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Transcript of ASG Strasbourg Jul06 - OPEC · PDF file Sulfur Aromatic Benzene Leaded Sulfur Aromatic Benzene...

  • 1

    Opening address for dinner-debate

    Mohammed Barkindo Acting for the OPEC Secretary General

    European Parliament Strasbourg, France

    4 July 2006

  • 2

    Outline

    • Importance of EU-OPEC Energy Dialogue

    • Current oil market developments

    • Longer-term outlook

    • Energy security

    • EU Green Paper

    • Cleaner oil and gas technologies

    • Poverty eradication

  • 3

    OPEC Reference Basket price (nominal and real) and non-energy commodity prices

    The real price is still well below historical highs

    Non-energy commodity prices have also risen

    Jan 2001 = 100 50

    100

    150

    200

    250

    300

    350

    400

    Jan- 01

    Jul- 01

    Jan- 02

    Jul- 02

    Jan- 03

    Jul- 03

    Jan- 04

    Jul- 04

    Jan- 05

    Jul- 05

    Jan- 06

    OPEC Basket Aluminium Copper Lead Nickel Gold

    0 10 20 30 40 50 60 70 80 90

    100

    1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

    Nominal ($/b)

    Real ($/b base May 2006)

  • 4

    High volatility in oil prices, US $/b Strong global economic and, in turn, oil demand growth (’03-’05 increase: 5.4 mb/d) High capacity utilization in the supply chain, tightness in the refining sector Heightened geopolitical concerns –fears of supply disruptions Increasing activity in futures market (new wave of capital movement by funds)

    53

    74

    59

    67

    50

    56

    62

    68

    74

    80

    D ec

    -0 5

    Ja n-

    06

    Fe b-

    06

    M ar

    -0 6

    A pr

    -0 6

    M ay

    -0 6

    Ju n-

    06

    Ju l-0

    6

    WTI OPEC R. Basket (ORB)

    60.8

    73.8

    52.9

    67.1

    1- Dec

    21- Dec

    10- Jan

    30- Jan

    19- Feb

    11- Mar

    31- Mar

    20- Apr

    10- May

    30- May

    19- Jun

    9- Jul

  • 5

    Recent oil market developments: high demand growth

    1.5

    2.9

    1.0

    1.4

    5.2

    3.9

    4.7 4.7

    0

    1

    2

    3

    4

    5

    6

    2003 2004 2005 2006 0

    1

    2

    3

    4

    North America China Middle East Other Asia Others World GDP

    % mb/d

  • 6

    Supply chain tightness: downstream bottlenecks Refinery capacity utilization rates

    75

    80

    85

    90

    95

    100

    Jan 04

    May 04

    Sep 04

    Jan 05

    May 05

    Sep 05

    Jan 06

    May 06

    %

    EU** USA Asia*

    */ Asia = Japan, South Korea, China, India and Singapore

    EU**/ Data reflects only sixteen countries due to availability.

  • 7

    Increasing activity in futures market Open interest surpassed 1 million contracts recently, reflecting sustained high interest by funds in oil futures! EU-OPEC Workshop on financial markets (Dec 06)

    25

    35

    45

    55

    65

    75

    Jan- 03

    May- 03

    Sep- 03

    Jan- 04

    May- 04

    Sep- 04

    Jan- 05

    Jun- 05

    Oct- 05

    Feb- 06

    Jun- 06

    300

    450

    600

    750

    900

    1050

    1200 OPEN Interest Price

    (U S$

    /b bl

    ) ('000 contracts)

    June 30, 2006 NYMEX WTI open interest & price

  • 8

    OPEC crude oil supply has risen by 4.5 mb/d since 2002

    25

    26

    27

    28

    29

    30

    31

    2003 2004 2005

    m b/

    d

    Call on OPEC crude

    OPEC crude production

  • 9

    2004

    2005

    Avg. 01-05

    2300

    2350

    2400

    2450

    2500

    2550

    2600

    2650

    2700

    2750

    Ja n

    Fe b

    M ar Ap r

    M ay Ju n

    Ju l

    A ug

    S ep O ct

    No v

    De c

    2001-2005 Max/Min

    2006

    OECD commercial oil stocks

    million barrels

    2004

    2005

    Avg. 01-05

    48

    49

    50

    51

    52

    53

    54

    55

    56

    57

    58

    Ja n

    Fe b

    M ar A pr

    M ay Ju n

    Ju l

    Au g

    Se p

    O ct

    No v

    De c

    2001-2005 Max/Min

    2006

    days of forward cover

  • 10

    Commercial oil stock levels in the USA week-ending, mb

    2004

    2005

    Avg. 01-05

    250

    270

    290

    310

    330

    350

    370

    1 5 9 13 17 21 25 29 33 37 41 45 49

    2001-2005 Max/Min

    2006

    2004

    2005 Avg. 01-05

    580

    600

    620

    640

    660

    680

    700

    720

    740

    1 5 9 13 17 21 25 29 33 37 41 45 49

    2001-2005 Max/Min

    2006

    Crude oil Total Products

  • 11

    OPEC crude capacity continues to expand

    20

    22

    24

    26

    28

    30

    32

    34

    36

    38

    40

    2006 2007 2008 2009 2010

    m b/

    d

  • 12

    3D seismic costs have doubled in the last 24 months Deepwater drilling day rigs up at least 50% in 12 months. Contracts at $500k/d for 2008. Wage pressure is escalating with growing shortage of skilled labor (~15% rise in 2005) Steel is a major component of infrastructure & facilities, with prices up 40% since 2004.

    35 35

    45 40

    15

    30

    0

    10

    20

    30

    40

    50

    Exploration Infrastructure Drilling SURF Personnel Facilities

    (% )

    Source: Goldman Sachs, OPEC Secretariat

    Rising project costs: indicative cost rises

  • 13

    Long-term oil demand outlook, mb/d

    • Reference case sees oil demand rise by 30 mb/d by 2025 • Four-fifths of increase in demand in developing countries • However, OECD remains dominant consumer • Developing countries will consume, on average, five times

    less oil per person, compared with OECD countries

    2005 2010 2015 2020 2025 OECD 49.8 51.5 52.8 53.8 54.6 DCs 28.7 34.2 40.0 46.3 52.9 Transition economies 4.7 5.0 5.3 5.5 5.7

    World 83.2 90.7 98.0 105.6 113.1

  • 14

    Conventional liquid resource base is sufficient

    Date of assessment release

    0

    500

    1000

    1500

    2000

    2500

    3000

    3500

    1984 1987 1991 1994 2000

    bi lli

    on b

    ar re

    ls

    USGS estimates of remaining resources

    Cumulative production

  • 15

    Long-term oil supply outlook, mb/d

    Non-OPEC increases: Latin America, Africa, Russia, Caspian

    2005 2010 2015 2020 2025 OECD 20.5 20.6 20.7 20.5 19.5 DCs, excl. OPEC 16.1 18.6 19.7 20.0 19.9 Transition economies 11.7 14.4 15.5 16.1 16.5

    Total non-OPEC 50.1 55.8 58.3 59.4 58.9 OPEC (incl. NGLs) 33.1 34.9 39.7 46.2 54.3

    World 83.2 90.7 98.0 105.6 113.1

  • 16

    Energy security • OPEC recognises consuming countries concerns over energy supply security, and attaches great seriousness to this

    • Security of demand and security of supply are mutually supportive

    • Uncertainty over future demand translates into a broad range of potential levels of demand for OPEC oil

    • Investment requirements are large, subject to long lead-times and pay-back periods

    • More transparency in evolution and implementation of policies

  • 17

    Cumulative investment in OPEC: three scenarios

    0

    50

    100

    150

    200

    250

    300

    350

    400

    450

    500

    2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

    $( 20

    05 ) b

    ill io

    n

    Uncertain future demand translates into a broad range of possible OPEC investment needs

  • 18

    EU Green Paper

    • Excellent platform for sharing views, ideas and visions

    • Should address interests of non-European countries

    • Interdependence rather than dependence

    • Should recognise importance of security of demand

    • Downstream investment issue should be addressed

    • Emphasis on carbon capture and storage welcomed

  • 19

    Cleaner oil and gas technology

    • Increased fossil fuel use can be consistent with the protection of the environment

    • Carbon capture and storage is a promising technology to address climate change concerns

    • Developed countries should take lead in providing cleaner oil and gas technologies

  • 20

    Poverty eradication

    • Access to modern energy services must be improved upon

    • Poverty eradication: first UN Millennium Development Goal

    • Comprehensive and balanced approach to the three pillars of sustainable development: economic growth, social progress and protection of the environment

    • Energy security applies to all nations

  • 21

    www.opec.org

  • 22

    Taxation of oil products Diesel