118th Extraordinary Meeting of the OPEC Conference
Vienna, Austria, November 14, 2001
118th Extraordinary Meeting of the OPEC Conference
The 118th (Extraordinary) Meeting of the Conference of the Organization of the Petroleum Exporting Countries (OPEC) convened in Vienna, Austria, on 14 November 2001, under the Chairmanship of its President, HE Dr. Chakib Khelil, Minister of Energy & Mines of Algeria and Head of its Delegation.
The Conference extended its deepest condolences to the Government and people of Algeria for the terrible loss they have suffered in the worst flash floods to hit the country for nearly forty years, killing well over 500 persons and leaving tens of thousands homeless in the capital city, Algiers.
Having reviewed the oil market situation and supply/demand expectations for the forthcoming period, and recalling the fact that the Organization has been shouldering the full burden of maintaining oil market stability, the Conference noted that the impact of the current global economic slowdown on the oil market requires firm and concrete co-operation between OPEC and non-OPEC oil producing countries in the form of equitable sharing in further reductions, as was the case in 1999.
The Conference further noted that, as a result of the global economic slowdown and the aftermath of the tragic events of 11 September 2001, in order to achieve a balance in the oil market, it will be necessary to reduce the supply from all oil producers by a further 2.0 mb/d, bringing the total reduction in oil supply to 5.5 mb/d from the levels of January 2001, including the 3.5 mb/d reduction already effected by OPEC this year. In this connection, and reiterating its call on other oil exporters to co-operate so as to minimize price volatility and ensure market stability, the Conference decided to reduce an additional volume of 1.5 mb/d, effective 1 January 2002, subject to a firm commitment from non-OPEC oil producers to cut their production by a volume of 500,000 b/d simultaneously.
Re-emphasizing the importance of securing effective co-operation from non-OPEC oil producing countries to preserve market stability, the Conference welcomed the positive responses expressed by some non-OPEC producers, especially Mexico and Oman, to co-operate in balancing the market, and decided that contacts with non-OPEC producing countries continue. The Conference also expressed its satisfaction at the outcome of the senior Experts Working Group of OPEC and invited non-OPEC producers, held on 29 October 2001. The Conference further agreed on future similar meetings being held periodically.
The Conference confirmed the date of 12 March 2002 for its next (Ordinary) Meeting.
Conference expressed its appreciation to the Government of
the Federal Republic of Austria and the authorities of the
City of Vienna for their warm hospitality and the excellent
arrangements made for the Meeting.
Vienna, Austria, November 14, 2001
Opening address to the 118th Extraordinary Meeting of the OPEC Conference by His Excellency Dr Chakib Khelil President of the Conference and Minister of Energy and Mines, Algeria
Excellencies, ladies and gentlemen,
Welcome to the 118th Meeting of the OPEC Conference.
It is with much sadness that I must begin this address with an expression of the deepest condolences from OPEC to the people of Algeria — my own country — for the terrible loss they have suffered in the worst flash floods to hit the country for nearly 40 years. Well over 500 people have been killed and tens of thousands left homeless in the capital city, Algiers, parts of which now lie devastated under a thick layer of mud and grime. At the same time, however, on behalf of Algeria, I should like to thank all those countries and international agencies that have promised to provide swift humanitarian aid, in our time of need.
Let us now turn our attention to this Meeting. The specific purpose of this Extraordinary Meeting is to review the current state of the international oil market and to decide, according to our observations, on the type of action that may be required by oil-producing nations to achieve order and stability in the months ahead. At our last Conference, on 26–27 September, we decided to leave OPEC’s existing output levels unchanged, with a total ceiling of 23.2 million barrels a day, excluding Iraq. We did this at a time when the deteriorating global economic outlook, exacerbated by the tragic events of 11 September in the USA, was expected to have a dampening effect on world oil demand. Our decision once again demonstrated OPEC’s commitment to its longstanding role as a responsive and responsible member of the world community, by saving the global economy hundreds of billions of US dollars as a result of the Organization’s determination to ensure stability in the international oil market. It also showed that, if OPEC did not exist, the world would have had to create it, in order to bring about this much-needed stability.
As you may recall, the price of OPEC’s spot Reference Basket, at our last Meeting, had just fallen heavily to little more than US $20 per barrel, after averaging around $25/b during the first three quarters of this year. Since then, it has been fluctuating in a range of around $17.5–20.5/b, well below our price band level of $22–28/b and our target price of $25/b, which lies in the middle of that range. The current situation is especially discouraging to those producers — OPEC and non-OPEC — who have worked so hard in recent years to achieve stability in the market, with prices that constitute what has been widely regarded as a reasonable balance between the needs of producers and consumers. Much of the credit for that success must go to the efforts of OPEC, which has sacrificed 3.5 mb/d of its production this year, together with the resulting revenue, partly to the benefit of non-OPEC producers.
As we set about our deliberations at today’s Meeting, there is underlying concern about the near-term prospects for the oil market. The events of 1997–98 are still fresh in our minds and recall the dangers of letting matters get out of hand through failure to act soon enough and in the appropriate manner. In our deliberations at this Conference, we will, therefore, be faced with a threefold task.
First, we will seek to ascertain the best measures to adopt in the face of the global economic downturn, with its depressing effect on the oil market, which, as the winter months approach, is already in a state of over-supply with high stock levels. At the same time, we are conscious of the need to avoid adopting any measures that will add to the current weakness facing many developed economies or impede the economic development of the long-suffering poorer nations. Let me say at this point, however, that the longer-term outlook is more favourable, with upturns already being forecast for leading sectors of the global economy in the second half of 2002, notably the USA, Japan and Europe. Therefore, we must ensure that any actions we take now will be consistent with the provision of a viable and stable oil market, which will be essential for when the economic upturns manifest themselves.
Secondly, we will endeavour to build upon the considerable progress that has been made in the international oil market over the past couple of years through the commitment and the resolution of responsible producers and other principal players. The fact that the recent sustained period of order and stability was underpinned by the establishment and successful operation of a transparent, realistic and widely accepted pricing mechanism will be uppermost in our minds. It is important, however, that, during this period of tightness in the market, we strengthen our resolve to stick to the letter of our agreements and ensure that our production policies are in strict accordance with them. Our credibility is only as good as the continuation of the effort among our Member Countries to maintain cohesion, solidarity and cooperation.
Also, we look forward to the continued cooperation of fellow oil producers from outside our Organization, whose support for our agreements have done so much to ensure their success in recent years. Non-OPEC producers and the governments of consuming countries have a clear role to play in the process of achieving and maintaining a healthy global oil sector; this will, in turn, provide a sound base for world economic growth. These governments could help their domestic economies by reviewing the excessive levels of taxation they impose on oil products, thereby allowing consumers to more productively allocate their own resources and enhance economic growth.
The final part of our threefold task is to ensure that any decision emanating from the Meeting will be sensitive to the feelings of peace-loving, virtuous members of the world community, whose principal concern at the present time is — understandably — greater international understanding and the cessation of hostilities. The importance of this was brought home to us immediately after our last Meeting of the Conference, at the two-day energy seminar we held in Vienna. The general message that emerged from the eminent group of energy experts gathered there was that oil supply is part of a much grander matrix affecting mankind as a whole — sustainable development.
During the present period of international conflict, despite all the fears, the stresses and the distractions that this involves, we must never lose sight of the fact that sound, secure energy supply is a vital ingredient in the process of developing the economies of the poorer nations of the world. Security of supply must, in turn, be matched by security of demand. When the present crisis is over — soon, hopefully — it is up to the richer nations of the world to restore the issue of sustainable development to its proper place at the top of the international agenda, in a united effort to eradicate poverty and hardship in developing nations and stimulate their economies. OPEC will continue to play a progressive role in such an environment, with the OPEC Fund for International Development, in particular, being an important source of assistance to the poorer developing countries.
Finally, as you already know, this is likely to be the final Meeting of the Conference during which I am bestowed with the honour of being President. I have found this to be a challenging and stimulating assignment, from which I have learned many valuable lessons during the course of the year. OPEC communicates and anticipates situations better, undertakes more coherent and coordinated discourse and engages in more open and constructive dialogue with non-OPEC producers and consumers. Overall, the Organization has become a force to be reckoned with, in the crucial area of oil market stability, and this is highly beneficial for a globalised economy, where sustainable development is taking on more and more importance.
Throughout this year, I have endeavoured to serve OPEC to the best of my ability in this post; as a result, I hope that this has helped the Organization move forward as it settles into the 21st century. I should like to thank the many generous, committed and accomplished individuals and groups who have assisted me in carrying out my duties. My successor, HE Dr Rilwanu Lukman, is already well-known to you and has unparalleled experience in the senior hierarchy of our Organization, having previously served with distinction for many years as both President and Secretary General. I am sure you will all join me in wishing him every success when he takes up the post of President again in the New Year.