we identify the issues and concerns in theseareas,” said MMS Acting Director, TomKitsos.

Korea to split up gas businessesSEOUL — The Korea Gas Corporation’s(Kogas) import and wholesale businesses willbe split among three firms by the end of thisyear, according to a statement from the Com-merce, Industry and Energy Ministry. Thestate would also sell its stakes in two of thenew companies by next year, said the state-ment, noting that Kogas was being partiallyprivatized by 2002, as part of an agreementwith the International Monetary Fund (IMF)that was helping Seoul rebuild its economy.Details of the share sales in the state-ownedKogas are due to be revealed by March. Po-tential bidders for Kogas units should have amanagement capability to stabilize gas sup-ply and demand and handle existing lique-fied natural gas import contracts. TheMinistry said it would complete the privati-zation plan for Kogas LNG facilities, receivingterminals and pipelines by the first quarterof next year, with full privatization takingplace by the end of the year.

ExxonMobil to expand Shawnee plantSHAWNEE, OKLAHOMA — ExxonMobilChemical Company has begun work on a100,000-sq ft building to house a major newproduction unit at the firm’s oriented poly-propylene manufacturing plant in Shawnee,Oklahoma, according to a company state-ment. The plant expansion creates 50 newjobs for the Shawnee area and increases an-nual capacity at the plant by 35 per cent.“This project marks the largest expansion forthe ExxonMobil Chemical’s Shawnee plantin over 10 years and is a tremendous growthopportunity for the Shawnee area,” saidShawnee Plant Manager Kevin Donovan. Headded that the firm remained dedicated tosafety and the project would demand strictadherence to a variety of safety guidelines.

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In briefgard, Khelil gave an overview of the struc-tural reforms being implemented in hiscountry’s hydrocarbons sector and calledon Belgian firms to involve themselves inthese efforts through direct investment andpartnerships.

Gosuin announced that a trade office,which would be in charge of ensuring apermanent presence for Belgian business-men in Algeria, would be shortly openedin the capital, Algiers.

In separate talks, Khelil met last monthwith the Italian Ambassador to Algeria,Romualdo Bettini, to discuss issues relatedto Khelil’s visit to Italy later in the month.

According to a statement from theAlgerian Ministry of Energy and Mines,the two sides discussed the consequencesof the deregulation of the European en-ergy market and its impact on Algeria-Italypartnerships.

In Italy, Khelil was scheduled to ex-amine with Italian authorities the techni-cal and political conditions for the con-struction of a gas pipeline to link Algeriangas fields to the Italy, as well as the pro-vision of an underwater cable connectingthe two countries.

During his stay in Italy, Khelil was dueto meet officials from the Italian energysector and managers of oil and electricityfirms.

France’s Entrepose wins$120 million oil fieldcontract in AlgeriaAlgiers — The French company, Entre-pose, has landed a $120 million contractfor the realization of the first stage of aproject related to the development ofAlgeria’s Menzel-Ledjmat North (MLN)oil field, the Algerian national oil com-pany, Sonatrach, announced last month.

MLN is located in Block 405 in theBerkine basin, in the south-west of thecountry, which is Algeria’s second largesthydrocarbon province after HassiMessaoud.

Entrepose won the deal following atender, which also included the Algerian-United States concern, Brown and RootCondor, and Petrofac of the US, whichproposed cost completions for the projectof $230m and $140m, respectively.

The first phase of the project entailsthe provision of installations necessary forgathering the field’s production, the treat-ment of more than 15,000 barrels/day ofliquid hydrocarbons, and the compressionof 1.7m cubic metres of gas.

The scheme, due to be completedwithin 20 months, also involves the injec-tion of 636m cu m/d of water into thefield for maintaining pressure, as well asproviding facilities for storage before ship-ment.

The second stage of the project —estimated to cost $80m — will entailextending a field unit to raise productionto 34,000 b/d, developing small surround-ing fields, and drilling 10 additional wells.

The MLN field, discovered in 1996,covers an area of about 46 sq km and holdsreserves estimated at 80m b of liquidhydrocarbons.

Within the exploitation phase, whichwill extend over 17 years, the recovery of40m b of oil is expected, according toofficials from Sonatrach. The project isbeing co-managed by Sonatrach,Burlington and Talisman.

PDVSA Gas to studypipeline link betweenColombia and VenezuelaBogota — Colombian state oil firmEcopetrol, PDVSA Gas, an affiliate of theVenezuelan national oil company, and theColumbian subsidiary of ChevronTexacoare to study and evaluate the constructionof a natural gas pipeline linking Colom-bia and Venezuela.

The proposed pipeline would be some200 kilometres long and would connectthe offshore infrastructure of Chevron-Texaco (formerly a Texaco operation un-der the newly merged company) in theGuajira region, in north-east Colombia,to Lake Maracaibo, Venezuela.

ChevronTexaco and Ecopetrol supplyaround 80 per cent of Colombia’s naturalgas needs. PDVSA Gas is the major sup-plier of natural gas throughout Venezuela.

Ecopetrol President, Alberto Calderon,commented: “We are interested in explor-ing conditions that would make a gasinterconnection between Colombia andVenezuela economically feasible. If we find

EIA sees modest US demand increaseNEW YORK — Total United States petroleumdemand in 2001 is projected to average 19.86million barrels/day, up by only 170,000 b/d,or 0.8 per cent, from the average seen for2000, according to the latest figures from theUS Energy Information Administration. Therise is even less than the 176,000 b/d growthrecorded last year and the smallest such in-crease since 1995, said the EIA in its short-term energy outlook. This year’s projectedchange would also have been close to zero,but for the substantial price-induced fuelswitching away from natural gas during thefirst quarter, it noted. In 2002, however, to-tal demand was projected to average 20.29mb/d, up by 423,000 b/d, or 2.1 per cent fromthe current year. Revised data now showedthat demand for petroleum products in thefirst quarter of this year jumped by 563,000b/d (2.9 per cent) from 1Q 2000.

Under-investment could hit oil suppliesSINGAPORE — Security of oil and gas suppliescould be threatened unless greater invest-ments are made in the transportation sectorand on developing new reserves, accordingto Omani Oil & Gas Minister, Dr Moham-med Hamed Al-Rumhy. “The issue of thesupply of hydrocarbons, both oil and gas, islargely an economic one,” he said in a key-note address to the Asia Pacific PetroleumConference in Singapore last month. TheMinister also noted that there was a need toassess the impact of e-commerce and oil trad-ing, mergers and acquisitions, and unilateralpolicy changes, especially on the environ-ment. “E-commerce is going to transform theway we deal with each other in this business.This is bound to create uncertainty, whetherwe like it or not. It will create e-risk or e-uncertainty with it,” he said.

BP quits Panasol solvents businessLONDON — BP has announced that it willcease production of Panasol solvents at itsTexas City refining and petrochemicals com-plex by year-end and exit the Panasol solventsbusiness. Following a review of the business,BP determined that Panasol solvent produc-tion was not core to BP’s petrochemical port-folio, said the firm’s General Managerresponsible for Panasol solvents, FrankRobertson. “BP’s petrochemical strategy isfocused on being a high-volume, low-costproducer of industrial chemicals and poly-mers and having leading edge process tech-nology,” he noted, adding: “The Panasolsolvents business does not meet the criterianeeded to warrant further investment.”Panasol solvents are light aromatic solventsderived from naphtha.

N E W S L I N E

28 OPEC Bulletin

In briefpossibilities, we’ll analyse the supply op-tions that satisfy the aspirations of bothcountries.”

Similarly, PDVSA Gas President,Nelson Nava, said: “We are looking at thisstudy with a futuristic approach. Our ideais to use the pipeline to import gas duringthe early years of the project, to offset somecircumstantial shortages that we are expe-riencing on the western side of the coun-try.

“But after this period we may very wellbe in a position to reverse the direction ofthe pipeline flow and use it as a first legof a pipeline system able to export gas fromVenezuela to other countries, both inCentral and South America,” Nava ex-plained.

The President of ChevronTexaco’sColumbian subsidiary, Alex Archila, saidthat as demand increased for cleaner en-ergy in the Andean region, the global giantwas keen to create new solutions which“link resources and markets.”

The three parties will form a team toconduct the study over a six-month pe-riod, in order to determine the scope ofthe export project and the pipeline con-struction budget. The study will evaluatethe environmental, technical and commer-cial factors involved in the project.

If deemed commercial, the partieswould determine their participation in ajoint development agreement for construc-tion and/or a supply agreement for the saleof Colombian gas to Venezuela.

Nigeria explains plansfor the allocation ofmarginal oil fieldsAbuja — In a move designed to openup the Nigerian oil industry to wider par-ticipation amongst indigenous companies,the government has announced proce-dures for the allocation of marginal fieldsin the country.

The Nigerian Presidential Adviser onPetroleum and Energy, Dr RilwanuLukman, told industry operators and jour-nalists that approval for the award wouldbe granted in three “sequential stages.”

The first stage involved pre-qualifica-tion, or selection of the most competentfirms by a team of officials from the

Department of Petroleum Resources(DPR), the Nigerian National PetroleumCorporation (NNPC), and the Office ofthe Presidential Adviser on Petroleum andEnergy in a transparent and open com-petitive bidding system.

Lukman said the second stage of theprogramme would entail specific field bids,which would be evaluated by a commit-tee comprising officials of the DPR andthe NNPC.

The third stage involved negotiationsof detailed farm-out terms by biddingcompanies, the NNPC and the Office ofthe Presidential Adviser on Petroleum andEnergy, with the DPR playing the role ofadjudicator.

Lukman said the selection committeewould scrutinize the companies involvedin the bidding process in terms of theirbackground and experience, explorationand production track record, particularlyin the Niger Delta, and of their exposurein operating at a federal level.

“To streamline the bidding exerciseand to avoid potential abuse, the guide-lines provide that applying companies shallparticipate in only one bid for the pur-pose of the exercise,” he noted, adding thatparticipation in more than one companyor surrogating participation would lead todisqualification.

Lukman said that in order to encour-age new entrants into the industry, theexisting holders of operating licences andoil mining licences, as well as marginalfield developers, should not participate inthe exercise.

He explained that the initiative for theexploitation of marginal fields would pro-vide an opportunity for the developmentof indigenous companies and would alsocreate a positive long-term effect on theNigerian economy.

Such a process would encourage theparticipation of new entrants, therebypromoting a vibrant industry and provid-ing opportunities for technology transfer.

“The development of marginal fieldsis a piece that fits into the large picture ofthe government’s aspirations for the effec-tive revamping of the economy,” he said.

At the beginning of the year, the gov-ernment repossessed 26 marginal oil fieldsfrom the multinationals operating in thecountry for the allocation to indigenouscompanies.

TotalFinaElf sees new fields hiking outputPARIS — France’s TotalFinaElf has said that itexpects production from its Elgin andFranklin fields to rapidly reach 140,000 bar-rels/day of oil and 13 million cubic feet/dayof gas. Speaking at a press conference in Parison the firm’s first-half results, Group Chair-man Thierry Demarest described the bring-ing onstream of the Elgin field last March andthe Franklin field last month as a major event.The fields, located in the UK sector of theNorth Sea, should produce about 5.5 per centof all British oil output and 4.5 per cent ofits gas, TotalFinaElf said. The two facilitieswere about 5.5 km apart in about 93 metresof water and would share process facilities,while using their own dedicated, unmannedwellhead platforms. Oil production would betransported using the existing Forties pipe-line system to the Bacton terminal.

Ecuador to develop Amazon oil fieldQUITO — Ecuador’s Petroproduccion, a sub-sidiary of state-owned PetroEcuador, and USfirm Occidental have signed a contract witha consortium of three local companies to de-velop the Eden-Yuturi oil field, located in theAmazon region. Investment for the projecthas been estimated at about $83 million,which represents some 25 per cent of the to-tal investment required for the field, put atabout $334m. Ecuadoran Minister of Energyand Mines, Pablo Teran, highlighted the im-portance of the participation of the domesticfirms Conducto, Santos, and Harbert in thescheme. Conducto’s work would include lay-ing a secondary pipeline between the oil fieldand the Lago Agrio station. Santos would bein charge of engineering, supplying equip-ment, civil and electric works, while the thirdcompany, Harbert, would handle civil works,bridges and pipelines.

Shell awards contract for GTL plantLondon — Shell Gas & Power has announcedthe award of an engineering contract to beused for its first large scale gas-to-liquids (GTL)plant to a joint venture consisting of KelloggBrown and Root and JGC Corporation. Thecontract, worth tens of millions of dollars,covers the definition of the engineering de-sign, said the company in a statement. Shellis currently involved in studies into the in-vestment opportunities for GTL projects in anumber of countries using its proprietarytechnology, the Shell middle distillates syn-thesis process. The location of the first sec-ond-generation GTL plant has yet to bedetermined, but an investment decision is ex-pected by the end of 2002. The company in-tends to commit to four projects by the endof 2010.

N E W S L I N E

October 2001 29

In briefSaudi firm satisfiedwith US decision onTexaco divestiture

New York — The Shell Oil ProductsCompany, a unit of Royal Dutch/Shell,and Saudi Refining Inc (SRI), a subsidi-ary of Saudi Aramco, have expressed sat-isfaction over the US Federal Trade Com-mission’s (FTC) consent order for theChevronTexaco merger.

The FTC ordered the divestment ofTexaco’s interests in Motiva and Equilonas a condition of its approval for theChevronTexaco merger. Shell, SRI, andTexaco own Motiva, while Shell andTexaco own Equilon.

The merger order allows for Texaco’sinterests in the Equilon and Motiva jointventures to be placed in a trust for subse-quent divestment, giving Shell and SRI theoption to buy the respective stakes.

Equilon and Motiva are downstreamjoint ventures that include gasoline sta-tions and refineries, and marketing, trans-portation, lubricant and trading busi-nesses.

Shell Oil Products President, A YNoojin and SRI President, SharafSalamah, said in a joint statement recently:“We have reviewed the FTC’s consentorder and believe that the order, in con-junction with our rights under the joint-venture agreements, provides a practicalframework for Shell and SRI to completea financially sound acquisition of theTexaco interest in Motiva and for Shell toacquire Texaco’s interest in Equilon.”

It was agreed that if Texaco could notcomplete the sale of its stakes in Motivaand Equilon to Shell and SRI prior to themerger, it would place the stock of Texacosubsidiaries holding those interests into adivestiture trust for sale within eightmonths of the merger.

“We note that Texaco’s interests in thecompanies will be managed by two inde-pendent trustees dedicated to promotingEquilon and Motiva as viable, competi-tive ongoing businesses,” the statementclarified.

“Shell and SRI remain the naturalbuyers of Texaco’s interests and we remainopen to discussions with Texaco to accom-plish these acquisitions.

“We are also prepared to negotiatedirectly with the divestiture trustee, inorder to acquire those interests on termsthat provide us with a fair return on ourrespective investments.

Formed in 1988, SRI, based in Hou-ston, Texas, purchases and sells crude oiland maintains a significant inventory ofcrude outside the United States.

Motiva refines and markets petroleumproducts in the eastern and Gulf coastareas of the US under the Texaco and Shellbrands. SRI sells around 450,000 b/d ofcrude to the joint venture. Motiva’s refin-ing capacity is about 800,000 b/d.

Shell Oil Products, a wholly ownedsubsidiary of the Shell Oil Company, holdsthe equity interest of Equilon enterprises,Motiva Enterprises, and the Deer ParkRefining Partnership.

These interests are collectively engagedin the refining, marketing and transpor-tation of crude oil and petroleum prod-ucts in the US.

Indonesian governmentcompelled to raise oilprices in fiscal 2002Jakarta — Indonesian President,Megawati Sukarnoputri, said in Jakarta lastmonth that the government would becompelled to raise fuel oil prices in fiscal2002, even though this would put anadditional burden on the people in thecountry.

“This decision is a heavy problembecause it must be taken so as to balancethe budget — an important step to reviveour economy,” Megawati pointed outwhen presenting the draft state budget for2002 and a financial note before theHouse of Representatives.

By way of explanation, she said therewas no other way to help ease the finan-cial constraints put on the country thanto go for the difficult decision of cuttingfuel subsidies.

Quoted by the Indonesian newsagency Antara, Megawati said fuel subsi-dies would be cut by 40 per cent to 32.29trillion rupiahs, while fuel prices wouldbe raised by 30 per cent in the future, shesaid, without setting a time-frame for themove.

Technip reports rise in 1H01 profitPARIS — French engineering companyTechnip said last month that its first-half netprofit, excluding goodwill and exceptionalitems, rose by only 1.8 per cent to EUR 56.5million. Nevertheless, operating profitclimbed by 21.8 per cent to EUR 98.3m ona revenue rise of 9.5 per cent to EUR 1.47billion. Technip said the company’s backlogtotalled EUR 3.5bn, with about one-third ofthe business slated for the Middle East region,the largest segment of operations. This didnot include another EUR 1.0bn in contractssigned, but not yet started. Forty-two per centof the backlog was accounted for by the pet-rochemical sector, while 35 per cent was des-tined for oil and gas production. Technip getsabout 30 per cent of its total revenue fromthe Middle East, followed by Europe (21 percent), the Far East (17 per cent), the Ameri-cas (16 per cent), Africa 12 (per cent), andRussia and Central Asia (four per cent).

PetroEcuador tests new oil wellsQUITO — State oil company PetroEcuadorhas drilled two new horizontal test wells inthe Sacha and Shushufindi oil fields, and ex-pects to have the results soon, the firm an-nounced last month. The fields, which areconsidered to be the largest in Ecuador, cur-rently have production of around 6,000 bar-rels/day, but PetroEcuador has said that thiscould be boosted by 30,000 b/d, if it werenot for a lack of electricity supply. To reachits targeted output of 45,000 b/d, the com-pany said it would drill three additional wellsat Sacha and Shushufindi. PetroEcuadoradded that it also hoped to sign a contractcovering strategic operation alliances for theAtacapi and Parahuacu oil fields.

Technology key to future, says API HeadNEW YORK — Technology is the key to pro-viding the future surplus energy capacity thatwill be needed to meet projected energy de-mand, according to the President of theAmerican Petroleum Institute, Red Cavaney.Speaking at a congressional forum, he said:“The US urgently needs a comprehensivenational energy strategy to support its con-tinued economic growth and to maintainAmericans’ quality of life. Technology is vitalto meeting US energy, economic and envi-ronmental needs. Industry and governmentmust work in concert in developing and de-ploying the advanced technologies requiredin the 21st century.” Cavaney also stressedthe need for more regulatory flexibility andthe modernization of current regulations toremove obstacles to the use of state-of-the-art technology. This would help to “providea better quality of life for all Americans.”

N E W S L I N E

30 OPEC Bulletin

In briefHowever, she assured the House that

efforts would be made to provide relief tothe country’s poor, who would be hit bythe cut in fuel subsidies.

Megawati said the governmentplanned to earn 291.4tr rupiahs in rev-enue in the year, adding that spendingwould amount to about 332.4tr rupiahs,leaving a deficit of 43tr rupiahs, or 2.5 percent of the national gross income.

Tax revenue would increase by 17 percent to 216.79tr rupiahs, 22.3tr of whichwould come from excise taxes on cigarettesand 12.25tr from import duties.

Non-tax revenue was projected to be28 per cent lower to just over 72.6trrupiahs, due to lower oil and gas earningsduring the year, according to the draftbrief.

Algeria, Nigeria set upsteering committeefor new gas pipelineAlgiers — Algeria and Nigeria set up asteering committee last month to super-vise the trans-Sahara gas pipeline project,which will link the two countries.

The announcement was made at theend of the first meeting of experts fromthe two countries, which was co-chairedby the Algerian Minister of Energy &Mines and President of the OPEC Con-ference, Dr Chakib Khelil, and the Nige-rian Presidential Advisor on Petroleum andEnergy, Dr Rilwanu Lukman.

The pipeline will extend over 4,000kilometres and will require investment ofbetween $5.0 billion and $7.0bn to com-plete. It will transport Nigerian gas fromthe Abuja fields to the Algerian port ofBeni Saf, in the north-west of the country.

Speaking at the meeting, Khelil notedthat the materialization of such a projecthad been influenced by the presidents ofAlgeria and Nigeria, Abdelaziz Bouteflikaand Olusegun Obasanjo, as well as froma recommendation made by African En-ergy Ministers, who met in Algiers inApril.

Khelil pointed to the strategic impor-tance of the project, stressing the eco-nomic, political and social benefits for thefuture development of the two countries.

He added that, once completed, the

project would enable the sale of Algerianand Nigerian gas on European markets,which would boost the future potentialearning of both countries.

In his comments, Lukman said the gaspipeline would have beneficial effects forthe development of the two nations andshould lead to rapid growth in the econo-mies of both the countries.

Algeria and Nigeria also gave a com-mitment to supporting the project withan extension of the trans-Saharan road andthe provision of an optical fibre line, link-ing telecommunications.

Conoco awards dealsfor new Indonesiannatural gas schemeNew York — US firm Conoco hasawarded two engineering, procurement,construction and installation (EPCI) con-tracts for the $1.6 billion Belanak naturalgas development offshore Indonesia,around 200 kilometres from Singapore.

The awards were made under Conoco’sSouth Natuna Sea Block B production-sharing contract (PSC) with the Indone-sian state oil and gas company, Pertamina.

The $587 million contract for a float-ing production, storage and offloading(FPSO) unit was awarded to PT Brown& Root Indonesia, while the $157m con-tract for two wellhead platforms and asso-ciated pipelines and an oil offloading buoywas awarded to PT J Ray McDermottIndonesia.

The EPCI contracts support two sepa-rate natural gas sales agreements, bothsupplied by the Conoco-operated SouthNatuna Sea Block B PSC.

The first natural gas sales agreementinvolves a 22-year contract betweenPertamina and Singapore’s SembCorp Gasfor the long-term delivery of natural gasto Singapore.

The second accord is a 20-year con-tract between Pertamina and Malaysia’sstate oil and gas company, Petronas, forthe delivery of natural gas to Malaysia.

With expected ultimate production ofabout 600bn cubic feet of natural gas and100m barrels of oil, condensate and liq-uefied petroleum gas, Belanak is the cor-nerstone for future gas supplies.

UK to tighten oil licensing regimeBRUSSELS — The British government haswarned oil companies operating in the NorthSea that it intends to tighten up the licensingregime, in an attempt to increase the pace ofexploration and production. Energy Minis-ter Brian Wilson told oil industry executivesat a conference in Aberdeen, Scotland, thatfuture licences would be over much shorterperiods than at present and that investmentterms would be stricter. He said that therewere at present 250 fields where oil had beendiscovered, but not yet exploited, and another200 unused licences in offshore territory.“No-one should doubt the government’s re-solve that licences should be in the hands ofcompanies that want to develop them. Hun-dreds of fallow fields and unused licenses area luxury which we can no longer afford,” hestressed.

TotalFinaElf ’s 1H01 profit sharply upPARIS — France’s TotalFinaElf has reported a27 per cent hike in its first-half net profit anda 22 per cent rise in the profit seen duringthe second quarter. A statement from thegroup said that first-half net profit, exclud-ing non-recurring items, had risen to EUR4.33 billion, compared with EUR 3.4bn inthe same period last year. Net profit in thesecond quarter rose to EUR 2.13bn fromEUR 1.75bn a year earlier. Operating incomein the upstream sector rose by 20 per cent toEUR 5.16bn and oil and gas production in-creased to 2.19m b/d from 2.14m b/d. Pro-duction growth came mainly from Venezuela,Nigeria, Indonesia, the United Kingdom,Norway and Myanmar. Group ChairmanThierry Demarest said last year’s merger ofTotalFina with Elf Aquitaine had been a suc-cess and the two companies were now reor-ganized and working efficiently.

North Sea has “solid future” — reportBRUSSELS — A new report from Scotland’sAberdeen and Aberdeenshire Council paintsa positive picture of the future of UnitedKingdom North Sea oil production. Thestudy says that firmer crude oil prices andgreater competitiveness among North Seaoperators means that the sector has turned asignificant corner and will enjoy “a muchmore solid future in the short to mediumterm.” Eighty per cent of respondents weremore optimistic than last year, said the re-port. However, it added that “no-one in theUK offshore sector is underestimating thechallenges” of volatile prices, the increasingmaturity of North Sea fields, ageing infra-structure, smaller average field sizes, and theincreasing technical complexity in recoveringthe area’s crude oil.”

October 2001 31

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 averageAugust 2001 September 2001 2000 2001

Reference Basket 24.46 24.29 27.22 24.71Arabian Light 24.92 24.73 26.49 24.49Dubai 24.70 24.37 25.70 24.28Bonny Light 25.41 25.98 28.08 26.16Saharan Blend 25.96 26.13 28.29 26.43Minas 24.82 24.59 28.45 25.96Tia Juana Light 21.54 20.72 26.00 21.78Isthmus 23.86 23.49 27.52 23.77

Other crudesBrent 25.78 25.84 28.04 26.15WTI 27.41 26.40 29.80 27.82

DifferentialsWTI/Brent 1.63 0.56 1.76 1.67Brent/Dubai 1.08 1.47 2.34 1.87

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

Crude oil price movements

The monthly price of OPEC’s spot Ref-erence Basket2 slid in September, surren-dering some of August’s gains. It fell by17¢/b to average $24.29/b, the fourthlowest monthly average price for the year.Most of the Basket’s components regis-tered losses, with the exception of theBrent-related Bonny Light and SaharanBlend, which rose by 57¢/b and 17¢/b,respectively. Leading the decline was TiaJuana Light, which fell by 82¢/b, followedby Isthmus and Dubai, which posted lossesof 37¢/b and 33¢/b, respectively. Minasand Arabian Light finished the month23¢/b and 19¢/b lower (see Table A).

On a weekly basis, the Basket dis-played a great deal of volatility, fallingduring the first week and staging a recov-ery during the second. However, duringthe remaining two weeks of September,the Basket’s weekly average price experi-enced a dramatic drop, losing close to 19per cent of its value. The average price ofthe Basket retreated slightly, by 7¢/b, inthe first week of the month, respondingto a diversity of bearish and bullish factors.On the positive side were the weekly stockfigures released by the American Petro-leum Institute (API), which showed drawson crude and product inventories, espe-cially distillates, as well as concern overIraqi exports. Nonetheless, profit-takingafter the previous week’s rally and concernover the fate of the world economy over-shadowed the positive facts. The Basketreversed its direction in the second week,gaining $1.23/b, with one of the two

major energy markets closed for mostof the week, after the tragic events ofSeptember 11 in the USA. Meanwhile,across the Atlantic, Brent markets re-mained open throughout the week, withthe benchmark (dated Brent) surging bymore than $1.50/b in the aftermath of theattack. Markets returned shortly thereaf-ter to fundamentals, focusing on the slow-down in demand for oil and petroleumproducts and bringing Brent prices closeto the pre-September 11 levels. Once again,the Basket changed direction, falling by23¢/b to average $25.65/b during thethird week, as concern over the slow-downin the global economy overshadowed fearsthat military action could somehow dis-rupt oil flows. During the fourth week,crude prices plummeted, with the Basketlosing $4.68/b, or almost 20 per cent, toaverage $20.97/b. This accentuated thedownward path which had begun theprevious week, amid growing expectationsthat the US economy would show furtherweakness, with negative consequences foroil demand.

US and European marketsThe fall in dated Brent, which wid-

ened the WTI/dated Brent differential,was not sufficient to encourage transatlan-tic movements to the East Coast; however,reported stock-draws on gasoline, distil-

September1

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.

lates and crude encouraged the movementof West African crudes. Physical tradingcame to a halt on September 11, in theaftermath of the attacks on the USA, but,even when activity was resumed, the clo-sure of the NYMEX severely hamperedthe pricing and negotiation of cargoes.The impact of the events in New York andWashington, the expectation of a globalrecession and the fall in jet fuel consump-tion resulted in the plummeting of theAtlantic Basin benchmarks, with WTIfalling by more than $2/b and dated Brentlosing $3/b.

In Europe, dated Brent started to easein the first week of September, after Shellended the buying spree that had started inlate August and lasted until the early daysof September. The fall in dated Brentprices widened the WTI/Brent differen-tial towards the beginning of the secondweek of September, increasing the pros-pects of the arbitrage window that hadbeen closed since mid-August. Brent pricesremained volatile after the events ofSeptember 11, rising initially to almost$29/b on that date, and then retreatingover the next two trading days, to shootup again towards the end of the week andapproach the $30/b mark. Refiners’ mar-gins deteriorated as crude prices outpacedproduct prices, with margins for simpleyield refineries in North-West Europe

32 OPEC Bulletin

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

falling by 47¢/b to 75¢/b and for complexrefineries at $5.45/b. Towards the end ofthe month, dated Brent weakened sharply,losing more than $7/b from the mid-month high, opening the spread to WTIand allowing some transatlantic trade.

Far Eastern marketsThe Asia Pacific market remained af-

fected by faltering economic growth pros-pects, dwindling oil demand and weakrefiners’ margins. Ample availability oflight sweet grades (Tapis and Cossack)kept prices under pressure. Medium sourgrades (Oman) received more support onhealthy demand from Asian refiners, whofirst cleared an overhang of October car-goes and then moved to trade Novembervolumes. Sentiment for light sweet gradeswas bearish on ample availability and lim-ited demand; however, discussion onNovember supplies was encouraging.

Product markets andrefinery operations

Apart from US light product prices, therewere gains across the three main worldmarkets in September, in accordance withregional fundamentals. Falling crude pricespaved the way for increased refiners’margins, but did not lead to geared-uprefinery throughputs (see Table B).

US Gulf marketThe gasoline price dropped by a con-

siderable $1.76/b in September, trackingthe usual trend that coincides with the endof the driving season. Furthermore, therewas abundant supply, caused by increasedgasoline output from refineries and morerobust import flows, in anticipation ofstronger demand for gasoline, instead ofjet fuel, as a consequence of reduced airtravel. Robust gasoline demand, however,failed to materialize; preliminary govern-mental data on the four-week movingaverage showed demand at levels evenlower than last month and a year earlier,by 4.3 per cent and 1.4 per cent, respec-tively. Gasoil was down by a marginal4¢/b, despite mounting concern aboutrecession. Moreover, on a yearly basis, thenatural gas price was much weaker, lim-iting the future prospects for the switchfrom fuel to heating oil in electrical utili-

US refinery throughput experiencedanother fall of 190,000 b/d to 15.36mb/d, in tandem with the commencementof autumn refinery maintenance and dis-cretionary run cuts. The utilization rate,therefore, declined to 92.8 per cent, whichwas about one and two percentage pointslower than last month’s and last year’slevels, respectively (see Table C).

Rotterdam marketThe gasoline price soared by $1.52/b

in September. Most of the gains occurredduring the first two weeks of the month,driven largely by intensive cargo move-ments to US markets, which switched toless stringent winter gasoline specifica-tions that were easier to meet than thestricter summer grade specifications. A

Table C: Refinery operations in selected OECD countries

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

July 01 August 01 Sept 01 July 01 August 01 Sept 01

USA 15.74 15.55 15.36 95.2 94.0 92.8France 1.72 1.77 1.80 90.7 93.2 95.0Germany 2.18 2.21R 2.03 96.4 98.0R 89.9Italy 1.74 1.77R 1.78 73.9 74.9R 75.3UK 1.45 1.65R 1.65 81.8 93.1R 93.4Eur-162 11.80R 12.13R 11.99 86.4R 88.9R 87.9Japan 3.94 4.14 na 79.3 83.4 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.

ties amid sufficient distillate stocks, par-ticularly in the US north-east region. Inaddition, bearish sentiment dominated thedistillate markets in the Atlantic Basin, asrefiners cut jet fuel production and en-hanced heating oil yields. The fuel oilprice shrugged off falling crude markets,as it soared by $2.12/b, bolstered by whatappears to have been a squeeze on supply,as a major regional refinery maximizedasphalt output, while the other plants optedto use lighter crude; both, in turn, reducedheavily fuel oil availability.

Refiners’ margins in the US Gulfenjoyed further increases. The relativelysharp weakness of West Texas Intermedi-ate (WTI), compared with other bench-mark crudes, was the underlying factorbehind this development (see Table B).

Table B: Selected refined product prices $/b

Change July 01 August 01 Sept 01 Sept/Aug

US GulfRegular gasoline (unleaded) 28.21 32.77 31.01 –1.76Gasoil (0.2%S) 28.59 30.19 30.14 –0.04Fuel oil (3.0%S) 17.40 17.67 19.79 +2.12

RotterdamPremium gasoline (unleaded) 27.86 29.01R 30.53 +1.52Gasoil (0.2%S) 29.33 30.18 30.87 +0.70Fuel oil (3.5%S) 17.19 18.40 19.23 +0.83

SingaporePremium gasoline (unleaded) 24.36 26.68 29.47 +2.79Gasoil (0.5%S) 28.54 28.71 29.44 +0.73Fuel oil (380 cst) 19.19 20.94 21.85 +0.90

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tled 40¢/b lower on the second day of thesecond week of September, as traders soldthe crude contract and bought the prod-ucts contract. The events of September11 caused NYMEX to close; however,IPE Brent futures surged by $3.70/b to$31.05/b the next day, but quickly re-treated to $28.02/b, as OPEC assured themarket of its commitment to security ofsupply. When NYMEX resumed tradingon September 14, WTI was at $29.53/b.

The third week witnessed a continu-ous decline in prices, as October WTIreached $26.59/b on September 20. Sup-ply was seen as uninterrupted in the market,while demand was expected to collapse.Even an unseasonal draw on distillate stockscould not excite the market, since manyexpected that the surplus in jet fuel wouldbe directed to the heating oil pool. Heat-ing oil losses dragged down both gasolineand crude.

On September 24, WTI lost nearly$4/b, with the market pricing in recessionin the USA and world economy. Bothcrude and products were sold off, and theselling continued in the Brent market,where IPE Brent reached a 17-month lowof $21.7/b. Funds were a major contribu-tor. The sell-off continued, as API figuresshowed a huge build of 8.7m b in gasolinestocks, and the Dow Jones index showeda decline. Prices started an upward movein the last days of the month, as speculativepaper came in and some sources said therewas a short supply of physical crude inEurope. Further advances came from tech-nical trading, with the market trying to fillthe gaps in the earlier price movement.OPEC’s decision to keep productionunchanged received a neutral response fromthe market.

The tanker market

OPEC area spot-chartering increased by2.20m b/d to a monthly average of 12.21mb/d in September, despite signs of a globaleconomic slow-down that would have anegative impact on world oil demand andprices. However, the main reason behindthis increase was concern over a possiblesupply disruption after the attacks of Sep-tember 11, which encouraged charterersto fix cargoes early to beat any potentialsqueeze in supply in the case of US mili-

sustained contango in distillate marketsencouraged many European countries,including France and the Benelux nations,to replenish their inventories prior towinter. Most importantly, Germany, thelargest European heating oil consumer,proposed stringent diesel specifications asof November 1, with ultra low sulphur of50 parts per million, instead of the current350 ppm. The introduction of the so-called ‘city diesel’ flourished with the taxbreak and motivated a buying spree for thenew grade by all the country’s retailers,after clearing their inventories of existinggrades. Both factors were cited as the mainreasons for the rise of 70¢/b in the gasoilprice. Fuel oil surged by 83¢/b, on the backof a number of supporting factors. Onewas a 20 per cent restriction on Russianfuel oil exports, to soak up increaseddomestic consumption. The second factorwas healthy bunker demand, while thethird was a strong Portuguese utility pur-chase. These factors, however, offset loweractivity on the eastbound route to Singa-pore, following the incorporation of thenew high war-risk premium into insur-ance costs (see Table B).

Refiners’ margins recovered, switch-ing moderately into positive territory.

Refinery throughput in Eur-16 (EU +Norway) fell by 140,000 b/d to 11.99mb/d, in tandem with refinery run cuts andseasonal maintenance. The equivalentutilization rate was 87.9 per cent, whichwas one percentage point lower thanboth last month’s and last year’s levels (seeTable C).

Singapore marketFor the second consecutive month,

gasoline led an upward product marketmovement in September. The monthlyaverage prices of these products, nonethe-less, masked sharp falls that occurred inthe last week of the month, driven mainlyby the collapsing crude market. Gasolineenjoyed a further large gain of $2.79/b,reflecting essentially the tightly suppliedmarket coinciding with healthy regionaland foreign demand during the first halfof the month. Precautionary measures bymost Asian countries, either to suspendproduct exports or to extend stocks toavert any possible future shortage in thewake of military attacks, were the under-lying factors behind another increase, of

73¢/b, in the gasoil price. Fuel oil surgedby a further 90¢/b, gaining support fromrobust Chinese demand, which was rein-forced by issuing a fresh large fuel oilimport quota, accounting for six milliontonnes until March 2002 (see Table B).

A combination of rising productmarkets and a fall in the price of Dubaienhanced its refining margin, which fluc-tuated from break-even point to moderategains. Persistent growth in fuel oil prices,with the product’s yield being consideredthe highest among refining centres, due toless advanced regional refineries, alsoboosted refiners’ profits.

Refinery throughput in Japan rose bya further 200,000 b/d to around 4.14mb/d in August. The equivalent utilizationrate was 83.4 per cent, which was 4.1percentage points higher than last month’slevel, but still 1.7 percentage points lowerthan the previous year’s run (see Table C).

The oil futures market

The NYMEX WTI crude oil contract wasin contango throughout September. Thepremium of the second front-month overthe first reached a maximum of 43¢/b onSeptember 24, the week in which the APIstock report showed a build of around3.4m b in crude inventories. Prices of theWTI front-month contract were aroundthe $27/b mark until September 11, be-fore jumping to a high of $29.53/b. Theythen drifted down slowly, to a minimumof $21.81/b on September 25, after whichthey recovered slightly to $23.43/b at themonth-end. Early in September, crudefutures were supported by short-covering,in anticipation of the implementation ofOPEC’s new output cuts. However, fund-selling reversed the upward movement,despite refinery buying of the October/November spread. The market later re-sponded to the Department of Energy’sstatistics showing a 2m b build in crudestocks, rather than the 410,000 b drawreported by the API, and gained momen-tum. Giving further support was concernabout Iraqi exports, as the pricing periodremained a point of contention betweenthe UN and Iraq.

After an initial break above $28/b (forthe first time in three months), driven bygood product markets, October WTI set-

34 OPEC Bulletin

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

tary action. As a result, global spot-char-tering edged 2.58m b/d higher to a monthlyaverage of 19.56m b/d; however, thisvolume was 970,000 b/d below the year-earlier figure. The OPEC area’s share ofglobal spot-chartering increased by 3.47percentage points to 62.42 per cent, andthis level was 0.21 percentage points abovethe previous year’s share. Spot fixturesfrom the Middle East on eastbound andwestbound long-haul routes rose by900,000 b/d to 4.23m b/d and 780,000b/d to 2.18m b/d, respectively. Therefore,the shares of Middle East eastbound andwestbound fixtures of OPEC total fixturesimproved by 1.35 percentage points to34.66 per cent and 3.84 percentage pointsto 17.83 per cent, respectively; together,they accounted for 52.49 per cent of totalchartering in the OPEC area, which was5.19 percentage points higher than thelevel observed in the previous month.Preliminary estimates of sailings from theOPEC area declined slightly by 100,000b/d to a monthly average of 22.78m b/d,which was only 0.44 percentage pointsbelow last month’s level. Sailings from theMiddle East declined by 240,000 b/d toa monthly average of 16.30m b/d, whichwas about 71.58 per cent of total OPEC’ssailings. Arrivals in the US Gulf Coast, theEast Coast and the Caribbean increased inSeptember by 2.18m b/d to a monthlyaverage of 9.15m b/d. Arrivals in North-West Europe also rose, by 50,000 b/d to6.92m b/d, while to Euromed they de-creased by 30,000 b/d to 4.60m b/d. Theestimated oil-at-sea on September 23 was471m b, which was 9m b below the levelobserved at the end of last month.

The tragic events of September 11 thatoccurred in the USA created uncertaintyover the direction of the oil transportationmarket. The VLCC tanker market in theMiddle East, which had been on an up-ward trend immediately before the at-tacks, climbed further after the incidents,on rising insurance premiums and hikedbunker prices, which made the MiddleEast cargoes more expensive than in otherregions. Monthly average freight rates onthe Middle East eastbound and westboundlong-haul routes edged higher, by 17 pointsto Worldscale 73 and 20 points to W68,respectively, affected by the surge in fix-tures to secure oil supply in case of disrup-tions resulting from US retaliation. The

Suezmax markets in the Atlantic werestable, as freight rates showed little move-ment. Monthly average freight rates on theroutes from West Africa to the US GulfCoast and from North-West Europe tothe US East Coast stood at W93 each, onlyone point and five points below theirrespective previous month’s levels. Aframaxmarket trading on the short-haul routefrom the Caribbean to the US East Coastenjoyed a positive trend, driven by in-creased cargo inquiries and tight end-month tonnage availability, which pushedthe rates up by ten points to W158.However, the Aframax market in theMediterranean softened, as freight rateson the routes across the Mediterraneanand to North-West Europe declined bynine points each to W144 and W136,respectively, despite the surge in activityin the second week of the month. Freightrates for 70–100,000 dwt tankers on theIndonesia to US West Coast route de-clined for the second consecutive month,by ten points to W120.

The product tanker markets displayedmixed trends in September, affected alsoby the attacks on the USA . On the bearishside, freight rates on the routes from theMiddle East and Singapore to the Far Eastremained under pressure from sluggishAsian demand, declining further by 18points to W185 and three points to W200,respectively. However, on the positive side,activity picked up significantly in the At-lantic and the Mediterranean markets,helped by the contango market structureand improved refiners’ margin. Freightrates from North-West Europe and theCaribbean to US destinations surged by17 points to W240 and 36 points to W230,respectively. On the routes across the Medi-terranean and from the Mediterranean toNorth-West Europe, freight rates im-proved by 13 points to W216 and fourpoints to W235, respectively.

World oil demand

Projections for 2001

WorldFor the present year, the projection for

world oil demand has been revised downsubstantially due to expected lower jet fuelconsumption and a further downward

adjustment to the world economic growthrate estimate. Consumption is now esti-mated to rise by 220,000 b/d, or 0.29 percent, to average 75.93m b/d. This very lowyear-on-year increment is comparable tothat in 1998, when demand growth wasonly 210,000 b/d, equivalent to 0.30 percent. On a regional basis, demand is pro-jected to decrease by 160,000 b/d in theOECD, but to increase by 200,000 b/din developing countries and by 170,000b/d in the ‘Other regions’ (former CPEs).

On a quarterly basis, compared withthe year-earlier figure, world demand grewby 0.74 per cent, or 560,000 b/d, toaverage 76.24m b/d in 1Q. It is estimatedto have grown by 1.34 per cent, or 990,000b/d, to average 74.99m b/d in 2Q. The3Q and 4Q, however, are expected toexperience negative growth. The reasonsfor this are the decelerating economicgrowth in these two quarters and thedeclining jet fuel consumption in 4Q. 3Qdemand is now estimated at 75.94m b/d,about 220,000 b/d, or 0.29 per cent, lessthan that of 3Q00. Likewise, 4Q demandis expected to be 76.56m b/d, nearly440,000 b/d, or 0.58 per cent, less thanthat of the year before.

OECDHaving grown by as little as 0.3 per

cent last year, OECD product deliveriesare projected to post a decline of 160,000b/d, or 0.3 per cent, to average 47.68mb/d in 2001. This drop would be the sumof a 40,000 b/d, 80,000 b/d and another40,000 b/d decline in North America,Western Europe and OECD Pacific, re-spectively. In addition to the weakeningGDP growth rate prospects in all threeOECD regions, especially the OECDPacific, the estimated lower jet fuel con-sumption, particularly in the USA, will beresponsible for the overall lower demandin the region. Our estimated 2001 GDP

growth rates for North America, WesternEurope and the OECD Pacific have beenrevised down by 0.24 per cent, 0.14 percent and 0.18 per cent, respectively.

Inland delivery of petroleum productsin North America in July, according to thelatest figures, grew by 0.8 per cent, or190,000 b/d, to average 24.19m b/d. Prod-uct deliveries rose by 0.9 per cent, or181,000 b/d, to average 20.19m b/d in theUSA and by 3.5 per cent, or 67,000 b/d,

October 2001 35

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to average 1.98m b/d in Mexico, whiledemand in Canada declined by 2.8 percent, or 58,000 b/d, to average 2.01mb/d. Demand in Western Europe inchedup, posting a rise of 4.2 per cent, or611,000 b/d, during July. However, theOECD Pacific countries displayed a 1.3per cent decline, or 100,000 b/d, in thesame period. According to the latest fig-ures, demand for petroleum productsdropped by 2.3 per cent, or 120,000 b/d,in Japan. Consumption also contracted byas little as 0.4 per cent, or 7,000 b/d, inSouth Korea in July.

Developing countriesOil demand in developing countries

has been revised down again for 2001. Itis now expected to rise by 200,000 b/d,or 1.1 per cent, to average 18.86m b/d forthe year. The estimated growth rate inconsumption has been lowered consider-ably for the Asian group of countries, fromthe previous 1.6 per cent to 0.3 per cent.The fundamental factor behind the lowerdemand outlook is that Asian regional GDP

is projected to grow at a substantiallylower-than-anticipated rate. These econo-mies are highly export-dependent and areextremely reliant upon the health of theirtrading partners. The demand growth ratesfor Latin America, Africa and the MiddleEast have also been revised down.

Other regionsApparent demand in the former CPEs

is projected to grow by 170,000 b/d, or1.9 per cent, to average 9.39m b/d for2001. Revisions to the trade and produc-tion data for 1Q show that apparent FSUdemand grew by 7.4 per cent, or 270,000b/d, compared with the year-earlier figure.The latest assessments indicate that therehas been growth of 2.8 per cent, or 100,000b/d, in 2Q. We anticipate a negligible risein apparent consumption in 3Q, but a 3.6per cent, or 150,000 b/d, decline in 4Q,due to a rise in the level of exports that willoutpace any gain in production. During1Q and 2Q, net exports were 320,000b/d and 510,000 b/d higher than in thecorresponding quarters of 2000. 3Q couldregister a 310,000 b/d gain. High inter-national oil prices, the need for more rev-enue, in order to service international loans,and the switch to natural gas continue toundermine internal consumption. Indig-

enous production and trade data for thefirst three months of the year show aconsiderable drop in Chinese apparentconsumption. According to the latest fig-ures, apparent demand declined by 7.5 percent during 1Q. Even though the declineseems huge, one should not forget that thiscomparison is made with 1Q00, whendemand surged by 17 per cent to reach a1Q record level. 2Q apparent demand,however, demonstrated a significant riseof 12.3 per cent. This is in line with theconsiderable recovery in total imports,which registered an impressive 44.4 percent rise in 2Q. Therefore, we are stilloptimistic about the demand outlook forthe rest of the year; nonetheless, due to thesize and the importance of China in theoverall demand picture, we shall continueto monitor closely further developments.

Forecasts for 2002Due to a downward revision to the

world economic growth rate, all quarterlyforecasts have, in turn, been revised down.However, the anticipated lower jet fuelconsumption has been applied to 1Q fig-ures only. As a result, the 2002 worlddemand forecast has been revised downsubstantially to 76.52m b/d, comparedwith the previous forecast of 77.36m b/d.The average yearly increment now standsat 580,000 b/d, or 0.8 per cent, comparedwith 1.01m b/d, equivalent to 1.3 percent, as mentioned in the previous report.

The estimated 2002 growth level issimilar to that experienced in 2000, butit is significantly higher than that of 2001.However, this assessment could be subjectto further adjustment, as more informa-tion becomes available on major factors,such as the economic growth outlook, thetrend in air travel and jet fuel consump-tion, prices and the weather.

World oil supply

Non-OPEC

Figures for 2001The 2001 non-OPEC supply figure

has been revised up from the last report by60,000 b/d to 46.36m b/d. The quarterlydistribution figures for 1Q remain un-changed, while those for 2Q, 3Q and 4Qhave been revised up by 50,000 b/d, 50,000

b/d and 140,000 b/d to 46.02m b/d,46.36m b/d and 46.77m b/d, respectively.The yearly average increase is estimated at580,000 b/d, compared with the 2000figure.

Expectations for 2002Our preliminary forecast for 2002 non-

OPEC supply has been revised up by130,000 b/d since the last report andprojects an increase of 1.00m b/d, com-pared with the estimated figure for 2001.The expected 2002 quarterly distributionis 47.27m b/d, 47.01m b/d, 47.36m b/dand 47.77m b/d, respectively, resulting ina yearly average of around 47.36m b/d.

The FSU net oil export estimate for2001 has been revised up by 40,000 b/dto 4.56m b/d, while that for 2000 remainsunchanged at 4.14m b/d, compared withthe last report. Our forecast for 2002 hasbeen revised up by around 40,000 b/d to4.94m b/d (see Table D).

OPEC natural gas liquidsThe OPEC NGL figures for 1998–2002

remain unchanged at 2.78m b/d, 2.86mb/d, 2.98m b/d, 3.01m b/d and 3.04mb/d, respectively, compared with the lastreport.

OPEC NGL production — 1998–2001m b/d

1998 2.781999 2.862000 2.981Q01 3.012Q01 3.013Q01 3.014Q01 3.012001 3.01Change 2001/2000 0.032002 3.04Change 2002/2001 0.03

Table D: FSU net oil exports m b/d

1Q 2Q 3Q 4Q Year

1998 2.77 3.02 3.18 3.20 3.041999 3.12 3.62 3.52 3.49 3.442000 3.97 4.13 4.47 4.01 4.1420011 4.28 4.64 4.91 4.38 4.5620022 4.84 5.15 5.01 4.75 4.94

1. Estimate.2. Forecast.

36 OPEC Bulletin

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OPEC crude oil productionAvailable secondary sources indicate

that, in September, OPEC output was26.96m b/d, which was 680,000 b/d lowerthan the revised August level of 27.64mb/d. Table E shows OPEC production, asreported by selected secondary sources.

Stock movements

USAUS commercial onland oil stocks

showed a moderate build of 26.3m b, or770,000 b/d, to stand at 1,027.4m b duringthe period August 31–October 5. A con-siderable build in gasoline stocks of 11.4mb to 206.1m b contributed mainly to thisincrease, as apparent gasoline demand fellrapidly, following the September 11 at-tacks on the USA. Other major productinventories also witnessed some increases,notably distillates, which rose by 4.2m bto 124.6m b due to increasing production.Fuel oil and jet kerosene moved up by1.1m b each to 36.7m b and 44.0m b,respectively, on lower fuel oil demand asa result of the mild weather and the sub-stitution of cheaper natural gas and stag-

nant jet kerosene demand, amid slumpingair travel. Crude oil stocks also contrib-uted to this build, rising by 4.9m b to307.4m b, due to increasing imports anddespite higher refinery runs. The overallstock level was 72.7m b, or about eight percent, above last year’s figure.

During the same period, the US Stra-tegic Petroleum Reserve (SPR) rose by1.1m b to 544.8m b (see Table F).

Western EuropeCommercial onland oil stocks in Eur-

16 in September declined by 8.6m b, or290,000 b/d, to 1,051.1m b. Distillatesled this draw, as they fell contra-seasonallyby 7.6m b to 322.3m b, on the back ofhigher demand, which was fuelled by lowerprices. Also, other major product stocksshowed some declines, especially fuel oilstocks, which decreased by 1.7m b to121.1m b, due to lower output as well asreduced Russian exports. Gasoline declinedby 1.0m b to 146.1m b on decreasedproduction. A minor build of 2.5m b to436.6m b in crude oil stocks diminishedthe draw. Hence, the overall level was13.7m b, or about one per cent, less thanthat registered a year ago (see Table G).

JapanIn August, commercial onland oil

stocks in Japan regained some of the pre-vious month’s losses when they increasedby 6.7m b, or 220,000 b/d, to stand at190.7m b. Most of the build occurred indistillate stocks, which rose by 6.6m b to43.1m b, due to increasing distillate pro-duction, as well as steadying demand. Thiswas followed by residual fuel oil and gaso-line stocks, which moved up marginally by900,000 b to 18.8m b and by 600,000 bto 13.9m b, respectively. Crude oil stockscontinued to decrease, declining by 1.3mb to 115.0m b, on the back of ongoingincreasing refinery runs. Total stocks were2.0m b, or about one per cent, below theyear-earlier level (see Table H).

Balance of supply/demand

For 2001, world oil demand has beenrevised down by around 400,000 b/d sincethe last report, while non-OPEC oil sup-ply has been revised up by 100,000 b/d,to estimates of 75.9m b/d and 49.4mb/d, respectively (see Table I). The yearlyaverage difference has been adjusted downby around 500,000 b/d to 26.6m b/d,with quarterly distributions of 27.0mb/d, 26.0m b/d, 26.6m b/d and 26.8mb/d, respectively. The balance for 1Q re-mains unchanged at 1.1m b/d, while thatfor 2Q has been revised up by around200,000 b/d to 1.1m b/d. The balance for3Q, introduced for the first time, is esti-mated at 600,000 b/d. The 2000 balanceremains unchanged at 1.0m b/d, com-pared with last month’s report.

Table I also shows a sharp downwardrevision to the world oil demand forecastfor 2002 of around 800,000 b/d to 76.5mb/d, while total non-OPEC supply hasbeen revised up by around 100,000 b/d to50.4m b/d. This has resulted in an expectedannual difference of around 26.1m b/d,down by around 1.0m b/d, compared withthe last report, with a quarterly distributionof 26.2m b/d, 25.3m b/d, 26.0m b/d and27.0m b/d, respectively.

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

Sept 01/1999 2000 2Q01 Aug 01* Sept 01* 3Q01 Aug 01

Algeria 766 808 820 843 818 834 –24Indonesia 1,310 1,280 1,216 1,210 1,195 1,206 –15IR Iran 3,509 3,671 3,676 3,733 3,648 3,711 –85Iraq 2,507 2,551 2,282 2,769 2,631 2,497 –138Kuwait 1,907 2,101 2,016 2,025 1,973 2,008 –53SP Libyan AJ 1,337 1,405 1,365 1,389 1,350 1,373 –39Nigeria 1,983 2,031 2,051 2,066 2,199 2,087 133Qatar 641 698 685 691 660 681 –31Saudi Arabia 7,655 8,248 7,922 7,950 7,703 7,893 –247UAE 2,077 2,252 2,174 2,140 2,061 2,119 –79Venezuela 2,808 2,897 2,846 2,827 2,727 2,797 –100

Total OPEC 26,499 27,943 27,051 27,641 26,964 27,205 –677

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

October 2001 37

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Table F: US onland commercial petroleum stocks1 m b

ChangeMarch 30, 01 June 29, 01 August 31, 01 October 5, 01 Sept/Aug October 5, 00

Crude oil (excl SPR) 303.2 310.7 302.5 307.4 4.9 277.9Gasoline 193.0 221.6 194.7 206.1 11.4 195.8Distillate fuel 104.0 112.8 120.4 124.6 4.2 115.3Residual fuel oil 39.8 42.5 35.6 36.7 1.1 37.4Jet fuel 40.1 43.0 42.9 44.0 1.1 42.3Unfinished oils 101.3 90.4 89.4 88.9 –0.5 86.9Other oils 142.1 191.4 215.6 219.7 4.1 199.1Total 923.5 1,012.4 1,001.1 1,027.4 26.3 954.7SPR 542.3 543.3 543.7 544.8 1.1 569.6

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

Table G: Western Europe onland commercial petroleum stocks1 m b

ChangeMarch 01 June 01 August 01 September 01 Sept/Aug September 00

Crude oil 451.7 438.5 434.1 436.6 2.5 432.5Mogas 158.3 155.6 147.1 146.1 –1.0 151.8Naphtha 22.0 25.1 26.0 25.1 –0.9 24.9Middle distillates 330.8 331.4 329.9 322.3 –7.6 336.6Fuel oils 123.6 122.2 122.8 121.1 –1.7 119.1Total products 634.7 634.3 625.7 614.5 –11.1 632.4Overall total 1,086.3 1,072.8 1,059.8 1,051.1 –8.6 1,064.9

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

Table H: Japan’s commercial oil stocks1 m b

ChangeMarch 01 June 01 July 01 August 01 Aug/July August 00

Crude oil 118.7 127.3 116.3 115.0 –1.3 115.1Gasoline 14.6 14.3 13.3 13.9 0.6 13.8Middle distillates 31.4 33.6 36.5 43.1 6.6 44.5Residual fuel oil 20.2 19.8 17.9 18.8 0.9 19.4Total products 66.3 67.7 67.7 75.8 8.1 77.6Overall total2 185.0 195.1 184.0 190.7 6.7 192.7

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

38 OPEC Bulletin

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

1998 1999 2000 1Q01 2Q01 3Q01 4Q01 2001 1Q02 2Q02 3Q02 4Q02 2002

World demandOECD 46.8 47.7 47.8 48.8 46.5 47.6 47.8 47.7 48.6 46.5 47.4 48.5 47.8

North America 23.1 23.8 24.1 24.2 23.7 24.3 24.0 24.1 24.0 24.0 24.4 24.3 24.2Western Europe 15.3 15.2 15.1 15.2 14.8 15.0 15.1 15.0 15.2 14.6 14.8 15.3 15.0Pacific 8.4 8.7 8.7 9.4 8.0 8.3 8.7 8.6 9.5 7.9 8.2 8.9 8.6

Developing countries 18.2 18.5 18.7 18.4 19.1 19.1 18.9 18.9 18.6 19.4 19.3 19.3 19.2FSU 4.3 4.0 3.8 4.0 3.7 3.5 4.0 3.8 3.9 3.7 3.9 4.2 3.9Other Europe 0.8 0.8 0.8 0.8 0.7 0.7 0.8 0.8 0.8 0.8 0.7 0.8 0.8China 3.8 4.2 4.7 4.4 4.9 5.0 4.9 4.8 4.6 5.0 5.0 5.0 4.9(a) Total world demand 73.8 75.1 75.7 76.2 75.0 75.9 76.6 75.9 76.5 75.3 76.4 77.8 76.5

Non-OPEC supplyOECD 21.8 21.3 21.9 21.8 21.6 21.7 22.0 21.8 22.0 21.9 21.9 22.2 22.0

North America 14.5 14.1 14.3 14.2 14.3 14.4 14.5 14.4 14.5 14.6 14.7 14.8 14.6Western Europe 6.6 6.6 6.7 6.8 6.5 6.5 6.6 6.6 6.8 6.6 6.5 6.7 6.6Pacific 0.7 0.7 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.7 0.8 0.8 0.8

Developing countries 10.5 10.8 11.0 11.1 10.9 11.0 11.2 11.0 11.3 11.1 11.3 11.4 11.3FSU 7.3 7.5 7.9 8.2 8.4 8.5 8.4 8.4 8.7 8.9 8.9 8.9 8.9Other 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 3.2 3.2 3.2 3.3 3.2 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3Processing gains 1.6 1.6 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7Total non-OPEC supply 44.5 44.6 45.8 46.3 46.0 46.4 46.8 46.4 47.3 47.0 47.4 47.8 47.4OPEC NGLs 2.8 2.9 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0(b) Total non-OPEC supply and

OPEC NGLs 47.3 47.4 48.8 49.3 49.0 49.4 49.8 49.4 50.3 50.1 50.4 50.8 50.4

OPEC crude oil production1 27.8 26.5 27.9 28.1 27.1 27.2Total supply 75.0 73.9 76.7 77.4 76.1 76.6Balance2 1.2 -1.2 1.0 1.1 1.1 0.6

Closing stock level (outside FCPEs) m bOECD onland commercial 2698 2446 2527 2519 2602OECD SPR 1249 1228 1210 1210 1207OECD total 3947 3675 3738 3729 3809Other onland 1056 983 1000 997 1019Oil on water 859 808 864 906 834Total stock 5861 5466 5601 5632 5662

Days of forward consumption in OECDCommercial onland stocks 57 51 53 54 55SPR 26 26 25 26 25Total 83 77 78 80 80Memo itemsFSU net exports 3.0 3.4 4.1 4.3 4.6 4.9 4.4 4.6 4.8 5.2 5.0 4.7 4.9[(a) — (b)] 26.5 27.7 27.0 27.0 26.0 26.6 26.8 26.6 26.2 25.3 26.0 27.0 26.1

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

Table I 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 40, whileGraphs One and Two (on pages 39 and 41) show the evolution on a weekly basis. Tables Three to Eight, and the corresponding graphson pages 42–47, 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).

October 2001 39

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

June to September 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

SeptemberAugustJulyJune11 22 33 44 11 22 33 44 11 22 33 44 11 22 33 44

$/barrel

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40 OPEC Bulletin

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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)

2000 2001Member Country/ Sept Oct Nov Dec Jan Feb Mar Apr May June July Aug Septembertype of crude (API°) 4Wav 5Wav 4Wav 4Wav 5Wav 4Wav 4Wav 4Wav 5Wav 4Wav 5Wav 4Wav 1W 2W 3W 4W 4Wav

AlgeriaSaharan Blend (44.1) 33.18 31.19 33.06 26.11 26.08 27.80 24.82 25.65 28.47 28.16 24.82 25.96 26.84 28.36 27.54 21.77 26.13

IndonesiaMinas (33.9) 33.36 32.30 31.07 24.87 24.03 25.62 25.64 27.64 28.21 27.86 25.32 24.82 24.46 25.58 25.93 22.39 24.59

IR IranLight (33.9) 30.45 30.42 29.75 22.66 22.63 24.65 23.58 24.05 25.58 25.80 23.78 24.68 24.53 25.82 25.88 21.93 24.54

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

KuwaitExport (31.4) 29.05 28.87 28.20 21.11 21.08 23.10 22.03 22.50 24.03 24.25 22.47 23.13 22.98 24.27 24.33 20.38 22.99

SP Libyan AJBrega (40.4) 32.64 30.98 32.99 25.40 25.93 27.79 24.69 25.54 28.85 28.18 24.88 25.85 26.65 25.30 27.00 22.15 25.91

NigeriaBonny Light (36.7) 32.65 30.67 32.86 25.47 25.43 27.40 24.35 25.43 28.51 28.06 24.81 25.41 26.63 28.22 27.31 21.76 25.98

Saudi ArabiaLight (34.2) 30.60 30.17 29.81 22.65 22.31 24.82 23.77 24.24 25.77 26.17 24.03 24.92 24.72 26.01 26.08 22.12 24.73Heavy (28.0) 28.00 28.21 27.94 20.83 20.74 23.32 22.57 23.15 24.60 24.88 22.61 23.77 23.62 24.91 24.98 21.02 23.63

UAEDubai (32.5) 30.05 30.57 30.25 22.27 22.56 24.79 23.67 24.06 25.40 25.86 23.45 24.70 24.52 25.74 25.61 21.60 24.37

VenezuelaTia Juana Light1 (32.4) 29.33 28.34 30.01 23.11 23.18 22.79 21.08 20.79 22.77 22.30 20.55 21.54 21.27 22.13 22.06 17.42 20.72

OPEC Basket2 31.48 30.42 31.22 24.13 24.06 25.41 23.70 24.38 26.25 26.10 23.73 24.46 24.6524.6524.6524.6524.65 25.8825.8825.8825.8825.88 25.6525.6525.6525.6525.65 20.9720.9720.9720.9720.97 24.2924.2924.2924.2924.29

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

2000 2001Country/ Sept Oct Nov Dec Jan Feb Mar Apr May June July Aug Septembertype of crude (API°) 4Wav 5Wav 4Wav 4Wav 5Wav 4Wav 4Wav 4Wav 5Wav 4Wav 5Wav 4Wav 1W 2W 3W 4W 4Wav

Gulf AreaOman Blend (34.0) 30.55 29.88 28.97 22.76 22.43 24.29 23.26 23.82 25.55 25.53 23.61 24.44 24.32 25.67 25.94 22.04 24.49

MediterraneanSuez Mix (Egypt, 33.0) 28.59 26.18 29.06 21.11 22.09 22.61 19.73 21.58 24.56 23.83 21.16 22.48 23.75 22.20 24.25 19.45 23.11

North SeaBrent (UK, 38.0) 32.94 30.86 32.67 25.07 25.60 27.30 24.42 25.37 28.35 27.96 24.66 25.78 26.53 27.95 27.26 21.60 25.84Ekofisk (Norway, 43.0) 32.75 30.77 32.66 25.50 25.51 27.49 24.34 25.38 28.45 27.59 24.55 25.70 26.31 28.08 27.22 21.32 25.73

Latin AmericaIsthmus (Mexico, 32.8) 31.19 29.73 31.47 24.40 24.80 24.63 22.60 22.86 24.62 24.25 22.67 23.86 24.10 25.09 25.00 19.75 23.49

North AmericaWTI (US, 40.0) 34.05 33.00 34.65 28.39 29.42 29.48 27.27 27.37 28.60 27.67 26.53 27.41 27.01 27.91 27.91 22.75 26.40

Others

Urals (Russia, 36.1) 30.30 28.04 31.23 24.06 24.40 24.78 21.72 23.60 26.46 25.60 23.08 24.46 25.69 27.25 26.42 20.85 25.05

October 2001 41

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

June to September 2001

15

20

25

30

35

40

OPEC Basket

Urals

West Texas

Isthmus

Ekofisk

Brent

Suex Mix

Oman

AugustJulyJune11 22 33 44 11 22 33 44 11 22 33 44 11 22 33 44

$/barrel$/barrel

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42 OPEC Bulletin

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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%SSeptember 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 17.05May 29.71 37.93 39.09 31.18 34.17 20.48 18.21June 27.21 30.27 31.73 31.06 33.69 19.23 17.97July 22.28 27.06 27.86 29.33 31.55 17.97 17.19August 22.51 27.93 29.01 30.18 31.58 18.18 18.40September 23.08 28.38 29.47 30.87 32.18 19.84 19.23

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

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

1999 2000 2001

0

10

20

30

40

50

fuel oil 3.5%S

fuel oil 1%S

jet kero

gasoil

premium

regular

naphtha

SepAugJulJunMayAprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJanDecNovOct

$/barrel

October 2001 43

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%SSeptember 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 14.96May 29.54 39.45 29.37 29.72 19.39 15.84June 27.15 32.21 30.98 29.40 17.71 15.89July 21.95 25.55 27.77 27.15 17.73 15.59August 22.26 26.60 27.58 27.74 18.20 16.93September 23.46 29.93 27.58 29.36 18.99 17.44

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

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

0

10

20

30

40

50

fuel oil 3.5%S

fuel oil 1%S

jet kero

gasoil

premium

naphtha

SepAugJulJunMayAprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJanDecNovOct

$/barrel

1999 2000 2001

44 OPEC Bulletin

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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%SSeptember 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 17.47May 39.06 32.48 35.60 27.84 23.09 18.58June 30.07 31.74 32.92 24.89 20.22 17.64July 28.69 29.31 30.10 23.71 19.33 16.72August 32.56 30.80 32.88 23.69 20.14 18.23September 31.61 30.71 31.77 24.02 20.24 19.80

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

Graph 5: US East Coast market — New York

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

SepAugJulJunMayAprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJanDecNovOct2000200019991999 20012001

$/barrel

October 2001 45

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

1999 naphtha gasoil jet kero 2%S 2.8%SSeptember 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 33.60 30.51 31.37 15.81 15.03May 29.65 33.07 34.46 17.50 17.10June 25.85 31.58 32.13 16.64 16.27July 25.06 28.84 29.57 15.54 14.45August 29.04 30.49 31.68 17.20 17.11September 26.14 29.84 30.01 18.54 18.55

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

Graph 6: Caribbean cargoes — fob

19991999 20002000 20012001

$/barrel$/barrel

0

10

20

30

40

50

fuel oil 2.8%S

fuel oil 2.0%S

jet kero

gasoil

naphtha

SepAugJulJunMayAprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJanDecNovOct

46 OPEC Bulletin

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 380CSeptember 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 20.47May 28.89 32.64 30.79 30.74 23.72 22.02 22.07June 27.57 26.89 30.00 30.84 25.11 20.26 20.16July 24.38 24.36 28.54 28.93 24.08 19.03 19.19August 24.33 26.68 28.71 29.37 21.03 20.70 20.94September 24.67 29.47 29.44 31.05 20.38 21.74 21.85

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

Graph 7: Singapore cargoes

0

10

20

30

40

50

fuel oil 380C

fuel oil 180C

fuel oil 0.3%S

jet kero

gasoil

premium

naphtha

SepAugJulJunMayAprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJanDecNovOct19991999 20002000 20012001

$/barrel$/barrel

October 2001 47

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 180CSeptember 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 18.83May 28.57 29.11 29.02 20.74June 26.95 28.08 28.93 18.92July 23.53 26.77 27.16 17.65August 23.49 27.15 27.78 19.28September 24.07 28.00 29.64 20.57

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

Graph 8: Middle East — fob

0

10

20

30

40

50

fuel oil 180C

jet kero

gasoil

naphtha

SepAugJulJunMayAprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJanDecNovOct1999 2000 2001

$/barrel

48 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

IMF praises Algeria’s progressin making economic reforms

Algiers — The International Monetary Fund (IMF) haspraised Algeria for the progress it has made in its economicreforms.

A recent statement released by the IMF’s board of directorssaid that since the outset of the country’s fund-supportedadjustment and reform programme in 1994, Algeria had made— in particularly difficult circumstances — substantial progresstowards the restoration of macroeconomic stability and hadimplemented a comprehensive set of structural reforms.

In an assessment of Algeria’s economy, the Board noted thatgrowth had turned positive, inflation had fallen, and the balanceof payments’ viability had been restored.

The statement added that, assisted by a tightening of do-mestic demand management, the Algerian economy was ableto weather the oil price downturn of 1998/99, thus demonstrat-ing its increased resilience to external shocks.

With the surge in oil prices from the spring of 1999, thecountry’s balance of payments position had strengthened mark-edly. This had resulted in a massive current account surplus ofaround 17 per cent of gross domestic product (GDP) in 2000.

In turn, this had contributed to the rise in gross officialreserves to $11.9bn by the end of last year, compared with$4.4bn at the end of 1999.

The IMF also noted that similar developments in early 2001had led to a further increase in gross official reserves to $15.2bn,as of the end of June.

At the same time, it observed that Algeria’s debt service ratiohad fallen to 21 per cent in 2000, from 40 per cent in 1999,partly because of the large increase in the value of exports.

Nevertheless, the IMF pointed out that the country’s economystill faced major challenges over the medium term, and estimatedthat higher economic growth was still needed to reduce unem-ployment and improve living standards.

In the IMF’s view, these required the introduction of acomprehensive set of reforms to promote private sector invest-ment and raise the efficiency of new investment, particularly inthe non-hydrocarbon sector.

The IMF stressed the importance of privatization, the restruc-turing of public enterprises, comprehensive banking reform,enhanced competition, and further trade liberalization efforts.

UAE economy achievesremarkable growth in 2000

Abu Dhabi — The United Arab Emirates (UAE) achievedremarkable growth in its economy in 2000, benefiting from theincrease in oil prices and production volumes seen last year.

According to the annual report of the country’s CentralBank, quoted by the UAE news agency (WAM) last month, theimproved performance was a result of OPEC Member Coun-tries’ adherence to their respective oil output quotas, coupledwith the increase in world crude demand.

The improvement resulted in higher governmental revenuesfrom oil exports, which in turn, was reflected in the narrowingof the deficit in the consolidated government finance account,the report stated.

“The monetary and credit policy succeeded in controllingexpansion in credit and in establishing rules and proceduresaimed at organizing and strengthening the banking sector,which has contributed to the increase in the growth of economicactivity,” the report noted.

The country’s gross domestic product (GDP) grew by 20.4per cent last year, compared to the level achieved in 1999, mainlyas a result of the increase in the output of oil and natural gas,and also production in all other economic sectors.

The oil sector’s contribution to GDP rose to 33.9 per centin 2000, compared with 24.8 per cent in 1999. This was mainlyattributed to an increase in oil prices from $17.6/barrel in 1999to around $27.2/b last year.

Nigerian President puts sharingof oil windfall on hold

Abuja — The Nigerian President, Olusegun Obasanjo, hassaid that the sharing of the $1.2 billion oil windfall between thethree tiers of government — federal, state and local — from thesale of crude oil would be put on hold until the next financialyear, starting in January 2002.

The windfall is revenue accruing to the government fromthe sale of crude oil above the projected budgeted price of$18/barrel, made in January this year, to the average price ofaround $25/b, which the country earned in the first eightmonths of 2001.

Obasanjo, who believed that any additional money fromhigher crude sales should be saved in the interest of prudenteconomic management, said he had initially, and reluctantly,approved the recommendation of the National Economic Councilthat some of the funds be shared among the three tiers ofgovernment.

In August, the governors of the country’s 36 states talkedthe federal government into agreeing to share the excess moneymade from the sale of crude oil between the three tiers ofgovernment.

This development, the governors thought, had counteredthe earlier decision of the government to put the $1.2bn realizedfrom the oil sales into a stabilization account.

However, Obasanjo commented last month at the mostrecent meeting with the National Economic Intelligence Com-

October 2001 49

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

mittee (NEIC) in Abuja that he agreed “entirely and absolutely”with the recommendation of the committee that the additionalfunds should remain in savings.

The NEIC urged the Nigerian President to resist pressurefrom the state and local governments to disburse the excessfunds. The committee also observed that the government neededto guard against shortfalls in national revenue, which mightoccur with a decline in oil prices, after maintaining that highprices might not be sustainable over a long period of time.

But in reaction to the position of the President, the Governorof the northern Kaduna State, Mohammed Makarfi, said the$1.2bn excess fund belonged to every Nigerian and, therefore,should be shared.

Venezuela eliminates technicalassistance pact with Cuba

Caracas — Venezuela has cancelled an oil-for-technical as-sistance arrangement it had with Cuba due to a series ofdifficulties on how to quantify the services, the VenezuelanDeputy Minister of Energy and Mines, Bernardo Alvarez, saidlast month.

Venezuela, however, would continue to supply crude oil toCuba at market prices under the Caracas Energy Accord.

Despite this development, Alvarez said that the will to co-operate had not been diminished and that only the barter aspectof the oil-for-technical assistance arrangement between the twoparties was affected.

Under the Caracas Energy Accord, signed last year withCentral American and Caribbean nations, Venezuela agreed tosupply Cuba with around 53,000 b/d of crude oil under pref-erential financial conditions.

Subsequently, the governments of Venezuela and Cubasigned an additional wider co-operation barter arrangement inOctober, allowing Cuba to provide Venezuela with technicalassistance in the fields of sports, medicine and sugar industryexpertise, which would be funded with petroleum.

Alvarez said the barter arrangement had become very com-plicated to handle from a financial and administrative view-point, and because of this his country had decided to separateboth aspects of the accord.

He stressed, however, that Venezuela would continue withthe normal supply of oil to Cuba.

Algerian 2002 finance billbased on oil price of $22/b

Algiers — The Algerian government has adopted the country’sfinance bill for fiscal 2002, based on an oil export price of$22/barrel, it was disclosed in the Algerian capital last month.

According to government sources, next year the governmentwas counting on receipts of about $18.69 billion, with expendi-ture set at $19.93bn.

This, they said, represented a rise of 11 per cent and 12.6per cent, respectively, over figures projected for 2001.

The 2002 finance bill forecast a budget deficit of around$1.24bn, the sources noted.

Dubai firm opens powerstation at Al Mirkad

Abu Dhabi — The Dubai Electricity and Water Authority(DEWA) has opened a power station in the Al Mirkad area, ata total cost of $82 million, it was reported last month.

New overhead lines, each with a capacity to generate 130kilovolts, are also being constructed to connect the unit to powerstations at Al Quoz and Mushrif.

DEWA General Manager, Saeed Al Tayer, said the plant wasone of the Authority’s largest projects to be set up this year, inaddition to the establishment of sub-stations that would connectthe station to the electricity network in Dubai, according to areport in the Khaleej Times newspaper.

He added that the last sub-station to be set up would connectthe Al Mirkad station with the electricity generating plant in theOudh Metha area.

“The power station is an important step in developing andmodernizing DEWA’s infrastructure and increasing our elec-tricity supplies to meet the rapidly expanding needs of Dubai,which has seen phenomenal economic growth in the last fewdecades,” Al Tayer noted.

Foreign direct investment inIran up 18 per cent in 2000

Tehran — Iran’s global flow of foreign direct investment (FDI)soared by 18 per cent in 2000 over the previous year to a record$1.3 trillion.

But the country’s FDI was expected to decline this year,according to the World Investment Report 2001, published bythe United Nations Conference on Trade and Development(UNCTAD).

The United Nations Information Centre (UNIC) in Tehransaid the main impetus behind both last year’s growth and thisyear’s projected drop in FDI was the result of global cross-bordermergers and acquisitions, which constituted a substantial shareof FDI worldwide.

But after last year’s peak of cross-border mergers and acqui-sitions, the rapid expansion of FDI was enlarging the role ofinternational production in the world economy, making it “themain force in international economic integration,” UNIC wasquoted by the Tehran Times as saying.

It noted that the world’s 63,000 transnational corporations,which contributed to FDI with their 800,000 foreign affiliates,also increasingly shaped trade patterns, accounting for aroundtwo-thirds of all world trade.

As in previous years, in 2000 the 10 largest FDI recipients,

50 OPEC Bulletin

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

as well as the 10 biggest sources of FDI, were developed countries,with one or two exceptions from the developing world, namelyChina and Hong Kong.

With just over $1.0 trillion in inflows accounting for a 21per cent increase in flow levels last year, developed nationsremained the prime destination of FDI, accounting for more thanthree-quarters of the global total.

Although flows to developing countries were also up in 2000— to $240 million — the share of these countries global inflowshad fallen over three consecutive years to 19 per cent, the lowestsince 1991.

Kuwait, Iran newly elected toIAEA Board of Governors

Vienna — Iran and Kuwait were among 11 member stateselected to the International Atomic Energy Agency (IAEA)Board of Governors at the 45th regular session of the 35-member policy-making body, the agency’s General Conferenceannounced last month.

The other member states newly elected to the board were:Bulgaria, Burkina Faso, Chile, Colombia, Morocco, the Phil-ippines, Romania, Spain and Turkey.

The other 24 board members, which have either beendesignated by the Board of Governors, or elected by the GeneralConference, are: Argentina, Australia, Brazil, Canada, China,Egypt, Finland, France, Germany, Ghana, India, Ireland, Ja-pan, Libya, Mexico, Pakistan, Peru, the Russian Federation,South Africa, Switzerland, Thailand, Ukraine, the United King-dom, and the United States.

According to an IAEA statement, the newly constitutedBoard would convene — shortly after the conclusion of theGeneral Conference — to elect the Board Chairman and ViceChairmen for the period 2001-02.

Three bidders for newSaudi petrochemical plant

London — The number of bidders for the estimated $350million contract to build an ethylene plant at the Jubail UnitedPetrochemical Company (JUPC) olefins complex in SaudiArabia has fallen to three, it was revealed last month.

According to the Middle East Economic Digest, four compa-nies had bid for the contract in late July. It was revealedsubsequently that Stone & Webster, a subsidiary of the UnitedStates’ Shaw Group, had now dropped out of the project.

Industry sources said JUPC, a subsidiary of the Saudi BasicIndustries Corporation (SABIC), had completed initial techni-cal discussions with the remaining bidders.

They comprised ABB Lummus Global of the US, Japan’sChiyoda Corporation, US-based Kellogg Brown & Root,Germany’s Linde, and South Korea’s Samsung Engineering andConstruction.

The remaining bidders have been asked to re-submit pro-posals on some parts of the package.

In addition to the 800,000 tonnes/year ethylene plant, thecomplex would include a 460,000 t/y ethylene glycol plant anda 100,000 t/y alpha olefins unit.

Iranian iron and steeloutput up 3.7 per cent

Tehran — Iran’s production of iron and steel in the first fivemonths of the current year (January-May) rose to 2.8 milliontons, according to the daily Jomhouri-e Eslami newspaper.

Quoting the International Iron and Steel Institute, thearticle said: “The figure (2.8m t) shows an increase of 3.7 percent compared with the corresponding period of the precedingyear.”

It noted that Iran was ranked first and 21st in the MiddleEast and the world, respectively, in terms of its iron and steelproduction. The report further said that China was currentlythe world’s largest producer of iron and steel.

The leading leading producers and exporters of steel prod-ucts in Iran include the 1945 Russian-built Isfahan steel mill,along with the Mobarakeh steel complex at Isfahan and theAhvaz steel plant in Khuzestan.

Algeria’s Sonatrach to launchtwo petrochemical projects

Algiers — Algerian state oil and gas company, Sonatrach, willsoon launch two petrochemical projects, it was officially an-nounced in the country’s capital last month.

According to Sonatrach sources, the first scheme wouldinvolve a steam cracking unit for the production of 1.0 milliontonnes/year of ethane, while the second project would produce2.5m t/y of condensate and naphtha.

The schemes would be built in the petrochemical areas ofArzew and Skikda, located in the west and east of the country,respectively.

Investments required for the completion of the two schemeshad been estimated at about $1.5 billion.

The sources indicated that, in this regard, investment dis-cussions were underway between Sonatrach and internationaloil firms for the speedy implementation of the projects, as wellas other schemes the Algerian was considering.

The others projects involved new liquefied natural gas (LNG)production units and the acquisition of two methane tankers.

In the short term, Sonatrach said it was projecting therealization of up to four LNG units, which would bring toproduction an additional 4.0m t/y.

Sonatrach, which produced 23m cubic metres of LNG inthe first half of this year, is seeking to maintain and boost itsmarket share in Europe with the realization of the new gasprojects.

October 2001 51

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

Nigerian NGO introduces plantspecies to help revitalize soils

Abuja — The hope of revitalizing soils degraded by oil spillsin Nigeria appears positive with an environmental non-govern-mental organization (NGO) about to introduce plant species —kenaf and vetiver — capable of returning such lands to produc-tive use.

Most communities in Nigeria, especially the oil-rich NigerDelta, which accounts for over 95 per cent of the West Africancountry’s crude oil and gas resources, suffer large-scale oil spills,either through accidents in the downstream production process,or through the deliberate sabotage of oil pipelines.

The environmental NGO, the Centre for EnvironmentalResources and Sustainable Ecosystem (CERASE) says that whilekenaf serves as oil absorbent, vetiver serves as soil conservationand a pollution control bio-filter.

CERASE explained that the process also involved “theapplication of site specific micro-organisms for biodegradation.”

According to CERASE Director and Chief ExecutiveOfficer, Uzo Egbuche, the initiative to introduce the plantssought to balance the involvement of communities in oil spillclean up.

She said the ultimate aim of the project was to address thesevere environmental problems primarily caused by oil activities,while providing employment and economic opportunities forthe rural people.

The project, she said, was in response to environmentaldegradation by industrial and domestic activities “which hasattracted international and local attention over the past threedecades, especially in the Niger Delta.”

The scheme, which was endorsed by the World Bank afterwinning $99,750 in funding last year in a contest entered intoby 1,200 organizations from 62 countries, has been recom-mended to the Nigerian government for support.

EU to finance companyprogramme in Algeria

Algiers — Algeria and the European Union (EU) signed a $50million agreement last month for the financing of a small andmedium-sized company programme in the country.

The programme includes three components related to thereinforcement of operational management of small and me-dium-sized firms, the setting up of financial companies, andsupport for entrepreneurs.

A panel of experts including Algerian and European special-ists have been put in charge of the programme.

Meanwhile, a World Bank team headed by its MaghrebDepartment Director, Christian Delvoie, is undertaking a visitto Algeria to discuss several projects which may be financed bythe international financial institution.

The move involves schemes in the agricultural, hydraulic,and public works sectors.

Iran’s electricity output to hit39,000 megawatts in 2005

Tehran — Iran’s electricity production will reach 39,000megawatts (mw) by the end of the Iranian year in 2005, thecountry’s Minister of Energy, Habibollah Bitaraf, announcedlast month.

Speaking at the inauguration ceremony of the new DeputyMinister of Energy and Head of the Ministry’s giant Tavanirorganization, Hassan Ahmadian, Bitaraf revealed that Iranwould take long strides in the energy field during its third five-year economic development plan (March 2000 to March 2005).

“Such long strides are exactly matching with the growingneeds of the country and will be carried out based on the variousdesigned phases of the relative projects,” the official IslamicRepublic News Agency (IRNA) quoted him as saying.

Ahmadian pointed out that in 20 years’ time, electricityproduction in Iran would stand at 90,000 mw.

World Bank loan earmarked forNigerian power infrastructure

Abuja — Nigeria’s state-run power firm, the National ElectricPower Authority (NEPA), has earmarked the $100 million loanit received from the World Bank recently for infrastructuralprojects, designed to equip the state concern to meet modern-day challenges.

A member of the NEPA Technical Board and Chairman ofthe Transmission Sub-Sector, Aako Ugbabe, said last monththat $35m of the amount would be used to establish and equipthe national control centre at Ope Osogbo.

He explained that current trends in the power sector madeit imperative to have a sophisticated control centre to ensureadequate monitoring of the entire network.

Ugbabe said it was necessary to have a well-equipped centrethat had access to consumption levels, as well as the totalgenerating capacity of all power plants, including the independ-ent power projects to aid planning.

“When you have that central control point, you will be ableto note fluctuations and control changes in power demand andgeneration, and this will in turn help efforts towards poweravailability,” he pointed out.

NEPA also planned to spend $24m on reinforcing andbuilding some sub-stations in Onitsha, Kano, Osogbo andKaduna to aid the process of transmission and distribution ofpower in the country.

Ugbabe disclosed that $5.0m had also been earmarked forgrid metering and protection, and consultancy services, while$3.7m would go towards the training of officers to handlefacilities at the control centre.

New staff would be employed to handle the sophisticatedequipment to make for maximum utility, while $3.0m wouldbe targeted towards market development and operation to aidNEPA’s sales and revenue generation capacity.

52 OPEC Bulletin

M E M B E R C O U N T R Y F O C U SAvailable exclusively from OPEC:

The 2000 edition of the OPEC Annual Statistical Bulletin, which has established

itself as the standard reference work on the oil and gas industries of OPEC Member Countries, is now

available exclusively from the Secretariat. Compiled by a team of statistical experts, the ASB contains

an unrivalled wealth of data covering the period until end-2000 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:

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.

The OPEC Annual Statistical Bulletin 2000 book plus diskette package costs $85.To order your copy, 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.

1 Summary tables and basic indicatorsBasic economic indicators in OPEC Member Countries (GDP, population, trade, etc) from 1980-2000. Side-by-side comparisons of

the same period.

EC and non-OPEC

n and production,

ucts, exports and

0.

tione of the oil tanker

er (LPG and LNG)

Member Countries

the world, as well

s for 1996-2000.

ata on all oil, gas

pelines in OPEC

s.

s of the OPEC

nd its components

es for 1991-2000,

on-OPEC) for the

breakdown of the

evron and Texaco.

Tables show revenue, operating costs, taxation, net income and much more.

October 2001 53

O P E C F U N D N E W S

nical and other support from collectiveentities of the South such as the Group of77 and the Non-Aligned Movement. TheCentre also prepares policy papers andstudies dealing with foreign direct invest-ment, UN reforms, resource transfers andfinancial flows, challenges presented bythe World Trade Organization agenda,the implementation of the UNCEDAgenda 21, as well as science and technol-ogy topics.

As the South Centre’s computer facili-ties are outdated and require upgrading inorder to enable access to the UN systemand handle new versions of software, thisgrant will go towards the purchase of thenecessary equipment and software, as wellas installation costs.

This is the second time the OPECFund has extended assistance to the Cen-tre. An earlier grant of $50,000 was ap-proved in support of working groupsdealing with environmental and develop-mental issues.

No 65/2001Vienna, Austria, September 21, 2001

OPEC Fund loansNepal $13.7m forwater supply project

The OPEC Fund for International Devel-opment has signed a $13.7 million loan

agreement with the Kingdom of Nepal insupport of an extensive scheme to alleviatechronic water shortages and improve sani-tation in the Kathmandu Valley. Theproject will provide some 180,000 poorfamilies with access to reliable water sup-plies and vastly improved sanitation facili-ties.

Nepal possesses abundant water re-sources but coverage is inadequate, withonly two-thirds of the population havingaccess to safe, although erratic, drinkingwater. Shortages are especially acute in theKathmandu Valley, which depends on theMelamchi River for water. Due to a sharplyfluctuating climate, the river’s flow is in-consistent, a problem exacerbated by en-vironmental damage caused bydeforestation.

During the dry months, the river is solow that many communities have runningwater for only thirty minutes every otherday. Proper sanitation facilities are alsolacking, and industrial waste and sewagedischarge are often released directly intothe Bagmati River, which also runs throughthe valley, polluting the water table andjeopardizing health.

The first phase of this multi-facetedproject is the Melamchi diversion scheme,which entails the excavation of a 27-kmtunnel, through which water harnessedfrom the Melamchi River will be divertedto the Kathmandu Valley. This supply,along with water from the region’s smallertributaries, will be processed at a newtreatment plant capable of handling 170million litres of water per day (m l/d), withthe potential to expand to 510m l/d. Otherworks include constructing a new distri-bution system of pipelines and reservoirs,and rehabilitating existing ones. Sanita-tion schemes comprise upgrading foursewage treatment plants, constructing newsewers and providing more public toilets.Throughout the project, monitoring proc-esses will insure minimal environmentalimpact.

Nepal has been the recipient of 12previous OPEC Fund loans. Of these,one was extended for balance of paymentssupport, another financed a commodityimports programme and ten were extendedin support of projects in the trans-portation, agriculture, energy and educa-tion sectors. The country has also bene-fited from two research grants and five

OPEC Fund for International Development,Parkring 8, PO Box 995, 1011 Vienna, Austria.Tel: +43 1 515640; fax: +43 1 513 9238; tx: 1-31734 fund a; cable: opecfund; e-mail:info@opecfund.org; Web site: http://www.opecfund.org.

OPEC Fund extends grantsand loans worth

$14m in SeptemberIn September, the OPEC Fund extended one loan and one grant worth almost$14 million to assist the South Centre in Geneva and a water supply andsanitation project in Nepal. Details can be found below.

No 64/2001Vienna, Austria, September 4, 2001

OPEC Fund extends$100,000 grant tothe South Centre

The OPEC Fund for International Devel-opment has approved a grant of $100,000towards the procurement of urgentlyneeded computer equipment for the Ge-neva-based South Centre, an intergovern-mental body of some 46 developingcountries.

Established in 1995, the objectives ofthe South Centre are to: promote South-South solidarity, networking and infor-mation exchange, as well as commoninterests in international fora; foster con-vergent views and approaches with respectto global economic, political and strategicissues; and, contribute to better mutualunderstanding and co-operation betweenthe North and South.

On a broader scale, the Centre assistsin elaborating the South’s points of viewon major policy issues and generating ideasand action-oriented proposals. It respondsto requests for policy advice and for tech-

54 OPEC Bulletin

S E C R E T A R I A T N O T E SO P E C F U N D N E W S

technical assistance grants in the areas ofagriculture, water supply and sanitationand health.

The agreement was signed in Viennaby Madhav P Ghimire, Joint Secretary ofthe Ministry of Finance of the Kingdomof Nepal, and by HE Dr Y Seyyid Abdulai,Director-General of the OPEC Fund.

Data summary

Project:Melamchi water supply.

Sector:Water supply and sanitation.

OPEC Fund loan:$13.7m

Lending terms:Interest rate of one per cent per an-num, with an annual service charge ofone per cent on amounts withdrawnand outstanding; maturity of 20 yearsincluding a grace period of five years.

Borrower:Kingdom of Nepal.

Executing agency:Ministry of Physical Planning andWorks.

Implementation period:Six years.

Appraising agency:Asian Development Bank (AsDB).

Loan administrator:AsDB.

Co-financiers:AsDB; International DevelopmentAssociation; Japan Bank for Interna-tional Co-operation; Norwegian De-velopment Co-operation Agency;Swedish International DevelopmentAgency; Nordic Development Fund;Japan International Co-operationAgency; Government of Nepal.

Total cost:$464m

Project description:The project comprises the following:— drilling of 26-km tunnel;— construction of water diversionstructure, water treatment plant andbulk distribution system; and— building 25-km access road, andupgrading of 29-km main road.

OPEC Meetings

The 104th Meeting of the Board of Gover-nors was held at the OPEC Secretariat,Vienna, Austria, on August 28–30, 2001.

The 96th Meeting of the Economic Com-mission Board was held at the OPEC Sec-retariat, Vienna, Austria, on September19–21, 2001.

The Interim Data Exercise Meeting washeld at the OPEC Secretariat, Vienna,Austria, on September 24, 2001.

The 34th Meeting of the Ministerial Moni-toring Sub-Committee (MMSC) was heldat the OPEC Secretariat, Vienna, Austria,on September 26, 2001.

The 117th Meeting of the Conference washeld at the OPEC Secretariat, Vienna,Austria, on September 26–27, 2001.

The OPEC 40th Anniversary Seminar onOPEC and the Global Energy Balance: To-wards a Sustainable Energy Future was heldin Vienna, Austria, on September 28–29,2001.

August/September

Secretary General’s diary

A meeting with the staff of the UK office ofPetróleos de Venezuela was held in London,UK, September 14, 2001.

The 23rd Oxford Energy Seminar was or-ganized by the Oxford Institute for En-ergy Studies, and held in Oxford, UK,September 3–13, 2001.

The 45th Regular Session of the GeneralConference of the International AtomicEnergy Agency was organized by the IAEAand held in Vienna, Austria, September17, 2001.

Secretariat missions

The Sixth International Forum on Reser-voir Simulation was organized by the Pe-troleum Department of the MontanUniversity, Leoben, Austria and StanfordUniversity, USA, and took place in Fuschl,Austria, September 3–7, 2001.

Forthcoming OPEC Meetings

The 36th Meeting of the Ministerial Moni-toring Sub-Committee (MMSC) will beheld at the OPEC Secretariat, Vienna,Austria, on November 13, 2001.

The 118th (Extraordinary) Meeting of theConference will be held at the OPEC Sec-retariat, Vienna, Austria, on November14, 2001.

The 119th Meeting of the Conference will beheld at the OPEC Secretariat, Vienna,Austria, on March 12, 2002.

October 2001 55

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