Commentar y

A new chance for peace

Reuters

Boosting oil
production in Iraq in March 2003 the basic infrastructure of Iraqi 6m b/d is a strong possibility and some fore-
remains crucial for society collapsed to such an extent that the new cast even more beyond that. However, the coun-
peace and increased government is facing an extremely difficult situ- try’s oil potential will not be realized until the
market stability ation which could take years to address. necessary repairs to installations and pipe-
It has been and could still be a long, lines are successfully carried out and the twin
The changes which have taken place in Iraq hard road to peace and stability — the two blights of smuggling and corruption are effec-
this year will shape the country for decades prerequisites for a meaningful delivery of tively tackled.
to come. January saw the first democratic elec- any tangible benefits to the Iraqi people. Al- Bahr Al-Ulum has vowed to do something
tions in over 50 years, and in April the Presi- though the interim government’s mandate about these issues, promising to “fight corrup-
dent and Vice-Presidents of the country were is focused on institutionalizing democracy tion and boost production”, recognizing that un-
announced along with a new cabinet represent- from the creation of a national constitution til these concerns are resolved any substantial
ing all the major groups in Iraqi political life, to the holding of general elections, Iraqis ex- foreign investment in the country’s oil industry
including several women. This was followed in pect that peace and stability be addressed at will prove elusive.
May by the announcement of one of the coun- the same time as other pressing needs, such Challenges aside, Iraq’s achievements
try’s most important portfolios — that of Minister as reliable power and water supplies, basic in these past few months are welcomed by
of Oil — which went to Ibrahim Bahr Al-Ulum. education, medical care, employment and per- its fellow OPEC Member Countries, not to
Bahr Al-Ulum is no newcomer to the port- sonal safety. mention the global energy industry. These
folio, having served as the interim Minister of Delivering all these necessities will depend recent developments will hopefully lead to
Oil from September 2003 to mid-2004 as a to a large extent on the fortunes of the Iraqi oil increased stability and peace for Iraqi citi-
member of the Iraqi Governing Council. A pe- sector, and here, timing will be crucial. Invest- zens and instill confidence amongst oil market
troleum engineer by trade, he has substantial ment is much needed in energy infrastructure participants and investors.
international experience, and direct experience to repair years of neglect thanks to sanctions With world demand for crude growing
of OPEC affairs gained during his interim post. and more recently sabotage, but at the same so fast, Iraq is now well-placed to realize its
In spite of these positive developments, time oil represents the country’s best chance potential and return to its rightful role as a reli-
Iraq still faces incredible challenges. The lack to ensure economic and social stability. able oil supplier, for the benefit of the world at
of security due to constant attacks on innocent Iraqi output has dwindled to around the large but more importantly its own population
civilians continues to threaten the country’s 1.8 million barrels per day level but with the who have a right to stability and peace.
stability. In the aftermath of the US-led invasion world’s second largest reserves, production of
 4
Contents
Features

Iraq to fight corruption and boost production — new Oil

Minister

Reuters

Stronger together (p10)

Qatar Petroleum
Australian Ministry for Industry, Tourism and Resources

Australia wants more oil (p12)

Exploration & production — a challenging future (p18)

Newsline 22
Mega-projects detailed
(p22)
OPEC bulletin

Honour for Saudi

Aramco head (p23)
Libya unveils second
AP Photo

bid round (p24)

Publishers Membership and aims

OPEC OPEC is a permanent, intergovernmental
Organization of the Petroleum Exporting Countries Organization, established in Baghdad, September
Obere Donaustrasse 93 10–14, 1960, by IR Iran, Iraq, Kuwait, Saudi Arabia
1020 Vienna, Austria and Venezuela. Its objective is to co-ordinate and
Telephone: +43 1 211 12/0 unify petroleum policies among Member Countries,
Telefax: +43 1 216 4320 in order to secure fair and stable prices for petroleum
Public Relations & Information producers; an efficient, economic and regular supply
Department fax: +43 1 214 9827 of petroleum to consuming nations; and a fair return
E-mail: prid@opec.org on capital to those investing in the industry. The
Organization comprises the five Founding Members
Cover Web site: www.opec.org and six other Full Members: Qatar (joined in 1961);
This month’s cover shows an Iraqi worker at the Visit the OPEC Web site for the latest news and infor- Indonesia (1962); SP Libyan AJ (1962); United Arab
Basra south refinery (see Feature on pp4–9).
mation about the Organization and back issues of the Emirates (Abu Dhabi, 1967); Algeria (1969); and
Photo: Reuters
OPEC Bulletin which is also available free of charge Nigeria (1971). Ecuador joined the Organization in
in PDF format. 1973 and left in 1992; Gabon joined in 1975 and left
Vol XXXVI, No 5, May 2005, ISSN 0474–6279 Hard copy subscription: $70/year in 1995.
Me m b e r Co untr y Focus 30

Kuwaiti women get the vote

Saudi Arabia to liberalize banking on road to WTO
(p32)

Reuters

O P EC Fun d News 38

Improving aid efficiency

Reuters

Market Review 42

Noticeboard 58

Advertising Rates 59
OPEC Publications 60

Secretariat officials Contributions Editorial staff

Secretary General The OPEC Bulletin welcomes original contributions on Editor-in-Chief
HE Sheikh Ahmad Fahad Al-Ahmad Al-Sabah the technical, financial and environmental aspects Dr Omar Farouk Ibrahim
Acting for the Secretary General, Director, Research Division
of all stages of the energy industry, including letters Senior Co-ordinator
Dr Adnan Shihab-Eldin
for publication, research reports and project descrip- Umar Gbobe Aminu
Head, Data Services Department
Dr Muhammad A Al Tayyeb tions with supporting illustrations and photographs. Editor
Head, Administration & Human Resources Department David Townsend
Senussi J Senussi Editorial policy Deputy Editor
Head, Energy Studies Department The OPEC Bulletin is published by the PR & Informa- Philippa Webb-Muegge
Mohamed Hamel tion Department. The contents do not necessarily Production
Head, PR & Information Department reflect the official views of OPEC or its Member Coun- Diana Lavnick
Dr Omar Farouk Ibrahim
tries. Names and boundaries on any maps should not Design
Head, Petroleum Market Analysis Department
be regarded as authoritative. No responsibility is Elfi Plakolm
Mohammad Alipour-Jeddi
Senior Legal Counsel taken for claims or contents of advertisements.
Dr Ibibia Lucky Worika Editorial material may be freely reproduced (un-
Head, Office of the Secretary General less copyrighted), crediting the OPEC Bulletin as the Indexed and abstracted in PAIS International
Karin Chacin source. A copy to the Editor would be appreciated. Printed in Austria by Ueberreuter Print and Digimedia
 IRAQ
Feature

to fight
corruption
and
boost
production

— new
Oil Minister
AP Photo

Dr Ibrahim Bahr Al-Ulum has been named as Iraq’s Minister of Oil in the new demo-
cratically-elected government which was sworn in in April,
replacing Thamir Ghadhban who held the portfolio for a
period of time under the interim government after the
US-led invasion of Iraq.
Bahr Al-Ulum is familiar with the job, also having
served as the former Minister of Oil from September 2003
to June 2004 in the post-invasion Iraq period.
In assuming his role, Bahr Al-Ulum promised to boost
the country’s oil exports back to the levels of a year ago,
OPEC bulletin 5/05

at which time exports were about 1.75 million barrels per

day, to re-assert its role in OPEC, the BBC reported.

4
Reuters

“We will work towards increasing production with the of fuel on the domestic market due to sabotage and Above: A member of an Iraqi secu-
aim of reaching previous output levels,” he said after his smuggling. rity force conducts a joint security
appointment was confirmed. “We will try to alleviate the suffering of the Iraqi peo- boat patrol against oil smugglers in
“Our new motto in the Ministry is fight corruption and ple by putting an end to these shortages,” he said. Shat-al-Arab waterway, which leads
to the port of Umm Qasir.
boost production,” he said. A return to former production levels would also
put Iraq back at the heart of OPEC, according to Bahr
Al-Ulum.
In the 1970s Iraq produced an estimated 3.5m b/d
Boosting production and some experts say that, with the world’s second larg-
est reserves, it has the potential to produce 6.0m b/d.
OPEC bulletin 5/05

His hopes for a production boost were not just for export Before the US-led invasion of Iraq which ousted Saddam
purposes, he explained, but to help ease the shortage Hussein, daily crude oil production was around 3m b/d.

5
Feature
Reuters

Since the toppling of Saddam Hussein, Iraq’s oil

pipelines and installations have come under attack from Challenges ahead
saboteurs in the country, which has resulted in varying
monthly production figures which were 1.8m b/d in March, But he faces a daunting challenge to rebuild Iraq’s oil
according to OPEC figures. industry, and rectify the petroleum sector. This will be
The new Minister has said that his top priority would central to the success of Iraq’s new government, which
be to protect the country’s pipelines and oil installations relies on oil exports for most of its revenues, the Wall
from saboteurs who were causing losses worth billions Street Journal reported.
of dollars to the country. The continued violence and insecurity in the country
Bahr Al-Ulum, an American-trained petroleum engi- have prevented long-planned repairs on oil installations
neer has also said his Ministry wants to “build strong rela- and restricted access by engineers to facilities damaged
OPEC bulletin 5/05

tions with international (oil) companies to increase produc- by fresh insurgent attacks, officials have said.
tion to between 5m and 6m b/d by the end of this decade.” Foreign contractors, hired with funds from the Ministry

6
Left: Iraqi fire fighters Right: A British army
extinguish a blaze at a patrol in Basra prov-
pipeline in Basra. ince, southern Iraq.

of Oil and American reconstruction aid, routinely are

not able to finish their work, which makes operating
in the country difficult, potentially threatening for-
eign investment.
As to the level of involvement of international oil
companies in developing Iraq’s oil resources, Bahr
Al-Ulum was previously outspoken about the need
for foreign investment in the sector when he held
the post before, and at the time he had invited inter-
Reuters

national oil companies to go to Iraq and make deals,

according to the Wall Street Journal.

7
Feature

Tackling corruption

As far as confronting the corrupt practice of selling

fuel on the black market, the Iraqi Ministry of Oil recently
announced that it had sacked more than 450 employees
suspected of doing this, Lebanon’s English-language Daily
Star newspaper reported.
The move is the most recent in a series of measures
designed to tackle corruption within the industry, as
well as to try to break smugglers who take cheaper, sub-
sidized petroleum products out of Iraq and sell them in
neighbouring countries; this has lead to petrol shortages
since the invasion two years ago. Drivers have often had
to wait hours to fill up in Iraq, some sleeping overnight
in their cars waiting for stations to open.
The Ministry of Oil’s General Inspector, Ali Muhsin
Ismael, said the government’s inability to provide a secure
environment was partly responsible, but added that his
Ministry accepted some of the blame for the situation.
“There is still corruption in the Oil Ministry and this
cannot be (completely eradicated),” Ismael said.
He said that criminals used a number of methods to
defraud the industry, including the manipulation of fuel
pump gauges and incorrect measurement of tankers’
contents — both of which could result in an undeclared
surplus that could be sold on the black market.
AP Photo

A worker carries
out routine main-
tenance on an
oil pipeline near
Basra.
Positive developments

While the country obviously faces serious challenges, it As the President of the OPEC Conference and the
is recognized that the swearing in of a democratic gov- Kuwaiti Minister of Energy, Sheikh Ahmad Fahad Al-Ahmad
ernment is a positive step for Iraq to begin to seriously Al-Sabah, said at the last Conference held in Isfahan, Iran,
address the problems it has encountered over the past in March: “We have been confronted with the Iraqi situa-
two years and try to re-build the country. tion for 14 years now and we have always found a solu-
Despite the problems Iraq has experienced with its tion, and the right situation for the country within OPEC.”
production levels over the last 14 years, since the 1991 “If Iraq’s security problems were solved, the coun-
Iraqi invasion of Kuwait to the US-led invasion of Iraq, try can produce 2.8m b/d, and hopefully that will be the
OPEC bulletin 5/05

other Member Countries within OPEC have managed to case, and that they will be back as OPEC-11 with improved
increase their production to make up for any shortfalls. security,” he said.

8
Quarterly Iraqi oil update by US State Department
Attacks on pipelines in the north of Iraq combined with Ali cluster pump station project where two final units are
water pressure maintenance problems in fields in the south still not on stream. An “approved task order” has now been
are keeping the country’s oil production levels significantly issued to repair the 48-inch pipelines that transport water
below the 2.5 million barrels/day seen last September. These to the stations and work is “tentatively” scheduled for com-
details were revealed in the latest quarterly update from the pletion in December.
US State Department to the US Congress released by the Elsewhere, procurement work has begun on the long-
Bureau of Resource Management. lead equipment for the natural gas liquids/liquefied petro-
It said exports of crude in the first quarter of this leum gas project in the south, designed to increase LPG
year had averaged 1.4m b/d compared with 1.6m b/d in output from the current 1,200 tons per day to 3,000 t/d and
September last year, but unchanged from levels from the supply additional dry gas to the pipeline system. The report
last report submitted in January. noted that this is the largest project in the programme val-
Despite increases in crude oil prices, the drop in pro- ued at $135m and is expected to be completed in late 2006.
duction and exports was making it “more difficult” for Iraq In addition, $206m worth of vehicles and heavy equip-
to close the almost $5 billion gap between planned expen- ment had been purchased this year and, as of the beginning
ditures and actual revenues in the current financial year. of March, 23 per cent of the 1,102 pieces of equipment that
The report said production and exports have been have been received at Umm Qasr port were being distrib-
limited by attacks on the northern pipelines (300,000 b/d) uted to the various operating companies of the Ministry
and pressure maintenance in the southern fields (200,000 of Oil. Also in the first quarter, the Emergency Response
b/d). To address the latter, Iraq Relief and Construction Pipeline Repair Organisation repaired four pipelines and
Fund resources were being used on projects relating to $9m has been set aside to support this effort through the
water pressure, through the construction of additional gas- end of May.
oil separation plants and the rehabilitation of the Rumalia Several projects are expected to be added during the
Field water tables to improve pressurization and increase second quarter of this year, including: engineering assist-
oil production. ance and critical spares for the North Gas second gas train;
and engineering assistance and critical spares for the East
Infrastructure project progress Baghdad field. Also, work will continue to “negotiate and
definitize” the remaining projects worth $323m, while con-
The report noted that $47m has been added to the alloca- struction work on the projects listed below would begin:
tion for oil infrastructure construction projects this year South: NGL/LPG projects, $135m; well workovers,
bringing the total to $1.697bn. The extra money was re- $37m; assessment and repair of the Qarmat Ali water pipe-
allocated from both the Emergency Supplies of Refined line, $26m.
Petroleum Products and Electrical Generation funds. North: Pipeline crossing of the Kirkuk canal/Al Fatha
Since the last report in January, 82 oil infrastructure river, $66m; repair of two gas-turbine generators, switch-
projects worth $871m had been negotiated and 55 projects gear, $6m; two gas-oil separation plants, $16m; two gas
worth $323m were under negotiation. Delays had arisen, compression plants, $10m.
the report said, because of insufficient contracting staff to Separately, Norway’s Det Norske Oljeselskap (DNO)
carry out work and a change of contractor in the south. said in April that it had signed a memorandum of under-
During the first three months of this year, the construc- standing with the Iraqi Ministry of Oil that would “serve
tion and commissioning of the 100,000 b/d Bai Hassan as a framework to define areas of mutual interest and co-
South gas-oil separation plant had been completed and operation.” These would include: training and technology
work has begun on a revamp of a similar a facility at Bai transfer; petroleum consulting and services; technical stud-
Hassan North. This unit will process 100,000 b/d of wet ies; and other areas. DNO Chief Executive Office, Helge
crude compared to the current 45,000 b/d. The project is Eide, said: “DNO is very pleased with this co-operation
expected to be completed in December. with the Ministry of Oil in Baghdad, which is considered
Meanwhile, electrical problems and water pipeline fail- by DNO to be a positive step towards a strong foothold
ures continue to delay the commissioning of the Qarmat for the company in Iraq.”

9
Feature

Photo: Qatar Petroleum

Stronger together
Last month Qatar hosted the first annual

meeting of the Officials of Petroleum Research

and Development (R&D) Institutions in OPEC

Member Countries. The group aims to in-

crease R&D collaboration among Member

Countries and eventually launch co-operation

Photo: Qatar Petroleum

in technological areas.

Qatari Governor for OPEC and Senior Adviser to the Second Deputy Premier,
Minister of Energy & Industry, Abdulla Salatt (l), with OPEC Acting Secretary
General and Director, Research Division, Dr Adnan Shihab Eldin, who said the
OPEC bulletin 5/05

meeting heralded the start of “an effective ongoing process of

collaboration in R&D.”

10
In an opening address to the meeting, OPEC Acting
Secretary General and Director, Research Division,
Dr Adnan Shihab Eldin, said that co-operation in
R&D would be focused “on long-term strategic
technological research areas, such as oil to hydro-
gen, oil to power, clean fuels, carbon manage-
ment, enhanced oil recovery and gas to liquids.”
The meeting was held in Doha and the Qatari
Governor for OPEC and Senior Adviser to the
Second Deputy Premier, Minister of Energy &
Industry, Abdulla Salatt, said the meeting repre-
sented “a great opportunity to advance the collab-
oration and teamwork spirit of OPEC Members.”
He described OPEC as a “knowledge gener- Photo: Qatar Petroleum
ating centre” and said the Organization should
have a “pioneering role” in promoting the sus-
tainability and environmentally friendly nature
of oil and gas.
Salatt noted that alternative energy promot-
ers were already engaged in research programmes
Above: Attendees arrive for
“that aim to reduce the domination of oil and gas the first annual meeting of
in global energy markets” and that OPEC should the Officials of Petroleum
have it its own independent programme “which Research and Development Below: Delegates listen
should be directed to sustain our position in these (R&D) Institutions, May 2–3, to a speaker at the Qatar
markets.” 2005, in Doha, Qatar. Foundation.
He added: “We should not be distracted by the
recent rise in oil prices away from our main scope
in groundbreaking new uses for oil and gas. As a
matter of fact, this should motivate us to increase
our spending on R&D not only on pure scientific
research but also in the application fields.”
Dr Shihab-Eldin said concrete action on col-
laboration and R&D among Member Countries
was already underway, adding: “If we prepare
ourselves well for the future not only will we be
able to help meet a world energy requirement
that, already substantial, is forecast to continue
growing in the coming decades, but we will also
extend and enhance the earning power of our
petroleum resources, to the benefit of both our
present and our future generations.”
During the meeting, delegates visited the
Qatar Foundation Education City in Doha and saw
a presentation on the Science and Technology
Photo: Qatar Petroleum

Park that is being developed specifically as a

home for scientific institutions and programmes.
Salatt formally invited the meeting to consider
locating any “collective R&D institute in this pres-
tigious site.”

11
 OPEC bulletin 5/05

12
Feature

Photo: OPEC
AUSTRALIA
wants more oil
 Australia is keen to encourage more exploration of its vast offshore

sedimentary basins and has recently opened up new acreage.

OPEC Bulletin spoke to the government minister in charge about

these plans as well as general energy policies in the country.

Australia’s Ministry for Industry Tourism and Resources long time because of coal and natural gas but we would
hope that with our incentives and a bit of luck we could
has a broad remit and at its head is Ian Macfarlane
find a major new oil field.”
(pictured left) who is responsible for energy in this To this end, the government wants to focus attention
the world’s sixth largest country and one of the few on new offshore acreage. In April it released 29 new explo-
ration areas; two off the coast of the Northern Territory; 24
members of the Organization for Economic Co-oper-
off Western Australia; one near the Ashmore and Cartier
ation and Development (OECD) that is a significant Islands; and two off South Australia.
This release includes five Designated Frontier Areas
net energy exporter.
which are subject to the 150 per cent frontier tax conces-
Macfarlane admits that Australia has “an ongoing prob- sion that was announced in 2004. Bids for 15 of the 29
lem” with oil production. According to the Australian new areas close on October 20 this year and the remain-
Bureau of Agricultural and Resource Economics (ABARE), der on April 20, 2006. Permits will be awarded for an ini-
domestic crude production averaged 574,000 barrels per tial term of six years.
day in 2002–2003, short of the country’s daily consump- The new acreage follows the granting in February of
tion which means it is a net importer of oil. 11 exploration permits in waters off Western Australia
Over half of all crude production comes from the and Tasmania. Eight were in the Carnarvon Basin, which
Carnarvon Basin in Western Australia; other major pro- holds both oil and gas, and three were adjacent to the
ducing areas are the Gippsland Basin, offshore the state Yolla gas field in the Bass Basin off northern Tasmania. Five
of Victoria and the Bonaparte Basin, off the north-west companies were awarded rights and they are expected
coast of the country. But production is falling to “concern- to spend a combined A$220 million on exploration.
ing levels”, Macfarlane says with Australian now produc- Macfarlane says it would be “fantastic” if oil was dis-
OPEC bulletin 5/05

ing around 60 per cent of the crude it consumes. covered in any of the new areas and that there had been
“We’re still a net energy exporter and will be for a “strong interest” in the latest package but the government

13
Feature

the Northern Basin in East Timor “depending how we’re

able to finalize negotiations.” This gas could be supplied
into the city of Darwin to supply an LNG market and also
possibly to add to the domestic supply.
With Australia already the world’s sixth largest
exporter of LNG, Macfarlane says the government “takes
every opportunity to talk with potential clients” to increase
exports, including Japan, China, South Korea but also now
the West Coast of the US and Mexico where he believes
there is “exciting demand.”
As far as the existing LNG projects are concerned,
Macfarlane says an agreement to expand the Northwest
Shelf to a fifth train has been all but finalized and this
should be on stream by the end of 2006. Meanwhile, the
Northwest Shelf Gorgon gas deposit, which has reserves
estimated at 80 trillion cubic feet, is also of interest, he says.
ChevronTexaco, ExxonMobil and Shell are working
on moving this project towards commercialization. The
current proposal calls for production of 10m tonnes per
Australian gas plant. year of LNG with first deliveries to the North American
West Coast in 2010. Other projects include, Scarborough,
proposed by BHP Billiton and Browse an option from
has not set any targets for how much oil it would like to Woodside Petroleum.
see produced in the future. “We’re hoping to see some major LNG projects go
“We are not a government that sets targets or that ahead over the next two to three years,” Macfarlane
has any financial interests in energy. Our aim is to see says. “The window of opportunity is still open — no-one
the country get the investments it needs. From time to knows how long it’s going to stay open – but we want to
time we provide incentives to establish LNG plants and see Australia get a good slice of that market.”
bring projects to Australia but that aside we let the com- Aside from oil and gas, and of course coal (Australia
mercial rules dictate.” is the world’s leading coal exporter), the government has
While oil production is giving cause for concern, it’s devised a long-term energy plan for the country which
a different story with natural gas. As Macfarlane puts it, includes an A$500m fund to help develop low-emission
“we are really awash in it and very well endowed.” Most technologies. In addition, Macfarlane’s department has
Australian production is sourced from fields located off begun a process of energy market reform for electricity
the West Coast and the country has a well established and gas. “We have made good progress with electricity
liquefied natural gas (LNG) sector. In addition, output and we’re about to move into natural gas,” he says.
from coal seam methane is growing. Macfarlane says the government was very keen to
As well as domestic production, Macfarlane says attract investment into Australia, no mean feat given
there are two important potential supply sources from the competition it faces from other areas particularly in
beyond the country. The first is from Papua New Guinea Asia. So, in order to ensure the country was an attrac-
where the government is encouraging the construction tive investment target, “we had to ensure that we had
of a pipeline that would run to Gladstone in Queensland adequate affordable energy and make sure the energy
OPEC bulletin 5/05

and then connect to the east coast gas grid. Secondly, market wasn’t overregulated.”
there is potential “in time”, Macfarlane says, for gas from By way of example, in April, the Ministry officially

14
opened the National Offshore Petroleum Authority
(NOPSA) responsible for regulating the health and safety
of workers on offshore platforms. Based in Perth, Western
Australia, NOPSA replaced separate state-based regula-
tors and a host of state-based regulation.
Another important issue that the government wanted
to address was the issue of greenhouse gas emissions. Oil platform offshore Western Australia.

Macfarlane claims that Australia is only one of a hand-

ful of nations that will achieve its Kyoto Protocol target
ahead of time.
“We needed to ensure that we were encouraging
investment in technologies which lower greenhouse
gas emissions in terms of their energy unit output. So
we introduced a range of initiatives and the cornerstone
was the fund, which was there to encourage investment,
particularly in pilot plants relating to low emission tech-
nology”. The government also set aside A$75m for solar
projects and A$100m for rewnewable energy.
As Macfarlane puts it, “it’s an energy policy for
Australia as much as you can set these things. We are
a country with a high standard of living but geographi-
cally disadvantaged and if we want to maintain our eco-
nomic growth we need to play to our strengths. One of
our strengths up to now has been abundant energy at an
affordable price and we need to make sure we retain that
competitive advantage.”

OPEC bulletin 5/05

Photos and map on this spread courtesy of the Australian Ministry for Industry, Tourism and Resources. 15
 Close dialogue
Feature

Australia’s Ministry for Industry,

Tourism and Resources,
Ian Macfarlane, was speaking
during an official visit to OPEC
just after he had chaired a
joint International Energy
Agency (IEA)/OECD energy
meeting in Paris.
That meeting saw discussions on several issues including secu-
rity of supply, energy efficiency and the need for co-operation and
dialogue between consumers and producers, governments and
institutions.
During his visit to OPEC, Macfarlane met with Acting Secretary
General, Dr Adnan Shihab-Eldin, and said that this had been “a
great opportunity” to follow up on items raised at the IEA/OECD.
“We both ended up on the same point: that close dialogue will
not only underpin a better understanding of the supply-demand
curve but also allow the extraordinary levels of investment that need
to be made both in production and refining capacity throughout the
world.”
Macfarlane added: “The one thing we can be sure of is that
demand for oil and to a lesser extent gas is going to continue to
increase and that demand is certainly going to be driven by places
like China but also from traditional developed economies.”
On that basis, he said, the question was how consumers and
producers should work together to ensure that investment is being
made to meet that demand “so that you keep a reasonable level
of margin in terms of surplus capacity so the market doesn’t suffer
any shocks.”
Macfarlane said he believed the Joint Oil Data Initiative (JODI)
would be a very important tool. “One of the reasons in terms of the
fundamentals that caused the price of oil to climb as steeply as it did
OPEC bulletin 5/05

was that there was actually an underestimation on a historical level

of what oil demand was doing and that created some uncertainty.”

16
“ I think there was an
underestimation of
demand and that’s

”
caused some of the
“
price escalation.

He added: “There were all sorts of reasons for that, people set-
ting very optimistic targets in terms of renewable energies as well
as the ability of the transport sector to move away from its funda-
mental reliance on petroleum. I heard a prediction the other day
that oil production would peak in 2010 — I thought then that that
was laughable but, seriously, I think there was an underestima-
tion of demand and that’s caused some of the price escalation.”
Macfarlane said it was in both producers and consumers inter-
ests that “we see a settling” of the oil price. “I’m not saying where
but the volatility in the market is obviously not useful.”
He admitted higher oil prices were of concern to the Australian
government but pointed out that the country was somewhat pro-
tected from the impact of this because it is a net energy exporter.
“One of the most interesting things that came out of the IEA
and the OECD meetings was that the potential dampening effect
of higher oil prices on economic growth hasn’t been realized and
there was general consensus that while it certainly wasn’t ideal
to have high oil prices, some of the fears of dire economic growth Macfarlane with OPEC’s Acting Secretary General, Dr Adnan Shihab-Eldin.
hadn’t been realized yet — I guess that’s really the issue.” Photos: OPEC

17
 Exploration & production
Feature

This is an edited version of a presentation

made by Shell Exploration & Production

Company’s Gulf of Mexico Deepwater USA

Major Projects Manager, Aidan McKay,

at OPEC last month as part of the Society

Photo: OPEC

of Petroleum Engineers Distinguished

Lecturer Series. It discusses the challenges

the E&P sector will face over the next 25

years to meet global energy demand;

asks where the industry will find oil and

gas needed to replace reserves; how to

achieve growth; and what all this will cost.

OPEC bulletin 5/05

18
a challenging future “... about 70 per cent

of oil demand ends up

as transportation fuels

and this area is fore-

This paper suggests that the future for the exploration In addition to installing new supply capacity for
and production (E&P) industry is going to be much more growth, the E&P industry must also replace declining cast to grow fast.”
difficult given the scale of demand growth and required reservoirs at existing assets. Decline rates vary from
investment levels which are almost beyond belief. only two to three per cent per year in some OPEC/major
The current world hydrocarbon proven reserve pool is hydrocarbon resource areas and from seven per cent per
broadly 1,100 billion barrels of oil, 700bn b of oil equiva- year up to 20 per cent per year in some deepwater and
lent (boe) of gas and 3,000bn boe of unconventional oils mature environments. The global average decline may be
like heavy oils, bitumen and oil sands. There are sufficient approximated as four to five per cent, heavily weighted
conventional hydrocarbons for 40 years supply at current by OPEC/major resource holding countries.
demand levels and more if unconventionals are included. The logic of demand growth may be explained in terms
of global GDP growth of one per cent resulting in some
Educating society 0.5 per cent of energy demand growth. A more simple
answer is that about 70 per cent of oil demand ends up as
The historical success the E&P industry has had in ensur- transportation fuels and this area is forecast to grow fast.
ing that demand is met in a volatile and changing world has Developed societies tend to enjoy their cars, trucks,
perhaps led society to take longer term energy demand and buses and like flying in planes. Today there are some
needs for granted. There has been an excess of supply 700m cars and trucks around the world and it is forecast
for three decades with minimal upsets. We in E&P need that there may be around twice as many by 2030.
to educate society about the scale of research and devel-
opment (R&D) and investment required, the time taken Transport demand growth
to access and develop hydrocarbons and translate them
from geological deposits to vital fuels or feed-stocks. Considerable efforts have been made to provide alterna-
In order to meet demand, the E&P industry will have tives to the car; several developed countries have world
to be highly innovative whilst providing acceptable returns class trains/buses/trams and infrastructure as alterna-
for investors. This is a significant task. tive forms of transportation. Also fuel taxes and taxation
Global hydrocarbon demand from well bores has on car engine size have been used, resulting in gasoline
grown from around 90m boe/d in 1980 to around 128m (petrol) costs higher than $4 per gallon. Despite this,
boe/d today. The E&P industry has collectively been a large-engined cars and four-wheel-drive vehicles are still
marvel of both technological innovation and improving a fast growing option in many developed and developing
cost structures in achieving this increase. countries. The individual personal choice may in practice
A wide range of technologies has been developed and not be the optimum for society.
deployed since 1980 and over the next 30 years techno- A similar demand growth indicator is observed with
logical innovation will have to be as successful as it has aircraft; today there are about 15,000 commercial jets
been in the past and indeed there are early signs that it will. worldwide. We have seen in North America in the last
New technology and a large amount of innovation eight years a 70–80 per cent increase in the number of
will be required if the industry is going to meet demand daily short-haul flights representing rapid on-ground
growth which is expected to rise from 128m boe/d to turnarounds and improved uptime.
OPEC bulletin 5/05

220m boe/d by 2030 — double the increase in demand Forecasts suggest that we may see some 32,000 jets
seen over the last 20 years. This equates to one to two per by 2030; this could also represent a huge increase in fuel
cent per year for oil and three per cent per year for gas. demand.

19
 Hydrocarbon (oil and gas) demand from wellbores: daily production
Feature

million barrels of oil equivalent per day

240

200

OIL & GAS

160

128m boe/d
Cur
120 ren
t e
stim
ated
dec
line
80 rate

Source: A McKay/SPE
40

0
1980 85 90 95 2000 05 10 15 20 25 30
Aggregate global production decline is ~ 5+ per cent per annum.
Aggregate long term oil and gas growth is 1.5 per cent pa average.

For natural gas, which is becoming the fuel of choice (approximated by the top 500 E&P companies, exclud-
for power generation and domestic heating, demand ing national oil companies) spent an estimated $20bn
growth will be even faster than with oil — three per cent per year which had grown to $60bn per year by 2000. It
per year as a global average. In localised areas, growth is likely that there will be a need for huge investments
may be as high eight per cent per year. There may be major growing to above $100bn per year by 2010 and poten-
inroads into transportation by natural gas, but in any case tially to $200bn (plus) per year by 2030.
by 2030 we are likely to be in a world where hydrocarbon
demand is around 220m boe/d in energy equivalents. Investment required
Global proven hydrocarbon resources today total
1,100bn boe of oil, 700bn boe of gas and 3,000bn boe There may be a significant impact from technology in
heavy oil, bitumen/oil sands. Global consumption is 44bn reducing future investment costs. However, irrespective
boe per year which may grow to 88bn boe per year by 2030. of this, the absolute investment levels are almost unim-
We have sufficient supplies to meet the next 40 years of aginably large. To achieve these large savings will require
demand or more; in short, the world is long on hydrocarbons. considerable R&D investment and there is much debate
However, while there is an abundance of hydrocar- as to whether the present levels of R&D are high enough
bons on the planet, there is not an abundance of quality compared to other major industries.
E&P investment opportunities. A quality investment is If the huge leaps forward in E&P technology do not
one where there is a likelihood of achieving an accept- continue, oil companies will face rapidly increasing invest-
able return for the different risks taken given the uncer- ment levels and achieve very low returns on invested capi-
tainties around commodity prices. tal for their shareholders. If commodity prices remain high
Using the last 30 years of investment as an indicator, this effect will be limited. An alternative way to achieve
OPEC bulletin 5/05

one can extrapolate a possible scale of the investment acceptable returns at lower prices would be government
required to meet this demand. In 1970, the E&P business subsidy or tax breaks for energy companies.

20
 Technology development and implementation have Number of cars and light trucks globally (history and forecast)
permitted the development of complex and economically millions
marginal fields but the rate at which these benefits have 1,400
USA ~ 200m vehicles (+15m pa) 287m people
come has not been fast enough to drive unit costs down China ~ 5m 1,300m people
India ~ 1m 900m people
materially further. We still have a lot to do in technology 1,200
deployment and reducing the industry cost structure.
There are six logical forces evident in the exploration 1,000
& production business today, which may shape its future.
The first is continual pressure to achieve structural
800
cost reduction. Essentially this means improving business
efficiency through process reengineering, improved sup- range of forecasts
600
ply chain management, globalising to remove the dupli-
cation of activities and achieving economies of scale.
The second is E&P portfolio restructuring. This 400

involves selling off fields and assets, the aim being to

Source: A McKay/SPE
reinvest the sale proceeds in a better E&P investment, 200
achieve a higher return or return the funds to sharehold-
ers. This assumes that exploration will be successful and 0
1940 50 60 70 80 90 2000 10 20 30
generate an attractive investment opportunity.
Assumes an eight billion population by 2030.
The third is a shift to gas where there is a huge devel-
opment effort underway both in terms of regional pipeline
infrastructure and also export options such as liquefied
natural gas (LNG) and gas to liquids (GTL).
The fourth force is achieving growth in earnings “... while there is an
through production volume either through exploration or
taking over management of green- or brown-field devel- does not generally increase the size of the global hydro- abundance of hydrocar-
opments for a resource-owning government or acquiring carbon resource pot.
the fields and facilities of others. Given the demand growth challenge on a global scale, bons on the planet, there
The fifth force is the increasing requirements from oil the E&P industry needs to look at ways to increase the
company shareholders to see improved financial manage- overall pot of hydrocarbons. This will involve getting higher is not an abundance of
ment of balance sheets and assets. This group (which recovery factors from existing fields, more efficient explora-
represents our pensions) expects high returns on capital tion and reducing development costs through technology. quality E&P investment
employed, annual reserves replacement, and a clear route Much has been written about renewables and they
to earnings growth. All of this is coupled to an increased will form a part of the energy mix in 2030. Hydrogen fuel opportunities.”
need for transparency and credible earnings forecasts. is considered promising, but it consumes considerable
The sixth force is industrial consolidation, which has energy in manufacture from either electricity or natural
been and will be, an essential part of the E&P industry as gas and needs more technological breakthroughs or sig-
fields and assets change ownership. Where this ends, is dif- nificant tax incentives to become a commercial proposi-
ficult to predict. Over the next decade there will be further tion and wide-scale alternative.
consolidation and we can only guess at what might happen. We in E&P are in a dynamic profitable growth busi-
ness, which is capital intensive and requires high tech-
Impact of consolidation nology almost like space travel or the defence industry.
We face an exciting challenge and the interesting conflict
One serious concern about this industrial consolidation of meeting global hydrocarbon demand and the needs of
is that while it often represents a transfer of ownership of our various stakeholders. We will need to be as success-
fields and facilities, new prospects and acreage, it does ful in R&D and be as innovative as we have been so far
not always result in an increase in global hydrocarbon and should ensure we are not under-investing in research
OPEC bulletin 5/05

supply capacity. The transfer of company assets may be we need. This will be vital if we are to meet the needs of
beneficial in terms of efficiencies and gains to owners but society.

21
 Mega-projects
Newsline

detailed
Photo: Saudi Aramco

The Rabigh Integrated Refinery and Petrochemical Complex.

Saudi Aramco has detailed several energy On gas, Jum’ah said the focus was on will develop the existing 400,000 b/d refin-
projects being planned in the Kingdom. They expanding the provision of natural gas as fuel ery into an integrated refinery/petrochemical
are worth billions of dollars and many will and feedstock as well as a push into refin- complex that will include a world-scale, high
represent a huge investment opportunity for ing and petrochemical projects. The com- olefins FCC and ethane-based steam cracker
investors as well as contractors. pany plans to build another world scale gas together with downstream derivative units
In an opening address to the Saudi Mega processing plant in Khursaniyah for process- producing 2.4m tons per year of secondary
Projects 2005 conference held in Dammam, ing associated gas and also expand some of petrochemicals. The project is due on stream
Saudi Aramco President and Chief Executive the existing processing plants. in the third quarter of 2008.
Officer, Abdallah S Jum’ah, said that the mega- It also wants to build more facilities for The second project is a proposed 400,000
projects in oil, gas and refining/petrochemi- gas feedstock recovery and fractionation of b/d export refinery for which, Saudi Aramco
cals would offer “significant, unprecedented gas feedstocks, expand the gas and product Vice President of New Business Development,
investment opportunities and will be available pipelines to the twin industrial cities of Jubail Isam A Al-Bayat says, the company “has
to private sector investors.” and Yanbu, and supply fuel and feedstock to approached the international market, seek-
He said the projects were all linked to Saudi major gas-intensive petrochemical projects. ing investor interest.” The 400,000 b/d export
Aramco’s current strategy. For oil this is based On refining, Saudi Aramco wants to refinery would cost an estimated $4 billion
on “strong and increasing” demand for crude expand existing facilities to meet growing to $5bn and an initial public offering is envi-
around the world which means the company is domestic demand and integrate high-value sioned that would allow domestic investors
now “aggressively” expanding crude oil pro- petrochemical facilities with refineries. It also to own stock in the venture.
duction capacity with multiple mega projects. plans to build grassroots refineries again for The third project, Ras Tanura and Ju’aymah
“These projects are at various stages of domestic supplies and export products to Refinery and Petrochemicals, is similar to
planning, design and construction, with a emerging markets worldwide. the Rabigh project. Saudi Aramco is looking
total capacity of about 2.2 million barrels per There are three major refining projects at at the possibility of integrating petrochemi-
day,” he said, and would take maximum pro- various stages. The first is the Rabigh Inte- cals production with the Ras Tanura Refinery
duction capacity to almost 12m b/d, “thereby grated Refinery and Petrochemical Complex and Ju’aymah Industrial Area feedstocks. Ras
OPEC bulletin 5/05

consolidating the company’s leading role in launched in May 2004 between Saudi Aramco Tanura currently consists of a 325,000 b/d
the oil industry.” and Japan’s Sumitomo Chemical. This project hydro-cracking refinery and a 200,000 b/d

22
 Honour
for Saudi
Photo: Saudi Aramco

condensate splitter. The inte-

gration would include a large
ethane/naphtha-based cracker,
Aramco
an aromatics recovery complex,
and complementary downstream head
derivative units to produce new
secondary petrochemicals. The The President and Chief Executive of contribution to the Kingdom of Saudi Arabia’s
total cost is estimated at around Saudi Aramco, Abdallah S Jum’ah, has revenue needs and consistently promote the
$6bn. been named 2005 Petroleum Executive of development of the local economy.”
Other potential investment the Year by international energy information Energy Intelligence said that, since
opportunities include: the devel- service, Energy Intelligence. becoming Chief Executive in 1995, Jum’ah
opment of new conversion indus- He was chosen for the award in a confiden- had led the “far-reaching” expansion of Saudi
tries from petroleum-based ole- tial selection process by Chief Executives and Aramco’s downstream and gas businesses
fins and aromatics, such as other senior officials of the world’s leading and had transformed the company into a fully
carbon fibres; a power gen- oil companies, according to Thomas Wallin, integrated international oil and gas enterprise.
eration and distribution cen- President of Energy Intelligence. Jum’ah joins “Under his leadership, the company has
tre to support Saudi Aramco’s a list of leading energy industry executives refocused its strategic direction to maintain
southern-area facilities (which who have received the award in the past (see its position as the world’s premier energy
includes the Hawiyah Gas Plant table below). supplier while supporting the expansion and
NGL Recovery Project); divest- “It might be my name on this award,” diversification of Saudi Arabia’s economy with
ment of non-core company func- Jum’ah said, “but it is really a tribute to the a continued strong commercial orientation.”
tions, such as gas turbine repair hard work and efforts put in by all Saudi Jum’ah is the first executive in the perol-
and refined-products distribu- Aramco employees across the company as eum industry outside of Europe and the
tion. they strive, sometimes against great odds, Americas to receive the award, which will be
Al-Bayat said these plans to achieve the strategic direction we’ve set officially presented in September in London
represented “an unprecedented for our company to significantly increase our during the 26th Oil and Money Conference.
era of capital expansion” and
would require over $20bn to be
spent on materials and equip- Energy Intelligence Executive of Year
ment and $23bn on services
between now and 2010. The Past winners:
new projects will also create job 2004: Chairman of ChevronTexaco, David O’Reilly
opportunities for over 50,000 2003: Chairman and CEO of ExxonMobil, Lee Raymond
OPEC bulletin 5/05

engineers and over 70,000 work- 2002: President and CEO of ConocoPhillips, James J Mulva
ers in other disciplines. 2001: Chairman of Royal Dutch/Shell Group, Sir Mark Moody-Stuart
2000: Chairman and CEO of Total SA, Thierry Desmarest
1999: Chairman and CEO of Mobil Corp, Lucio Noto
1998: Chairman and CEO, Petroleos de Venezuela, SA (PDVSA), Luis E Giusti
1997: Group Chief Executive of the British Petroleum Co, Lord Browne of Madingley 23
 Libya unveils second bid round
Newsline

AP Photo

Ghadames, western Libya.

Libya’s National Oil Corporation (NOC) to sign EPSAs from any awards during the first Indonesia’s Medco Energy and Indian Oil
is inviting bids for 44 blocks in the sec- half of November. Corporation and Oil India — also received one
ond international licensing round since the Libya has previously said it wants to in- block per pair.
lifting of sanctions. Ten of the blocks are crease oil production capacity to 2.5 million
located offshore with the remainder dis- b/d by 2010 and possibly 3m b/d by 2015. Signs gas deal
tributed amongst Libya’s five major basins, In January, the NOC awarded 15 blocks in the
Cyrenaica, Ghadames, Sirte, Murzuq and first licensing round with the US’ Occidental Meanwhile, May saw the NOC and Shell
Kufra (see table). Petroleum and partners Woodside Petroleum Exploration and Production Libya announce
Any contracts awarded from this lat- of Australia and Liwa Energy of the United Arab a long-term agreement for a major gas explo-
est round will be governed by Libya’s Emirates (UAE) awarded a stake in nine of the ration and development deal. The contract
fourth Exploration and Production-Sharing 15 blocks on offer. follows an earlier heads of agreement signed
Agreement (EPSA IV). Bids have to be submit- Chevron and Amerada Hess received one between the two parties covering a long-
ted by October 2 and an opening ceremony will block each as did Algeria’s Sonatrach. Three term strategic partnership in the Libyan gas
OPEC bulletin 5/05

be held in public with the winners announced consortia — Brazil’s Petrobras and Australia’s sector.
at the end of the session. NOC said it expects Oil Search, Canada’s Verenex Energy and Shell said it will modernize and upgrade

24
 in brief
Available open acreage
Basin Area number Block number (sq km)

Offshore 2 1+2 4,650

3 2,010
17 NNPC approves Akpo field plan
4 2,535
40 3+4 4,540 The Nigeria National Petroleum Corporation (NNPC)
has authorized France’s Total, as operator, to start
44 1+2+3+4 10,290
development of the offshore gas and condensate
Cyrenaica 42
1+3 4,564 Akpo Field. Total has a 24 per cent interest along-
2+4 3,352 side NNPC, Petrobras and Sapetro. Discovered in
2000, the field is around 200 km offshore Port
94 1+2+3+4 10,001 Harcourt in water depths of between 1,100 and
1,700 metres. The development plan calls for 22
Ghadames 81
1 1,900
producing wells, 20 water injection wells and two
2 2,650 gas injection wells, tied back to a floating produc-
3 2,500 tion, storage and offloading vessel with a stor-
82 age capacity of 2m b. It will come on stream in
4 2,306
2008 with peak production at 225,000 barrels
Sirte 102
3 2,750 of oil equivalent per day (80 per cent conden-
4 2,750 sate) which will be piped to the Amenam/Kpono
platforms and from there to the Bonny lique-
121 2 1,830 faction plant.
1 2,750
123 2 2,000 Kuwaiti refining to rise
3 2,030
Kuwait’s refining capacity could reach over 1.2m
Murzuq 146 1 2,444
b/d by 2010 from 930,000 b/d at present, accord-
147 3+4 2,270 ing to the head of Kuwait Petroleum Corporation
(KPC) in a report from the state news agency KUNA.
1 2,750
161 Sami Fahd Al-Rashid said the company planned to
2+4 3,900 spend over $8bn on modernizing two of the coun-
3 2,750 try’s existing three refineries — Al-Ahmadi and
176 Mina Abdullah — and constructing a new fourth one
4 2,750 which would add 450,000–600,000 b/d of capac-
ity. Separately, KUNA reported that the Kuwait Oil
Kufra 171 1+2+3+4 11,000
Company (KOC) said oil reserves increased last year
186 1+2+3+4 8,400 by 818m b bringing the reserve total to 97.3bn b
with production reaching 2.4m b/d — a new record.
Gas production totaled 1.1bn cubic metres. KOC,
the report said, wants to increase oil production
capacity to 4m b/d by 2020 to meet an expected
the existing liquefied natural gas (LNG) plant acquisition of 2D and 3D seismic data rise in world demand.
at Marsa Al-Brega at a minimum cost of in 2005/06 followed by exploration and
$105m rising possibly to $450m which will appraisal drilling.
Oxy to develop Oman oil field
increase output from 0.7 to 3.2m tons per Shell’s Executive Director for Exploration
year. Depending on gas availability, Shell will and Production, Malcolm Brinded said: “We Occidental Petroleum Corporation of the US has
also jointly develop with the NOC a new LNG are delighted to be back in Libya and honoured signed a heads of agreement with the govern-
ment of Oman to develop the Mukhaizna oil field
plant. Marsa Al-Brega LNG is operated by NOC to work together with the NOC to develop a boosting production from the current 10,000 b/d
affiliate, the Sirte Oil and Gas Production and modern LNG industry and explore for and to around 150,000 b/d within the next few years.
Manufacturing Company with gas supplied develop gas in the prolific Sirte Basin.” Located in the centre of the country, the field was
discovered in 1975 by Petroleum Development
from the Sirte Basin. He added: “Libya’s integrated gas indus-
Oman. Occidental said it and its partner Liwa
Shell has also received exploration rights try has enormous potential, based on its large Energy Limited, owned by Mubdala Development,
to five blocks in the Sirte Basin covering resources and favourable geographic location. which is owned by the Government of the Emirate
20,000 sq km at a minimum commitment I look forward to our co-operation and believe of Abu Dhabi, planned to invest over $2bn in the
OPEC bulletin 5/05

project. It will involve implementing a large-scale

cost of $187m. The exploration programme that this is the beginning of a new lasting and steam flood to increase production and recover
will start immediately, Shell said, with the fruitful partnership with Libya.” around 1bn b of oil.

25
 OPEC/IEA hold
Newsline

third workshop

Executive Director of the President of the OPEC

IEA, Claude Mandil, said Conference and Minister of
there was a growing Energy for Kuwait, Sheikh
interdependence between Ahmad Fahad Al-Ahmad
the world’s major energy Al-Sabah, said the MENA
Reuters

consumers and the energy region offered tremendous

producing countries in MENA. economic opportunities.

A joint International Energy Agency and IEA Secretariats, as well as senior gov- was large and the region offered tremen-
(IEA)/OPEC workshop was held last month ernment officials from OPEC, OAPEC and IEA dous economic opportunities. The world’s
in Kuwait on the energy outlook in the Middle Member Countries, senior analysts from MENA largest consumers, he said, could facilitate
East and North Africa (MENA). This was the countries, international experts on MENA eco- the development of this potential, by offer-
third in a series of workshops that has seen nomic and energy analysis, and experts from ing stable markets and steady demand for
the dialogue and cooperation between these finance institutions. hydrocarbons from MENA countries, through
two Organizations further strengthen. The workshop included sessions on the the removal of unnecessary impediments,
The focus of this most recent workshop economic and energy outlook for the MENA duties and taxes.
was on both economic and energy supply region, as well as country perspectives of the
and demand prospects for the MENA region region’s energy demand and supply pros- Force for growth
which represents great economic, commercial pects. Presentations were made by interna-
and trade potential and is expected to play tional experts, as well as by representatives However, Al-Sabah told the meeting that
a growing role in world energy markets over from several OPEC member countries from the despite having some of the world’s largest oil
the coming decades. region. The workshop concluded with a panel producers and possessing almost three-quar-
The first two workshops, which took place discussion addressing implications for global ters of global oil reserves, the region had not
at the OPEC Secretariat in Vienna in June 2003 energy markets and sustainable development received the attention it deserved from plan-
and in Paris at the IEA Secretariat in April 2004, in the MENA region. ners, industry observers and international
concentrated upon oil investment prospects, In his opening address, President of the agencies responsible for ensuring balanced
in particular the outlook for oil and invest- OPEC Conference and Minister of Energy world economic growth.
ment challenges. for Kuwait, Sheikh Ahmad Fahad Al-Ahmad Executive Director of the IEA, Claude
Hosted by the Kuwaiti Ministry of Energy, Al-Sabah, said that the populations of MENA Mandil, said in his address in the opening ses-
OPEC bulletin 5/05

the third workshop was attended by a select countries were rising rapidly and were rela- sion that there was a growing interdependence
group of high-level delegates from the OPEC tively young; hence, the potential for growth between the world’s major energy consumers

26
 in brief
Trans-Sahara pipeline study

Algeria’s Sonatrach and the Nigerian National

Petroleum Corporation (NNPC) have signed an
agreement with a UK-based joint venture between
pipeline consultants Penspen and IPA Energy
Consulting for the latter to carry out a feasibil-
ity study on the Trans-Saharan gas pipeline. The
study which will last nine months will include:
market analysis; pipeline infrastructure require-
ments; establishment of gas supply sources;
project cost estimates; assessment of the policy
issues and institutional framework relating to the
project; economic and financial analysis; pipeline
route survey; project risk analysis; assessment
of environmental issues; and a regional benefit
study. The proposed 4,500 km pipeline would
run from Nigeria to Algeria’s Mediterranean coast
with a possibly capacity of up to 25bn cu m of
gas per year.

New Saudi oil field

Saudi Aramco has made a new oil discovery, the

Reuters

Halfa Field, in the Eastern Province of the Kingdom.

The Halfa-1 well flowed 6,000 b/d of Arabian Extra
Light crude oil (36° API gravity) and 4.2m cu ft/d
and the energy producing countries in MENA. we must seek to minimise through contin- of gas from an open-hole test conducted over the
Hanifa reservoir at a depth of 9,687 ft. The com-
“The world is becoming more and more ued cooperation and dialogue.” However, at pany said that based on test data analysis, the well
reliant on the vast, low-cost energy resources the same time as assessing the energy pros- was expected to flow at a significantly higher rate
of the region. The timely development of these pects, he said, “we should not lose sight of under normal production completion. Drilling is
continuing to evaluate the well’s deeper gas objec-
will benefit both parties in the producer-con- the very important alternative — and con- tives. The well is located around 320 km south of
sumer relationship. For consuming countries nected — focus of attention of the workshop. Dhahran and 280 km south-east of Riyadh.
the benefits are obvious: economic develop- This relates to the socio-economic needs of
ment cannot be achieved without energy and the region and the role that the international
SABIC profits rise
cannot be sustained unless the energy supply community can and should play in support-
is secure. From the producers’ side, develop- ing them.” Chemicals group Saudi Basic Industries
ment of their energy resources has the poten- Corporation (SABIC) has announced first quarter
2005 profits of Saudi rials 5.077bn ($1.354bn)
tial to act as a driving force for growth, stabil- Co-operation and dialogue an increase of 116 per cent over the same period
ity and prosperity.” last year and up eight per cent from the previous
Dr Adnan Shihab-Eldin, Acting for the The continued strengthening of co-operation quarter. The company said the increase was due
to greater productivity and higher prices for most
Secretary General of OPEC, said that the and active dialogue between OPEC and the IEA of its products. Production from SABIC affiliates
MENA region would “play a central role” in is viewed as an important element in helping during the quarter was 11.2m tons a rise of 12.4
future world energy supply and as a result, to improve the understanding of the concerns per cent over the 9.9m t seen a year earlier. Sales
were 8.3m t, up two per cent over the first quar-
oil prices must be at sufficiently robust lev- of all parties and is in line with the clear mutual
ter of 2004. Also last month SABIC signed a letter
els to support the required investment, “the interests of supporting oil market predictabil- of intent with Italy’s Technip for the engineering,
magnitude of which will not be dissimilar to ity and stability. A fourth joint OPEC/IEA work- procurement and construction of an ethylene and
what has occurred in the past.” shop, which will focus upon the oil demand propylene plant at the Yansab complex in Yanbu
OPEC bulletin 5/05

Industrial City. The plant will have a nameplate

He added that the investment challenge outlook, is planned for 2006, and is expected ethylene production capacity of 1.3m t/y and
would be complicated by uncertainties “which to be hosted by an IEA country. 400,000 t/y of propylene.

27
 Dolphin secures Dubai gas sale
Newsline

Reuters

The next stage of the Dolphin Energy transportation by sub-sea export pipeline of supply of natural gas. DUSUP will not only
gas project, which claims to be the largest up to 3.2bn cu ft/d of refined natural gas to be an important customer — as the strategic
single energy initiative ever undertaken in the United Arab Emirates (UAE). energy developer for the Emirate of Dubai,
the Middle East, has come a stage closer to The signing ceremony took place at the DUSUP will become a long-term partner. This
realization. Last month, the company signed Palace of the UAE’s Deputy Prime Minister agreement highlights Dolphin Energy’s com-
a long-awaited gas sales agreement with the and Minister of State for Foreign Affairs, mitment to meet the future requirements of
Dubai Supply Authority (DUSUP) to deliver His Highness Sheikh Hamdan Bin Zayed Al the UAE energy sector.”
future supplies of Dolphin gas from Qatar to Nahayan. He is also Chairman of Dolphin
Jebel Ali starting from 2007. The agreement Energy Limited. The agreement was signed by Clean energy
with DUSUP provides for the supply of up to Sheikh Hamdan on behalf of Dolphin Energy
700 million cubic feet/day of Dolphin natural and by the Chairman of DUSUP, HH Sheikh For DUSUP, Al Maktoum said: “We welcome
gas from Qatar for a period of 25 years. Ahmed Bin Saeed Al Maktoum. the opportunity to work with Dolphin Energy
The Dolphin Project involves the devel- Al Nahayan said: “With this important in meeting the growing need for clean energy
opment of natural gas reserves in Qatar’s agreement, Dolphin Energy confirms its com- in Dubai. This contract with Dolphin will ena-
OPEC bulletin 5/05

offshore North Field, processing onshore at mitment to meet DUSUP’s future requirements ble us to serve our market competitively and
Ras Laffan industrial city outside Doha and through a stable, clean and cost-effective efficiently.”

28
 in brief
Statoil spends $2bn in Golf of Mexico

Norway’s Statoil is buying EnCana Corporation’s

entire deepwater US Gulf of Mexico portfolio for
$2bn. The deal includes several discoveries and
exploration opportunities which could deliver
30,000 net barrels of oil equivalent per day by
2008-09 rising to over 100,000 net boe/d after
2012. The properties contain expected discovered
resources of 334m net boe and expected total
resources of over 500m net boe. The portfolio
includes an average 40 per cent working interest in
239 gross blocks covering 5,665 sq km. Central to
the deal is the Tahiti development in which Statoil
will hold 25 per cent working with operator Chevron
and where first oil is expected in 2008. There are
also several adjacent prospects with tieback options
into Tahiti, including Jack (25 per cent) and St Malo
(6.25 per cent) in the Walker Ridge Area. A pro-
duction test is due in 2006 and first oil in 2013.
At another discovery, Sturgis (25 per cent), in the
Atwater Valley, appraisal drilling is planned this
year. Statoil said a Tahiti-type development was
possible with first oil after 2011.

Petrobras hits new oil record

Brazil’s Petrobras produced a record amount of oil

in April with daily production averaging 1.704m b,
16.5 per cent higher than in the same month last
year and an increase of 14.2 per cent on the aver-
age for 2004 as a whole. The company said that
this new level of output meant it was on target to
guarantee Brazil’s self-sufficiency in oil by the end
of this year or early next. April’s monthly average
surpassed by more than 100,000 b the previous
monthly record which was 1.597m b in February
In October 2003, Dolphin signed long term Gas supplies to
2003 and by more than 210,000 b/d the average
gas sales agreements with two other major Dubai will start production for 2004.
customers, Abu Dhabi Water & Electricity in 2007.
Company and Union Water & Electricity
BP extends Egypt concessions
Company of Fujairah.
Dolphin Energy’s first project was the Al BP Egypt has extended two concessions in the
Ain to Fujairah Pipeline, which came on stream Gulf of Suez — the Merged Concession Agreement
(MCA) and South Gharib — by 20 years and 10
in January 2004. It supplies the Fujairah Water years, respectively. BP will invest at least $615m
and Power Plant on the UAE’s East Coast — over seven years in exploration and development
initially with natural gas from Oman, and sub- activities as well as renewing and upgrading the
existing facilities and infrastructure across the
sequently with Dolphin gas from Qatar.
Gulf of Suez. Operations in these two concessions
Dolphin Energy is owned 51 per cent by are conducted by Gulf of Suez Petroleum Company
Mubadala Development Company, on behalf (GUPCO), a 50/50 joint venture between BP
and Egyptian General Petroleum Corporation
of the Government of Abu Dhabi — and 24.5
OPEC bulletin 5/05

(EGPC). Production from the concessions amounts

per cent each by Total of France and Occidental to over 100,000 barrels of oil equivalent a day
Petroleum of the US. (boed).

29
 Kuwaiti women get the vote
Member Countr y Focus

Kuwait City — Kuwaiti women have

been granted the right to vote and stand
in elections, under a historic amend-
ment to the state’s election law that trig-
gered celebrations outside parliament,
according to Agence France Presse.
The Kuwaiti Prime Minister, Sheikh
Sabah Al-Ahmad Al-Jabir Al-Sabah, told
reporters in parliament that he planned
to name a woman minister.
“God willing, it will be soon. Now we
have the right to appoint women in the
government,” he said, adding: “Thank
God ... that women got their political
rights.
“I congratulate the women of Kuwait
for having achieved their political
rights.”
Kuwaiti women now join their coun-
Reuters

terparts from Gulf neighbours Qatar,

Oman and Bahrain in having the vote.
Kuwait’s women’s activist Roula
The amendment, which was final-
al-Dashti shouts for joy after
parliament passed the new law.
ized after several years of debate and
struggle by Kuwaiti women, passed by
a vote of 35 Members of Parliament
(MPs) in favour, including 14 ministers,
23 against and one abstention. The
OPEC bulletin 5/05

bill had been opposed by conserva-

tives.

30
 Arab women increase
MP presence
The number of women Members of
Parliament (MPs) in the Arab world has
almost doubled in the last five years,
according to a new report.
The International Parliamentary Union
(IPU) said 6.5 per cent of the region’s MPs
were women, compared with 3.5 per cent
in 2000.
Jordan, Tunisia and Morocco
contributed most, but the trend should
continue thanks to the recent Iraqi elections
(see picture).
However, the region is still well below
the world average, with several Gulf states
Reuters

having entirely male parliaments.

Iraq’s new cabinet
includes several
women.

The result, announced by Parliamentary Speaker, al-Dashti said, who clarified that she would stand for elec-
Jassem Al-Khorafi, was greeted with thunderous applause tion in 2007. “I’m starting my campaign as of today.”
from the public gallery who also sang Kuwait’s national Dashti said she was not concerned by the reference
anthem. to Shariah law.
Women activists and their supporters came out of Hard-line MP Waleed Al-Tabtabai said: “This vote is
parliament cheering the result, and singing and danc- against the will of the Kuwaiti people ... it aims at chang-
ing, while others were in disbelief. ing the identity of the society.”
“This is a historic moment. It’s difficult for me to Opponents had fiercely campaigned against wom-
speak,” activist Fatima Al-Abdali said, who was in tears. en’s suffrage on the grounds that Islamic teachings bar
“Today, it was a victory for democracy ... the day of com- women from participating in political life.
pleting democracy in Kuwait.” The amendment of Article 1 of the electoral law auto-
The final vote came after a nine-hour heated debate matically allows women to vote and run for both the
during which anti-women MPs tried to block the vote after municipal council and parliament.
realizing the government had a sufficient majority to pass The article, which dated back to 1962 and limited
the amendment. the right to vote to men, was deemed out of step with
But they succeeded in passing an addition to the the state’s constitution which stipulates equality of the
amendment requiring Kuwaiti women who take part in sexes.
the elections “to comply with regulations dictated by The amendment will increase the number of eligible
Islamic Shariah law”, without explaining the nature of voters in Kuwait from the current 145,000 males to more
OPEC bulletin 5/05

those guidelines. than 350,000 people, or 37 per cent of Kuwait’s native

“I am overexcited. I can’t believe this,” activist Roula population of 950,000.

31
 Saudi Arabia to liberalize banking on road to WTO
Member Countr y Focus

President Bush
greets Saudi Crown
Prince Abdullah

AP Photo
at his ranch in
Crawford, Teaxas.

Jeddah — Saudi Arabia will allow foreign investors to own eign investors in the capital of a bank to 60 per cent,”
60 per cent of the local banks’ capital instead of 49 per Al-Eqtisadiah said.
cent before the end of this year, according to a report last Saudi Arabia has enacted and updated a number of
month in the English-language daily Arab News. laws in recent years in its bid to join the world body. They
Arab News quoted the Al-Eqtisadiah business daily include opening up the insurance and telecom sectors
as saying that Saudi Arabia would take this step accord- for foreign investment.
ing to the requirements needed to become a member of A WTO agreement with the US is the remaining major
the World Trade Organization (WTO). hurdle before the Kingdom’s admission to the body. The
The official announcement of Saudi Arabia’s member- talks between Crown Prince Abdallah and Bush were
ship to the WTO would be made at the organization’s meet- instrumental in helping the Kingdom achieve its goal.
ing in Hong Kong in December, according to the report. At the time, the Saudi Arabian Minister of Finance,
The United States President, George W Bush, prom- Ibrahim Abd Al-Aziz Al-Asaf, expressed his optimism
ised last month after meeting Saudi Arabian Crown Prince about the Kingdom’s speedy WTO accession and said
Abdallah bin Abd Al-Aziz Al Saud at his Texas ranch that the remaining technical issues related to WTO agreement
Washington would support the Kingdom’s efforts to join with the United States could be resolved within weeks.
the WTO before the end of this year. Speaking to Saudi Television on the outcome of Crown
Saudi Arabia has 11 banks, out of which seven are Prince Abdallah’s meeting with Bush, Al-Asaf said the US
partially owned by foreign investors. The seven banks are assurance to help Saudi Arabia win WTO membership
Saudi British Bank, Saudi Hollandi Bank, Banque Saudi before the end of this year was a significant achievement.
Fransi, the Arab National Bank, Samba Financial Group, “We have reached an agreement on major topics
Bank Aljazira and the Saudi Investment Bank, with for- during our talks with the US Secretary of Commerce and
eign stakes varying between 31 and 40 per cent. Industry and the US negotiating team. Only technical
OPEC bulletin 5/05

“The Saudi and American negotiators have reached aspects are remaining which could be settled within the
an agreement last month on increasing the share of for- coming days or weeks,” Al-Asaf said.

32
Budget blow for Nigeria’s leader
Abuja — The Nigerian Senate has rejected plans by the “There is also a risk that the oil revenue windfall from
Nigerian President, Olusegun Obasanjo, to curb budget domestic crude oil sales would be distributed for spend-
increases for 2005 despite a warning by the International ing, as in 2004, which would greatly increase SLG spend-
Monetary Fund (IMF) to limit spending, the BBC has ing,” the IMF said.
reported. As a result, the implementation of the appropriations
An alliance of senators said government plans to bill, and distribution of much higher oil revenue to SLGs
unilaterally cut Nigeria’s 1.8 trillion naira ($13.6 billion) would lead to a sharp widening of the non-oil primary
budget was “illegal and unconstitutional”. deficit to 47 per cent of non-oil GDP (from 35 per cent in IMF Managing Director,
Last month President Obasanjo had signed a bill into 2004). Rodrigo Rato (l), after a
law sanctioning a 38 per cent jump in spending, compared “The significant expansion in domestic liquidity fol- bilateral meeting with
with 2004. But in May the President said his government lowing from such loose fiscal policy would reignite infla- Nigerian President
would not implement the 2005 budget in full. tionary pressures and undermine the achievements of Olusegun Obasanjo.
Members of Nigeria’s Upper House voted unanimously 2004,” the IMF said.

Reuters
to reject President Obasanjo’s plans to scale budget The lending body
spending back to 1.7tr naira. also said that any
“We would adjudge any review unacceptable to substantial increases
the National Assembly and the Nigerian people,” the in spending should
Chairman of the Senate Committee of Information, Tawa be matched with
Wada, said. “If he (the President) has to slash the budget, increases in effi-
the law has to be amended,” Senator Mukhtar Aruwa said. ciency.
“It is not for him to sit there and unilaterally slash the As for the 2006
budget without the law being amended.” budget, the IMF wel-
President Obasanjo originally submitted a budget co m e d N i ge r i a ’ s
proposal for 2005 of 1.685tr naira. plan to move to a
However, that figure was inflated to 1.8tr naira follow- more goals-oriented
ing six months of political wrangling between Nigeria’s approach to budg-
National Assembly and the government. eting by the minis-
During this time, the President sacked his Minister tries.
of Education for allegedly bribing politicians to increase “The budget
his budget. The scandal eventually led to the resignation office would set spe-
of the Senate President. cific spending lim-
Nigeria has come under international pressure over its within a medium-
its spending plans for the current year. term expenditure
In a recent report, the IMF described Nigeria’s budget framework. In addition, the mission recommends to
as “the greatest risk to macroeconomic stability.” also determine allocations to programmes within line
Specifically, the IMF said the 2005 appropriations ministries in order to permit a more meaningful functional
bill “implied a 52 per cent increase in federal govern- classification of the budget and improvement of infor-
ment spending financed by higher oil revenue, the use mation on budget execution at the level of the spending
of half of the 2004 savings of oil revenue windfall, sales units,” the IMF said.
of government assets, and privatization receipts.” The lending body said that expenditure tracking
Higher oil revenue would result from the increase in surveys would help identify “useful improvement in
the budget reference oil price, from $25 to $30 per barrel, financial management, monitoring and institutional
which the IMF said appeared to be too high “because of arrangements.”
underestimated cost offsets against companies’ petro- The IMF also said it welcomed the creation of a
OPEC bulletin 5/05

leum profit tax liabilities, which increases the resources poverty monitoring and tracking unit to ensure that the
available to state and local governments (SLGs). allocated resources reached their intended purposes.

33
 Polio cases spread in Indonesia
Member Countr y Focus

Polio vaccination rates across Indonesia as a whole

stand at about 90 per cent, but in western Java the rate
has been around 55 per cent.
Authorities have now launched a drive to immunize
five million children in the area.
Reuters

DNA tests done on a viral sample from one of the

infected children has determined that the polio arrived
Indonesian mothers wait London — Four young children in Indonesia are now in Indonesia from Nigeria, via Saudi Arabia.
for polio vaccinations confirmed to have polio, in the country’s first outbreak Experts suspect the strain could have been carried
with their children in in a decade, the BBC reported. by migrant workers or pilgrims visiting Muslim holy sites
Sukabumi, West Java. Officials said other suspected cases, all of which have in Saudi Arabia.
been recorded in the same area of West Java province, The disease has all but disappeared in the devel-
were still being investigated. oped world, but it is still endemic in Nigeria, a problem
The World Health Organization (WHO) has called on that was made worse in 2003 when rumours were spread
Indonesia — which generally has good vaccination cov- that the polio vaccine had been contaminated to make
erage — to step up its campaign. people infertile.
Officials have said they were confident they could Until the middle of last century, when a vaccine was
prevent a major outbreak. discovered, polio was endemic across the globe, and the
Polio is a waterborne disease which usually infects international campaign for universal vaccination has been
young children by attacking the nervous system. It causes one of the great successes in the fight against disease of
paralysis and muscular atrophy, and there is no cure. recent years.

US ‘blocking Iran plastics deal’ — INPC

London — Iran’s National Petrochemical Company (INPC) officials had raised objections. US firms face trade sanc-
said last month that it was being excluded from buying tions if they import Iranian goods.
a major Dutch plastics maker by political pressure from Basell is the world’s biggest maker of polypropylene
the United States. and its US customers are worried about the implications
Polypropylene maker Basell is being sold by its joint of an Iranian deal, according to Reuters and the Wall Street
owners, Shell and chemicals giant BASF of Germany. Journal.
INPC has been “unofficially told Iran cannot buy US sanctions date back to tensions following Iran’s
Basell,” the Islamic Republic News Agency (IRNA) cited 1979 Islamic Revolution.
the firm’s boss as saying. But diplomatic tensions with the US and Europe are
A Shell spokeswoman in London reportedly said the currently escalating over Iran’s nuclear programme, mak-
Basell negotiations were confidential. She declined to ing a change of policy unlikely.
OPEC bulletin 5/05

confirm whether the Iranian firm was among the bidders “Shell and BASF announced that we had an intention
being considered, or comment on press reports that US to review strategic alternatives for Basell in July 2004.

34
Offers for the company have been received and advanced the Iranian firm’s Managing Director, Mohammed Reza
discussions have taken place,” the Shell spokeswoman Nematzadeh, as saying.
said. An Indian firm, Haldia, is now poised to win the bid-
“We are bound by commercial confidentiality and I ding for Basell, the Wall Street Journal reported. Haldia
cannot give you any further comment.” is backed by two New York-based financiers, Chatterjee
A deal to sell Basell for €4.4 billion ($5.7bn) is report- Group and Access Industries.
edly close to completion. Its products are used in every- The US is “concerned that Basell is a very large mul-
thing from plastic bottles to car parts. tinational with a high degree of technology and Iran is
“Although INPC won all aspects of the Basell tender, state sponsor of terrorism and a proliferator,” Reuters
due to US pressures, we cannot buy Basell,” IRNA quoted cited a US State Department official as saying.

UAE plans new telecom company

Sharjah — Tough competition is expected in the monop-
olized telecom sector of the UAE following a government
decision to license a new company with a capital of four
billion dirhams, according to the English-language daily
Arab News.
Until now, the government-controlled Emirates
Telecommunications Company (Etisalat) was the only
operator in the sector. The state owns 60 per cent of
stakes in Etisalat and UAE citizens own the rest.
The state pension and social security fund and other
private investors will hold a 40 per cent stake in the new
entity, which is expected to be operational early next year.
According to the Director General of the Telecommuni-
cations Regulatory Authority (TRA), Mohammad Al-Ganem
— which approved the decision in May — the new company
would be a local entity with local investment and there
would not be any foreign investors at the launching stage.
“The new company will be based exactly on the model
of Etisalat and it will be a purely local investment venture,”
Al-Ganem was quoted as saying in the local press.
“At this stage there will be no foreign company
involved.”
The license agreement is expected to be signed before
August this year. Other details are yet to be finalized.
For years, it has been argued that the UAE should
open up its telecom sector for a second GSM operator.
The UAE Minister of State for Finance and Industry
and Chairman of TRA, Hamdan Bin Rashid Bin Said Al
Maktum, said licensing a second telecom operator was
the first step in the liberalization of the sector.
“We will create the fertile ground and environment for
all telecom companies in order to achieve their aspired
Reuters

goals in the short and long term,” he told the official UAE
news agency, WAM.
A man speaks on his mobile phone at Dubai’s Etisalat.

35
 Qatar to host
G77 summit in June 15–16, a senior Qatari official said last month, according
to a report in the English-language daily Arab News.
“Around 60 heads of state and a large number of
heads of government and ministers will attend the big-
gest global summit to be held in the Middle East,” Qatar’s
Assistant Foreign Minister, Mohammad Al-Rumaihi, told
reporters.
The heads of state will get together on June 15–16,
but their summit will be preceded by preparatory meetings
of foreign ministers and other senior officials, he said.
Qatar expects to host more than 5,000 people
between June 10 and 17 in connection with the summit,
including some 1,500 participants, 3,000 aides and body-

Qatar Tourism Authority

guards and 800 journalists, Al-Rumaihi said.
The deliberations will focus on “strategic issues of
concern to the South ... the main goal is to promote devel-
opment and tackle problems which hamper (economic
growth) in member states,” he said.
The summit will also look into trade within the group
and relations with the North, the Qatari official said.
Doha — Some 60 heads of state and many prime minis- He added that Blair would address the summit on
ters, including Britain’s Tony Blair, will attend the second behalf of the Group of Eight industrialized nations to
Group of 77 and China South Summit in Doha on June explain his proposals to solve debt problems.

Saudi Arabia loosens control on

citizenship laws
Jeddah — The Interior Ministry’s Agency for Civil Affairs in Applicants must have stayed in the Kingdom for not
Riyadh will start accepting citizenship applications from less than ten years. They must accumulate a minimum of
May 23 for foreigners who qualify, an official statement said. 23 points to qualify in the first stage of the process. Those
The statement released said aspirants holding doc- with doctorates get 13 points in addition to 10 points for
torates would get preferential treatment, according to a a 10-year continuous stay.
report carried by the English-language daily Arab News. Applications of those holding master degrees and have
“Applications of those holding doctorates in medi- family connections with Saudis would be accepted from
cine, engineering and other sciences will be received from June 11–29, provided they have accumulated 23 points.
May 23 to June 8,” the statement said. The date for submitting applications by bachelor
According to the BBC, thousands of foreign residents degree holders is from July 2–20; candidates should have
in Saudi Arabia started queuing to apply for Saudi citi- obtained at least eight points from a family relationship.
zenship on hearing the news. Qualified women can submit their applications
Large crowds built up outside government offices in through legal agents conforming to the same principles.
several Saudi cities as people scrambled to get hold of The agency said it would not accept re-applications
OPEC bulletin 5/05

forms to apply for citizenship. In some places, the forms from candidates whose applications were rejected ear-
ran out early. lier unless they acquired at least eight points.

36
Libya grapples with unemployment
London — After many years when the entire popula-
tion officially had jobs, Libya is now trying to tackle a
growing unemployment problem, as it moves towards a
more liberal economy, according to the BBC in a report
last month.
Socialist ideology remains deeply entrenched in the
mindset of many Libyans, where officials are currently
struggling to define unemployment and to find solutions
for its jobless citizens.
Official estimates say 13 per cent of Libyans are unem-
ployed. With a local population of 5.5m people, half of
whom are under 20, this is an alarming figure and one
that calls for solutions. The government recognizes that
there is a problem.
Libya’s Prime Minister, Shokri Muhammad Ghanem,
told the BBC that unemployment was one of the coun-
try’s highest priorities on its list. He said there are many
reasons why the problem has emerged.
“There are so many factors, among them (being that),
at certain period in time, Libya’s schools and universities
unfortunately stopped teaching English for a long time,
which affected the abilities of Libyans to work for foreign

Reuters
companies and also their ability to comprehend what’s
(going on) around them in this world.”
The Prime Minister added that some foreign com- eigners had gone to Libya to do the work locals refused to do.
Libya’s Prime Minister,
panies had violated the mandatory quotas for Libyan Gaddafi’s Green Book emphasizes the need for “part- Shokri Muhammad Ghanem.
employees, and that the government seemed to have ners, not wage-workers” and describes wage-workers as
been relaxed in implementing the laws and regulations “a type of slave”.
in that regard. This ideology presents a conflict with the principles of
But Ghanem said the government was committed to a free market economy to some, but to others, like Zaidi,
addressing the problem. “First of all there’s a crash pro- this is the way forward for Libyan society.
gramme in training, and training in (the) English language, “We believe in ‘partners, not wage-workers’ and we
both locally and abroad,” he said. “Secondly, trying to are calling for a free society,” he said.
implement the laws we have, and thirdly, to encourage “That’s why you can see in Libya some who are not
Libyanisation in foreign companies.” implementing the principles of the Green Book of the
But unemployment in Libya is different from unem- Revolutionary Committee movement. Maybe they don’t
ployment in the rest of the world, because in the past agree with it and feel its wrong. We are not forcing them
everyone expected a job in the state sector, according to be partners with a stick, that’s not the way it works.”
to the Foreign Affairs Co-ordinator of the Revolutionary Although the principles outlined in the Green Book are
Committee, (a body to promote Libyan leader Moammer enshrined in Libyan law, Zaidi hinted this could change.
El Qaddafi’s ideology), Mustafa Al-Zaidi. “We raise our points in front of the people’s con-
“Previously, everyone who graduated from high gresses and individuals, if they accept it as a policy, it
school or universities was employed by the state,” he said. will be a law; (the) people will choose,” he said.
“Of course now the state is overcrowded by employees.” Zaidi went on to stress that the Revolutionary
OPEC bulletin 5/05

He added that some Libyans would only work in admin- Committee movement did support privatization, but not
istrative and managerial jobs and said that three million for- in a capitalistic way.

37
 OPEC Fund Loans and Grants
Improving aid efficiency
Harmonizing aid goals

Delivering aid is not an easy task, the primary concern being whether the The OPEC Fund for International Development has been in
money ends up being used prudently, or for its intended purpose. the aid business for 29 years now, and knows the issues
Essentially, every aid agency that has been in the business for a long involved in building partnerships for development, which
happens to be one of the eight United Nations Millennium
time knows the issues concerned when it comes to the effective manage-
Development Goals (MDGs).
ment of aid deployment, which involves many partners and parties, and
Part of the challenge in building effective partnerships
crosses many geographic and cultural boundaries.
includes the harmonization of aid goals, which is the cur-
The issues can be challenging and complex, and the harmonization of rent buzzword in development circles since the meeting
aid goals between donors, agencies and countries can be difficult when the on Joint Progress Toward Enhanced Aid Effectiveness was
same processes, or reporting procedures are not followed in every case. held in Paris in March.

— the eight millennium development goals — the eight millennium development goals — the eight millennium development goals —

Eradicate extreme poverty and hunger Achieve universal primary Promote

education
OPEC bulletin 5/05

38
 Partnerships for development

The high level forum addressed the issues of own- Accordingly, the OPEC Fund Director-General, Suleiman
ership, harmonization, alignment, results and mutual J Al-Herbish, recently undertook two important visits to
accountability of development aid. Egypt and Yemen to reinforce the Fund’s relationship with
In the closing statement, it was agreed that “aid effec- the countries, review ongoing operations and discuss
tiveness must increase significantly … to support partner further co-operation.
country efforts to strengthen governance and improve In Egypt, the OPECFund has supported the development
development performance.” process in the public and private sectors. Financial assist-
In order to enhance partner country efforts, especially ance amounting to more than $102 million has been given
in light of the MDGs, it is essential that all aid donors for public sector projects in the fields of energy, agricul-
maintain close contact with beneficiary countries. ture, education, health and national development banks.

the eight millennium development goals — the eight millennium development goals — the eight millennium development goals — th

gender equality and empower women Reduce child mortality

Photos: Reuters
OPEC bulletin 5/05

39
 While in Egypt, Al-Herbish had a working meeting Fund delegation was warmly welcomed on both occasions
OPEC Fund Loans and Grants

with the Egyptian Minister of International Co-operation, and thanked for its long standing support to the country,
Fayza Aboulnaga, as well as with a number of ministers which began in 1976, the year of the institution’s estab-
and representatives from the private sector. He also met lishment.
with the Secretary-General of the League of Arab States, Both the President and the Prime Minister priori-
Amre Moussa, with a view to strengthening mutual co- tized vocational training, sanitation, agriculture, power
operation regarding development projects in the Arab and education as areas of special focus in the country’s
region as a whole. development plan.
In Yemen, the Fund has extended development financ- Al-Herbish assured the leaders of continued sup-
ing totalling over $177m to the country. This sum includes port, noting that Yemen was always accorded the utmost
balance of payments support as well as co-financing for importance in the Fund’s lending programmes.
projects in a wide range of sectors. “Yemen’s priorities are the Fund’s priorities,” the
Yemen has also benefited from diverse grants for Director-General said.
regional programmes in the areas of health, social devel- These types of co-operative visits are essential for
opment and education, as well as emergency assistance serious aid and development issues to be tackled and
for flood victims. for the streamlining of international efforts to address
Al-Herbish met the President of Yemen, Ali Abdullah some of the most pressing needs which affect develop-
Salah, and the Prime Minister, Abdulquader Bajamal. The ing countries.

— the eight millennium development goals — the eight millennium development goals — the eight millennium development goals —

Improve Ensure environmental sustainability Develop a

maternal health
OPEC bulletin 5/05

40
 Stronger support for MDGs to share the benefits of globalization; indeed they face
further marginalization from the main world economy.”
As far as the MDGs are concerned, Al-Herbish recently Al-Herbish called for greater co-operation among all
spoke at the 32nd International Energy Conference of the stakeholders in the development process.
International Research Center for Energy and Economic “The diverse difficulties of today cannot be resolved
Development in the USA where he called for stronger politi- by any single government or development agency, acting
cal will to push forward global poverty eradication efforts alone,” he said.
and help developing countries achieve the MDGs. The OPEC Fund, he asserted, was fully committed to
“The political will to shift from dialogue and consen- working with others to fight poverty and inequality.
sus-documents to action remains key to transforming the The Director-General went on to emphasize the com-
vision of sustainable development into reality,” he said. mitment of the OPEC Fund’s Member Countries to global
Recalling the many pledges made by the international social and economic progress, citing the pledge made at
community to sustainable development since the first the First OPEC Summit of Sovereigns and Heads of State in
Earth Summit in Rio de Janeiro, Brazil, in 1992, Al-Herbish 1975 and reaffirmed 25 years later at the Second Summit
noted the lack of concrete progress in many areas. in Caracas, Venezuela in the year 2000.
“Issues of growth with equity have remained largely “The resolve of OPEC Fund Member Countries (to live
unresolved,” he stated. up to the Fund’s mandate) is as strong today as it ever
“The world’s poorest countries have not been able was,” he said.

the eight millennium development goals — the eight millennium development goals — the eight millennium development goals — th

global partnership for development Combat HIV/AIDS, malaria and other diseases

Photos: Reuters
OPEC bulletin 5/05

41
 M a r c h
Market Review

This section is based on the OPEC Monthly Oil Market Report

published in mid-April by the Research Division of the Secretariat,
containing up-to-date analysis, additional information, graphs and
tables. The publication may be downloaded in PDF format from
our Web site (www.opec.org), provided OPEC is credited as
the source for any usage.

Crude oil price movements Coast. Market bullishness was further enhanced upward momentum in March, rising through to
by the hefty fall in US product inventories of the third week to a peak of $51.76/b. Following
gasoline, distillates and heating oil. Accordingly, a downtrend in late March, the Basket turned
OPEC Reference Basket1 the Basket rose $1.72 or 2.8 per cent to settle upward again in early April, pushed higher by
The Basket started off strong in March, con- at $50.13/b. With US crude oil stocks at three- an investment bank report predicting that oil
tinuing the upward movement seen in the last year record highs and OPEC discussing a further prices were in a ‘super-spike’ period that could
two decades of February. Deteriorating arbi- output increase of 500,000 b/d, the market see prices reach as high as $105/b over the
trage economics for western barrels headed eased. However, a tragic refinery blast in the next few years. Accordingly, the Basket jumped
east enhanced the bullish sentiment in Asia USA added concern over a shortfall in refined to an all-time high of $52.93/b. Nevertheless,
while lower programmes for March loading in products and pushed the weekly Basket price this bullish momentum was short-lived and
the Mediterranean and tight gasoil and heat- up 59¢ or 1.2 per cent to a new record high of by the end of the first week in April, prices
ing oil in Europe gave a further boost to market $50.72/b. Despite slimming demand in Europe had eased on healthy crude stock-builds in
sentiment. Continued concern over high global due to April maintenance and another hefty the USA amid consideration of a second OPEC
demand amid downstream bottlenecks also build in the US crude oil stocks, continued con- output increase. The Basket closed the first
pressured prices. As a result, the Basket’s weekly cern over the hefty draw on gasoline inventories week in April at $49.94/b, with a weekly aver-
average gained $2.63 or nearly six per cent to ahead of the driving season supported prices. age of $49.16/b, while the month-to-date price
stand at $46.58/barrel. The arbitrage situation Although the Basket saw a healthy rise in the reached $52.05/b, an increase of $2.98 over the
hindered Russian crude from heading east, leav- last day of March, the final weekly average was March average.
ing indisposed cargoes to pressure the regional down a hefty $1.56 or over three per cent to
market. A continued cold snap in the Western settle at $49.16/b (see Table A). US market
hemisphere combined with an upward revi- On a monthly basis, the Basket registered Crude oil prices strengthened towards the
sion to US Energy Information Administration’s a strong surge in March, gaining $7.40 or 17.75 second half of February with March beginning
(EIA’s) demand projection spurred a revival in per cent over the previous month to settle on a bullish note with concern over the restart
the futures market. The prospect that demand at $49.07/b. This was due in part to the pro- schedule of the Chevron/Texaco’s Petronius
could outpace supply sent the Basket surging longed late winter cold snap in the USA and an field in the Gulf of Mexico. A refinery glitch in
close to $50/b to close the second week with upward revision in world oil demand at a time the US Gulf Coast added to concern whether
an average of $48.76/b for a rally of $2.20/b or when additional OPEC supply was seen as not gasoline stocks would build to sufficient levels
4.7 per cent. While continuing to suppress the being sufficient to meet the expected surge to meet summer demand while arbitrage was
regional market, freight rates supported sen- in demand. The March Basket stood $17.02/b somewhat closed for the flow of transatlantic
OPEC bulletin 5/05

timent across the Atlantic and Asia. This was higher than the same period last year. The daily barrels. Hence, WTI surged in the first week
furthered by another cold snap in the US East Basket price continued the previous month’s by an average of $2.36/b while the WTI/WTS

1. An average of Saharan Blend, Minas, Bonny

Light, Arabian Light, Dubai, Tia Juana Light
and Isthmus.
42
spread narrowed a slight 7¢ for a weekly aver- Table A: Monthly average spot quotations for OPEC’s Reference Basket
age of $4.87/b. Prices eased in the second week and selected crudes including differentials $/b
before planned maintenance at the Mars plat- Year-to-date average
form revived supply concerns. The WTI/WTS Feb 05 Mar 05 2004 2005
spread widened slightly to $4.90/b on contin- Reference Basket 41.68 49.07 30.75 44.08
ued tight transatlantic arbitrage activities due Arabian Light 40.10 46.85 30.32 42.13
to the narrow WTI/Brent spread. Consequently, Dubai 39.35 45.60 29.50 41.27
the WTI weekly average surged $1.85 in the sec- Bonny Light 45.43 53.15 31.71 47.96
Saharan Blend 45.44 52.59 31.90 47.87
ond week to close at $54.03/b. While mainte-
Minas 44.56 54.30 30.74 47.69
nance delays on the Mars platform pressured
Tia Juana Light 36.77 43.50 29.17 39.04
sour differentials, the lack of light sweet rival Isthmus 40.08 47.52 31.93 42.57
West African crude due to poor arbitrage with no Other crudes
sign of emerging westbound barrels pushed the Brent 44.87 52.60 32.03 47.58
WTI to peak at $56.88/b for a weekly average WTI 47.69 54.09 35.29 49.83
of $55.51/b. Hence, the WTI/WTS spread wid- Differentials
WTI/Brent 2.82 1.49 3.26 2.25
ened to $5/b. The impact of the OPEC decision
Brent/Dubai 5.52 7.00 2.53 6.31
to add 500,000 b/d to the market at the Meeting
in Isfahan followed by another possible output rates and slipping refinery margins added fur- premium in the first week. Closed arbitrage sup-
increase of 500,000 b/d, was diminished by an ther downward momentum to differentials in ported Mideast differentials on the tight flow of
explosion at BP’s 470,000 b/d-refinery in Texas North Sea crudes at a time when absolute prices western crudes. Bullish European demand for
City, which turned out to be more of a tragedy were rising. Although Dated Brent surpassed products, which limited the outflow of arbitrage
than damaging to the infrastructure. However, WTI late in the month following stock-builds cargoes, supported the market sentiment in
the psychological effect placed alertness in the in the USA, weak price differentials remained Asia on demand from China. Hence, the Oman
marketplace amid tight gasoline stocks. While through March sustaining the contango market premium in May escalated further to 25–28¢/b
the industry worried that higher OPEC produc- ahead of spring refinery maintenance. Dated to MOG in the second week. Moreover, healthy
tion would result in reduced spare capacity, Brent peaked in March at an all-time high of refining margins supported Abu Dhabi distil-
growing US crude stocks at 309 million barrels $55.72 to close the month at $52.49/b for a late-rich Murban to trade in the third week at
(m b) for the week closed March 18, the high- gain of $7.62 or 17 per cent over February. a healthy premium of $1.15/b to ADNOC’s offi-
est level since July 2002, helped to ease con- While prices followed suit in the cial selling price (OSP). Oman was assessed
cerns, as did the prospect that China’s energy Mediterranean on rising global demand, dif- at a lower premium of 12–23¢/b in the third
appetite could have some limits. WTI slipped, ferentials declined on larger programmes and week, before a late snap of May barrels boosted
with the weekly average down $1.11 to settle at not-so-tempting refining margins. The senti- the premium to 30¢/b to MOG. Healthy refin-
$54.40/b. The final days in March saw a con- ment further weakened on closed arbitrage for ing margins continued to support Abu Dhabi
tinuation of the downtrend as refiners stayed outbound rival Russian Urals. Nonetheless, the Murban, while scheduled maintenance on some
on the sidelines amid high outright prices and opening of inter-continent arbitrage depressed oil fields in May and June supported trade at a
further US stock-builds of 5.4m b. The WTI/ differential further in the Mediterranean while premium of $1.40/b before slipping to $1.20/b
WTS spread widened $1.05 to $6.05/b. The more northern barrels flowed south. The Brent/ in the final days of March.
WTI average price for March was $53.91/b for Urals spread average in March stood at $5.44/b,
a gain of $6.22 or 13 per cent over February. nearly $1/b wider than the February average. Asian market
Moreover, the prospect of more OPEC barrels On the regional front in Asia, the market
European market added to the burden on the sweet/sour spread began the month strengthened by healthy
In Europe, the market emerged on a stronger in the Mediterranean at a time when Iraq’s demand for sweet grades with Malaysia’s April
note with differentials firming in both the north Basrah Light was flowing at a steady rate. Tapis sold at a $1.50/b premium to the APPI
and the south on healthy demand. Despite the quote. This sentiment was underpinned by the
closed arbitrage, dwindled availability kept Far East market lower operational rate at Japan’s TEPCO which
bears hibernating. However, the larger monthly Mideast crudes performed stronger in Asia usually requires more sweet crude for direct
programme for April weakened average refin- with May-loading Oman showing a premium, burning thermal plants. Hence, Indonesia April
OPEC bulletin 5/05

ery margins further amid a narrowing of the on bid at 10¢/b and on offer at 18¢/b to MOG, Centa and Minas were heard bought at strong
arbitrage window. The continued rise in freight which continued to strengthen selling at a 22¢/b premiums of $2.05 and $1.40 to Indonesian

43
 Crude Pricing (ICP). Nevertheless, high out-
Market Review
Table B: Selected refined product prices $/b
right regional crude prices and rising differen-
tials made West African crude more attractive Change
Jan 05 Feb 05 Mar 05
Mar/Feb
to Asian refiners. With benchmarks set at the
highest level on record, Asian regional crude US Gulf (cargoes)
came under pressure. However, the procure- Naphtha 50.86 48.69 59.70 11.01
Premium gasoline (unleaded 93) 53.58 53.02 64.61 11.59
ment of local grades by Asian majors helped to
Regular gasoline (unleaded 87) 52.58 52.11 62.64 10.53
boost demand for regional crudes. Continued Jet/kerosene 56.12 56.20 65.78 9.58
high prices encouraged North-East Asian Gasoil (0.2% S) 53.34 54.67 63.81 9.14
refiners to opt for cheaper alternative crudes. Fuel oil (1.0% S) 31.33 31.26 34.72 3.46
Although premiums lost momentum, May Tapis Fuel oil (3.0% S) 26.79 27.24 30.59 3.35
was on offer at around $1.10/b, enhanced by Rotterdam (barges fob)
the scheduled maintenance at the Tapis field Naphtha 51.32 54.49 62.33 7.84
which prevented a further tumble at month- Premium gasoline (unleaded 95) 47.84 49.96 56.03 6.07
end. Persistent demand from Japan’s TEPCO Regular gasoline (unleaded) 47.72 49.69 55.94 6.25
supported the spread for regional sweet grades, Jet/kerosene 55.05 58.05 68.81 10.76
Gasoil (0.2% S) 51.92 54.31 64.60 10.29
such as Duri and Minas for May loading which
Fuel oil (1.0% S) 26.68 27.78 34.06 6.28
were on offer at a premium of $1.50 and $2.00 Fuel oil (3.5% S) 23.54 25.48 30.09 4.61
to ICP.
Mediterranean (cargoes)
Naphtha 41.69 44.26 51.34 7.08
Product markets and Premium unleaded (0.15g/l) 45.80 48.33 54.20 5.87
Premium gasoline (unleaded 95) 45.72 48.28 54.23 5.95
refinery operations Jet/kerosene 52.75 55.65 66.66 11.01
Gasoil (0.5% S) 51.04 53.64 63.65 10.01
Lingering cold weather in the US Northeast Fuel oil (1.0% S) 28.69 29.59 35.31 5.72
and North-East Asia, coupled with planned and Fuel oil (3.5% S) 21.80 24.79 29.07 4.28
unplanned refinery maintenance across the Singapore (cargoes)
globe and the unexpected drop of US gasoline Naphtha 41.34 44.61 50.74 6.13
stocks in March, switched market sentiment Premium gasoline (unleaded 95) 47.57 54.27 59.47 5.20
in favour of product developments. This situa- Regular gasoline (unleaded 92) 46.87 53.70 58.72 5.02
Jet/kerosene 51.10 54.54 66.33 11.79
tion sparked fears of a gasoline supply crunch
Gasoil (0.5% S) 51.26 55.74 67.24 11.50
during the US driving season and has over- Fuel oil (180 cst 2.0% S) 28.08 30.35 34.13 3.78
shadowed bearish developments in the crude Fuel oil (380 cst 3.5% S) 26.61 29.28 33.61 4.33
market, including stock-builds in the USA and
resulting in aggressive fund-buying as well as persisting, particularly in the USA and Asia, but US market
record-high prices both for crude and products given increased arbitrage cargoes to the USA US gasoline stocks dropped by about 12m
(see Table B). and the higher refinery utilization rates, the b over the last weeks of March. This drop was
Due to soaring prices across the barrel, product markets may lose part of their earlier due to higher demand, lower production and
the crack spread of premium products against strength. However, due to limited effective refin- a decline in imports. On April 1, the four-week
benchmark crudes widened significantly in ery spare capacity, especially in the USA, the average of US gasoline demand had risen by 1.5
March, and refinery margins improved in the product market is exposed to refinery glitches per cent compared to the same period last year,
same month. In the USA, margins soared to and could again affect crude prices. and that has hiked the gasoline crack spread
$3.28/b for WTI crude, up from $2.02/b in In March, the refinery utilization rate in versus benchmark crude WTI to exceed $12/b
February. In Singapore, refining margins rose the USA increased marginally to 90.2 per cent recently from about $1/b at the beginning of
18 per cent, while in north-west Europe they from 89.5 per cent in February. In Europe and March. The bullishness in the gasoline market
were not able to outpace the benchmark’s per- Japan, the utilization rate dropped by 11.4 per was also fueled by refinery outages in Texas
formance and declined to $2.54/b from $2.99/b cent and 10.7 per cent respectively, while in and Venezuela and more fund activities in the
OPEC bulletin 5/05

in the previous month. Singapore it surged 2.2 per cent compared to futures market.
The new trend of the product markets is still the previous month. Similarly, continued strong demand for jet

44
 Table C: Refinery operations in selected OECD countries

Refinery throughput m b/d Refinery utilization per cent1

Jan 05 Feb 05 Mar 05 Mar/Feb Jan 05 Feb 05 Mar 05 Mar/Feb
USA 15.30 15.01 15.14 0.1 91.2 89.5 90.2 0.8
France 1.81R 1.70 1.70 0.0 92.9R 86.9 86.9 0.0
Germany 2.36R 2.27R 2.26 0.0 101.7R 97.6R 97.3 –0.3
Italy 1.83R 1.85R 1.81 0.0 78.6R 79.8R 78.1 –1.6
UK 1.65R 1.62R 1.60 0.0 90.6R 88.5R 87.7 –0.8
Eur-16 12.49R 12.31R 12.12 –0.2 90.0R 88.7R 87.3 –1.3
Japan 4.31 4.42R 3.92 –0.5 91.6 94.0R 83.3 –10.7
1. Refinery capacities used are in barrels per calendar day. R Revised since last issue.
Sources: OPEC statistics, Argus, Euroilstock Inventory Report/IEA.

fuel and diesel strengthened the distillate mar- In addition to the gasoline market, demand chemical plants and higher exports from India.
ket and its spread against WTI, further extend- for middle distillates in Europe, especially in the Following the replacement of naphtha feedstock
ing the upward trend. Over the last four weeks Mediterranean area, was also strong. Among the by LPG, Indian refiners increased their naphtha
of March, distillate demand in the USA surged different grades of middle distillate products, exports up to 20,000–25,000 t/month.
by seven per cent on average compared to the the performance of jet-kerosene was excellent The fuel oil market in Asia has done well
same period of last year. However, with the start with prices reaching a record-high. This situa- over the last few weeks as result of tight supply
of warm weather and the approaching driving tion has encouraged Middle Eastern suppliers due to refinery maintenance and less arbitrage
season, market players focused their attention to send jet-kerosene to Europe rather than the cargoes from Europe, as well as higher utility
more on developments in the gasoline market Singapore market. demand in Japan. The fuel oil market in Asia
rather than in distillates. High-sulphur fuel oil prices also firmed on for low density (18°CSt) is exceptionally tight
Apart from the top and middle of the bar- the back of tight bunker-spec supplies in the now.
rel, the price of fuel oil in the USA also soared market and light flows from the Baltic.
in line with a spike in prices in Europe and Asia
and due to higher utility demand as well. Asian market The oil futures market
Regional robust demand, refinery shut-
European market downs for scheduled maintenance and lower New York Mercantile Exchange (NYMEX) crude
Tight product supplies due to refinery exports from the Middle East have lifted mid- oil futures rebounded in early March to a four-
turnarounds and unplanned refinery outages dle distillate prices significantly. This was par- month high. The bulls gained momentum on a
on both sides of the Atlantic, as well as a hike ticularly the case for jet-kerosene prices and refinery glitch in Texas which pushed gasoline
in Nymex gasoline prices following a higher- its crack level versus the Dubai crude exceeded futures up over eight per cent in the first few
than expected draw on US gasoline stocks, $24/b. China’s buy tender for 430,000 tonnes days in March. The West Texas Intermediate
lifted European product prices, and their crack of jet fuel for the second quarter has provided (WTI) futures contract followed suit with the
spreads against the benchmark crude surged more support for this product. The firm mar- Commodity Future Trading Commission (CFTC)
significantly over the last few weeks of March. ket for middle distillates in Asia strengthened data for the week ending March 1, revealing
The gasoline crack spread in Rotterdam versus regional distillate-rich crude oil prices, and the that non-commercials increased long positions
Brent rose from almost zero to over $10/b on price of the Tapis benchmark crude exceeded to over 130,000 lots, a level last seen in the
April 7. $61/b in early April. previous October. Net long positions were up
In the Mediterranean area, the gasoline The gasoline market has also risen due to 60,000 lots, the highest level since June 1.
market was stronger due to higher exports to to robust regional demand and production The Nymex WTI prompt month contract closed
the Middle East and North Africa. The new cir- glitches. The unplanned shut-down of a gasoline the same weekly period at $53.57/b after slip-
cumstances of the gasoline market also sup- unit at the Shell Dickson refinery in Malaysia ping a marginal 7¢ on the day. However, a cold
ported naphtha prices, but demand from petro- supported the high octane gasoline market. snap in the US northeast stirred speculative
chemical plants is still sluggish, and the use of Despite the good performance of the gasoline buying interest in heating oil futures with the
OPEC bulletin 5/05

liquefied petroleum gas (LPG) as an alternative market, the naphtha market remained lacklus- open interest peaking to a record high of some
feedstock has dampened the naphtha market. tre due to the maintenance schedule of petro- 775,000 contracts. The stride persisted into

45
 the second week with the CFTC report for the ish trend proved short-lived as the continued following the end of winter in the Northern
Market Review

week ending March 8, showing that non-com- build in US crude oil stocks spurred fund sell- Hemisphere implying lower demand for crude.
mercial net long positions saw another peak at offs on profit-taking. However, an expectation Middle Eastern long-haul fixtures accounted for
nearly 77,000 lots. In the same period, Nymex that OPEC would refrain from an immediate 53 per cent of OPEC global chartering. Similarly,
WTI rose to $54.59/b following another cold output increase generated some bullishness. non-OPEC spot fixtures declined a further 2.6m
snap on the US East Coast amid a weakened US Non-commercials continued to reduce their b/d to stand at a monthly average of 7.0m b/d,
dollar, which helped to inspire fund buying in shorts at a faster rate than longs leaving the which was 1.7m b/d lower than last year’s fig-
the futures market. Open interest continued to net long positions at over 73,000 contracts. ure. The combination of the drop in OPEC and
climb to an all time high, breaking the 800,000 Bulls got unexpected support from the infa- non-OPEC fixtures led global spot chartering to
mark to reach 816,000 contracts. mous ‘super-spike’ report from an investment average around 21.2m b/d, which corresponded
The futures market sustained strength on bank which heightened concern over refined to a significant decline of more than 4.3m b/d,
an upward revision to the International Energy products amid refinery bottlenecks, despite the highest level in almost a year. According to
Agency (IEA) global demand forecast and continued strong builds in crude oil invento- preliminary estimates, sailings from the OPEC
despite OPEC’s decision in Isfahan to boost ries. The NYMEX WTI prompt month closed at area fell by 1.1m b/d to stand at an average of
output by 500,000 b/d to 27.5m b/d. Continued $55.40/b for a gain of $3.65 or seven per cent 23.52m b/d, with the Middle East, which repre-
concern over the hefty drop in heating oil and over the same time last month. sented 72 per cent of OPEC’s sailings, falling by
gasoline inventories added momentum to the The forward structure remained in con- around 800,000 b/d. Preliminary data shows
futures market as the NYMEX WTI front month tango throughout March for the fifth consecu- that, contrary to the previous month, arrivals in
peaked at an all-time high of $55.05/b on March tive month. The average 1st/2nd month spread the USA and the Caribbean declined in March
15. The CFTC report for the week ending March for March was at –68¢/b or 14¢ wider in con- by nearly 500,000 b/d to average 11.14m b/d,
15 revealed that non-commercial long positions tango than in February. Moreover, the contango but remained 1.5m b/d higher than the March
increased to a record high of 169,000 contracts, extended into the sixth month, with the 1st/6th 2004 level. At the same time arrivals in the
the highest since May 11, last year. However, as month spread widening a further 60¢ to –70¢/ Euromed region declined by 500,000 b/d to
short positions also rose to 101,000 contracts, b in March. A continued crude oil stock-build stand at an average of 4.0m b/d, the lowest
net longs narrowed to 68,000 lots while open prolonged the contango, with the spread wid- level since October 2004. However, arrivals
interest blossomed to 842,000 lots. The bull- ening towards month-end to reach over $1/b. in Japan remained unchanged at 4.4m b/d. The
ish sentiment was also supported by lingering The US crude oil inventory closed the last week only exception was NW Europe which experi-
cold weather in the US north-east, which implies in March at 315m b or more than 23m b higher enced an increase of 300,000 b/d.
that refiners still have to produce heating fuel than last year at this time, a level last seen in Spot freight rates for crude oil showed
at a time when they should be switching to July 2002. mixed patterns across the different sectors.
gasoline. The NYMEX WTI peaked to a new all- After displaying a strong recovery in February,
time high of $56.72/b on March 18. In the week freight rates for the very large crude carrier
ending March 22, non-commercials reduced Tanker market (VLCC) sector slipped on a monthly basis by
short positions at a faster rate than the longs, 25 per cent to 28 per cent in March due to an
boosting net long positions to nearly 70,000 OPEC area spot fixtures declined in March for increase in tonnage availability and low fixtures.
lots, while open interest peaked at an all-time the first time this year to average 14.12m b/d Freight rates on the Middle East/eastbound
high of more than 845,000 lots. Nonetheless, compared to 15.83m b/d in the previous month. long-haul route fell by 40 points to stand at a
news that OPEC would begin discussions about Despite persistent higher OPEC crude oil pro- monthly average of Worldscale 105, while on
whether to raise the production ceiling helped duction, the drop of 1.71m b/d occurred due the Middle East/westbound long-haul route,
to reverse the oil price trend. Over the course of to expected lower seasonal demand as well they declined by 29 points to W92. This signifi-
two days, the NYMEX WTI front month plunged as refining maintenance in different regions. cant drop resulted from a growing increase in
6.5 per cent, falling below the $54/b barrier for However, OPEC’s share of total spot chartering tonnage availability as buyers from countries
the first time in two weeks. moved up to 67 per cent against 62 per cent with limited desulphurization capacity, par-
A tragic explosion at BP’s Texas City refinery in February, the highest level since November ticularly China and India, looked outside the
helped to reverse the downward momentum, 2004, and gained three percentage points Middle East for sweet crudes to meet require-
as reassurances that there would be no impact compared to the same period of 2004. Most ments for light products with more stringent
on production appeared insufficient to suppress of the decline was attributed to Middle Eastern sulphur specifications. In addition, the start of
OPEC bulletin 5/05

speculation that a key piece of the infrastructure fixtures, especially on the Middle East/west- refinery maintenance in some Asian countries
may have suffered a damaging blow. This bull- bound long-haul route, which fell 21 per cent, such as Japan, China and South Korea put more

46
pressure on freight rates by reducing demand to the East were 42 points higher each. The half of March as well as on indications of some-
for crude oil and therefore the number of car- Caribbean/US Gulf Coast route showed a signifi- what stronger consumption from preliminary
goes. However, compared to last year, freight cant increase of 45 points or 18 per cent to reach data from the OECD for the first two months
rates on both routes were almost at the same an average of W302, while the NW Europe/US of 2005, despite a minor downward revision
levels as in March 2004. In the Suezmax sec- East and US Gulf Coast routes gained 38 points to the forecast of total world economic activity,
tor, freight rates on the West Africa/US Gulf to stand at an average of W329. However, freight which now stands at 4.12 per cent. As mentioned
Coast route increased slightly by six points to rates within the Mediterranean region and from above, preliminary data for OECD countries for
W166, reversing a decline of seven points in there to NW Europe continued to climb for the the period January-February, as well as figures
the previous month, while on the NW Europe/ second consecutive month, growing a substan- on apparent demand from the FSU and China
US East and US Gulf Coasts, rates dropped by tial 40 points to average W335. The increase in for January and direct communication data for
eight points to average W159, which was slightly the Mediterranean region was quite small up the first quarter from OPEC Member Countries
higher than the March 2004 level because of four points to average W313. suggest that demand rose by 2.8 per cent y-o-
limited arbitrage due to a minor differential y during the first quarter to average 84.03m
between WTI and Brent-Forties-Oseberg (BFO). b/d. This apparent significant growth rate could
The West Africa/US Gulf Coast route saw the World oil demand in part be the result of the moderate 1.63 per
only increase in the Suezmax sector which con- cent rise observed during the first quarter of
firms the competition between the USA and Forecast for 2004 2004. It is important to note that, although
some Asian countries for the light sweet African projections for world oil demand growth for
crudes to meet the necessary product demand. World this year are considerably lower than actual
The Aframax sector showed mixed movement As further revisions to the demand data for growth during 2004, the substantially higher
with freight rates on the Indonesia/US West 2004 have been incorporated, based on the lat- first quarter y-o-y growth of 2.8 per cent this
Coast route experiencing a strong increase of est information, global as well as regional fig- year should be carefully noted. Following the
71 points or 42 per cent to reach an average ures have seen only marginal revisions. With exceptionally high growth of 4.87 per cent seen
of W239. At the same time, a sudden surge of minor increases and decreases netting out, during the second quarter of 2004, world oil
activity sharply pushed up freight rates on the the figure for total world oil demand growth demand growth is projected to decelerate to
Caribbean/US East Coast to average W258, of 2.61m b/d for 2004 is slightly lower than 2.07 per cent or 1.67m b/d to average 82.62m
which corresponded to a substantial 43 point the assessment presented in the last report. b/d for the second quarter of 2005. Demand is
increase after a loss of 138 points in February. Likewise, changes to the quarterly distribu- estimated to gain momentum during the last
In contrast, freight rates in the Mediterranean tion were minor with the first and third quar- two quarters of the year on the back of strong
and from there to NW Europe declined for the ters revised up by 20,000 b/d while the fourth consumption in transportation and heating oil
fourth consecutive month, although losses were quarter was up 10,000 b/d, while 2Q remained fuels. The 3Q world oil demand is estimated to
lower than in the previous month, as a result of unchanged. On a regional basis, OECD as well grow by 2.2 per cent or 1.8m b/d to 83.55m b/d,
a decline in activity due to refining maintenance as total other regions aggregate demand was while demand in the last quarter is estimated
in Europe. It is worth noting that most of the unchanged at 49.54m b/d and 11.24m b/d, to reach 85.83m b/d, or just a notch below the
routes in different sectors recovered quickly in respectively, while total developing countries unprecedented 86m b/d mark.
the second half of March following OPEC’s deci- consumption was marginally revised up by
sion to increase production by 500,000 b/d. 30,000 b/d to 21.36m b/d. All in all total world OECD
Product freight rates increased on all routes demand is estimated to have grown by 3.28 per Total OECD consumption is estimated to
as a result of high demand for distillates sup- cent to a yearly average of 82.13m b/d. grow by 0.8 per cent or 390,000 b/d during
ported by cold weather in combination with the the present year to average 49.92m b/d. On a
refining maintenance in Asia, Europe and the Forecast for 2005 regional basis, North America will account for
USA. Freight rates for vessels carrying 30,000– Total world oil demand for the present year a big proportion of the increase (350,000 b/d)
50,000 dwt along the Middle East/East route is projected to rise by 1.89m b/d or 2.3 per cent and the USA will contribute more than 80 per
increased by 11 points compared to a slide of to average 84.02m b/d, on continued strength cent of that growth. Preliminary supply figures
67 points in the previous month, to stand at an and global oil consumption above recent years for the period January–March 2005 released
average of W303. Similarly, the Singapore/East but below 2004. World oil demand has been by the EIA indicate that finished motor gaso-
route gained 22 points, pushing average freight revised up slightly, mainly due to lower than nor- line deliveries rose by 0.7 per cent to 8.92m
OPEC bulletin 5/05

rates to W347. Compared to March 2004 fig- mal temperatures in the Northern Hemisphere b/d versus the same period last year. Distillate
ures, rates on both routes for cargoes heading during the second half of February and the first deliveries remained almost flat during the

47
 first three months of 2005, while kerosene the same line, Indonesia and Thailand lowered
World oil supply
Market Review

and fuel oil rose by 3.7 per cent and 9.8 per subsidies on transportation fuel and Malaysia is
cent, respectively. The estimated 0.6 per cent expected to follow suit. Record high oil prices
Non-OPEC
y-o-y increase in Western Europe’s demand, and record revenues for many Middle Eastern
which translates into 100,000 b/d, will be par- producing countries, supporting solid GDP
Estimate for 2004
tially offset by the projected drop of 60,000 growth rate of 7.55 per cent point to another
The total non-OPEC supply estimate for
b/d in OECD Pacific demand. The split of total solid rise in oil demand in that region. Oil con-
2004 remains unchanged. Non-OPEC supply
OECD oil requirements by products for January sumption is forecast to increase by 300,000 b/
averaged 49.74m b/d for the year, which rep-
2005 shows that inland consumption grew by d or 5.61 per cent to a yearly average of 5.64m
resents an increase of 1.1m b/d from 2003, or
0.3 per cent or 150,000 b/d versus January b/d. In Latin America and Africa demand is
2.2 per cent y-o-y. The quarterly distribution
2004 to 46.08m b/d. Consumption of fuel oil expected to rise by 140,000 b/d and 80,000
for non-OPEC supply was 49.67m b/d, 49.76m
and naphtha rose by 4.5 per cent and 4.4 per b/d based on healthy projections of economic
b/d, 49.51m b/d and 50m b/d for 1Q, 2Q, 3Q
cent in January while LPG and gas oil/diesel expansion.
and 4Q, respectively.
demand fell by 3.4 per cent and 0.8 per cent,
respectively. In North America, inland consump- Other regions Forecast for 2005
tion rose by 350,000 b/d or 1.54 per cent on Oil demand in this group in estimated to
Non-OPEC supply growth in 2005 has been
demand for fuel oil (210,000 b/d) and gasoline rise by more than six per cent y-o-y or 700,000
revised down by approximately 70,000 b/d ver-
(150,000 b/d). In contrast, inland consumption b/d to reach an average of 11.93m b/d for 2005.
sus the estimate published in the March report.
in Western Europe fell by 170,000 b/d or 1.25 China’s yearly average demand is projected to
Non-OPEC gains are now expected to average
per cent on a sizable drop in gasoline, fuel oil reach 7.12m b/d which represents a y-o-y rise
990,000 b/d in 2005, which represents a y-
and LPG consumption. Strong naphtha demand of 9.2 per cent or 600,000 b/d. Very prelimi-
o-y increase of two per cent from 2004. For
was not sufficient to counteract the fall in LPG, nary data and estimates of production and trade
the full year, non-OPEC supply is expected to
gasoil/diesel and fuel oil consumption in OECD figures indicate that apparent consumption in
average 50.7m b/d, with a quarterly distribu-
Pacific countries. China grew by seven per cent to 6.67m b/d dur-
tion of 50.45m b/d, 50.79m b/d, 50.53m b/d
ing 1Q2005.
and 51.15m b/d for the 1Q, 2Q, 3Q and 4Q,
Developing countries Despite this significant growth it is only
respectively.
Developing countries oil consumption half of the 15 per cent rise in apparent demand
On a quarterly basis, 1Q2005 has been
— based on lower but still healthy economic for the first quarter of 2004. Preliminary trade
revised down by 50,000 b/d, 2Q revised up
growth figures compared to the previous year data, subject to further revisions, showing
by 40,000 b/d, and 3Q and 4Q revised down
— is estimated to rise by 3.8 per cent or 810,000 healthy import levels of crude and products is
by 150,000 b/d and 110,000 b/d, respectively.
b/d to average 22.17m b/d. The estimated the main reason behind such growth. China’s
The major revisions come from lower-than-
growth in demand in this group of countries net imports of crude and products seem to have
will make up for more than 40 per cent of total dropped in January following healthy buying and
world oil demand for the present year. Demand stocking during the last quarter of 2004 but Table D: FSU net oil exports m b/d
growth for products from the Asian countries rebounded substantially in February following 1Q 2Q 3Q 4Q Year
within this group was revised upwards from the end of the Chinese New Year. Preliminary 2001 4.30 4.71 4.89 4.47 4.59
the last report — increased by 50,000 b/d to indications for March point to another month 2002 5.14 5.84 5.85 5.49 5.58
290,000 b/d based on the healthy 5.3 per cent of healthy buying. In the FSU, very prelimi- 2003 5.87 6.75 6.72 6.61 6.49
20041 7.17 7.28 7.34 7.37 7.29
projected rise in GDP for 2005 and indications nary production and trade statistics show that
20052 7.48 7.78 7.76 7.87 7.75
of strength in consumption during February and apparent demand rose by more than five per
1. Estimate.
March. cent to 3.81m b/d during 1Q2005. However, this 2. Forecast.
It is important to mention that, in response preliminary figure is likely to be revised down-
to the new market reality of high oil prices, sev- ward in the near future. As for the whole year,
eral Asian countries have started to introduce FSU apparent demand is projected to rise by
measures to curb demand growth especially 2.27 per cent or 90,000 b/d to 3.86m b/d. Oil
in the transportation sector. The Indian and consumption in the group of Central European
Chinese governments recently increased the countries is projected to increase by three per
OPEC bulletin 5/05

price of gasoline and China is likely to raise cent or 30,000 b/d to reach a yearly average
diesel prices once the harvest season is over. In of 860,000 b/d.

48
expected growth in Russia, Kazakhstan, and the
OPEC NGL production, 2001–05 Stock movements
UK. Preliminary data for Russian output in the
m b/d
first quarter of 2005 indicates that production
2001 3.40
was roughly 80,000 b/d below expectations. USA
2002 3.42
In 2005, Russian production is now expected 2003 3.57 In the period February 25–April 1, US com-
to grow by an average of 360,000 b/d versus 1Q04 3.65 mercial oil stocks reversed the downtrend typi-
450,000 b/d in our previous assessment. Full 2Q04 3.66 cal for this time of year, increasing an unseason-
year average production growth in Kazakhstan 3Q04 3.71 able 4.90m b or 140,000 b/d to 955.9m b. This
has been assessed at 100,000 b/d vs a previ- 4Q04 3.78 slight build came mostly from a mix of crude
2004 3.70
ous 150,000 b/d. The forecast for the UK has oil, unfinished oils and other oil stock, while
Change 2004/2003 0.13
also been revised down a modest 40,000 b/ 2005 3.93 substantial draws mainly on gasoline helped
d and is now expected to decline by 130,000 Change 2005/2004 0.23 to diminish the overall gains.
b/d in 2005 (see Table D). Crude inventories continued to build,
However, the outlook for other selected 4.21m b/d and 4.26m b/d for 1Q, 2Q, 3Q and reaching a level not seen since June 2002.
non-OPEC countries remains strong, particu- 4Q, respectively. Oil stocks stood at 317.1m b on 1 April, repre-
larly in the second half of the year. This report senting an increase of 17.7m b or 510,000 b/d
sees an improved outlook versus last month’s OPEC crude oil production since February 25. This increase could be jus-
report particularly in Brazil, Angola, Sudan and Total OPEC crude production averaged tified mostly by higher domestic oil production
Azerbaijan, as the start up and ramping up of 29.76m b/d in March, according to second- which rose from 5.49m b/d to 5.50m b/d and
projects remains on track, and in some cases ary sources, which represents an increase of lower refinery input which fell by 150,000 b/d
ahead of schedule. Sequentially, 1Q2005 non- 300,000 b/d compared to February. In the to 15.06m b/d.
OPEC production is expected to grow 450,000 middle of March, OPEC agreed at the Meeting Higher crude oil imports which hovered
b/d vs 4Q2004; for 2Q, production is expected in Isfahan to modify its production agreement around 10m b/d were part of this build, and
to grow 350,000 b/d vs the 1Q; and then from 27m b/d to 27.5m b/d. For 1Q2005, total figures were higher at the beginning of the
dropping in 3Q due to the maintenance sea- production averaged 29.52m b/d, up 1.3m b/d period than at the end. Compared with last year
son. However, in 4Q non-OPEC production is from 1Q of last year (see Table E). and the five-year average, crude oil stocks are
expected to reach 51.1m b/d. This represents eight per cent and six per cent higher, respec-
an increase of approximately 600,000 b/d vs tively. In terms of days of forward cover, crude
the previous quarter and 1.1m b/d vs 4Q of last Rig count oil stocks stood 1.3 days above last year but
year. declined a slight 0.3 days below the five-year
Non-OPEC average.
FSU net oil export Non-OPEC rig count dropped by 129 in The draw on gasoline stocks of 12.2m b or
FSU net oil export for 2005 is expected March compared to the previous month. North about five per cent was mainly due to robust
to average 7.75m b/d, an increase of 460,000 America lost 149 rigs, due to losses in Canada implied demand which rose from 8.88m b/d
b/d over the previous year. This represents a and Mexico, which were partly offset by new to 9.10m b/d or about three per cent higher
downward revision of 70,000 b/d from last rigs in the USA. Western Europe gained 17 rigs than in the previous period. Declining gasoline
month, largely due to the previously indicated over the previous month, whilst OECD Pacific imports added to this draw, slipping 80,000
lower expectations for Russia’s oil production added just one rig. Overall, non-OPEC rig activ- b/d to 900,000 b/d. The draw on gasoline
growth. However, exports from Azerbaijan are ity in 1Q2005 was 2,390, which represents an stocks would have been higher if gasoline pro-
expected to increase significantly, particularly increase of 196 from 1Q2004 and a historical duction had not picked up by 130,000 b/d
in the second half of the year, underpinned by record high. In 2005, non-OPEC rig activity in to 8.62m b/d. At this level, gasoline invento-
volume growth in Phase I of the ACG project. expected to remain strong, largely fueled by ries stood more than six per cent above last
North America’s gas drilling. year’ figure and five per cent higher than the
OPEC NGLs and non-conventional oils five-year average. Forward cover slipped from
The 2005 forecast for OPEC NGLs and OPEC 25.3 days to 23.3 days, still one day above last
non-conventional oils remains unchanged at OPEC’s rig count was 274 in March, year’s level.
4.19m b/d, which represents an increase of unchanged from February. Rig count averaged Even approaching the end of seasonal
OPEC bulletin 5/05

240,000 b/d over 2004. The quarterly distri- 271 in 2Q2005, up 34 rigs from 1Q2004 and demand, distillate stocks continued to head
bution is projected at 4.11m b/d, 4.17m b/d, eight rigs from 4Q2004. downward, falling a further 5.9m b or five per

49
Market Review
Table E: OPEC crude oil production, based on secondary sources 1,000 b/d
Mar/
2003 2004 4Q04 Jan 05 Feb 05 Mar 05 Feb
Algeria 1,134 1,229 1,289 1,305 1,317 1,333 16
Indonesia 1,027 969 961 955 948 947 –1
IR Iran 3,757 3,920 3,947 3,927 3,907 3,906 –1
Iraq 1,322 2,015 1,960 1,813 1,846 1,813 –34
Kuwait 2,172 2,344 2,448 2,406 2,443 2,481 39
SP Libyan AJ 1,422 1,537 1,608 1,608 1,613 1,617 5
Nigeria 2,131 2,351 2,344 2,291 2,324 2,365 41
Qatar 743 781 798 781 793 796 4
Saudi Arabia 8,709 8,982 9,450 9,143 9,191 9,346 155
UAE 2,243 2,360 2,486 2,388 2,381 2,440 59
Venezuela 2,305 2,580 2,615 2,698 2,700 2,717 17
OPEC-10 25,644 27,052 27,947 27,502 27,614 27,948 334
Total OPEC 26,965 29,068 29,907 29,315 29,461 29,761 300

Totals may not add, due to independent rounding.

cent to stand at 104.1m b. Much of the draw building 5.8m b to 961.7m b compared with nificantly to this build as refiners pushed pro-
occurred on heating oil inventories as cold the previous weekly period. Most of the incre- duction up in an attempt to benefit from high
weather especially in US Northeast forced con- ment came from crude oil stocks which rose gasoil prices. Moderate draws on gasoline and
sumers to turn up their heating despite higher by 3.6m b to 320.7m b on the back of lower fuel oil stocks capped the overall build. The y-
prices. This was supported by implied demand implied crude oil demand which dropped from o-y surplus widened to 12.7m b from the 7.3m
figures which showed an increase of 70,000 15.06m b/d to 14.77m b/d, pushing refinery b registered last month.
b/d to 4.23m b/d. Higher distillate production runs down from 93.71 per cent to 91.03 per Crude oil inventories in Eur-16 showed a
helped to slow the draw-down as output rose cent. Gasoline inventories added to the build, further build on increasing imports especially
400,000 b/d to 4.13m b/d. The year-on-year rising a modest 800,000 b to 213.1m b on a from Middle East countries and lower exports
and average five-year deficit remained at the 80,000 b/d increase in output to 8.70m b/d to Asia due to closing arbitrage. Lowering refin-
previous month’s levels of one per cent and two and higher imports which reached 1.0m b/d, a ery runs due to seasonal maintenance also con-
per cent, respectively, a trend which is expected rise of 100,000 b/d. Middle distillates declined tributed to this build, rising by 3.1m b or about
to improve further as consumption is projected slightly by 120,000 b to stand at 104.00m b one per cent to stand at 468.2m b or 10.60m
to fall seasonally in the coming months. due to lower imports and output (see Table F). b below the year-ago level.
The Strategic Petroleum Reserve (SPR) con- Eur-16 gasoline stocks followed the US draw
tinued to build steadily towards its maximum Western Europe pattern, falling by 2.3m b to 140.6m b on the
capacity of 700m b, gaining a further 6.0m b to Crude oil flows into European tanks helped back of decreased output due to low refinery
stand at 687.5m b during the period February total oil stocks in Eur-16 (EU plus Norway) to runs which dipped by 180,000 b/d. Cleaning up
25–April 1, 2005. regain the previous month’s losses, building tanks from winter gasoline was another factor
US commercial oil stocks in the week end- an unseasonable 7.5m b/d or 240,000 b/d to behind the draws as refiners started to prepare
ing April 8, 2005 showed a further increase, stand at 1,097.8m b. Distillates contributed sig- for summer gasoline specifications. Despite the
OPEC bulletin 5/05

50
Table F: US onland commercial petroleum stocks1 mb

Change
Jan 28, 05 Feb 25, 05 Apr 1, 05 Mar/Feb Apr 1, 04 Apr 8, 052

Crude oil (excl SPR) 295.3 299.4 317.1 17.7 293.7 320.7
Gasoline 216.3 224.5 212.3 –12.2 201.3 213.1
Distillate fuel 118.6 110.0 104.1 –5.9 104.0 104.0
Residual fuel oil 40.1 38.2 39.2 1.0 39.0 39.0
Jet fuel 43.1 43.0 38.8 –4.2 35.6 39.2
Total 957.7 951.0 955.9 4.9 914.1 961.7
SPR 678.6 681.5 687.5 6.0 652.1 688.8

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

2. Latest available data at time of publication.

Table G: Western Europe onland commercial petroleum stocks1 mb

Change
Jan 05 Feb 05 Mar 05 Mar/Feb Mar 04

Crude oil 455.1 465.2 468.2 3.1 478.8

Mogas 136.2 142.9 140.6 –2.3 141.8
Naphtha 25.5 24.6 25.5 0.9 24.2
Middle distillates 354.0 347.3 357.4 10.1 325.9
Fuel oils 111.7 110.3 106.1 –4.2 114.3
Total products 627.4 625.2 629.6 4.4 606.2
Overall total 1,082.5 1,090.3 1,097.8 7.5 1,085.1

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

Table H: Japan’s commercial oil stocks1 mb

Change
Dec 04 Jan 05 Feb 05 Feb/Jan Feb 04

Crude oil 117.5 116.2 109.3 -6.9 108.3

Gasoline 12.9 14.8 15.6 0.8 14.1
Middle distillates 40.0 34.4 27.1 -7.3 27.8
Residual fuel oil 19.5 19.4 18.3 -1.1 19.5
Total products 72.4 68.6 61.0 -7.6 61.4
Overall total2 189.9 184.8 170.3 -14.5 169.7

1. At end of month. Source: MITI, Japan.

2. Includes crude oil and main products only.
OPEC bulletin 5/05

51
 draw, the y-o-y deficit narrowed to 1.2m b from which rose 2.2 per cent to 93.8 per cent, and NGLs and non-conventional oils averaged 53.7m
Market Review

8.3m b last month. lower imports pressed crude oil stocks down, b/d. This resulted in an average annual dif-
Middle distillate inventories regained the which lost 6.9m b to register 109.3m b but stood ference of 28.4m b/d for 2004, versus 27.2m
previous month’s losses, building a consider- 1m b higher than a year ago. Crude oil stocks b/d in 2003.
able 10.1m b or about three per cent on higher had not been this low since last August when Table I for 2005 shows that world oil
output as refiners raised middle distillate pro- they dipped to the lowest level for the year. demand is now expected to average 84m b/d,
duction to its maximum in order to benefit from Middle distillate stocks also showed a very whilst non-OPEC supply and OPEC NGLs and
soaring prices. However, refiners were forced strong draw, falling by 7.3m b or about 21 per non-conventional oils are expected to average
to store much of it as end-users were reluctant cent. This level is the lowest in eight months 54.9m b/d. This results in an average difference
to buy at very high prices, preferring to wait for when middle distillates reached 26.8m b in June of 29.1m b/d for 2005. The quarterly distribu-
prices to ease. Flows of Russian and US mate- 2004. The previous month’s surplus turned to a tion is expected to be 29.5m b/d in 1Q2005,
rials added to the build, with the y-o-y surplus minor deficit of 700,000 b or about three per 27.7m b/d in 2Q, 28.8m b/d in 3Q and 30.4m
extending to about ten per cent, an increase of cent. Seasonal winter demand especially for b/d in 4Q.
about seven per cent from last month’s level kerosene was one of the main reasons behind Based on the quarterly supply/demand
(see Table G). this draw as cold winter hit northern Japan. balance for 2005, the resulting required OPEC
Lower implied demand and rising gasoline crude production levels and the projected pro-
Japan production due to increasing refinery through- duction capacity, spare capacity is estimate to
For the third consecutive month, total com- put helped gasoline stocks to build, increasing average 8.8 per cent in the first quarter of 2005
mercial oil stocks in Japan continued to head modestly by 800,000 b to 15.6m b which was and to rise to 9.1 per cent in the second with
south in February, losing a massive 14.5m b or 1.50m b higher than the level observed a year OPEC producing at current levels. In the third
eight per cent to stand at 170.3m b, the lowest ago (see Table H). and fourth quarters, OPEC’s spare capacity is
level in six months. Middle distillate and crude expected to average 10.9 per cent and 9.5 per
oil inventories contributed mostly to the draw. cent, respectively. Therefore, even with the high
The only product which showed an increase
Balance of expected demand for OPEC crude in the fourth
was gasoline but this minor build did little to supply/demand quarter, estimated at 30.4m b/d, spare capac-
counter the massive draw. Compared with last ity should be more than adequate to accommo-
year’s figure, total commercial stocks in Japan Table I for 2004 remains nearly unchanged date the projected requirements and will even
were slightly higher by 600,000 b. from last month. World oil demand averaged reach twice the level seen in the same period
Increasing refinery utilization in February, 82.1m b/d, whilst non-OPEC supply and OPEC last year.
OPEC bulletin 5/05

52
Table I: World crude oil demand/supply balance m b/d
2000 2001 2002 2003 1Q04 2Q04 3Q04 4Q04 2004 1Q05 2Q05 3Q05 4Q05 2005
World demand
OECD 48.0 48.0 48.1 48.9 50.2 48.2 49.2 50.6 49.5 51.0 48.4 49.4 50.9 49.9
North America 24.1 24.0 24.1 24.6 25.0 24.9 25.2 25.6 25.2 25.5 25.1 25.5 26.0 25.5
Western Europe 15.2 15.3 15.3 15.5 15.8 15.3 15.7 16.1 15.7 16.0 15.4 15.7 16.2 15.8
Pacific 8.7 8.7 8.6 8.8 9.4 8.0 8.3 8.9 8.6 9.5 7.9 8.1 8.7 8.6
Developing countries 19.3 19.7 20.2 20.5 20.8 21.4 21.4 21.7 21.4 21.7 22.3 22.2 22.5 22.2
FSU 3.8 3.9 3.7 3.8 3.6 3.8 4.0 4.1 3.9 3.8 3.8 4.0 4.1 3.9
Other Europe 0.8 0.8 0.8 0.8 0.9 0.9 0.8 0.8 0.9 0.9 0.8 0.8 0.9 0.9
China 4.7 4.7 5.0 5.6 6.2 6.8 6.4 6.7 6.5 6.7 7.4 7.0 7.4 7.1
(a) Total world demand 76.5 77.2 77.9 79.5 81.8 81.0 81.7 84.0 82.1 84.0 82.7 83.6 85.8 84.0
Non-OPEC supply
OECD 21.9 21.8 21.9 21.6 21.8 21.5 20.7 21.0 21.3 21.2 21.3 20.7 20.8 21.0
North America 14.2 14.3 14.5 14.6 14.8 14.7 14.4 14.4 14.6 14.6 14.6 14.5 14.4 14.5
Western Europe 6.8 6.7 6.6 6.4 6.4 6.3 5.7 6.0 6.1 6.0 6.1 5.7 6.0 5.9
Pacific 0.8 0.8 0.8 0.7 0.6 0.6 0.6 0.5 0.6 0.5 0.5 0.5 0.5 0.5
Developing countries 10.9 10.9 11.2 11.3 11.7 11.7 12.0 12.1 11.9 12.3 12.3 12.4 12.7 12.4
FSU 7.9 8.5 9.3 10.3 10.8 11.1 11.3 11.4 11.2 11.4 11.6 11.8 12.0 11.7
Other 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 0.2 0.2
China 3.2 3.3 3.4 3.4 3.4 3.5 3.5 3.5 3.5 3.6 3.6 3.6 3.6 3.6
Processing gains 1.7 1.7 1.7 1.8 1.9 1.8 1.8 1.9 1.8 1.9 1.8 1.8 1.9 1.9
Total non-OPEC supply 45.7 46.4 47.7 48.6 49.7 49.8 49.5 50.0 49.7 50.4 50.8 50.5 51.2 50.7
OPEC ngls and non-conventionals 3.3 3.6 3.6 3.7 3.9 3.9 4.0 4.0 3.9 4.1 4.2 4.2 4.3 4.2
(b) Total non-OPEC supply
49.0 50.0 51.4 52.3 53.6 53.7 53.5 54.0 53.7 54.6 55.0 54.7 55.4 54.9
and OPEC ngls
OPEC crude supply and balance
OPEC crude oil production1 28.0 27.2 25.4 27.0 28.2 28.4 29.8 29.9 29.1 29.5
Total supply 77.0 77.2 76.7 79.3 81.7 82.1 83.2 83.9 82.8 84.1
Balance2 0.6 0.0 –1.1 –0.2 0.0 1.1 1.5 –0.1 0.6 0.0
Stocks
Closing stock level (outside FCPEs) m b
OECD onland commercial 2534 2632 2478 2525 2468 2546 2589 2569 2569
OECD SPR 1270 1285 1345 1407 1421 1426 1432 1444 1444
OECD total 3804 3918 3822 3932 3888 3972 4021 4013 4013
Oil-on-water 877 830 814 885 909 898 895 908 908
Days of forward consumption in OECD
Commercial onland stocks 53 55 51 51 51 52 51 50 51
SPR 26 27 28 28 29 29 28 28 29
Total 79 82 78 79 81 81 79 79 80
Memo items
FSU net exports 4.1 4.6 5.6 6.5 7.2 7.3 7.3 7.4 7.3 7.6 7.8 7.8 7.9 7.8
[(a) — (b)] 27.4 27.2 26.5 27.2 28.2 27.3 28.3 30.0 28.4 29.5 27.7 28.8 30.4 29.1

1. Secondary sources. Note: Totals may not add up due to independent rounding.
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 for oil 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 54, while Graphs
One and Two (on page 55) show the evolution on a weekly basis. Tables Three to Eight, and the corresponding graphs on pages 56–57, show
OPEC bulletin 5/05

the evolution of monthly average spot prices for important products in six major markets. (Data for Tables 1–8 is provided by courtesy of Platt’s
Energy Services).

53
Market Review
Table 1: OPEC spot crude oil prices, 2004–05 $/b
Member 2004 2005
Country/ April May Jun Jul Aug Sep Oct Nov Dec Jan Feb March
Crude (API°) 4Wav 4Wav 5Wav 4Wav 5Wav 4Wav 4Wav 5Wav 4Wav 4Wav 4Wav 1W 2W 3W 4W 5W 5Wav

Algeria
Saharan Blend (44.1) 33.71 37.96 35.14 38.16 42.67 43.92 50.48 42.97 39.61 44.39 45.44 50.84 52.96 54.04 53.83 51.28 52.59
Indonesia
Minas (33.9) 32.19 37.18 36.75 36.28 41.79 44.27 49.68 37.25 34.76 42.55 44.56 50.62 53.64 55.26 56.46 55.52 54.30
IR Iran
Light (33.9) 30.41 34.97 32.67 35.42 38.40 38.77 43.59 37.81 34.77 39.87 40.56 44.92 47.40 50.06 50.93 49.20 48.50
Iraq
Kirkuk (36.1) — — — — — — — — — — — — — — — — —
Kuwait
Export (31.4) 31.75 34.78 33.83 34.98 38.44 36.12 38.81 35.87 34.91 38.55 40.09 43.74 45.60 47.11 48.37 47.30 46.42
SP Libyan AJ
Brega (40.4) 33.82 37.96 35.46 38.08 43.07 44.04 50.14 43.21 37.98 43.61 44.97 50.58 52.71 53.91 na 51.23 52.11
Nigeria
Bonny Light (36.7) 33.74 37.87 35.60 38.08 42.55 43.56 49.91 43.60 39.08 44.01 45.43 50.69 52.97 54.28 54.97 52.85 53.15
Saudi Arabia
Light (34.2) 32.48 35.63 34.70 35.55 38.93 36.58 39.00 35.56 34.64 38.26 40.10 43.85 46.11 47.62 48.88 47.80 46.85
Heavy (28.0) 30.31 33.07 32.00 32.75 35.41 32.38 33.79 30.17 29.34 33.41 35.62 39.45 40.91 42.42 43.68 42.60 41.81
UAE
Dubai (32.5) 31.69 34.65 33.58 34.70 38.22 35.52 37.61 34.87 34.16 37.78 39.35 42.90 44.66 46.21 47.47 46.77 45.60
Venezuela
Tia Juana Light1 (32.4) 29.88 33.63 31.67 33.81 36.86 37.23 43.55 37.37 32.36 35.75 36.77 41.65 43.55 44.68 44.65 42.95 43.50
OPEC Basket 2
32.35 36.27 34.61 36.29 40.27 40.36 45.37 38.96 35.70 40.24 41.68 46.58 48.78 50.13 50.72 49.16 49.07

Table 2: Selected non-OPEC spot crude oil prices, 2004–05 $/b

2004 2005
Country/ April May Jun Jul Aug Sep Oct Nov Dec Jan Feb March
Crude (API°) 4Wav 4Wav 5Wav 4Wav 5Wav 4Wav 4Wav 5Wav 4Wav 4Wav 4Wav 1W 2W 3W 4W 5W 5Wav

Gulf Area
Oman Blend (34.0) 31.71 34.78 33.92 35.10 38.49 36.53 39.81 36.65 35.40 39.04 40.54 44.29 46.25 47.72 48.98 47.53 46.95
Mediterranean
Suez Mix (Egypt, 33.0) 28.40 33.00 30.56 33.21 36.75 36.43 39.56 35.34 32.48 36.37 36.98 43.22 45.02 45.38 45.61 43.66 44.58
North Sea
Brent (UK, 38.0) 33.23 37.71 35.21 38.33 42.87 43.43 49.74 42.80 39.43 44.01 44.87 50.68 52.80 54.00 54.07 51.43 52.60
Ekofisk (Norway, 43.0) 33.31 37.79 35.37 38.42 42.86 43.44 49.75 42.23 39.26 43.92 44.70 50.52 52.60 53.68 53.75 51.15 52.34
Latin America
Isthmus (Mexico, 32.8) 32.76 36.95 34.85 37.41 40.88 41.47 47.40 41.10 35.315 38.89 40.08 45.50 47.58 48.81 48.78 46.92 47.52
North America
WTI (US, 40.0) 36.80 40.11 38.18 40.69 44.77 45.98 53.32 48.22 43.12 46.64 47.69 52.18 54.03 55.51 54.40 54.35 54.09
Others
Urals (Russia, 36.1) 29.88 34.87 32.08 35.45 38.29 37.96 42.12 37.52 35.52 38.89 40.46 45.72 47.05 47.79 49.03 46.20 47.16

1. Tia Juana Light spot price = (TJL netback/Isthmus netback) x Isthmus spot price.
OPEC bulletin 5/05

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.

54
 Graph 1: Evolution of spot prices for selected OPEC crudes, December 2004 to March 2005

�� ������������� ������������� ���������� ���������������

����� ����� ���������� �����������

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��

��

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��

��
� � � � � � � � � � � � � � � � �
�������� ������� �������� �����

Graph 2: Evolution of spot prices for selected non-OPEC crudes, December 2004 to March 2005

�� ���� ������� �����

�������� ������� �����������
����� ����������
��

��

��

��

��
OPEC bulletin 5/05

��

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�������� ������� �������� ����� 55
 Graph and table 3: North European market — spot barges, fob Rotterdam $/b
regular premium
������� ������������ ������� ������ gasoline gasoline fuel oil fuel oil
������� �������������� �������� naphtha unleaded unl 95 gasoil jet kero 1%S 3.5%S
��
2004 March 42.65 41.57 41.68 37.77 40.55 23.33 21.49
�� April 43.49 45.52 45.58 38.74 43.69 23.03 22.77
May 48.99 53.08 53.11 42.83 47.81 25.70 25.10
�� June 45.70 45.79 45.85 41.68 45.26 24.21 23.39
July 48.87 52.01 52.03 46.18 49.88 24.28 24.44
�� August 54.96 51.06 51.06 49.99 55.74 23.73 24.62
September 54.88 50.73 50.77 53.02 58.49 23.40 24.12
�� October 61.21 55.81 55.72 63.06 65.91 28.10 25.88
November 56.49 50.64 50.62 56.89 60.31 25.23 21.49
December 50.20 42.42 42.54 51.26 54.05 24.96 20.93
��
2005 January 51.32 47.72 47.84 51.92 55.05 26.68 23.54
�� February 54.49 49.69 49.96 54.31 58.05 27.78 25.48
��� ��� ��� ��� ��� ��� ��� ��� ��� ��� ��� ��� ���
����
March 62.33 55.94 56.03 64.60 68.81 34.06 30.09
����

Graph and table 4: South European market — spot cargoes, fob Italy $/b
premium premium fuel oil fuel oil
naphtha gasoline gasoline gasoil
������� ������� 1%S 3.5%S
������������ unl 95 0.15g/l
���������������� ������ ��������������
�� 2004 March 34.24 40.92 41.07 36.94 23.63 20.02
April 35.78 44.55 44.65 38.31 24.32 21.01
��
May 40.52 52.16 52.15 43.41 27.66 23.69
June 37.48 44.64 44.74 41.92 26.54 21.07
��
July 40.37 49.37 49.40 45.88 26.47 23.03
August 45.94 48.76 48.80 49.41 25.47 23.59
��
September 45.90 49.84 49.87 53.12 25.66 22.81
October 50.76 54.43 54.39 60.78 29.03 24.20
��
November 45.68 48.70 48.74 56.47 26.72 18.65

�� December 39.98 39.72 39.88 50.75 25.65 18.62

2005 January 41.69 45.72 45.80 51.04 28.69 21.80

��
February 44.26 48.28 48.33 53.64 29.59 24.79
��� ��� ��� ��� ��� ��� ��� ��� ��� ��� ��� ��� ���
���� ���� March 51.34 54.23 54.20 63.65 35.31 29.07

Graph and table 5: US East Coast market — spot cargoes, New York $/b, duties and fees included
regular
�������� �������� ������������ fuel oil fuel oil fuel oil
gasoline gasoil jet kero
������ ����������������� �������������� 0.3%S 1%S 2.2%S
unleaded 87
��
2004 March 45.56 37.87 40.47 28.90 24.67 23.11
�� April 46.94 38.33 42.10 29.85 25.65 24.62
May 56.32 42.45 48.54 34.22 30.33 27.86
�� June 48.06 41.40 43.80 32.71 29.64 25.62
July 51.30 45.54 49.26 30.90 27.93 25.07
�� August 50.39 48.57 52.29 32.08 27.97 25.34
September 52.80 52.49 58.16 31.82 27.85 26.47
�� October 57.67 62.09 65.82 39.29 33.17 31.16
November 53.12 57.86 59.01 38.16 28.77 24.50
�� December 44.66 53.14 54.25 33.57 25.22 22.74

2005 January 51.67 55.02 58.76 35.20 29.86 27.62

��
��� ��� ��� ��� ��� ��� ��� ��� ��� ��� ��� ��� ��� February 51.32 56.08 57.64 38.11 30.94 28.91
���� ���� March 60.28 65.07 66.52 41.21 35.57 32.22

56
 Table and graph 6: Caribbean market — spot cargoes, fob $/b
fuel oil fuel oil
naphtha gasoil jet kero ������� ��������
2%S 2.8%S
�������������� �������������� ������
��
2004 March 40.69 37.93 40.74 19.11 18.82
April 41.08 38.18 41.70 20.62 20.50 ��
May 46.82 42.18 46.71 23.86 23.73
June 43.00 41.30 44.16 21.62 21.37 ��
July 44.95 45.39 49.00 21.06 20.82
August 46.62 48.67 52.38 21.34 21.04 ��
September 49.65 52.80 58.10 22.47 22.11
October 55.18 62.12 64.83 27.16 26.87 ��
November 50.51 56.02 57.23 20.50 20.26
December 41.06 50.50 52.15 18.75 18.41 ��

2005 January 49.21 53.75 56.75 23.62 22.60

��
February 47.01 55.09 56.83 24.91 24.25 ��� ��� ��� ��� ��� ��� ��� ��� ��� ��� ��� ��� ���
March 58.11 64.23 66.41 28.22 27.50 ���� ����

Table and graph 7: Singapore market — spot cargoes, fob $/b

premium premium fuel oil fuel oil
naphtha gasoline gasoline gasoil jet kero �������
180 Cst 380 Cst ���������������� ������������������� ��������
unl 95 unl 92
���������������� ������������������� ������
��
2004 March 36.03 44.10 43.15 38.42 37.72 24.31 24.57
April 36.48 44.09 42.79 42.82 40.92 25.30 25.54
��
May 39.69 49.71 48.41 44.62 45.71 27.58 27.83
June 37.19 45.19 44.04 42.84 43.17 26.63 26.87
��
July 38.60 46.52 45.12 46.25 48.08 26.92 26.98
August 44.19 51.50 50.62 51.67 52.29 27.99 28.19
��
September 43.95 49.06 48.20 54.29 55.30 26.99 27.18
October 48.81 54.73 53.68 58.40 61.25 30.14 29.95
��
November 47.46 52.45 51.74 56.82 57.64 28.72 27.99
December 42.79 44.81 44.24 51.33 50.07 25.95 24.00
��
2005 January 41.34 47.57 46.87 51.26 51.10 27.16 26.61
February 44.61 54.27 53.70 55.74 54.54 29.31 29.28 ��
March 50.74 59.47 58.72 67.24 66.33 32.73 33.61 ��� ��� ��� ��� ��� ��� ��� ��� ��� ��� ��� ��� ���
���� ����

Table and graph 8: Middle East Gulf market — spot cargoes, fob $/b
fuel oil
naphtha gasoil jet kero 180 Cst ������� ��������
������ ����������������
��
2004 March 35.04 34.84 35.02 21.96
April 36.54 36.89 38.98 23.53 ��
May 39.94 40.74 43.77 25.89
June 37.06 38.79 40.88 24.61 ��
July 38.47 42.75 45.58 24.86
August 44.23 47.98 50.03 25.72 ��
September 44.07 50.44 53.04 24.71
October 48.42 53.79 58.29 26.79
��
November 45.07 50.90 53.56 24.02
December 40.40 45.16 46.20 21.97
��
2005 January 40.39 45.60 47.68 25.20
February 45.16 50.10 52.24 27.39 ��
��� ��� ��� ��� ��� ��� ��� ��� ��� ��� ��� ��� ���
March 50.84 59.83 63.74 29.44 ���� ����

Source: Platts. Prices are average of available days.

57
Noticeboard

Forthcoming events

Fundamentals of LNG, June 4–5, 2005, Oman. Details: Conference Global gas transportation and marketing, June 13–17, 2005,
Connection Administrators Pte, 105 Cecil Street, #07–02 The Octagon, London, UK. Details: CWC Associates, 3 Tyers Gate, London SE1 3HX,
069534 Singapore. Tel: +65 6222 0230; fax: +65 6222 0121; e-mail: UK. Tel: +44 (0)20 7089 4200; fax: +44 (0)20 7089 4201; e-mail:
info@cconnection.org; Web site: www.connection.org. bookings@thecwcgroup.com; Web site: www.thecwcgroup.com.

CERI 2005, June 5–7, 2005, Calgary, Canada. Details: Canadian Energy Oil and gas industry: a global perspective, June 20–21, 2005,
Research Institute, #150, 3512–33 Street, NW Calgary T2L 2A6 Canada. Calgary, Canada. Details: Canadian Energy Research Institute
Tel: +1 403 220 2380; fax: +1 403 289 2344; e-mail: jstaple@ceri.ca; #150, 3512–33 Street, NW Calgary T2L 2A6, Canada. Tel: +1 403 282
Web site: www.ceri.ca. 1231; fax: 1 403 289 2344, e-mail: sjohnsgaard@ceri.ca; Web site:
www.ceri.ca.
3rd Annual EIEF — CWC Egypt gas conference, June 6–7, 2005,
Cairo, Egypt. Details: CWC Associates, 3 Tyers Gate, London SE1 3HX, West Africa oil and gas 8 — Gulf of Guinea and beyond, June 20–22,
UK. Tel: +44 (0)20 7089 4200; fax: +44 (0)20 7089 4201; e-mail: 2005, London, UK. Details: CWC Associates, 3 Tyers Gate, London SE1
bookings@thecwcgroup.com; Web site: www.thecwcgroup.com. 3HX, UK. Tel: +44 (0)20 7089 4200; fax: +44 (0)20 7089 4201; e-mail:
bookings@thecwcgroup.com; Web site: www.thecwcgroup.com.
World fiscal systems for oil and gas, June 6–10, 2005, London,
UK. Details: CWC Associates, 3 Tyers Gate, London SE1 3HX, UK. World legal systems and contacts for oil and gas, June 20–24,
Tel: +44 (0)20 7089 4200; fax: +44 (0)20 7089 4201; e-mail: 2005, London, UK. Details: CWC Associates, 3 Tyers Gate, London SE1
bookings@thecwcgroup.com; Web site: www.thecwcgroup.com. 3HX, UK. Tel: +44 (0)20 7089 4200; fax: +44 (0)20 7089 4201; e-mail:
bookings@thecwcgroup.com; Web site: www.thecwcgroup.com.
Latin America olefins and poliolefins markets 2005, June 7–8,
2005, São Paulo, Brazil. 8th Moscow international oil and gas exhibition, June 21–24,
7th Asia/China olefins & polyolefins markets, June 16–17, 2005, 2005, Moscow, Russia. Details: ITE Group Plc, 105, Salusbury Road,
Shanghai, China. Details: Centre for Management Technology, 80 London NW6 6RG, UK. Tel: +44 (0)20 7596 5000; fax: +44 (0)20
Marine Parade Rd, #13–02 Parkway Parade, 449269 Singapore. Tel: 7596 5111; e-mail: enquiry@iteexhibitions.com; Web site: www.ite-
+65 6345 7322; fax: +65 6345 5928; e-mail: nancy@cmtsp.com.sg; exhibitions.com.
Web site: www.cmtevents.com.
3rd Russian petroleum congress, June 22–23, 2005, Moscow,
Caspian oil and gas 2005, June 7–10, 2005, Baku, Azerbaijan. Russia. Details: ITE Group Plc, 105, Salusbury Road, London NW6
Details: ITE Group, Plc, 105, Salusbury Road, London NW6 6RG, 6RG, UK. Tel: +44 (0)20 7596 5000; fax: +44 (0)20 7596 5111; e-mail:
UK. Tel: +44 (0)20 7596 5000; fax: +44 (0)20 7596 5111; e-mail: enquiry@iteexhibitions.com; Web site: www.ite-exhibitions.com.
enquiry@iteexhibitions.com; Web site: www.ite-exhibitions.com.
Introduction to the upstream petroleum industry, June 23–24,
Electric power industry fundamentals and the role of the AESO, 2005, Vancouver, Canada.
June 8, 2005, Calgary, Canada. Details: Canadian Energy Research Introduction to the natural gas industry … from wellhead to
Institute, #150, 3512-33 Street, NW Calgary T2L 2A6 Canada. Tel: +1 burner-tip, June 27–28, 2005, Vancouver, Canada. Details: Canadian
403 220 2380; fax: +1 403 289 2344; e-mail: jstaple@ceri.ca; Web Energy Research Institute, #150, 3512-33 Street, NW Calgary T2L
site: www.ceri.ca. 2A6, Canada. Tel: +1 403 282 1231; fax: +1 403 289 2344; e-mail:
sjohnsgaard@ceri.ca; Web site: www.ceri.ca.
NOC — IOC 2005, June 8–9, 2005, London, UK. Details: CWC
Associates, 3 Tyers Gate, London SE1 3HX, UK. Tel: +44 (0)20 7089 Petroleum Africa workshop, June 27, 2005, Dakar, Senegal.
4200; fax: +44 (0)20 7089 4201; e-mail: bookings@thecwcgroup.com; Details: Global Pacific & Partners, Suite 27, 78 Marylebone High
Web site: www.thecwcgroup.com. Street, Marylebone, London W1U 5AP, UK. Tel: +44 (0)20 7487 3173;
fax: +44 (0)20 7487 5611; e-mail: info@glopac.com; Web site: www.
10th Annual Asia oil and gas conference, June 12–14, 2005, Kuala petro21.com.
Lumpur, Malaysia. Details: The Conference Connection Inc, Raffles City,
PO Box 1736, 911758 Singapore. Tel: +65 6111 0230; fax: +65 6222 Call for papers
0121; e-mail: info@cconnection.org; Web site: www.connection.org.
2nd Kuwait International petroleum conference and exhibi-
Introduction to the Canadian downstream petroleum industry, tion on reservoir management, KIPCE 2005, December 10–12,
June 13–14, 2005, Toronto, Canada. Details: Canadian Energy Research 2005, Kuwait City, State of Kuwait. Details: Conference Secretariat,
Institute #150, 3512–33 Street, NW Calgary T2L 2A6, Canada. Tel: +1 Department of Petroleum Engineering, Kuwait University, PO Box 5969,
OPEC bulletin 5/05

403 282 1231; fax: +1 403 289 2344; e-mail: sjohnsgaard@ceri.ca; Safat 13060, Kuwait. Tel: +965 481 1188-5212; fax: +965 484 9558;
Web site: www.ceri.ca. e-mail: algharaib@kuc01.kuniv.edu.kw; Web site: www.kipce.net.

58
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Tel: +43 1 211 12-0; fax: +43 1 214 98 27; e-mail: prid@opec.org

Annual Report 2003

Free of charge

Vol XXIX, No 1 March 2005

OPEC Bulletin
Annual subscription $70 Forward-looking approach for
fiscal sustainability: a case of Egypt,
Ahmed Al-Kawaz

Indonesia, Kuwait, Saudi Arabia

and the United Arab Emirates

The impact of the budget deficit on Abbas Alavirad and

inflation in the Islamic Republic Sanhita Athawale
of Iran

OPEC Monthly Oil Market Report The economics of oil definitions:

the case of Canada’s oil sands
Douglas B. Reynolds

Business cycles and natural Apostolos Serletis and

gas prices Asghar Shahmoradi
Crude oil and product prices analysis
Member Country output figures
Stocks and supply/demand analysis
Annual subscription $525 (12 issues)
OPEC Review
(published quarterly)
annual subscription rates for 2004:
Institutional subscribers £265/yr
(North/South America $429);
Individuals £117/yr
(North/South America $126).
OPEC Annual Statistical Bulletin 2003 Orders and enquiries:
144-page book with CD-ROM Blackwell Publishing Journals, 9600
Single issue $85 Garsington Road,
The CD-ROM (for Microsoft Oxford OX4 2DQ, UK.
Windows only) contains all the Tel: +44 (0)1865 776868; fax: +44
data in the book and much more. (0)1865 714591;
• Easy to install and display e-mail: jnlinfo@
• Easy to manipulate and query blackwellpublishers.co.uk;
• Easy to export to spreadsheets such as Excel www.blackwellpublishing.com

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