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Indonesian National Committee, World Energy CouncilJakarta, Indonesia
29 July 2004
OPEC: Vision, Mission and DevelopmentWorld Oil Outlook to 2025
Dr Maizar RahmanIndonesian Governor for OPEC
Acting for the Secretary General
Organization of the Petroleum Exporting Countries
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OPEC Member Countries
Islamic Republic of Iran 1960 Iraq 1960 Kuwait 1960 Saudi Arabia 1960 Venezuela 1960 Qatar 1961 Indonesia 1962 Socialist People’s Libyan Arab Jamahiriya 1962 United Arab Emirates 1967 Algeria 1969 Nigeria 1971
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OPEC Statute
“The Organization shall devise ways and means of ensuring the stabilisation of (oil) prices in international markets, with a view
to eliminating harmful and unnecessary fluctuations
“Due regard shall be given at all times to the interests of the producing nations and to the necessity of securing: a steady
income to the producing countries; an efficient, economic and regular supply of petroleum to consuming nations; and a fair
return on their capital to those investing in the petroleum industry”
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OPEC’s landmark declarationsDeclaratory Statement of Petroleum Policy in Member Countries
Vienna, 1968Inalienable right, as expressed by the UN, of all countries to exercise permanent
sovereignty over their natural resources in the interests of their national development
Conference of Sovereigns and Heads of State of OPEC Member Countries(First Summit) Algiers, 1975
First “Solemn Declaration”. Led to establishment of:
OPEC Fund for International DevelopmentUS $7.0 billion committed*US $4.7 billion disbursed*
*Since 1976
Second Summit of Heads of State and Government of OPEC Member CountriesCaracas, 2000
Second “Solemn Declaration”
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OPEC’s development1960
Five Founder MembersOPEC formed to safeguard legitimate national interests, when petroleum industry
dominated by established industrial powers
Intervening yearsNew Members
OPEC faced formidable challenges, impacting across spread of pricing spectrum and compounded by factors far removed from simple market economics
TodayVast experience of petroleum issues
Acute awareness of realities and sensitivities of performing on world stageProduction agreements make major contribution to market stability
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Cooperation within OPEC
OPEC founded on premise of cooperation
“The principal aim of the Organization shall be the unification of petroleum policies for the Member Countries and the determination of
the best means for safeguarding the interests of Member Countries, individually and
collectively”
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OPEC/non-OPEC cooperation
Big advances since mid-1980sSupport for OPEC’s market-stabilisation measures
Many other benefits for oil industry
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Producer-consumer dialogueBig advances since 1990
International Energy ForumOPEC’s prominent role in development
Saudi Arabia hosts 7th ForumSecretariat in Riyadh
OPEC Member of Executive BoardJoint Oil Data Initiative
International Energy AgencyCloser working relationship between OPEC and IEA
First joint press conference in 2002Two Joint Workshops on Investment
Informal discussions calmed oil market in early 2003
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Cooperation will better prepare the
industry to meet the challenges that
lie before it in the early 21st century
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Today’s oil marketOPEC concerned about high oil prices
Market well-supplied with crude, buthigher-than-expected demand
geopolitical tensionsdownstream bottlenecks
speculation
OPEC seeking to restore order and stability
2-stage OPEC-10 output ceiling rise25.5 mb/d from 1 July
26.0 mb/d from 1 August
Support needed from non-OPEC and other parties
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G-7 Economic Growth Rates (Y-o-Y % change)
-4
-2
0
2
4
6
1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05
USAJAPANGERMANYG7
World economic growth rates (%):
2001 2.42002 2.82003 3.82004 4.82005 4.3
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Regional economic growth ratesRegional economic growth rates(percentage change from previous year)(percentage change from previous year)
Estimate
2001 2002 2003 2004 2005 2003 2004
OECD 1.0 1.7 2.2 3.5 3.0 0.0 0.0N.America 0.6 2.2 2.9 4.3 3.6 0.0 -0.1Europe 1.4 1.3 1.2 2.4 2.5 0.0 0.0Pacific 1.2 1.2 2.8 4.2 2.7 0.0 0.0
Japan 0.4 -0.3 2.7 4.0 2.0 0.0 0.2DCs 2.7 2.7 4.4 5.3 5.1 -0.1 0.1OPEC 2.7 2.4 3.2 5.4 5.2 -0.3 0.3China 7.5 8.0 9.1 8.8 7.7 0.0 0.0Russia 5.1 4.7 7.3 7.0 5.7 0.0 0.0
World 2.4 2.8 3.8 4.8 4.3 0.0 0.0Source: OPEC Secretariat
*/ As presented to the 131st (Extraordinary) Conference in June, 2004.
Forecast from Jun '04*Revisions
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2.1
0
1
2
3
4
5
1q04 2q04 3q04 4q04 1q05 2q05 3q05 4q05
OPEC Max Min Mean (exc. OPEC)
1.7
0
1
2
3
4
5
1q04 2q04 3q04 4q04 1q05 2q05 3q05 4q05
Range of quarterly oil demand estimations Range of quarterly oil demand estimations (year(year--onon--year change, year change, mb/dmb/d) )
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Regional oil demand growth Regional oil demand growth (year(year--onon--year change, year change, mb/dmb/d))
0.96
0.95
0.76
0.94
0.90
0.98
0.70
-1.2
-0.6
0.0
0.6
1.2
1.8
2.4
3.0
94 95 96 97 98 99 00 01 02 03 04 05-1.2
-0.6
0.0
0.6
1.2
1.8
2.4
3.0
Others Asia Total
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Growth in global oil demand and non-OPEC supply in 2005mb/d
-1
0
1
2
3
Demand Non-OPEC Supply Demand - Non-OPECSupply
-1
0
1
2
3Range of forecasts
Mean (exc. OPEC)
OPEC
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World oil demand & supply balance (adjusted)(mb/d)
2003 1Q04 2Q04 3Q04 4Q04 2004 04/03 2005 05/04
Demand (a) 78.8 81.0 79.0 80.6 82.9 80.9 2.1 82.6 1.7
Supply 79.3 81.7 81.9Non-OPEC (b) 48.7 49.7 49.6 49.9 50.9 50.0 1.4 51.2 1.2OPEC NGL (c) 3.7 3.9 3.9 3.8 3.8 3.9 0.2 4.0 0.1OPEC Crude oil 27.0 28.1 28.4
a-(b+c) 26.4 27.4 25.5 26.9 28.2 27.0 0.6 27.4
Balance 0.5 0.7 2.9
Seasonal stock chg
(1999-2003) -0.5 1.0 0.3 -0.6
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OPEC production versus capacitymb/d
24
26
28
30
32
34
1998 1999 2000 2001 2002 2003 2004* 2005*
Capacity
Production
*/ 2004 production reflects the 1st half '04, while the ranges for '04 & '05 are based on required OPEC crude production for the balance from the survey of forecasts.
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Real oil price assumption, $(2003)/b
0
10
20
30
40
50
60
70
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
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Oil Outlook to 2025Underlying assumptions:
Prices:initial years see the OPEC basket price at $ 25/b,long-term real oil price $20/b (2003 prices).
GDP growth rates:average world economic growth of 3.6% pa over the period 2003-2025,uncertainties over OECD productivity growth and the Chinese economy.
Imply fundamental perceptions:sufficient oil resourcessustainable price level (does not generate boom-bust supply cycles)sufficient to mobilise necessary resourceswould be supportive of the prospects for robust economic growth (both for producers & consumers)
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Average annual real GDP growth rates (PPP), % pa
Average growth in the OECD economies of 2.5% pa over the period 2003–2025For developing countries, with low capital stock bases and considerable technological catch-up potential, GDP growth rates are expected to be higher, but large uncertaintiesexistChina is a significant uncertainty but expected to remain fastest growing regionDeveloping countries expand at an average 5% pa Economies in transition have considerable scope for productivity “catch-up”Thus, economic growth in the reference case is relatively optimistic regarding the long-term health of the world economy
Reference 2003-05 2006-10 2011-15 2016-20 2021-25 2003-25OECD 2.6 2.6 2.5 2.4 2.3 2.5DCs 5.6 5.3 5.1 4.9 4.5 5.0
China 8.0 6.8 6.4 6.0 5.5 6.4FSU 5.2 3.8 3.4 3.2 3.0 3.6World 3.9 3.8 3.7 3.6 3.4 3.6
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World oil demand outlook in the reference casemillion barrels a day
2002 2010 2020 2025 OECD 47.7 51.2 54.5 55.8 DCs 24.7 32.3 45.3 52.5 Transition economies 4.5 5.3 6.0 6.3 World 77.0 88.7 105.8 114.6
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Growth in oil demand – 2002-25million barrels a day
0 5 10 15 20 25 30
Transition economies
OECD
DCs incl. China
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Annual global growth in oil demand by sectormillion barrels of oil equivalent a day
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
Transport
HH/Comm
Industry
Elec. Gen.
1971-1980 1980-1990 1990-2000 2010-20252000-2010
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World oil production outlook in the reference casemillion barrels a day
2002 2010 2020 2025 Non-OPEC 47.8 54.6 56.9 56.3 OPEC (incl. NGLs) 29.2 34.1 48.9 58.3 World 77.0 88.7 105.8 114.6 OPEC market share % 37.9 38.4 46.2 50.9
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OPEC and non-OPEC oil productionmillion barrels a day
0
10
20
30
40
50
60
70
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
mb/
d
non-OPEC
OPEC
OECD
non-OECD
History Projection
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More investment in production capacity needed:
to meet forecast rise in demandto replace exhausted reserves
to cover sudden, unexpected shortages
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Uncertainties over future economic growth,government policies and technological progress
raise questions over scale of investment
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Cumulative OPEC investment requirements:how much is needed to provide market stability?
0
50
100
150
200
250
300
350
400
450
2000 2005 2010 2015 2020 2025
$(20
03) b
illio
n Reference
Low economic growth
$122-173 billion
$258-382 billion
$70-95 billion
If OPEC balances the market, the uncertain volume requirements translate into huge ranges of anticipated capital outlay needs
Already by 2010 an estimated gap of $25 billion exists between the reference case and the low economic growth case
This a central concern: where lies the onus of maintaining sufficient spare capacity?
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Estimated annual upstream investment requirements 2000-2025, $bn (2003)
0102030405060708090
100
OPEC non-OPEC World
2005-2010 2010-2015 2015-2020 2020-2025
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Starting-point for sound investment strategyis market order and stability today,with reasonable, predictable prices
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Collective responsibility
OPEC’s agreement are necessary for healthy market— present and future
Non-OPEC must actively support OPEC’s measures
All parties benefit from cooperation
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World’s oil resource base sufficient to meet forecast rise in demand
in early 21st century
Increasing reliance upon OPEC oil
OPEC committed to meeting demand in orderly manner
stable markets reasonable prices steady revenues
secure supply fair returns for investors
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BACK UP SLIDES
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Commercial oil stock levels in the USA week-ending, mb
250
280
310
340
370
J F M A M J J S O N D
Avg. 99-03
2003
2004
Min-Max range: '94-'03
Crude Oil Products
560
620
680
740
800
J F M A M J J S O N D
Avg. 99-03
2003
2004
Min-Max range: '94-'03
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Comparisons of world oil balance:supply – demand, (mb/d)
-2
-1
0
1
2
3
4
1q04 2q04 3q04 4q04-2
-1
0
1
2
3
4
Min-Max range Mean (exc. OPEC) OPEC
uncertainty range