The Relationship between OPEC and other International Organizations

Speech by OPEC Secretary General, HE Abdalla S. El-Badri, to the International Energy Symposium, on the occasion of OPEC’s 50th Anniversary - Riyadh, Kingdom of Saudi Arabia, 18-20 October 2010

Excellencies, ladies and gentlemen,

Good morning.

I would like to begin by expressing my appreciation to His Excellency Ali I. Al-Naimi, Minister of Petroleum & Mineral Resources of the Kingdom of Saudi Arabia, for the invitation to speak at this International Energy Symposium, and my sincere thanks to the Chair of this session, His Royal Highness Prince Abdulaziz Bin Salman Al-Saud. It is a great honour for me to participate in this event; one that marks the happy occasion of the 50th Anniversary of the Organization of the Petroleum Exporting Countries.

Fifty years ago, when OPEC was set up in Baghdad, there were some who predicted that the Organization would not last long. Fifty years on, however, that initial small group of developing oil producing countries has evolved into a group of twelve. These come from across the world and have brought more strength and diversity to the Organization.

It has certainly not been an easy task to advance the Organization's standing and influence, particularly given the nature of the oil industry at the time of its establishment. As I am sure you are all aware, the main catalyst for its birth came in 1959, when a group of international oil companies - the Seven Sisters - unilaterally reduced the posted prices of the crude they supplied.

At that time, these international companies were the dominant force in the oil market, playing the major roles and deriving the greatest benefits from all segments of the business, from exploration to final distribution. They controlled the quantity of oil extracted and sold, to whom it was sold, and at what price. And decisions were made without ever consulting host Governments of oil-producing countries.

So in 1960, five oil-producing developing countries - Iran, Iraq, Kuwait, the Kingdom of Saudi Arabia and Venezuela - came together around the premise of cooperation. They have since been joined by Qatar, Libya, United Arab Emirates, Algeria, Nigeria, Ecuador and Angola.

The founding of OPEC was a commitment based upon the need to safeguard their legitimate national interests and to ensure order and stability in the international oil market. It was about gaining the full sovereignty over their exhaustible non-renewable natural resources.

Over the years, this cooperation has grown stronger as the Organization has evolved and become an established and respected member of the global energy community. In the years ahead, OPEC's dedication to the welfare of its Member Countries, the international energy market and the global economy will of course continue.

This very brief history underlines the importance OPEC attaches to cooperation and dialogue. It was an essential part of its founding, has been fundamental to its evolution, and will be a key element in the Organization's future.

Of course, the issue of cooperation is central to the main topic I have been asked to talk about today: 'The Relationship between OPEC and other International Organizations'.

OPEC has long recognized the importance of adopting a plurilateral approach to addressing major topical issues, involving dialogue and cooperation with other international organizations and interested parties. This applies to both direct oil industry matters, as well as related areas, such as environmental protection and sustainable development.

At first, however, OPEC found it difficult, if not impossible, to establish dialogue and start cooperation outside of OPEC circles. This is due mainly to the hostile environment that prevailed when OPEC was born.

Gradually this changed. And there was a coming together and an understanding that in many respects our interests, particularly in regard to market stability, were, if not identical, at least similar. We have come a long way, from the early confrontation to the cooperation we see today.

Today, the importance of dialogue between international organizations, particularly in terms of bringing together producers and consumers, has never been greater. The reason is that globalization, international trade and mass communication are bringing us all closer together. We live in an increasingly interdependent world. This fact was clearly evident during the global financial and economic crisis. The knock-on impacts have been felt in almost all industries and in all countries across the world.

And, with energy central to each and every one of us, it is critical that all stakeholders work together for market stability. This is vital for the effective and efficient functioning of the global energy market.

In the global oil market, while demand for oil is clearly set to grow in the coming years, a number of factors that could have both medium- and long-term impacts on supply exist. This includes the policies of a number of consuming countries that offer an unclear picture of their impact on future oil consumption levels and overall energy demand. There is a need to provide clearer policies that are reliable, predictable and not discriminatory. Market stability is essential for both producers and consumers.

In addition, there is the need for a better understanding of such matters as the effects of excessive market volatility, the role of speculation, the future requirements for human resources as well as the impact of climate change and of mitigation policies and measures.

We should also never forget that it is a world in which energy poverty continues to blight the lives of billions of people. It is an issue that needs the urgent and critical attention of world leaders.

To help meet some of these challenges and uncertainties facing the global oil market, and the world, in general, we at OPEC believe in continually looking to explore and evolve our dialogue and cooperation with other international organizations. We recognize the value of strong and mutually-beneficial relationships.

In this regard, OPEC continues to maintain a strong and positive relationship with the European Union (EU). In the latest EU-OPEC Ministerial Dialogue that took place in June this year, the two organizations highlighted a number of relevant and topical areas where cooperation could be furthered. This included the need to continue to analyze and discuss the root causes of the recent financial crisis and economic recession; to organize roundtables on the challenges facing offshore oil and gas exploration and production activities and the causes of the skilled workforce shortage in the energy and oil industry; and to develop a study to explore the potential of technological advances in transportation.

OPEC and the EU also remain in discussions about enhancing cooperation through the development of an OPEC-EU Technology Centre, with energy technologies identified as one of the most important areas for cooperation.

Cooperation between OPEC and the IEA goes back many years and has advanced considerably. In recent years, a number of joint workshops on a variety of topical issues have been held and both Mr. Tanaka and I have made visits to the headquarters of our respective organizations. OPEC sees the dialogue between the two as an important element in improving the understanding of the concerns of all parties for oil market stability and predictability.

OPEC has also been proud to have played an active part in the formation of the International Energy Forum, whose Secretariat is now located here in the Kingdom of Saudi Arabia. It was founded as a platform that helps informal dialogue between producers and consumers and OPEC continues to support the IEF in providing this function.

This can be seen in the Organization's active participation in the IEF's Joint Oil Data Initiative, set up to enhance the transparency, quality, timeliness and flows of oil market data. We remain committed to furthering this project.

The Cancun Declaration, which was a result of the initiative begun by Saudi Arabia when it held an ad-hoc energy meeting in June 2008, maps out a path for a strengthened IEF, specifically through the development of an IEF Charter. Furthermore, it outlines specific areas of cooperation between the IEF, the International Energy Agency (IEA) and OPEC. This covers present and future market trends; the functioning and regulation of energy markets; and data.

The Organization and its Member Countries have also been, and continue to be, actively involved with many United Nations Organizations. This includes the United Nations Commission on Sustainable Development and, of course, the long-standing negotiations within the framework of the United Nations Framework Convention on Climate Change and its Kyoto Protocol.

I think we all appreciate that the climate change negotiations can, at times, feel extremely complex and, on occasion, appear to be never-ending. However, OPEC recognizes the importance of being part of these negotiations and of working with all parties and organizations to develop solutions that safeguard the legitimate interests of all parties.

In this regard, I am sure all stakeholders agree that any future agreement should be balanced, fair and equitable. It needs to take into account the past, present and future; the fulfilling of current commitments and obligations; address the net emissions of all greenhouse gases; use all available cost effective abatement options and technologies, including cleaner fossil fuel technologies, such as carbon capture and storage; and remain focused on the priority of sustainable development, particularly in regard to those least able to help themselves.

Additionally, OPEC has furthered dialogue this past decade with countries such as China, Russia and a number of other non-OPEC producers, as well as with other international organizations, such as the World Bank, the International Monetary Fund, and the World Trade Organization.

We also hope to expand our dialogue with other international organizations, as well as countries, such as India and Brazil.

Excellencies, ladies and gentlemen,

In summing up, let me stress once again that OPEC, in its 50th Anniversary year, remains faithful to the cooperation and the commitments that were agreed in Baghdad 50 years ago; to ensure market stability, an efficient and regular supplies of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry.

Thank you for your attention.