January 2012, No. 62

Oil & Gas

Opening address to the 160th Meeting of the OPEC Conference

When reviewing the market outlook for 2012 and beyond, we face a very unclear picture. On the one hand, we are committed to ensuring that the world oil market is always well-supplied.

By HE Eng. Rostam Ghasemi, Minister of Petroleum of the Islamic Republic of Iran and President of the Conference.

First of all, I should like to take this opportunity to welcome you to Vienna for the 160th Meeting of the OPEC Conference.

After this, I should like to continue by extending a special welcome to His Excellency Eng Abdurahman Benyezza, the Minister of Oil and Gas for Libya, who is attending the Conference for the first time as Head of his Country's Delegation. We are all relieved to see the end of hostilities in Libya, one of OPEC's earliest Members, and our best wishes are with its citizens as they seek to rebuild their country.

It is also an honour for me to appear at the Conference for the first time as Head of Delegation of the Islamic Republic of Iran, in my capacity as Minister of Petroleum. This includes succeeding my distinguished predecessor from the Islamic Republic of Iran, His Excellency Mohammad Aliabadi, as the Conference President.

Since we last met in Vienna on 8 June, the international oil market has witnessed further volatility. The OPEC Reference Basket price has risen to US $113 a barrel on several occasions, and it fell below $99 a barrel briefly at the start of October as well.

Indeed, in the five weeks from 4 October, the Basket price rose by more than 15 per cent, before dipping again.

However, the big challenge facing the oil market at the present time is coping with the tremendous uncertainty affecting world economic growth. Since our June Meeting, most growth estimates have been revised down, in some cases substantially. For example, if we compare our July forecasts with those of December, we see that the world growth estimate for 2011 has fallen from 3.9 to 3.6 per cent and, for 2012, by an even bigger margin, from 4.1 to 3.6 per cent. That is in just five months! Most of these declines have come from developments in the OECD - most specifically, the Euro-zone debt crisis and the United States with its slower-than-expected economic growth. On the other hand, the economic growth estimates for China have seen little change and now stand at 9.0 and 8.7 per cent for these two years. However, in the fast-growing developing countries, there is added concern about the real levels of growth.

This uncertainty about economic growth translates into uncertainty about oil demand. In the aforesaid five-month period, we have reduced our forecast for world oil demand growth in 2012 by around 600,000 barrels a day. This leaves us with a demand growth estimate for 2012 of 1.1 million barrels per day over 2011.

Therefore, when reviewing the market outlook for 2012 and beyond, we face a very unclear picture. On the one hand, we are committed to ensuring that the world oil market is always well-supplied. Yet, on the other hand, we are faced with the prospect of a world economy which could swing either way in the coming months. It could enter a welcome period of sustainable economic recovery or return to a new downturn or even recession. A relatively small impulse in an economy, or a group of economies, could be a deciding factor in this unstable global environment. The situation is not helped by the still considerable influence of the international financial sector in over-stating market trends in one direction or another, out of line with fundamental factors.

All this presents a huge challenge to OPEC's Member Countries, when it comes to investing in future production capacity in an industry with high capital-outlays and long lead-times.

I should like to stress that this is a challenge facing all parties in the oil industry and that it is not merely confined to OPEC. Our Member Countries should not bear alone the burden of stabilizing the oil market. We all benefit from market stability. Therefore, we should all contribute to market stability, that is to say OPEC and non-OPEC producers, together with consumers, financial institutions and other interested parties.

As we turn our attention towards the New Year, we take the opportunity to reflect upon the grander picture. This is summed up well by our Third Summit Declaration, which highlights the three guiding themes of: global energy market stability, energy for sustainable development, and energy and the environment.

While we review the results of the latest round of climate change negotiations, which ended in Durban last week, we are also aware of the fact that next year marks the 20th anniversary of the Earth Summit in Rio de Janeiro. This is still a very active issue, and we must keep making efforts to ensure that the interests of oil-producing countries are properly represented in the negotiations at all times. There is so much at stake for all our Member Countries here. We shall be considering this issue at the Fifth OPEC International Seminar that is due to be held in Vienna in June 2012. Next year will also see the tenth anniversary of the World Summit on Sustainable Development, which took place in Johannesburg in 2002. Again this issue should be covered at the Seminar, together with the other sessions on world energy, the global economy and the oil sector.