Tank Monitoring Specialists
www.dunravensystems.com
Our range of Storage Tank Monitoring Systems:
•
Local Level Monitoring Units
•
Overfill Warning Systems
•
Fuel Tank Security Systems
•
Remote Tank Monitoring
Inside Out
The significant influence of OPEC
OPEC, the Organisation of the Petroleum
Exporting Countries, was established by its five
founding members – Iraq, Iran, Kuwait, Saudi
Arabia and Venezuela – at a special conference
in Baghdad in September 1960.
OPEC describes itself as a permanent
intergovernmental organisation whose mission
is ‘to coordinate and unify the petroleum
policies of its Member Countries and ensure
the stabilisation of oil markets in order to
secure an efficient, economic and regular
supply of petroleum to consumers, a steady
income to producers and a fair return on
capital for those investing in the petroleum
industry’.
Its foundation resulted from the near
complete control over worldwide oil reserves
exercised by the seven sisters – BP, Shell, Esso,
Gulf, Chevron, Mobil and Texaco – which
together controlled around 85% of global oil
reserves.
In early 1959 and again in mid-1960 this
group of companies announced unilateral
reductions in the posted prices of their Middle
East production. OPEC was established as a
counterweight to the seven sisters’ power with
the simple aim of achieving the best prices
available from these companies.
OPEC membership
The original intention was to have
headquarters in Geneva but, when the Swiss
Government declined to extend diplomatic
privileges, OPEC moved to Vienna in 1965
where it remains.
Membership now includes Qatar (1961),
Indonesia (1962), Libya (1962), United Arab
Emirates (1967), Algeria (1969), Nigeria
(1971), Ecuador (1973), Gabon (1975) and
Angola (2007).
There are currently 13 member
countries; having both previously suspended
membership, Ecuador and Gabon, have
now rejoined whilst Indonesia suspended its
membership in November 2016.
Since the 1980s representatives
from Egypt, Mexico, Norway, Oman, Russia
and other oil-exporting nations, have attended
many OPEC meetings as observers.
OPEC’s secretariat is responsible for the
Key challenges for OPEC since the 1970s
It was during the Yom Kippur war (between an Arab coalition led by Egypt and Syria, and
Israel) that awareness of OPEC first became apparent.
• The war in October 1973 prompted the mounting of an embargo on oil supplies to
the US and a number of developed countries which had supported Israel; a move that
resulted in a quadrupling of the oil price from $3 to $12 per barrel. The organisation’s
control over oil prices was cemented by nationalisation of their oil production operations
by the member countries, taking ownership from the major oil companies.
• The weakness of oil prices through the mid 1980s resulted in OPEC establishing a system
of production quotas allocated to each member which was then subject to review at its
periodic meetings.
• By late 1998 the Asian financial crisis of 1997/98 saw the oil price fall to a low point of
just under $10 per barrel. At the end of year meeting, this prompted OPEC to pursue joint
action in concert with other producers, such as Norway and Mexico, to arrest the decline.
This proved to be successful and there ensued a long, progressive rise in values over the
subsequent nine years, peaking at $144 per barrel in early July 2008.
• In November 2014 against a backdrop of increasing over-supply (due primarily to a
doubling of US shale oil production between 2008–2014), Saudi Arabia declined appeals
from some smaller OPEC members to curtail production in order to support prices. The
country argued that ‘the oil market should be left to rebalance itself competitively at
lower price levels, strategically rebuilding OPEC’s long-term market share by ending
the profitability of high-cost US shale oil production’. Although falling somewhat
through 2015 and up to mid-2016, US shale production proved a lot more resilient than
anticipated, with savage cost reduction initiatives reducing cash breakeven prices from
a typical $70-$80 per barrel range down to around $35-$40. Consequently, prices saw
progressive a decline, from over $100 per barrel in late 2014 to a low of $28 per barrel in
late January 2016.
• During 2016 there was a measure of price recovery in the $40s per barrel range. Seeing
the need for production curbs OPEC instigated an overall reduction of just over one million
bpd over the first half of 2017. Formalised at its November 2016 meeting, Saudi Arabia
absorbed around 50% of the total agreed cut which was also supported by a Russian
reduction. While compliance to date has been fairly strong, prices have failed to break
out of a $45-$55 bpd range. At its meeting in late May 2017, OPEC was expected to
announce an extension of the current production curbs to the end of 2017......
implementation of all resolutions passed by the
conference and carries out all decisions made
by its board of governors. The secretariat also
conducts research with the findings being key
inputs in decision-making. Headed up by a
secretary general, it has legal, research and
support services.
What future for OPEC?
OPEC’s demise has been predicted on several
occasions. It continues to face a number
of challenges, not least being the ongoing
internal antagonism/rivalry between Saudi
Arabia and Iran.
Going forward it will need, among other
things, to:
9 Continue to manage its production in a
way that is consistent with sustainable
levels of oil prices and meeting world
market demands – cognisant especially of
non-member producer aspirations/plans.
9 Recognise the increasing role of natural
gas as the fossil fuel of choice, especially
in non-transport requirements
9 Accept the various challenges of climate
change and the consequent need for
progressive de-carbonisation of the global
economy
In the absence of internal stresses
resulting in its break up, an organisation that
currently accounts for around 40% of global
oil production and 80% of proven reserves
will continue to exert a significant influence
on the state of the world economy and, so, by
implication, our livelihoods, for several years
ahead!
Fuel Oil News | June 2017 17