Opening address for dinner-debate

Transcription

1 Opening address for dinner-debate Mohammed Barkindo Acting for the OPEC Secretary General European Parliament Strasbourg, France 4 July

2 Outline Importance of EU-OPEC Energy Dialogue Current oil market developments Longer-term outlook Energy security EU Green Paper Cleaner oil and gas technologies Poverty eradication 2

3 OPEC Reference Basket price (nominal and real) and non-energy commodity prices Nominal ($/b) Real ($/b base May 2006) The real price is still well below historical highs OPEC Basket Aluminium Copper Lead Nickel Gold Non-energy commodity prices have also risen Jan 2001 = Jan- 01 Jul- 01 Jan- 02 Jul- 02 Jan- 03 Jul- 03 Jan- 04 Jul- 04 Jan- 05 Jul- 05 Jan- 06 3

4 High volatility in oil prices, US $/b Strong global economic and, in turn, oil demand growth ( increase: 5.4 mb/d) High capacity utilization in the supply chain, tightness in the refining sector Heightened geopolitical concerns fears of supply disruptions Increasing activity in futures market (new wave of capital movement by funds) 80 WTI 74 OPEC R. Basket (ORB) Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul Dec 21- Dec 10- Jan 30- Jan 19- Feb 11- Mar 31- Mar 20- Apr 10- May 30- May 19- Jun 9- Jul 4

5 Recent oil market developments: high demand growth % mb/d North America China Middle East Other Asia Others World GDP 0 5

6 Supply chain tightness: downstream bottlenecks Refinery capacity utilization rates % Jan 04 May 04 Sep 04 Jan 05 May 05 Sep 05 Jan 06 May 06 EU** USA Asia* */ Asia = Japan, South Korea, China, India and Singapore EU**/ Data reflects only sixteen countries due to availability. 6

7 Increasing activity in futures market Open interest surpassed 1 million contracts recently, reflecting sustained high interest by funds in oil futures! EU-OPEC Workshop on financial markets (Dec 06) June 30, 2006 NYMEX WTI open interest & price OPEN Interest Price (US$/bbl) ('000 contracts) Jan- 03 May- 03 Sep- 03 Jan- 04 May- 04 Sep- 04 Jan- 05 Jun- 05 Oct- 05 Feb- 06 Jun- 06 7

8 OPEC crude oil supply has risen by 4.5 mb/d since Call on OPEC crude OPEC crude production 29 mb/d

9 OECD commercial oil stocks 2750 million barrels 58 days of forward cover Jan Feb Mar Apr Max/Min May Jun Jul Aug Sep Oct Avg Nov Dec Jan 2006 Feb Mar Max/Min Apr May Jun Jul Aug Sep Oct Avg Nov Dec 9

10 Commercial oil stock levels in the USA week-ending, mb 370 Crude oil 740 Total Products Avg Avg Max/Min Max/Min

11 OPEC crude capacity continues to expand mb/d

12 Rising project costs: indicative cost rises 3D seismic costs have doubled in the last 24 months Deepwater drilling day rigs up at least 50% in 12 months. Contracts at $500k/d for Wage pressure is escalating with growing shortage of skilled labor (~15% rise in 2005) Steel is a major component of infrastructure & facilities, with prices up 40% since (%) Exploration Infrastructure Drilling SURF Personnel Facilities Source: Goldman Sachs, OPEC Secretariat 12

13 Long-term oil demand outlook, mb/d OECD DCs Transition economies World Reference case sees oil demand rise by 30 mb/d by 2025 Four-fifths of increase in demand in developing countries However, OECD remains dominant consumer Developing countries will consume, on average, five times less oil per person, compared with OECD countries 13

14 Conventional liquid resource base is sufficient USGS estimates of remaining resources 2500 Cumulative production billion barrels Date of assessment release 14

15 Long-term oil supply outlook, mb/d OECD DCs, excl. OPEC Transition economies Total non-opec OPEC (incl. NGLs) World Non-OPEC increases: Latin America, Africa, Russia, Caspian 15

16 Energy security OPEC recognises consuming countries concerns over energy supply security, and attaches great seriousness to this Security of demand and security of supply are mutually supportive Uncertainty over future demand translates into a broad range of potential levels of demand for OPEC oil Investment requirements are large, subject to long lead-times and pay-back periods More transparency in evolution and implementation of policies 16

17 Cumulative investment in OPEC: three scenarios Uncertain future demand translates into a broad range of possible OPEC investment needs 350 $(2005) billion

18 EU Green Paper Excellent platform for sharing views, ideas and visions Should address interests of non-european countries Interdependence rather than dependence Should recognise importance of security of demand Downstream investment issue should be addressed Emphasis on carbon capture and storage welcomed 18

19 Cleaner oil and gas technology Increased fossil fuel use can be consistent with the protection of the environment Carbon capture and storage is a promising technology to address climate change concerns Developed countries should take lead in providing cleaner oil and gas technologies 19

20 Poverty eradication Access to modern energy services must be improved upon Poverty eradication: first UN Millennium Development Goal Comprehensive and balanced approach to the three pillars of sustainable development: economic growth, social progress and protection of the environment Energy security applies to all nations 20

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22 Taxation of oil products Diesel prices & taxes, December 2005 USA Canada 19% 25% Crude CIF Price Industry Margin Tax Japan 34% France 48% Germany 50% Italy 44% UK 60% US$/litre 22

23 US gasoline stocks and demand cover 240 Gasoline Stocks. Week ending (mb) 27 Days of gasoline demand cover Avg Avg Max/Min Max/Min

24 OPEC 10 capacity expansion plans, (tb/d) Over 100 projects with cumulative investments of more than $100 billion! 50% of these projects are in partnership with IOC s OPEC-10 cumulative capacity increase > 4 mb/d by 2010, with Iraq: 5-6 mb/d Algeria Indonesia Iran Kuwait Libya Nigeria Qatar Saudi Arabia UAE Venezuela Source: based on projects and other assumptions including secondary sources

25 OPEC Downstream expansion plans: mb/d Condensate Conversion+treating Distillation Investment $billion $billion Algeria Indonesia IR. Iran Iraq Kuwait Libya Nigeria Qatar Saudi Arabia UAE Venezuela 25

26 Regional gasoline quality specification ( ) Sulfur Aromatic Benzene Leaded Sulfur Aromatic Benzene Leaded (ppm) (wt%) (wt%) % of Pool (ppm) (wt%) (wt%) % of Pool North America Latin America Western Europe Eastern Europe Asia Pacific Middle East Africa Sources: Hart forecast and analysis database 26

27 Regional diesel fuel quality specification ( ) Diesel Sulfur* Centane Diesel Sulfur* Centane (ppm) Index (ppm) Index North America Latin America 2, , Western Europe Eastern Europe Asia Pacific 1, Middle East 1, Africa 1, *On-road diesel Sources: Hart forecast and analysis database 27