OPEC. International Seminar. Petroleum: An Engine for Global Development June Hofburg Palace Vienna, Austria

OPEC

th International Seminar Petroleum: An Engine for Global Development 3–4 June 2015 Hofburg Palace Vienna, Austria

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www.opecseminar.org

Contact: +44 7818 598178 [email protected]



— a better way?

Over the last half century, modern technology has been a powerful force of transformation. It has changed the way we live, offering new innovations and state-of-the-art processes that, in one way or another, have touched most everyone going about their daily lives. Nowadays, no new year seems to pass without some new-fangled application bursting onto the scene with major implications for science, industry and the public at large. It is a huge, fluid and interlinked process that can — and does — affect all walks of life and will no doubt continue to astound in the years ahead as even more advances are made. These technological applications, which have given us eversmarter phones, self-parking cars and even the possibility to fly to Mars (although it is only a one way ticket at present), have also helped the oil industry make great developmental strides. Most importantly, modern scientific methods have created a whole host of solutions to problems that once seemed unsolvable. For example, today’s engineers can now retrieve petroleum resources from depths on the sea bed once considered unimaginable and produce ever cleaner petroleum-based products in keeping with a healthier environment. One such process to sweep the industry, which became apparent about five or six years ago, is the exploitation or ‘fracking’ of unconventional, so-called tight oil, which is crude extracted from petroleum-bearing formations of low permeability, often shale or tight sandstone. This revolutionary oil source has lain dormant for decades, but today, through the use of modern technology, it has become a game-changer, albeit most probably only in the short term. The fact is, the advent of this new resource, which the United States and Canada, in particular, are exploiting to the full, has upset the oil market applecart, as it were. The relatively sudden and, it must be said, unexpected, exploitation of tight oil has taken the industry by surprise, adding such large quantities to the world’s already sufficient conventional crude supplies that the global oil market is now oversupplied. And it is primarily because of this extra crude that international oil prices have fallen by 50 per cent since last summer. This price slump, although welcomed by the consumers, has far-reaching implications for the entire oil industry and casts a huge shadow over future capacity investment. OPEC, like any responsible stakeholder, is concerned about current developments. The Organization is the first to welcome any new source of energy. It is fully cognizant of the fact that with global energy demand expected to expand considerably in the years ahead, the growing number of consumers — especially coming from Asia

and the developing world — will likely need all available sources, conventional or otherwise, to meet their needs. But surely there has to be a rational use of any new additions, especially if their introduction has the effect of destabilizing an already smooth-running market, as has been the case with tight oil. Looking at developments over the last decade one can plainly see how the industry came to be immersed in its current dilemma. In 2005, OPEC crude production stood at 29.58 million barrels/day. It then rose to around 30m b/d the following year and went on to average that level over the next eight years, in line with its current self-imposed production ceiling. Stability personified. However, over the same time-span, non-OPEC output grew from 49.6m b/d in 2004 to 55.9m b/d at the end of 2014. That is a rise of 6.3m b/d, or almost 13 per cent. All but 200,000 b/d of this growth has come from the US and Canada — chiefly as a result of their allout exploitation of tight oil. Good fortune for North America; not so good for others associated with the industry which has already seen countless thousands of workers lose their jobs as a result of the perceived downturn in activity. These indisputable facts notwithstanding, certain commentators persist on laying the blame for the current price demise at the doorstep of OPEC for choosing to protect its market share — a stable, fair and responsible share at that — at its Conference in November last year. Compounding this irony, others clearly expected it to cut production once again to restore market stability, a sacrifice OPEC Members, who are developing countries themselves, have made on several occasions in the past. It is at times like these that the Organization feels compelled to remind all parties that make up the international oil sector that this is exactly why, from day one, the Organization has been committed to establishing serious dialogue, transparency and cooperation with the other main stakeholders — especially the producers and the consumers. Only by openly and regularly discussing the latest market developments can such instances as the latest oil price decline be prevented from occurring. After all, ALL parties agree on one thing — an unstable oil market with wildly fluctuating prices serves no one’s interest. It is a further irony that in producing to the maximum and effectively driving the oil price down, the future of tight oil in North America is now in question, due to the high cost of its extraction compared with the exploitation of OPEC’s conventional crude reserves. Perhaps, rational planning and a good helping of compromise would have brought a far better outcome — for everyone.

Commentar y

Rational planning and compromise

Reuters

Contents

OPEC bulletin

4

8

18

Obitu a r y

4

World leaders pay tribute to late King Abdullah of Saudi Arabia

D avos

8

OPEC Secretary General attends World Economic Forum

Gas Pro d u cers Me et

12

16th GECF Ministerial Meeting convenes in Qatar

EU-O PEC Wo r ks h op

14

EU-OPEC Roundtable discusses challenges in petrochemical sector

En erg y Fo rum

16

OPEC committed to longstanding 30m b/d output ceiling

Petro chem icals

18

Saudi petrochemicals sector offering huge potential for jobs, diversification drive

I nsigh t

22

The future of oil

Newsl i ne

30 32 33 34 35

Oil market weakness due largely to US tight oil growth — BP Outlook

Cover This month’s cover shows King Abdullah Bin Abdulaziz Al-Saud, of Saudi Arabia, who passed away in January 2015 (see Obituary on page 4).

Vol XLVI, No 1, January/February 2015, ISSN 0474—6279

Iran again postpones oil roadshow to later in 2015 Shell signs petrochemical deal with Iraq but reduces other investments Kuwait proceeds with oil capacity expansion plans Total first to be awarded stake in Abu Dhabi oil concession

Publishers OPEC Organization of the Petroleum Exporting Countries Helferstorferstraße 17 1010 Vienna Austria Telephone: +43 1 211 12/0 Telefax: +43 1 216 4320 Contact: The Editor-in-Chief, OPEC Bulletin Fax: +43 1 211 12/5081 E-mail: [email protected] Website: www.opec.org Website: www.opec.org Visit the OPEC website for the latest news and information about the Organization and back issues of the OPEC Bulletin which are also available free of charge in PDF format.

OPEC Membership and aims OPEC is a permanent, intergovernmental Organization, established in Baghdad, on September 10–14, 1960, by IR Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Its objective — to coordinate and unify petroleum policies among its Member Countries, in order to secure a steady income to the producing countries; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the petroleum industry. Today, the Organization comprises 12 Members: Qatar joined in 1961; Libya (1962); United Arab Emirates (Abu Dhabi, 1967); Algeria (1969); Nigeria (1971); Angola (2007). Ecuador joined OPEC in 1973, suspended its Membership in 1992, and rejoined in 2007. Gabon joined in 1975 and left in 1995. Indonesia joined in 1962 and suspended its Membership on December 31, 2008.

Shutterstock

Shutterstock

Shutterstock

34

22 Sp o tl ig ht

36

A glimpse into Venezuela’s automobile history

App o in tm en t

44

Venezuela appoints new Minister of Petroleum and Mining

Obitu ar y

45

Garry Brennand

S e cre tar y G en eral’s Diar y

48

Visitors to the OPEC Secretary General

B r ief ings

49

Students at the OPEC Secretariat

O P EC Fun d News

52

OFID’s Al-Herbish honoured by City of Vienna

45

OFID-backed aluminium plant to help transform Mozambique (p54)

No ticeb oard

56

Mar ket Review

57

O P EC Pu blicatio ns

65

Secretariat officials Secretary General Abdalla Salem El-Badri Director, Research Division Dr Omar S Abdul-Hamid Head, Energy Studies Department Oswaldo Tapia Head, Petroleum Studies Department Dr Hojatollah Ghanimi Fard General Legal Counsel Asma Muttawa Head, Data Services Department Dr Adedapo Odulaja Head, PR & Information Department Hasan A Hafidh Hamid Head, Finance & Human Resources Department Jose Luis Mora Officer-in-Charge, Admin & IT Services Department Badreddine Benzida

Energy industry events

Contributions The OPEC Bulletin welcomes original contributions on the technical, financial and environmental aspects of all stages of the energy industry, research reports and project descriptions with supporting illustrations and photographs. Editorial policy The OPEC Bulletin is published by the OPEC Secretariat (Public Relations and Information Department). The contents do not necessarily reflect the official views of OPEC nor its Member Countries. Names and boundaries on any maps should not be regarded as authoritative. The OPEC Secretariat shall not be held liable for any losses or damages as a result of reliance on and/or use of the information contained in the OPEC Bulletin. Editorial material may be freely reproduced (unless copyrighted), crediting the OPEC Bulletin as the source. A copy to the Editor would be appreciated.

Editorial staff Editor-in-Chief Hasan A Hafidh Hamid Editor Jerry Haylins Associate Editors James Griffin, Alvino-Mario Fantini, Maureen MacNeill, Scott Laury Production Diana Lavnick Design & layout Carola Bayer and Tara Starnegg Photographs (unless otherwise credited) Diana Golpashin and Wolfgang Hammer Distribution Mahid Al-Saigh

Indexed and abstracted in PAIS International Printed in Austria by

Ueberreuter Print GmbH

4

OPEC bulletin 1–2/15

Obituary

World leaders pay tribute to late King Abdullah of Saudi Arabia World leaders and dignitaries have

leaders who attended the funeral included Kuwaiti Emir,

paid tribute to Saudi Arabia’s King

Sheikh Sabah Al-Ahmad Al-Sabah, Qatari Emir, Sheikh

Abdullah, Custodian of the Two

Tamim Bin Hamad Al-Thani, and Bahrain’s King Hamad

Holy Mosques, who passed away in

bin Isa Al-Khalifa. Oman’s Deputy Prime Minister, Fahd bin Mahmoud al

Presidents, prime ministers and

Said, Turkish President, Recep Tayyip Erdogan, Pakistani

members of royalty from around the

Prime Minister, Nawaz Sharif, and Russian Prime Minister,

world flocked to the Saudi capital,

Dimitri Medvedev, also attended, while Jordan’s King

Riyadh, to take part in his funeral,

Abdullah II and other Middle Eastern dignitaries left the

which followed afternoon prayers

World Economic Forum in Davos, Switzerland, on news

and was held at the Imam Turki bin

of the King’s death.

Abdullah mosque.

Many world leaders paid tribute to the late Saudi

Clothed in a simple white shroud,

King. United States President, Barack Obama, referred

the late King was carried by bearers

to him as “a bold and candid leader who had the cour-

wearing the traditional red-and-white

age of his convictions”, while French President, François

checked shemagh head gear to an

Hollande, described him as “a statesman whose work has

unmarked grave in a Riyadh cemetery

profoundly marked the history of his country.”

where many other citizens rest. According to Al Arabiya News, Arab

In France, a statement by the Elysee Palace hailed “the memory of a statesman whose work has profoundly

OPEC bulletin 1–2/15

January.

5

Reuters

Obituary

The body of King Abdullah Bin Abdulaziz Al-Saud is carried during his funeral at Imam Turki Bin Abdullah Grand Mosque, in Riyadh.

marked the history of his country.” It stressed that King

Arabia is one of the Founding Members. The King was also

Abdullah’s “vision of a just and lasting peace in the

host of the successful Third Summit of Sovereigns, Heads

Middle East remains more relevant than ever.”

of State and Government of OPEC Member Countries

United Kingdom Prime Minister, David Cameron, said

“He also showed his deep understanding of the oil

gious dialogue in the world, while Canadian Premier,

market back in 2008 when he called a meeting of global

Stephen Harper, hailed the late King as a fierce defender

stakeholders to discuss excessive speculation and vola-

of peace.

tility in the oil price. This proved to be a catalyst in help-

Indian Prime Minister, Narendra Modi, was quoted as saying that a “guiding force” had been lost with the King’s

sequent years. “King Abdullah was greatly admired for his dignity

Abdullah as a man who dedicated his life to the service

and dedication. The Arab world and the international

of the Arab world.

community have lost a great leader. He was loved by his

Both Egyptian President, Abdelfattah al-Sisi, and to attend the funeral.

people,” it concluded. Meanwhile, at the beginning of February, the United Nations General Assembly held a special session to com-

An Egyptian presidency statement said: “The

memorate the late King Abdullah, with several world lead-

Egyptian people will not forget the historic stances of

ers praising the King’s efforts in promoting peace and

King Abdullah.”

fighting hunger and disease.

The OPEC Secretariat in Vienna, Austria, also paid tribute to the late King. In offering the Organization’s sincerest and heartfelt

UN Secretary-General, Ban Ki-moon, pointed to the late King’s efforts in developing Saudi Arabia and supporting the global fight against hunger.

condolences to King Abdullah’s family, the Kingdom of

Ban and representatives of different countries

Saudi Arabia and its people, a statement on OPEC’s web-

observed a minute of silence in honour of the late

site said the King provided a steady hand and wise coun-

King.

sel in guiding Saudi Arabia, both at home and through the often choppy waters of international affairs. “And he participated in helping solve many international and Arab conflicts,” it affirmed. It pointed out that, over the years, King Abdullah gave strong and steadfast support to OPEC, of which Saudi

OPEC bulletin 1–2/15

ing the international oil market return to stability in sub-

passing, while Morocco’s King Mohammad VI hailed King

Jordan’s King Abdullah cut their visits to the Davos forum

6

in 2007.

King Abdullah was a man who strengthened inter-reli-

Ban said “humility” was the last message he had received from the late King. The UN leader said he had discussed with King Abdullah the prospects of restoring the Middle East peace initiative, which the late King had put forward to end the decades-old conflict. In his comments, Ban commended King Abdullah

King Abdullah Bin Abdulaziz Al-Saud, pictured with past OPEC Secretaries General at the Third OPEC Summit of Sovereigns, Heads of State and Government, in 2007.

The King with late Venezuelan President Hugo Chavez Frias (c) (1954–2013) and Abdelaziz Bouteflika (l), President of Algeria, at the Second OPEC Summit of Sovereigns, Heads of State and Government, in 2000.

for his contributions in the fields of peace, security, and

The Ambassador stressed that the late King provided aid to hungry and needy people through the World Food

humanitarian actions. He described him as a wise leader who had directed

Programme and provided relief assistance to the victims

the Kingdom’s efforts in development, worked to over-

and peoples affected by floods, natural disasters and epi-

come the challenges to peace and security, helped com-

demic diseases on all continents of the world.

bat terrorism, while devoting considerable time and effort

“He was overflowing with love for peace, mutual

to achieving rapprochement and understanding between

understanding and communication between the peo-

the peoples of different cultures.

ples of the earth, so he launched his initiative for dia-

Ban said the late King was “a hero” in the fight against hunger. The Kingdom’s donation to the World

logue among followers of religions and cultures from this platform.

Food Programme in 2008 during the food crisis amounted

“And he was consistently the champion of the UN,

to $500 million. And last year it extended a large finan-

its charter, principles and call for peace and harmony in

cial contribution to the humanitarian efforts in Syria and

the world,” he added. King Abdullah, who was 90, died following a short

Iraq. He pointed to the late King’s important initiatives to

illness. He was hospitalized in December suffering from

promote dialogue between the followers of religions and

pneumonia and had been breathing with the aid of a

cultures. His meeting with the King in Jeddah in July 2014

respirator.

had focused on resolving the conflict in the Middle East

Crown Prince Salman has been named the new King

and reviving the Arab Peace Initiative, behind which he

with Prince Muqrin Crown Prince, according to a Royal

was the driving force.

Court statement. The smooth succession indicates sta-

Ban added that the late King’s hard work had made

bility in the Kingdom. Since the death in 1952 of King

an impact on the Arab and Islamic worlds, as well as the

Abdul Aziz, the founder of Saudi Arabia, the throne has

international community.

systematically passed down to his sons.

Also speaking at the Assembly, the Permanent

According to a report in Arab News, King Salman,

Representative of Saudi Arabia to the UN, Abdallah bin

credited with transforming Riyadh during his half-century

Yahya Al-Mouallimi, said: “With the passing away of

as Governor, has a reputation for austerity, hard work and

the late King Abdullah Bin Abdulaziz Al-Saud, the world

discipline. Born in December 1935, King Salman is the 25th son

the world looked forward to his leadership. He was a

of King Abdul Aziz. He was appointed Governor of Riyadh

statesman as long as his hands touched human hearts

province at the age of 20. He became Minister of Defense

everywhere.”

in 2011.

Abdullah Bin Abdulaziz Al-Saud, then Prince, during the traditional Bedouin sabre dance called Arda.

The face of the new King: Salman Bin Abdulaziz Al-Saud.

OPEC bulletin 1–2/15

gettyimages

has lost a shining star and a unique leader, as long as

7

Davos

OPEC Secretary General attends World Economic Forum

The energy in Davos

Given the falling oil price and the volatility seen in the international oil markets in the second half of 2014, discussions surrounding oil and energy in general were high on the agenda at the World Economic Forum (WEF) Davos meeting in January. With OPEC Secretary General, Abdalla Salem El-Badri (pictured left), in attendance, and participating in a number of public and closed sessions, the OPEC Bulletin reports from the

8

gettyimages

OPEC bulletin 1–2/15

picturesque Swiss municipality.

If you are looking for empty ski slopes, come to Davos

economies, and issues related to this became the focus

during the annual World Economic Forum meeting. For

of much of the session.

most visitors during this week the focus is not on the discussions of global leaders from across business, government and international organizations.

An OPEC perspective OPEC Secretary General El-Badri was initially asked

The four-day event, attended by a who’s who of global

about the OPEC Conference decision to keep production

political and business leaders, seems to take in the whole

unchanged back on November 27 last year. He began by

of Davos, as well as neighbouring Klosters too. You can-

stating that when the OPEC Ministers met back then they

not drive, or walk if that’s your preference, without see-

debated the energy and economic situation of the world

ing some event related to the WEF experience.

and eventually “decided collectively to keep production

Besides the main conference centre, there are many

at 30 million barrels/day. He said that “there were some

hotels and restaurants playing host to gatherings and

reservations from some Ministers”, but at the end of the

themed day and evening events; there are an array of

day everyone agreed.

pavilions dotted throughout the town to promote various

He also found it interesting to recall that he was in

countries and companies; and, of course, there is a huge

Davos a few years ago and was asked then why OPEC

media presence. It is certainly easy to become subsumed

would not increase supply because it was believed that

into the whole Davos experience, but a weekend of rest

at the time that there was some shortage in the market.

is certainly welcome at the end!

“Now it is the other way round,” he said, “with people

This year’s event took place from 21-24 January under

grilling me as to why OPEC didn’t cut in November!”

the title ‘The New Global Context’. To some this proved

El-Badri agreed with Yergin that the current market had

apt for the energy context that the world is now facing

some over-supply and demand growth had been weaker

– particularly in the oil market – following the fall in oil

than originally envisaged over the past year. However, on

prices that began in the middle of last year. The impor-

the supply side he felt it was important

tance of oil and energy issues was highlighted on the first

to stress that “OPEC has not increased

afternoon of the event with the public session titled ‘Geo-

its production over the past ten years,”

Economics of Energy’. It also proved to be an extremely

with its level being around 30m b/d,

popular event for attendees, with many left queueing

“while non-OPEC has increased its

outside for seats to become available.

production over this period by around 6.5m b/d.”

Geo-economics of energy

Elaborating on this, he added that the additions from non-OPEC were

The event was moderated by IHS Vice Chairman, Daniel

nearly all from high-cost production

Yergin, who underscored how “timely” the subject mat-

areas. He said that if OPEC had cut

ter was given how “so much has changed, even from a

production in November, it would

year ago.” In the oil market, he went on, over the last

probably have to cut again in 2015

ten years or so, it had been commonly understood that

and 2016, with non-OPEC benefitting

demand growth would come mainly from emerging mar-

from OPEC’s cut if prices rebounded.

kets, particularly in Asia, “but questions are now being

In reality, he said later in an interview

raised over the nature of demand.”

with Bloomberg TV, OPEC would be

And on the supply side, he said, the picture has

“OPEC has not increased its production over the past ten years, while Abdallah Salem El-Badri, Secretary General non-OPEC hasOPEC increased its production over this period by around 6.5m b/d.” — Secretary General, El-Badri

subsidizing non-OPEC.

changed in recent years with North American shale gas

He was also keen to underline that this decision was

and shale oil development having a profound impact on

not targeting any other producing country, stressing that

the market.

it was a purely an economic decision.

These two issues were now impacting the market

He did, however, emphasize that the OPEC door is

more directly, with Yergin stressing that while there was

always open for discussions with non-OPEC producers.

still no shortage of geopolitical risk, this does not seem

In this regard, in the Bloomberg TV interview, he thanked

to be part of the oil price today. It is clear, he said, that

Venezuela’s President, Nicolas Maduro Moros, who

the current market situation is impacting companies and

had recently been talking to both OPEC and non-OPEC

OPEC bulletin 1–2/15

piste, despite its attractiveness, but on the thoughts and

9

Davos

countries. He added that although nothing concrete has

high-cost producing areas, while Descalzi mentioned

so far been achieved, “this is the right way” to look at

shale oil, its high costs and high depletion rates.

the current situation as any responses had to come collectively from OPEC and non-OPEC.

El-Badri summed up the conundrum of producers succinctly in his interview with Bloomberg TV when stating that with current prices “if your production is a very high cost, you will get out of the market.”

There was general agreement from other panel mem-

and adopt new strategies. Arkady Dvorkovich, Deputy Prime

bers regarding the comments from El-Badri and Yergin.

Minister of the Russian Federation, said lower oil prices

Fatih Birol, Chief Economist of the

would focus Russia more on efficiency gains and drive

International Energy Agency (IEA),

innovation. He emphasized the significance of stability

said most of the supply glut had

rather than high prices and “for Russia … we are better off

actually come from two IEA mem-

when prices are $70 to $80, rather than $40 to $110.”

gettyimages

General agreement

bers, the US and Canada, and also

He added that Russia is also shifting its focus more

highlighted the weakness in global

towards the Asia-Pacific and has signed contracts to sup-

demand growth.

ply China with oil and gas.

Khalid Al-Falih, President and

Al-Falih stressed that Saudi Aramco was looking to

Chief Executive Officer of Saudi

balance the short-term situation with the longer-term out-

Aramco, said the previous higher

look. He said the company is using the downturn as an

price environment had fuelled the

opportunity to sharpen its fiscal discipline, but “we are

non-OPEC supply growth and, along

as committed as ever to our long-term strategy”, empha-

with efficiency, had “crimped demand

sizing gas, downstream and petrochemicals investment

growth to levels that do not match

and further building resilience in the company.

the supply growth.” He stressed

And Descalzi underlined the importance of now look-

that other factors had contributed to

ing more closely at how technologies can help companies

an acceleration in the price fall too,

reduce costs.

including developments in the financial markets, the strong dollar and the

Khalid Al-Falih, President and CEO of Saudi Aramco.

unwinding of quantitative easing. El-Badri also emphasized in the Bloomberg TV inter-

Over the four days, what also became clear in discussions was the fact that while the current situation was to the

active.”

forefront of everyone’s minds, there was a need to keep

(at the time around $45/b for Brent) as unsustainable.

the long-term in focus. The future for oil, and energy, was about the need for more, not less.

El-Badri said the actual fundamentals did not warrant the

Al-Falih said there was certainly a need to be more

price drop that had occurred and although a clear picture

careful with investment flows in the years ahead, “but in

may not emerge until the middle of 2015, he was sure

our industry we need to recognize that we have to invest,

prices would rebound.

and we have to invest big to meet rising demand and to

Birol said “the $45/b level is a temporary phenomenon and towards the end of this year we may see an upward pressure on prices again.”

OPEC bulletin 1–2/15

Not losing sight of the long-term

view that “speculation activity is still there, and still very It was also clear that panelists saw current price levels

10

There was also much talk of the need to focus minds

replace the declines that we see every year.” And El-Badri concluded that the industry has to be very careful how it handles the current situation and learn

And Claudio Descalzi, CEO of Eni, said: “We believe

from the past. “We have been in this situation before”, he

it is a cycle, it is not a structural change in the market,”

said, “and we need to keep the future in mind. We need

adding that demand will return as businesses make the

to continue investing, keep our people. We should try and

most of cheaper oil.

benefit from our previous experience of these cycles.”

There was also no doubt among panelists that the

If we do not invest, he said in the Bloomberg TV inter-

current situation would have an impact on all produc-

view, and if we do not see new supply, then we could

ers, albeit to varying degrees. Birol said a big chunk of

see prices go too far the other way at some point in the

the investments curtailed in 2015 will come from the

future.

OPEC Energy Review

OPEC Energy Review

Vol. XXXVI, No. 1

Call for papers

Vol. XXXVI, No. 1 Modelling petroleum future price volatility: analysing asymmetry and persistency of shocks Analysis of consumption pattern of highway transportation fuel in Nigeria An analysis of energy price reform: a CGE approach

March 2012 Fardous Alom, Bert D. Ward and Baiding Hu Maxwell Umunna Nwachukwu

and Harold Chikeissue Mba The OPEC Energy Review is a quarterly energy research journal published by the OPEC Secretariat in Vienna. Each

Davood Manzoor, consists of a selection of original well-researched papers on the global energy industry and related topics, such as Asghar Shahmoradi and Iman Haqiqi

Gas development in Saudi Raja M. Albqami and sustainable development and the environment. The principal aim of the OPEC Energy Review is to provideF. an important Arabia assessing the short-term, John Mathis demand-side effects

scope is international.

Organization of the Petroleum Exporting Countries, Vienna

March 2012

How to sell Russian gas to Sergei andIts forum that will contribute to the broadening of awareness of these issues through an intellectual exchange ofChernavsky ideas. Published and distributed on behalf of the Europe via Ukraine? Oleg Eismont Real exchange rate assessment for Nigeria: an evaluation of determinants, strategies for identification and correction of misalignments

Emre Ozsoz and Mustapha Akinkunmi

The three main objectives of the publication are to: Printed in Singapore by Markono Print Media Pte Ltd. Organization of the Petroleum Exporting Countries 1. Offer a top-quality original research platform for publishing energy issues in general and petroleum related matters in

particular. 2. Contribute to the producer-consumer dialogue through informed robust analyses and objectively justified 001_opec_v36_i1_cover_5.0mm.indd1 1

1/17/2012 6:36:04 PM

perspectives. 3. Promote the consideration of innovative or academic ideas which may enrich the methodologies and tools used by stakeholders. Recognizing the diversity of topics related to energy in general and petroleum in particular which might be of interest to its readership, articles covering relevant economics, policies and laws, supply and demand, modelling, technology and environmental matters will be considered. The OPEC Energy Review welcomes submissions from academics and other energy experts. Prospective authors wishing to submit papers should send them to: Executive Editor, OPEC Energy Review, OPEC Secretariat, Helferstorferstrasse 17, 1010 Vienna, Austria; tel: +43 1 21112-0; e-mail: [email protected]. All correspondence about subscriptions should be sent to John Wiley & Sons, which publishes and distributes the quarterly

OPEC Energy Review Chairman, Editorial Board: Dr Omar S Abdul-Hamid General Academic Editor: Professor Sadek Boussena Executive Editor: Hassan Hafidh

OPEC bulletin 1–2/15

journal on behalf of OPEC (see inside back cover).

11

Gas Producers Meet

16th GECF Ministerial Meeting convenes in Qatar

Producers committed to securing global gas stability Ministers and high-ranking officials from the world’s

and countries, as well as the evolution of LNG trade and

leading gas producers met in the Qatari capital, Doha, in

gas price developments.

December to discuss the global natural gas market situa-

Delegates assessed the dynamics and challenges of

tion, including how prices of the fuel have been affected

the global natural gas market in the short, medium and

by the downturn in crude oil prices.

long term.

The 16th Ministerial Meeting of the Gas Exporting

They highlighted the need to monitor challenges

Countries Forum (GECF) was attended by OPEC Members

facing the gas industry. The GECF Secretariat was urged

Algeria, Iran, Libya, Nigeria, Qatar, the United Arab

to continue with its evaluation of developments occur-

Emirates (UAE) and Venezuela.

ring in the energy market with a focus on supply and

High-level representatives from other GECF Members,

demand.

Bolivia, Equatorial Guinea, Egypt, Peru, Russia,

Commenting on the market situation, Al-Sada said

and Trinidad and Tobago, as well as observers, the

the GECF was committed to securing stability in the global

Netherlands, Norway and Oman, were also in attendance.

gas markets. Increasing price volatility was the major challenge facing gas producers the world over.

Strength-to-strength The GECF has gone from strength to strength since it was

political elements. “We need to be alert and keep monitoring the

today control over 70 per cent of the world’s natural

expected challenges of the gas industry due to this proba-

gas reserves, as well as more than 80 per cent of liq-

bility of an energy glut in the market,” Al-Sada was quoted

uefied natural gas (LNG) output. In between ministerial

as saying.

Secretariat in Doha. The latest meeting, which was chaired by Dr Mohammed Bin Saleh Al-Sada, Qatar’s Minister of

OPEC bulletin 1–2/15

by a variety of factors, including both economic and geo-

established in Tehran, Iran, in 2001. Its member states

meetings, the work of the GECF is organized through its

12

He maintained that the instability was being driven

He pointed out that the GECF was a platform for cooperation and its existence and the success it had achieved so far were a reflection of its members’ determination to enhance cooperation.

Energy, discussed the global gas market report as pre-

“Yet our mutual understanding and cooperation

sented by GECF Secretary General, Seyed Mohammad

has to grow further, especially in facing the future chal-

Hossein Adeli of Iran.

lenges,” he affirmed.

His detailed report covered the latest developments

This, he said, entailed promoting investments in new

in the international energy market in general and the gas

gas projects for the benefit of producers and consumers

market in particular.

alike.

It included a short-term forecast of supply and

He contended that GECF member countries had

demand for natural gas worldwide and in specific regions

great potential to contribute to the growth of the global

economy, which was being supported by the increase in

other sources as it is the cleanest and most environmen-

demand for natural gas as the main component in the

tally-friendly,” he asserted.

energy mix. The Minister said he hoped the benefits of member countries’ cooperation and collaboration would reflect

He conceded that shale gas would affect other energy sources in the short term, but its impact in the long term would have to be seen.

positively on the international gas industry in a man-

During the meeting, delegates decided to start

ner that helped realize the interests of all participating

preparations for the Third GECF Summit, which will be

parties.

held in Tehran in 2015. It was also decided that the 17th

Speaking to reporters earlier on the oil market situation, Al-Sada said OPEC and other producers were closely watching the direction of oil prices, but he maintained that the market would eventually settle.

Ministerial Meeting of the Forum would be convened in Abuja, Nigeria, also this year. The meeting approved the extension of GECF observer status to Peru and appointed Diezani Alison Madueke,

“OPEC is watching the market closely and the devel-

Minister of Petroleum Resources of the Federal Republic

opment of oil prices is being studied by individual coun-

of Nigeria, as President of the Ministerial Meeting, with

tries and the Organization’s Secretariat,” he was quoted

Mohamed M. Oun, Deputy Vice Prime Minister for Energy,

as saying.

Libya, as Alternate President.

Interconnected

Mohammad Hossein Adeli, was attending his first meet-

Al-Sada observed that the steep fall in crude oil prices

of 2014 for a two-year term, succeeding Russia’s Leonid

since the summer months had adversely affected gas

Bokhanovsky.

The GECF’s newly installed Secretary General, Seyed

prices as the two elements of the energy market were interconnected. He noted that that there was already a strong degree of conversion of gas spot prices between different regions.

ing. He was appointed to the position at the beginning

He has served in the Iranian Petroleum Ministry as International Advisor, and has been the advocate and chief negotiator of many energy plans and projects in his country. Adeli is a former Iranian Ambassador to the United

Asked about the rising importance of shale gas, the

Kingdom, Canada and Japan. From 1989 to 1994, he

Minister maintained that the super-cooled LNG would still

was Governor of the Central Bank of Iran. More recently,

remain the prime source of clean energy in the future.

he founded the Ravand Institute for Economic and

“Both supply and demand of gas is increasing in the international market. But LNG will have an advantage over

International Studies and is currently its Chairman and Chief Executive Officer.

OPEC bulletin 1–2/15

GECF

Delegates pose for a group photograph.

13

EU-OPEC Roundtable

EU-OPEC Roundtable discusses challenges in petrochemical sector A European Union-OPEC Roundtable on the Petrochemical Industry

“Moreover, the petrochemical industry is an important source

Outlook and Challenges was held at the OPEC Secretariat in Vienna,

of oil demand. It consumes around 11 per cent of total oil demand,

Austria, in December 2014.

as both a feedstock and energy source,” he affirmed.

The gathering was attended by experts and analysts from OPEC Member Countries, the Organization’s Secretariat, officials from the EU and the European Commission (EC), as well as petrochemical stakeholder representatives and industry consultants. It was also

Abdul-Hamid pointed out that in order to look at the issue of pet-

made available via WebEx to Member Country representatives who

rochemicals in more depth, OPEC, in partnership with the EU,

could not join the event in person.

had commissioned a joint study entitled ‘Petrochemical Outlook:

The Roundtable was co-chaired by OPEC Research Division Director, Dr Omar S Abdul-Hamid, and Principal Advisor, EC Directorate-General for Energy, Anne Houtman.

“The study provides a thorough background on current developments in the petrochemical industry around the world. More specifically, it focuses on the competition between feedstocks, namely

overview of the international petrochemical industry, looking at the

naphtha and ethane, as well as on the unique and challenging sit-

main issues involved, the outlook for the medium and long term,

uation in the EU. “It also considers the global petrochemical and feedstock con-

Session two was dedicated to discussions with the stake-

sumption outlooks, some of the regional dynamics, and touches

holders present and was followed by summaries of the day’s

on both the challenges and opportunities the industry faces in the

deliberations.

years to come,” he added.

In his welcoming remarks, Abdul-Hamid explained to partic-

In her introductory remarks, Ms Houtman stressed the impor-

ipants that the Roundtable formed part of the ongoing EU-OPEC

tance for the EU of having energy dialogues with major oil producers

Energy Dialogue, which was established in 2005 to discuss issues

— and with OPEC in particular — to discuss and exchange views on

of mutual interest and address common challenges faced by both

strategic energy issues, as well as energy outlooks and scenarios.

oil-producing and consuming countries. “This gathering is devoted to the downstream and the petrochemicals industry, which is of particular importance to both the EU and OPEC,” he stated.

She highlighted that the EU was not only the largest global importer of crude oil, but also a major producer and importer of refined and petrochemical products. “The refining and petrochemical industries are closely inter-

“This industry has been undergoing significant changes in the

linked. In the past few years, the refining industry in the EU has

past few years — changes that affect, either directly or indirectly,

been confronted with challenging developments, indigenous over-

both parties.”

capacity, unbalanced diesel-petrol production, competition with

The Research Division Director stressed that the petrochemical industry played a significant role in the economies of EU Member

OPEC bulletin 1–2/15

Challenges and Opportunities’.

It was divided into two sessions. The first comprised a detailed

followed by conclusions and recommendations.

14

Joint study

increasing production capacity in the global market and strict environmental standards.”

States. “In fact, petrochemicals represent almost 25 per cent of

Ms Houtman observed that the European petrochemical indus-

the European chemical industry’s turnover. The industry employs

try, as indicated in the study, had been confronted with major

directly over 400,000 people and, indirectly, two to three times

challenges, including high labour rates, strict environmental leg-

more than that figure.”

islation, a lack of access to cheap feedstocks as in other regions

Similarly, he said, petrochemicals played an important role in OPEC Member Countries, in terms of enhancing added value in the hydrocarbons chain and diversifying their economies.

and a demand which was not growing at the same pace as in other regions. Delegates then heard a presentation from Nexant, the

Delegates to the Roundtable assemble for a group photograph.

international independent energy and chemicals consulting firm,

In today’s market, ethane from associated gas in the Middle

which has its headquarters in the United States.

East and shale gas ethane from North America are the most

OPEC launched a project with the company in May 2014 to analyze and help understand the global and regional petrochemical industry and markets. The objectives of the project entailed developing an overview

cost-efficient options. In North America, the discovery of shale gas has revitalized its petrochemical industry, dramatically increasing the amount of low-cost ethane on the market.

of the petrochemicals industry, its market and drivers; formulate an

In China, the increased production of methanol-based olefins

understanding of the key issues and challenges facing the indus-

derived from low-grade coal is expected to result in more than

try; and provide global and regional medium- and long-term out-

eight million tonnes of ethylene per year by 2018.

looks, including the impact on feedstocks, in particular, ethane and naphtha. The Nexant presentation, made by the company’s Richard Sleep and Stewart Hardy, provided the major findings of the project.

The petrochemical industry in the EU has been forced into a prolonged period of restructuring as a result of increasing competitive pressure in both its export and domestic markets. Producers have responded by closing uneconomic plants, shifting the product focus towards specialities, and most recently by investing to import attractively priced ethane from the US to improve their ethylene cost.

Looking at the overall situation, it maintained that the global petro-

Despite this challenging landscape, European producers con-

chemical industry had a bright future and would continue to grow

tinue to play a leading role in providing value-added, innova-

in tandem with world economic growth as rapidly growing populations in the developing world continued to seek new materials that were only made possible through petrochemicals. It highlighted that the major building blocks of the petrochem-

tive petrochemical products. Crude oil-based petrochemicals, namely naphtha, will again increase in importance in the long-term, despite developments in North America and China.

ical industry were ethylene, propylene, butadiene, benzene, tolu-

Overall, the global petrochemical industry has a bright future.

ene and para-xylene — basic petrochemicals that gave rise to over

The global megatrends of urbanization and population growth

90 per cent of petrochemical end-products.

are highly supportive of the petrochemicals industry.

After lengthy and fruitful discussions during the two sessions, delegates agreed to the following main conclusions: That petrochemical demand growth will remain very closely related to GDP growth, although the multiple on GDP will con-



In his closing remarks, OPEC Research Division Director, AbdulHamid, noted that the petrochemical industry was in the midst of some significant changes, which were clearly impacting both OPEC and EU Member Countries.

tinue to decrease slowly. Increasing wealth and consumption

“This Roundtable provided a very informative and useful pres-

in developing regions will remain the key driver of global pet-

entation on the study, as well as some conclusions and recommen-

rochemical demand, stemming from their increasing popula-

dations to take with us for consideration. The meeting greatly ben-

tions and growing economies.

efited from an interactive discussion with our stakeholders, which

The profitability of the petrochemical sector is highly dependent

provided additional expert input into our deliberations, enriching

on cost advantage, mainly in relation to feedstock optimization.

our analysis of this important issue even further,” he stated.

OPEC bulletin 1–2/15

Bright future for petrochemicals

15

Energy Forum

OPEC committed to longstanding 30m b/d output ceiling

Will not change strategy

— Al Mazrouei

“Like OPEC, they need to look at growth in the international market for oil and need to cater for that additional production to that growth,” he was quoted as saying. International crude oil prices have fallen by around $50/b since the summer months, due to a combination of factors, including market over-supply and speculation. But Al Mazrouei said OPEC had no intention of backing down on the decision the Organization’s 12 Member Countries made at the 166th Meeting of the Conference at the end of November last year — to retain its production ceiling for the first six months of 2015 He also indicated that there was little prospect of the Organization holding an emergency meeting ahead of the scheduled June Conference. “The market needs more time. It is not rational to meet or do anything at this time,” he was quoted as saying. “We have seen oversupply coming from shale oil and that needs to be corrected.”

Sudden rise in the market unlikely Suhail Mohamed Al Mazrouei, United Arab Emirates Minister of Energy.

Speaking about the level of crude oil prices, the Minister said that in the current environment no one could dictate OPEC is committed to its longstanding oil production

the price, stating that in his opinion it was unlikely the

ceiling of 30 million barrels/day and will not change

market would see any sudden rise and it could take some

this strategy heading towards the Organization’s next

time before prices moved higher.

Ministerial Conference in June, Suhail Mohamed Al

He said the first half of 2015 would provide more data

Mazrouei, United Arab Emirates (UAE) Minister of Energy,

to predict what would happen. “It will all depend on what

has inferred.

we see in this quarter and the next quarter.”

Addressing the 6th Gulf Intelligence UAE Energy Forum

OPEC bulletin 1–2/15

in January, he stressed that against a backdrop of falling

16

Continued Al Mazrouei: “No one can dictate the price anymore. This is not the 1970s and the 1980s.”

crude oil prices, OPEC would not be resorting to cutting

He maintained that a fair price for crude would be

its oil output, stating that it expects higher-cost produc-

where some United States tight oil remained commercial,

ers outside the Organization to do so.

but not all of it. That “is the fair price for conventional oil,”

The Minister explained that by not reducing output the Organization was telling the market and other producers that they needed to be rational.

he said. “Whether that is $60/b, $70/b, or $80/b — that is where oil will stabilize.” Al Mazrouei said that under the current circumstances

it would take time for the market to stabilize. But whether

“We will continue to invest at lower costs. We are in

that would take two or three years depended on how

this business for the long haul and will invest in a busi-

rational producers were.

ness that is robust enough to overcome low prices in the

However, the Minister said the oil price drop was not in any way affecting the UAE’s investment to expand its oil production capacity. He explained that the government would encour-

short term,” he was quoted as saying. Al Yabhouni pointed out that OPEC had experienced previous cycles during which international crude oil prices had settled for some time in the range of

age the Abu Dhabi National Oil Company (ADNOC) and

$20–40/b, which was fol-

the Abu Dhabi state fund, Mubadala, to look at acquisi-

lowed by periods of sub-

tion targets and investment opportunities in a low-price

stantially higher prices.

environment.

He said that to him the biggest surprise of the last

Opportunity

high-price period was that

“They will be looking at targets because this is an

development had led to

opportunity if you believe things will improve upwards,

speculation that prices

and we believe things will not stay for long at these

would remain at higher

oil prices.

than historic levels, in turn

it lasted for so long. This

“And so we will encourage these companies to look

spurring investment in

at targets, and we have seen in the past that these

the development of mar-

investments create best values for those who buy at

ginally economic new oil

that time.”

sources.

Specifically, the Minister said he did not think that

Al Yabhouni observed

the decline in oil prices should affect the contest for Abu

that when crude oil prices

Dhabi’s 1.6m b/d onshore oil concession.

fell, the inefficient and high-cost producers lost

oil firms were reviewing their global investments in the

out, while the efficient producers benefitted from reduced

light of the lower oil price, he said he did not consider

industry costs. At the same time the entire global econ-

that the nine firms that had submitted bids for the con-

omy received a boost.

cession in October 2013 would need to drastically change their positions. “Those that are bidding under a long-term relation-

The Gulf Intelligence UAE Energy Forum has been held since 2009 under the patronage of the UAE Minister of Energy.

ship have a long-term view of investment. They are not

According to the Gulf Intelligence website, this year’s

going to change their minds every time we have a blip

event took place at a time of profound change and grow-

or glut in the market,” he maintained, asserting that the

ing challenges in global energy markets.

UAE had no intention of cutting any projects in the price downturn.

Dr Ali Obaid Al Yabhouni, the UAE’s Governor for OPEC.

“Even though geopolitical trouble spots have all but disappeared, record United States shale oil output and

“This is an opportunity … we have seen in the past

stagnating economies in Europe and Asia have combined

that these periods of low prices create the best value,”

to leave markets abundantly supplied and pushed crude

he affirmed.

prices to four-year lows,” it commented.

Meanwhile, the UAE’s Governor for OPEC, Dr Ali Obaid

“Just as the world was preparing to accept oil at

Al Yabhouni, told the Energy Forum that even though

$100/barrel as the ‘new normal’, the world appears to

OPEC would prefer to see higher prices, its Members were

be entering a period of sustained low oil prices — provid-

ready to address the current period of lower prices as an

ing benefits to some and raising serious concerns among

opportunity for investment.

others,” it added.

OPEC bulletin 1–2/15

Even though international oil companies and national

17

Petrochemicals

The birth of a city … the rise of ‘Plastics Valley’

Saudi petrochemicals sector offering huge potential for jobs, diversification drive Saudi Arabia has long been known for its massive oil reserves and regular supplies of crude to consumers the world over. But today, the Kingdom is in the process of change — diversifying into other areas to support its growing economy. One such opportunity that holds great promise is petrochemicals, which some analysts say could turn out to be as big as the Gulf state’s oil sector operations. OPEC Secretariat intern, Nawaf AlSalloum, himself a Saudi national, reports for the OPEC Bulletin on this major new oil-related venture for the leading OPEC Member Country.

Growth of Middle Eastern petrochemicals industry

industry in the region employed 148,900 people and

The petrochemicals industry is rapidly growing in the

industry’s capacity growth has risen by an impressive ten

Middle East and is fast becoming one of the most crucial

per cent a year since 2008, offering massive opportuni-

sectors in terms of lowering unemployment and enhanc-

ties in relation to investment and employment. In quot-

ing economic diversification.

ing figures from the Gulf Petrochemicals and Chemicals

produced 140.5 million tons of products. And a report by ArabianBusiness has claimed that the

OPEC bulletin 1–2/15

service, as of 2013, the $89.4 billon petrochemicals

18

Association (GPCA), it said that in 2013 alone, the expansion figure stood at 12.2 per cent.

Shutterstock

According to the Zawya business intelligence news

In fact, petrochemical production in the Gulf

With rising petrochemical projects set to increase

Cooperation Council (GCC) region — which comprises

the industry’s capacity, combined with regional compet-

Kuwait, Qatar, Saudi Arabia, the United Arab Emirates

itive advantages and the Kingdom’s emphasis on tech-

(UAE), Oman and Bahrain — stands today as the sec-

nological innovation, Saudi Arabia is poised to become

ond-highest output globally, after Asia.

a global hub for future petrochemicals, supporting the

The burgeoning growth of the industry is set to have a significant impact on the global economy. The Secretary

government’s pressing plans to increase employment and diversify domestic exports.

General of the GPCA, Abdulwahab Al-Sadoun, was quoted that touches nearly every sector of the GCC economy —

A new city

from supply chain, equipment manufacturing, construc-

Saudi Arabia is an example of a country that has grown

tion and agriculture, to retail and trade.”

so quickly, it can hardly keep up. Rapidly increasing pop-

Saudi Arabia, in particular, has been a large player in

ulation growth has created a number of issues, such as

the increasing market share of the Middle Eastern petro-

insufficient housing, high unemployment and increased

chemical industry. The Kingdom currently boasts 26 pro-

road congestion.

jects costing $15bn in development and over 83,700 jobs in its operations occupied by Saudi nationals.

As a countermeasure, the government launched KAEC, a massive project that entails building an entire

The Kingdom also accounts for a whopping 74.9 per

city from scratch at a cost of $27bn, according to Time

cent of GCC petrochemical revenues –amounting to some

magazine. This will be located 100 kilometers north of

$66.9bn — making it the main driver of regional industry

Jeddah. The city will help satisfy domestic demand for

development. This level of growth is attributed to domes-

housing and create job opportunities.

tic competitive advantages, such as abundant supplies

According to the Governor of the Saudi Arabian

of raw materials, high population growth, low regional

General Investment Authority (SAGIA), Amr Al-Dabbagh,

oil prices, proximity to markets, and a new-found shift

the city will take approximately 20 years to build and “will

towards technological modernization and integration.

be roughly the size of Washington DC, with a population

Some of the major projects currently being pur-

of over 1.5m.”

sued by the Kingdom include the Petro Rabigh

KAEC Chief Executive Officer, Fahd Al-Rasheed, stated

Petrochemical Complex, the Ras Tanura Integrated

that as a result of its extreme housing scarcity, exacer-

Refinery and Petrochemical Complex, and the Saudi

bated by population growth, Saudi Arabia requires 6m

Kayan Petrochemical Complex, among others.

housing units in the next 12 years — more than what has

However, the main project behind the transformation

been built in the past six decades.

of the Kingdom into a petrochemical hub — King Abdullah

The new city will not only serve to provide more hous-

Economic City (KAEC), along with King Abdullah Port (KAP)

ing, it will create 40,000 industrial jobs, as well as hun-

— is still to be constructed. Its strategic location is advan-

dreds of thousands of service employment opportunities.

tageous, as one-third of domestic plastic and petrochem-

Also, careful attention is being paid to living condi-

ical industries and 50 per cent of total production occurs

tions, as the towns of Yanbu and Jubail, which were built

in the Western region near Jeddah, Mecca and Rabigh,

in the late 1900s, have been abandoned due to lack of

according to a report by ConstructionWeekOnline and

care towards living conditions.

figures calculated by the Middle East Economic Digest (MEED). KAEC will provide competitive advantages, along with

KAEC will boast high-rise apartments with family-friendly features, as well as hospitals, a university and a sports stadium.

economies of scale, while KAP, with its potential logisti-

In addition to housing, the city aims to reduce con-

cal benefits, will drive distribution networks and reduce

gestion in the capital, Riyadh, as well as Jeddah and

congestion.

Dammam, another consequence of the population

OPEC bulletin 1–2/15

as saying: “Petrochemicals is evolving into an industry

19

growing too quickly, in fact

Location of King Abdullah Port, located strategically by the coast of the Red Sea.

One such company is the joint venture between Saudi

doubling in just a decade.

Aramco and US Dow Chemical — the Sadara Chemical



Company (Sadara).

A high-speed railway link

will be built between Mecca

According to ArabNews, Sadara, with an investment

and Medina, which receive

amounting to $19.3bn, is planning to build the largest

millions of pilgrims annually.

chemical complex in the world for the production of eth-

This will pass through KAEC.

ylene. In 2013, the company signed agreements with

The provision of King Abdullah

several national and international banks for a $10.5bn

Port will also serve to boost

loan to fund the construction of the project.

regional trade and help in the

According to Sadara Chief Executive Officer, Ziad

transportation of pilgrims to

Al-Labban, the Middle East has a 20 per cent market

further reduce congestion.

share in global ethylene production, which has grown

The main focus of the new city, however, remains

by eight per cent since 2009.

boosting the industrial standing of the Kingdom. KAEC

Also, he said, due to “cost-effective feedstock pricing,

is aiming to become the ‘Plastics Valley’ of the Middle

strong regulatory and industrial infrastructure and prox-

East. Hence, the majority of the industries set to be devel-

imity to markets,” the region has a competitive advan-

oped there will centre on plastics’ manufacturing. There

tage in the market and can become “the perfect hub of

will also be a $6bn aluminum complex and a container

the global petrochemical industry.” Plastics and chemical giant, the Saudi Arabian Basic

depot. According to the Saudi Gazette, Emaar Economic

Industries Corporation (SABIC), is also gaining ground in

City (Emaar EC), which is the company developing KAEC,

the petrochemical market through sophisticated chemi-

signed a memorandum of understanding with one of the

cal production, according to SABIC’s official website.

leading Saudi plastics packaging companies in December

Back in 2012, SABIC worked with Saudi Kayan to make the Kingdom the first Middle Eastern country to

2014. The agreement with the Savola Group, through its subsidiary, Savola Packaging Systems (SPS), aims at

ship advanced petrochemical products in the form of ethanolamines and ethoxylates.

establishing a “plastic cluster” in KAEC’s Plastics Valley.

Ethanolamines are chemicals often used in consumer

The Chief Executive Officer of Emaar EC, Fahd

products and industrial processes. Ethoxylates are sur-

Al-Rasheed, has praised the sustainable growth models

factants used in shampoos, cleaning and personal care

of SPS, while indicating that the accord is “driving for-

products. They are also used in high quantities in the oil,

ward the development of KAEC Plastics Valley…creating

textile and agricultural industries.

a vibrant hub for the plastics industry.” He also claimed that the move will result in muchneeded employment opportunities.

This marked shift in the Kingdom from basic to sophisticated petrochemical products has signaled a growing maturation of the petrochemical industry in the Middle East region.

Petrochemicals — from basic to sophisticated While KAEC sets out to provide a foundation for nurturing

Plastics and technological innovation

the growing petrochemical industry, several companies

In keeping with its new-found focus on technological

have begun producing more sophisticated products and

research and cooperation with foreign companies, SABIC

building complexes to take full advantage of the compet-

has achieved important milestones in plastics. Of note,

itive advantages currently available today.

together with Cima NanoTech, a Singapore and US-based company, the Corporation developed the first transparent conductive polycarbonate film in

King Abdullah Economic City overview

June last year.

• 20 years scheduled for construction

Vice President, said he believes “it has the

OPEC bulletin 1–2/15

Ernesto Occhiello, SABIC’s Executive

20

• Population to be over 1.5 million • 40,000 industrial jobs to be created

potential to revolutionize materials used in consumer

will help companies save costs when transferring prod-

electronics, household goods, automotive, architecture

ucts and materials from land to sea. The Red Sea Forum is also a new annual event aimed

and healthcare.” He maintained that in the age of touchscreen phones

at attracting foreign investors, primarily US companies.

and tablets, the faster response screens, electro-mag-

To further encourage industrial growth and attract foreign

netic interference (EMG) shielding effectiveness and

firms, the Kingdom will help with loans to fund up to 50

lighter weight will become a common-place product to

per cent of a company’s investment. In fact, the Saudi Gazette reported that January

help lower costs, yet boost efficiency. SABIC’s emphasis on technological innovation has

2014 marked the first official export shipment from

also yielded further achievements, other than the trans-

PetroRabigh to Singapore, via KAP, which consisted of

parent conductive polycarbonate film. This comes in the

54 containers of polymer materials. The Chief Executive Officer of PetroRabigh, Abdullah

form of the joint-development of the first thermoplastic carbon composite wheel with Kringlan Composites.

bin Saleh Al-Suwailem, pointed to the important mile-

This new material is expected to “replace traditional

stone and indicated how the logistical advantages and

metal and aluminum alloys, due to reduced weight, emis-

proximity of the port allow PetroRabigh to reduce costs,

sions, and manufacturing costs in aerospace, automo-

access markets quickly, all while reducing congestion in

tive, and consumer goods,” according to Occhiello.

Jeddah.

He pointed out that not only is the material fully recyclable and lighter, it offers major advantages to several huge industries by increasing efficiency and lowering the environmental impact.

Looking to the future The Kingdom has revamped its entire petrochemical industry and has billions invested in its future. Through

Logistics — distribution advantages

ongoing and planned development of Saudi Arabia’s

King Abdullah Port (KAP) is a substantial and impor-

the integration of technology and innovation, and the

tant project that will cement the Kingdom’s standing in

strategic port to transform the distribution of goods, the

the petrochemical industry and attract investors from

Kingdom’s future looks bright as it strives to become

around the globe.

one of the global leaders in the petrochemical industry.

infrastructure, the development of industrial clusters,

The port is strategically located near the Red Sea and

Both national and international companies are ready

will connect the region with Asian and European markets,

to reap the benefits as they are flocking to take advan-

where 24 per cent of global trade already takes place. This

tage of the low logistic costs, easy access to markets,

has the considerable potential to lower logistic costs and

high growth and demand, and abundant supply of raw

help ensure the diversification of Saudi Arabia’s exports.

materials that the Kingdom offers. Undoubtedly, a win-win situation going forward in

The port is also located nearby King Abdullah University of Science and Technology (KAUST) and the

these testing times.

Cargo ships entering one of the busiest ports in the world, Singapore. Last year reportedly marked the first official export shipment from PetroRabigh to Singapore, via KAP, which consisted of 54 containers of polymer materials.

largest petrochemicals plant in the world — PetroRabigh — which produces 1.3m tons of ethylene and has a capacity of 900,000 tons of propylene a year, according to PetroRabigh’s official website. PetroRabigh also combines Saudi Aramco’s huge oil supplies with Sumitomo’s technological prowess and 95 years of experience in the international marketing of petrochemicals. Understandably, this has attracted great interest

of the port to PetroRabigh, along with low energy prices,

OPEC bulletin 1–2/15

bases to take advantage of the opportunity. The proximity

Shutterstock

in KAEC, with around 70 companies already setting up

21

Insight

The future of oil From wood to coal to oil: mankind has developed and improved upon its energy sources over the centuries. As with other energy sources in the past, oil’s possibilities are beginning to evolve. The OPEC Bulletin’s Maureen MacNeill talks to OPEC Senior Research Analyst, Ralf Vogel, to gain his views on the past, present and future OPEC bulletin 1–2/15

path of oil.

22

drilling of oil wells in China

4th century AD

Times change; nothing is stagnant.

When people learned coal could be mined in huge

“And times change quicker these days than 500 years

quantities, it grew into the most important energy-

ago,” says OPEC Senior Research Analyst, Ralf Vogel,

carrier for mankind. In the 1880s, coal became widely

when talking about the evolution of energy.

used to generate electricity, a trend that peaked at the

energy, says Vogel. This was an important milestone

end of the 19th and beginning of the 20th century, Vogel explains.

in human development, he says. And from this point

Due to coal’s advance, many technologies sprang

onwards, the Iron Age, the Bronze Age and other subse-

up, including steam engines and electricity generation.

quent ages developed.

Solid fuels held centre stage until the beginning of the

However, shortly after discovering fire, people started

20th century, since liquids and gases — particularly flam-

experimenting with it. They found that food tasted better

mable ones — were too difficult to handle at the time, and

when they applied a little bit of fire. They also found that

perceived as dangerous and highly unsafe.

there was an energy carrier easily available, which at the

Although small amounts of crude oil were used centu-

time was wood. Solid fuels — primarily wood — remained

ries before oil drilling started — documents show ancient

dominant for thousands of years.

Mesopotamia had asphalted roads and cakes of bitumen

coal widely used to generate electricity

start of modern oil industry

peak of coal industry

gas pipelines to households and power stations

what will happen with oil?

1880s

mid 19th century

end 19th century

late 20th century

future

OPEC bulletin 1–2/15

When humans first discovered fire, they discovered

23

Insight

were found

of technology increases so we can deal with more com-

in an early

plicated energy carriers.

third millennium vil-

“It could also be renewables,” he adds. “It could be

lage in the Ur region of southern Iraq — the material likely

solar, geothermal, wind. We are already seeing that.”

came from seepage rather than active prospecting.

Keeping in mind that the evolution of energy sources is

There is evidence of some oil wells being drilled a long time ago, perhaps as early as the fourth century in

ongoing, the question arises: What future opportunities lie ahead for oil?

China using bamboo poles; but the modern oil industry didn’t begin until the mid-19th century. When oil drilling and refining were discovered, people learned how to handle flammable liquids and an

Over time oil is becoming more valued; it is getting more

industry quickly emerged from this knowledge. Oil-run

difficult to extract and presently enhanced oil recovery

power stations sprang up, as well as the entire modern

(EOR) techniques and new technologies are taking cen-

transportation industry and the beginnings of a real pet-

tre stage, says Vogel. These things were known before;

rochemical industry. Organic chemistry — the process of

but deposits that were inaccessible or too expensive to

converting molecules into something more valuable —

assess before are now feasible to develop.

became important.

plenty of oil out of it,” Vogel notes. “It [now] requires more

gases by pipeline to households and power stations, and

sophistication.” From permafrost in Siberia to deep sea

to handle the commodity on a bulk scale.

offshore drilling, more technological effort is needed to recover oil.

in road transport vehicles and ships through the cooling

“All of this just makes oil more precious,” he says.

and conversion of gas into liquefied natural gas (LNG).

Cleaner-burning gas — now becoming accessible —

In the US and China, commercial LNG trucks are already

is likely to reach its peak as an energy provider in 30–40

taking to the roads, and LNG powered ships such as the

years, says Vogel. “But oil is becoming a precious com-

brand new car and passenger ferry ‘M/S Viking Grace’

modity, and due to its higher value the use for oil may

have already set sail.

slowly shift into other areas where it’s more appreciated

“Somebody who is interested in futuristic views may ask what is coming after gases, what may be down the road in 50 or 100 years,” says Vogel. “We don’t know. It could be a safer and clean form of nuclear energy, fusion or fisOPEC bulletin 1–2/15

“It’s not anymore just drilling a hole and you get

By the late 20th century, it was possible to transport

Now natural gas is slowly beginning to have a role

24

Looking down the road

than just for burning.” In fact, he says there are many untapped areas that are coming to light in which oil has great potential.

When wood was replaced by coal and later by oil as a burning substance, it became a more precious natural

sion or something

material (for instance

combined. Over time

for building furniture).

the sophistication

Today raw sources of

wood (ie forests) can serve as carbon sinks to relieve

made of plastic,” Vogel says. “With the discovery of per-

our atmosphere from excess CO2. “Trees are growing and

formance plastics with good optical properties like poly-

absorbing millions of tons of CO2 from the atmosphere,”

carbonate, glass in cars is being increasingly replaced by

says Vogel. This is an issue for the future, he adds, “so

plastic,” he says. In fact, some smaller cars are already

we should definitely preserve the forest and, beyond that,

using lightweight polycarbonates for their side windows.

we should re-forest the planet wherever possible.”

It makes a car lighter, more fuel efficient and more vandal-proof, Vogel notes.

Plastic composites

“This trend is ongoing,” he says. “And we can comfortably say that once the flat glass sector of the car

These environmental considerations open up opportu-

industry adopts this concept, polycarbonate

nities for other materials which perform well and which

glass applications for buildings will soon

are recyclable, Vogel notes. In Asia, a trend is starting in

follow.” In fact, this type of flat glass is

the use of wood-plastic composites (WPC). This mate-

already being introduced for green-

rial is environmentally-friendly, containing about 50

houses because of its light weight

per cent wood and 50 per cent oil-based plastic — “so,

and resistance to damage by

half as much wood,” says Vogel. It also has a long life,

hailstorms.

can be tailor-made for different climate conditions, with

Of course, replacing glass

the possibility of blending antibacterial additives into

with plastic is not a new idea.

it to make it last even longer, and it can be fully recy-

Plexiglass was created for military

cled. It can also be combined with additional plastics,

aircraft in World War II. Although

re-melted and new articles can be made from old fur-

the new material was lightweight

niture, Vogel adds.

and strong, it underwent an aging

WPC can be used in many applications — from out-

In 2012, 15 per cent of a car’s body was made of plastic.

process through the influence of sun-

door furniture, tiles and panels, to office furniture, trans-

light and temperature which left it turning

port pallets, etc. Though it has an astonishing growth

first yellow and then brown. This problem,

rate of 13 per cent per year, it is still a small market. But

however, does not exist with polycarbonate

by 2016 that market is expected to swell globally to 4.5

which, in addition, can be recycled.

million metric tons, with exponential growing potential.

consumer goods,” says Vogel.

Opportunities for petrochemicals A by-product of natural gas is natural gas condensate.

In general, the use of plastics is increasing, says Vogel.

It is normally ethane; but compared to methane, which

If today’s adults look back to their childhood, the use of

has one carbon atom, ethane has two. It is a very good

plastics for bottles was unknown, as they were usually

petrochemical feedstock and can be relatively easily

made of glass or sometimes ceramic. In addition, about

converted into ethylene, which is traditionally produced

20 years ago, the headlights of cars were also made out

from petroleum-based feedstock through steam cracking.

of glass. “It was unthinkable that one day they would be

With massive amounts of ethane coming from gas

OPEC bulletin 1–2/15

“It is used mostly for building products now but also increasingly has applications for automotive and other

25

Insight

operations in the future, it may become more attractive

product. The same is valid for butadiene, much needed

for some regions, such as the US, to produce ethylene

for tyres, or aromatics.”

from gas-based feedstock. “The oil industry would be advised to look to non-

The long-term trend is clear: better-performing plastics in all sectors.

ethylene, such as propylene or butadiene, which is used for rubbers, or aromatics, which are used for performance plastics, bottles, carbon fibre, etc.,” Vogel says. “One has to look in depth and see what sort of petrochemicals will

Vogel sees the transport sector increasingly adopting

become important for the oil industry in future.”

natural gas as an alternative, which will likely appear at

One big application of oil-based materials will come

petrol station pumps beside diesel and gasoline. In order

in the area of transport vehicles. “It’s not only con-

to compete with this, the oil industry will have to come

fined to windows but also to the frame, the body,

up with higher-quality gasoline with octane numbers

which will increasingly be made of plastic,”

above 100 — a trend which has already started, he says.

says Vogel. By 2012 about 15 per cent of a car’s body was made of plastic. “One hundred kilograms of plastics can in fact replace 200–300 kg of metal,” Vogel says. “And this will reduce fuel consumption by half a

can better compete with natural gas.” Road transportation will continue to rely on oil for the time being, he says. In some instances, the oil industry is starting to apply an innovative concept by combining biofuels with

cles out of plastic and we can expect

petroleum-based components, such as taking bioetha-

that in the future cars will be made

nol and producing it with an oil-based butane stream,

25–30 per cent from plastics.” He

called bioETBE, which is a very high-performance gasoline component.

matic-based performance plastics were

“The US is producing big amounts of that — and

used for about 50 per cent of the building

Japan is buying it from the US” in order to meet biofuel

of the Boeing 787, which helped to reduce

requirements without mixing pure ethanol into gasoline,

manufacturer. “This is a long-term trend where the oil indus-

try would be able to retain a competitive advantage over gas and coal and where large profits can be generated,” OPEC bulletin 1–2/15

will produce higher-valued more efficient fuels … which

attractive to produce transport vehi-

fuel use by about 25 per cent, according to the

“A more sophisticated chemistry will be applied to oil rather than just distillation and cracking,” he says. “This

litre per 100 kilometres. So it’s very

notes that such propylene- or aro-

26

Fuels

a process with a lot of disadvantages, he says. “This hybrid fuel is a perfect solution for gasoline and makes both industries happy: the bio industry and the oil industry.” Oil can definitely compete in the

Vogel says. “The oil-based petrochemical industry should

aviation transport sector, he adds.

think about slowly decoupling from ethylene and look

Today it is difficult to imagine an

more into on-purpose propylene technologies. It should

airplane running on LNG because

not be any longer considered a by-product but a main

of safety and approval issues. “So

oil will definitely have a bright future in transportation

size of a shipping container,” he says. “They are ideally

for decades to come,” says Vogel.

suited to be deployed as a modular concept for small villages or communities, supermarkets, hospitals or

Power generation

hotels.”

The trend among huge centralized plants has been to

efficient, decentralized power generation

move away from oil towards gas, with a revival some-

could actually be supportive for oil … where

what of coal, says Vogel. However, the megatrend of

power, electricity and heat (which can also

moving away from solid fuels is still in place. Highly effi-

be converted into cold) are needed at the

cient natural gas-powered combined cycle power plants

same time.”

In general, Vogel says “the trend of highly

are coming, and the latest plan by the US Environmental

Stationary fuel cells can be run on

Protection Agency (EPA) to reduce carbon emissions from

many kinds of hydrocarbons, including

the power sector by 30 per cent below 2005 levels is a

natural gas or diesel, and can be con-

clear signal to the industry to adopt cleaner and more

figured in such a way that a reformer will

efficient technologies.

transform hydrocarbons into hydrogen and

Coal will still be attractive for some time because it

CO2. Hydrogen can be used in a fuel cell to produce electricity with a thermal efficiency of about 45–50 per cent. The heat generated can then

carbon capture and storage (CCS) — the process in which

be used to supply buildings, bringing overall thermal

CO2 is condensed to a liquid and stored underground

efficiencies to above 90 per cent. In contrast, future ship-

or used for EOR at large source points — could have an

ments of natural gas to fuel cells may not always be prac-

impact on that trend.

tical, as it requires some sort of infrastructure or pipeline.

“We have to look for completely new technologies

Thus, more easily transportable oil-based hydrocarbons

and have completely new approaches where the use of

that are rich in hydrogen — such as LPG or naphtha —

oil or oil-based power generation can play a role in the

may be ideal in many cases.

Water Hydrogen Reformer

Air electrode Electrolyte membrane Fuel electrode

Simplified interior of a fuel cell.

“This would definitely compete with centralized power

He notes that only about 30–60 per cent of oil’s energy

stations which are less efficient and which on top of that

is converted in traditional power plants (in cars it is only

require the erection of power lines or electricity distribu-

about 40 per cent). If 90 per cent of the energy con-

tion networks,” Vogel says. “There is the added advantage

tent of oil could be extracted, then we would get

of having energy independence — not being affected by

for the oil, so we want to get more out of

No carbon dioxide

Hydrocarbon [fossil fuels]

a strong influence on which fuels will be chosen, though

more out of the oil, he says. “We pay more

Electron

Oxygen

is cheap. But tighter CO2 emission laws are going to have

future,” maintains Vogel.

Load

blackouts or other network problems.” If a community grows, modules can be added. Thus,

Into the picture come fuel cells — par-

period of time on an ‘as-needed’ basis. In the past, eve-

ticularly large, stationary fuel cells.

rybody had their own stove and heating system, notes

“These produce a few hundred KW

Vogel. Then the grid came; and now the trend towards

of electricity and typically have the

decentralized energy production is coming back.

OPEC bulletin 1–2/15

a decentralized network can be developed within a short

it.”

27

Insight

“Developing countries; regions like Siberia, like Canada or Africa; huge countries where it may not be

very good. The market is anticipated to add 7 GW a year up to 2022.

financially feasible to lay hundreds of kilometres of elec-

In fact, some department stores and hospitals in

trical lines or build a complete power station; they may

the US are already powered by fuel cells. And in August

all select this option in a couple of years’ time when fuel

2014, a South African town became the first in the world

cell technology becomes more mature,” Vogel

to be powered by fuel cells, with 34 homes in Naledi to be serviced with up to 60 KW of power in a pilot project.

said. In fact, it is already becoming more

In recent comments to the press, Chris Griffith, the

mature and affordable. There

Chief Executive Officer of Anglo American Platinum —

have been improvements in

which, along with partner Ballard Power Systems, set

cost, overall thermal effi-

up the pilot — said that about two million poorer house-

ciency has exceeded 90

holds in the country have no access to the grid and could

per cent and the lifetime

also use fuel cells. “What we have here is a world first,”

is currently at about ten

stated Griffith. “Fuel cell mini-grid technology is a cost-

years. “If they manage

competitive alternative to grid electrification in these

to bring it up to 20 years

remote areas and could accelerate access to electricity.”

and slash costs by 50

Vogel agrees, adding that fuel cells are one of the very

per cent this technology

important technology advancements that will be emerg-

will be very competitive

ing over the next 50 years and could become a disrup-

for broad applications.”

tive technology tool if well managed. He further notes

Fuel cell technology is also

that fuel cell technology is extremely safe — “safer than

being looked at for ships,

nuclear power plants, more efficient than the most effi-

particularly for use in harbours

cient centralized power plants. It is an opportunity for

with emission restrictions. In addi-

both gas and oil-based fuels.”

tion, it could supply air conditioning and hot water for cruise ships. The next step could be further miniaturizing fuel cells and making them suitable for individual homes, apartments

Turning to CCS technology, the prospect of using CO2 for

or trucks, says Vogel.

‘fracking’ or EOR instead of water is definitely becom-

OPEC bulletin 1–2/15

Hydrogen as a fuel for transportation is much further

28

Carbon Capture and Storage (CCS)

ing one of its most exciting applications, states Vogel.

down the road, as too few filling stations are available.

“It would be a great combination of using fos-

That is likely to remain the case for 20–30 years to come,

sil fuels for large-scale power generation

he noted. “The idea is not for a hydrogen economy (as

and at the same time re-injecting this

was thought would exist in the 1970s). It is about down-

undesired product, CO2, back into

sizing hydrocarbon-powered fuel cells over the next dec-

the soil and getting in return

ades until they become suitable for transport vehicles,”

the good stuff — the hydro-

says Vogel. He adds that these developments are still

carbons — out of it.”

far away, though the outlook for larger stationary cells is

CCS can enhance

energy security through collecting CO2 and using it for

says. “They can come online producing electricity within

EOR, while at the same time making hydrocarbon power

minutes ... the same thing goes for peak demand.”

generation CO2-neutral. In 2014, about 21 large CCS pro-

In general, trends are shifting in the world, times are

jects either came into operation or were under construc-

changing and oil demand will also evolve. These devel-

tion, elevating the amount of sequestered CO2 to about

opments offer opportunities for the future oil industry.

20 million tonnes per year, says Vogel. “This only repre-

“The shifting of oil demand to diversified and new

sents 0.1 per cent of global CO2 emissions, but it is a step

products across the value chain and slowly away

in the right direction.”

from traditional usage in power and trans-

All eyes are currently on Boundary Dam, the world’s

portation offers new opportuni-

first post-combustion coal-fired CCS facility which will use

ties for the petroleum industry

CO2 for EOR. The power plant — located in the Canadian

to enhance customer atti-

prairies — was up and running in the autumn of 2014

tudes, practice flexible

(see OPEC Bulletin August/September 2014, pp22–27

approaches, synergies

for full coverage). If the Boundary Dam pilot proves to

and partnerships,

be financially feasible, it may provide the reassurance

as well as engage

needed by many countries and companies considering

in out-of-the-box

similar projects and push them on to the next step.

thinking and progressive R&D strat-

Synergies with renewables

egies,” says Vogel.

In an increasingly complex energy world, the oil industry

“The oil indus-

will likely develop synergies with renewable energy indus-

try should be pro-

tries, says Vogel. For example, he says, wind power has

active in identify-

become quite competitive and large rotors can be seen

ing trends at an early

spinning in many fields around the world. Oil can sup-

stage and embarking

ply these big rotors with light-weight, high-performance

on them. The big trends

plastics or fibre-reinforced composites.

you can’t stop; it’s better to

per year. The translucent part of solar cells is also starting to be made with polycarbonate plastic materials. In both cases, oil-based backup power generating systems could be used when there is no wind for turbines or sun for solar panels.

jump on them and see where the opportunities are.” So if one wonders what roles oil may play in the future, one must consider the energy industry in a multifaceted way, and examine other potential uses of this resource. What is clear is that oil will

“Backup systems running

continue to be important to the way we live and work

on oil and large conventional

around the world. “Thus, oil can contribute to the sus-

piston engines are a conveni-

tained development of society and the industry,” Vogel

ent and highly reliable solu-

says, adding: “And it is clear the oil industry will have a

tion to bridge that gap,” he

vital part in the future of humanity.” Images courtesy Shutterstock.

OPEC bulletin 1–2/15

Vogel considers this a huge, multi-billion dollar market

But he adds:

29

Shutterstock

Newsline Spotlight

Oil market weakness due largely to US tight oil growth

— BP Outlook

Oil major BP has blamed the current weakness in inter-



national crude oil prices largely on the strong growth re-

tight oil supply growth slowed and demand strength-

corded in United States unconventional oil production.

ened, the call on OPEC crude would begin to increase,

BP



BP Chief Economist, Spencer Dale.

In its authoritative BP Energy Out-

But the Outlook pointed out that “further out”, as

exceeding, by 2030, the Organization’s historical high

look 2035, released in February, it said

output of 32m b/d, recorded in 2007.

the current weakness in the oil market,



which has seen crude oil prices fall by

estimated at around 40 per cent, similar to its average

around $50/barrel since the summer

over the past 20 years.

months of last year, stemmed in large



part from strong growth in US tight oil

the next 20 years,” BP Chief Economist, Spencer Dale,

production.

said at the launch of the publication in London.





And with output from this relatively

OPEC’s market share by the end of the Outlook was

“OPEC remains a central force in the oil market for

“I am perplexed by the idea that OPEC has lost its

new source of oil projected to remain

power,” he stressed, stating that the need for the Orga-

robust in the near term, BP maintained

nization’s crude had not dropped too dramatically.

that it was likely to “take several years



“OPEC’s market share has dipped very slightly, but

to work through”.

it retains a market share of around 40 per cent and ac-



counts for 70 per cent of total reserves, so it is still a

The company noted that, in 2014,

tight oil production drove US oil output

material player,” he was quoted as saying.

higher by 1.5 million barrels/day — the



largest single-year rise in the country’s

mentally, so the benefits of shifting the timing of oil

history.

supply were very different.





By the 2030s, the US was likely to

Dale asserted that the world had changed funda-

“That does not affect the fundamental power of

have become self-sufficient in oil, after

OPEC if another temporary shock comes along — it can

having imported 60 per cent of its total

carry on in that vein,” he affirmed.

demand as recently as 2005, it observed.





It said US tight oil output was set to grow by about

Dale observed that after three years of high and decep-

Commenting on the current oil market situation,

3m b/d between 2013 and 2035, accounting for around

tively steady oil prices, the fall of recent months was a

two-thirds of global tight oil production in 2035.

stark reminder that the norm in energy markets was one

OPEC bulletin 1–2/15

of continuous change.

30

Market requirements



“It is important that we look through short-term

“The strength of tight oil and the relative weakness of

and demand that are likely to shape the energy sector

demand have reduced the market requirement for OPEC

over the next 20 years and so help inform the strategic

crude in recent years. This pressure on OPEC is likely

choices facing the industry and policymakers alike,” he

to persist in the early years of the Outlook and the re-

professed.

sponse of OPEC to this reduction is a key uncertainty,”



said the report.

the dramatic recent weakening in global energy mar-

volatility to identify those longer term trends in supply

The latest edition of BP’s Outlook said that despite

kets, ongoing economic expansion in Asia — particular-

grow fastest of the fossil fuels over the period to 2035,

ly China and India — would drive continued growth in

increasing by 1.9 per cent a year, led by demand from

global demand for energy over the next 20 years.

Asia.





Its projections saw world demand for energy rising

Half the increased demand would be met by rising

by 37 per cent from 2013 to 2035, or by an average of

conventional gas production, primarily in Russia and

1.4 per cent a year.

the Middle East, and about a half from shale gas.

The Outlook projected that demand for oil would in-



crease by around 0.8 per cent each year to 2035.

for almost all global shale gas supply, will still produce



around three-quarters of the total,” said the report.

This meant that global demand for oil, biofuels and

“By 2035, North America, which currently accounts

other liquids was forecast to rise by around 19m b/d,



reaching 111m b/d by 2035.

in traded gas would be met through increasing supplies

BP said the overwhelming majority of the increase

of liquefied natural gas (LNG).

Rising demand



“The rising demand comes entirely from non-OECD

per cent a year through the period to 2020. This also

countries; oil consumption within the OECD peaked in

means that by 2035 LNG will have overtaken pipelines

2005 and by 2035 is expected to have fallen to levels

as the dominant form of traded gas,” said the report.

not seen since 1986. By 2035, China is likely to have



overtaken the US as the largest single consumer of oil

also have other effects on markets. Over

globally,” it said.

time it could be expected to lead to more



connected and integrated gas markets and

Increasing LNG trade, it said, would

stemmed primarily from transport (16m b/d) — reflect-

prices across the world.

ing a rapid increase in vehicle ownership — and indus-

“And it is also likely to provide

try (8m b/d), largely for petrochemicals.

significantly



supplies to consuming regions such as

“The global vehicle fleet (commercial vehicles and

greater

diversity

in

gas

passenger cars) more than doubles from around 1.2 bil-

Europe and China.”

lion today to 2.4bn by 2035. Most of that growth is in

The Outlook noted that coal had been

the developing world (88 per cent), while some OECD

the fastest-growing of the fossil fuels over

markets are already at saturation levels,” it said.

the past decade, driven by Chinese de-



“I am perplexed by the idea that OPEC has lost its power … OPEC remains a central force in the oil market for the next 20 years.” — BP Chief Economist, Spencer Dale

However, Dale pointed out that there was consider-

mand. However, over the next 20 years it

able uncertainty as to just how long the Asian giants of

saw coal as the slowest-growing fossil fuel,

China and India could continue to grow at such rapid

expanding by just 0.8 per cent a year, marginally slower

rates relative to the global norm.

than oil.





Climate change, he added, was another key area of

“The change is driven by three factors: moderating

uncertainty surrounding oil demand.

and less energy-intensive growth in China; the impact



The report said the increased demand would be met

of regulation and policy on the use of coal in both the

initially by supply from non-OPEC unconventional sourc-

US and China; and the plentiful supplies of gas helping

es and later from OPEC.

to squeeze coal out from power generation,” stated the



report.

“By 2035, non-OPEC supply is expected to have in-

creased by 13m b/d, while OPEC production expands by



7m b/d,” it stated.

America — which was expected to become a net export-

It maintained that energy self-sufficiency in North



The largest increments of non-OPEC supply would

er of energy this year — and increasing LNG trade were

come from the US (6m b/d), Brazil (3m b/d) and Cana-

also over time expected to have fundamental impacts

da (3m b/d), which offset declines in mature provinces

on global energy flows.

such as the North Sea.





BP said OPEC’s supply growth would come primarily

demand in the US and Europe due to improving energy

from natural gas liquids (NGLs) amounting to 3m b/d

efficiency and lower growth will combine with continu-

and crude oil output from Iraq (2m b/d).

ing strong economic growth in Asia to shift the energy

The Outlook said demand for natural gas would

flows increasingly from west to east.”

“Increased oil and gas supplies in the US and lower OPEC bulletin 1–2/15

The report stated that non-OECD oil demand growth

“Production of LNG will show dramatic growth over

the rest of this decade, with supply growing almost eight

31

Newsline

Iran again postpones oil roadshow to later in 2015 Due to the protracted

International Affairs,

nature of its ongo-

maintained that the

ing nuclear talks with

current lower oil price

Western nations, Iran

should work in his

has again decided to

country’s favour.

postpone its oil round



roadshow in London,

this very low price,

at which it intends to

expensive oil produc-

announce the latest

tion in other parts of

investment possibili-

the world cannot com-

ties in its oil and gas

pete with that of low-

sector.

cost OPEC Members,”

“Definitely, given

he was quoted as say-

The OPEC Member

ing by Platts.

been the subject of



Western sanctions for

t h a t t h e co s t o f

Reuters

Country, which has

many years as a result of a dispute over its domestic nuclear pro-

Iranian President, Hassan Rouhani.

H e r e v ea l e d

extracting oil in Iran stood at an average of $5–6/barrel, rising to a maximum of $8/b

gramme, had initially planned to hold the special conference in the UK capital

in the country’s offshore areas. By comparison, he said,

at the beginning of November last year.

North Sea crude cost $50/b and shale oil $60–$85/b.

However, as Mehdi Hosseini, Head of the Iranian Oil Contracts Revision Committee, announced last summer, that date would have been too soon to enable all relevant oil companies to participate in the roadshow.

stressed that his government had made “substantial

Russia the United Kingdom and the United States — have

progress” in overcoming the pressures on its oil indus-

been attempting to draw up an amicable, workable deal.

try from the Western sanctions, including managing to boost domestic oil production.

to February 2015, but unfortunately the latest estima-

“Despite all the sanctions and pressure, we have

tion for reaching a tentative agreement on the sanctions’

made substantial progress,” he pointed out at a rally

removal is now July this year.

broadcast on state television to mark the anniversary of

“Given the overall political situation and nuclear talks, the organizer (CWC Group) suggested that it is again not the right time,” Hossein told Platts. He said the conference organizers had now proposed September or October this years as a suitable time. OPEC bulletin 1–2/15

Meanwhile, Iranian President, Hassan Rouhani, has

Iran and six world powers — China, France, Germany,

Hosseini subsequently postponed the oil conference

32

Substantial progress

the country’s Islamic Revolution in 1979. Rouhani disclosed that oil production last year rose by 200,000 b/d to 2.9 million b/d. A substantial increase in natural gas production had also been recorded. The country is gearing up to boost its crude output

He explained that the nuclear talks would take until

capacity by 550,000 b/d from western fields that strad-

July to reach a conclusion and a few months later would

dle the border with Iraq as part of a four-year develop-

provide a good time for the move.

ment plan costing more than $15 billion, according to

Hosseini, Iran’s former Deputy Petroleum Minister for

the students’ ISNA news agency.

Reuters

Shell signs petrochemical deal with Iraq but reduces other investments products per year and its establishment would make Iraq the largest petrochemical producer in the Middle East.

Petrochemical sector “The Nibras complex will be one of the largest (foreign) investments (in Iraq) and the most important in the petrochemical sector in the Middle East,” Al-Esawi was quoted as saying. Shell is one of the major oil companies operating in southern Iraq. It operates the Majnoon oil field and leads the Basra Gas Company joint venture. It signed a memorandum of understanding for the Nibras scheme in 2012. However, Shell has reportedly suspended its $12bn Bonga South West project in Nigeria for an indefinite period. Sources said the move was consistent with the company’s announcement that 40 projects would be under the spotlight durBen van Beurden, Shell’s Chief Executive Officer.

ing 2015–17, as a result of the lower oil prices. Bonga South West forms part of a complex operated by Shell’s deep-water arm, the Shell Nigeria Exploration and Production

Royal Dutch Shell has signed an agreement to build a major petro-

Company (SNEPCO), which pioneered Nigeria’s deep-water oil and

chemical plant in southern Iraq, but it has suspended or scrapped

gas production at the Bonga field.

and Qatar.

The development of the field increased Nigeria’s oil capacity by ten per cent when output began in 2005. At full output, Bonga

As a result of the sharp downturn in international crude oil

has the potential to add more than 200,000 barrels of crude oil and

prices, the oil major said it was being forced to cut spending by

150 million standard cubic feet of gas to Nigeria’s daily production.

around $15 billion over the next three years, leaving the company with some tough choices to make. Shell’s Chief Executive Officer, Ben van Beurden, told reporters at a briefing in London that the spending reduction would mean delaying or canceling around 40 projects.

And Shell has scrapped plans to build a multi-billion dollar petrochemical plant in Qatar, again because of the lower oil prices, coupled with extensive capital costs. Both the national oil company, Qatar Petroleum (QP) and Shell announced that they had decided to pull back on the proposed

And he said there was the possibility that investment could

$6.5bn Al Karaana petrochemicals project on the grounds it is “com-

be curtailed even further going forward, depending on the future

mercially unfeasible in the current economic climate prevailing in

direction of oil prices, which have virtually halved in value since

the energy industry.”

the summer months. The $11bn accord to build the petrochemical plant in Basra was reached in January after the green light for the project was given by the Iraqi government. Iraq, a Founder Member of OPEC, is aiming to diversify its economy by widening its reach as a major regional energy player.

The companies signed a memorandum of understanding in December 2011 to conduct a feasibility study covering the construction of the plant at Ras Laffan Industrial City. The plant, which would have been a joint-venture scheme between QP and Shell, involved providing a world-scale ethane steam cracker fed by Qatar’s massive gas reserves.

Iraqi Industry Minister, Nasser Al-Esawi, told a news conference

Shell’s existing projects with QP include the giant Ras Laffan

that the Shell Nibras plant was slated to be operational within five

Pearl GTL scheme, the world’s biggest integrated gas-to-liquids

to six years. It would produce 1.8 million tonnes of petrochemical

plant.

OPEC bulletin 1–2/15

plans for projects in two other OPEC Member Countries — Nigeria

33

Newsline

Kuwait proceeds with oil capacity expansion plans Despite lower crude oil prices, Kuwait is proceeding with its plans to boost its oil production capacity. According to the Chief Executive Officer of the Kuwait Oil Company (KOC), Hashem Hashem, oil and gas drilling rigs would

The project, which is slated to produce 60,000 by 2018 in its first phase, forecasts output of 180,000 b/d by 2025 and 270,000 b/d by 2030. It will also incorporate a data acquisition programme and pilot schemes to test different heavy oil extraction methods.

be increased by 50 per cent by early next year as part of efforts to

According to reports, the Lower fars contract covers engineer-

boost production capability. The number of drilling rigs for oil and

ing, procurement and construction of a central processing facility

gas would rise from 80 to 120.

to treat waste water, as well as a 165 km oil export pipeline to a

“We are continuing our programme, building capacity, espe-

tank farm at Al Ahmadi.

cially in the oil and gas programme. We are not stopping ... we are

The Reuters report said that subsequent work to fully develop

growing our activities on the drilling side,” he was quoted as say-

Lower Fars would involve steam injection and heavy oil production

ing by Reuters.

facilities, support complex, tank farms and a 270,000 b/d pipeline

Hashem revealed that KOC was aiming to add some 150,000 barrels/day of crude production to the current potential, bringing around three million b/d by early 2016.

to the planned new $15bn Al Zour Refinery in southern Kuwait. It said the entire Lower Fars Heavy Oil Development project was scheduled for completion by 2017.

Late last year, at a conference in Kuwait City, he announced

In tandem with the crude oil expansion, the Kuwait National

that Kuwait planned investment of around $7 billion to develop

Petroleum Corporation (KNPC) plans to expand its refining capac-

the country’s heavy oil fields.

ity to 1.4m b/d from 937,000 b/d.

“Developing heavy oil projects in Kuwait is economical even with the current fall in oil prices,” he said. KOC recently awarded a $4.1bn contract for the first phase of the Lower Fars Heavy Oil Development to Petrofac and the Greecebased, Consolidated Contractors Company. The Lower Fars project, which will involve the drilling of some 900 wells, is situated 80 km northwest of Kuwait City and forms part of Kuwait’s plans to boost the country’s oil production capacity to 4m b/d by 2020.

Mohammad Ghazi Al-Mutairi, the company’s CEO, stated at the December conference that KNPC would attain this target when it completed the 615,000 b/d Al-Zour facility, and upgraded existing plants to produce clean fuel. He explained that crude density was becoming heavier in the Middle East, and refineries must be improved to process it. Al-Zour would be capable of processing all of Kuwait’s heavy crude. The Al-Zour plant was expected to begin commercial operation by mid-2019.

OPEC bulletin 1–2/15

Shutterstock

The skyline of Kuwait City illuminated at night.

34

Total first to be awarded stake in Abu Dhabi oil concession The Abu Dhabi National Oil Company (ADNOC) has

onshore oil fields that represent more than half of the

reached an agreement with Total of France, providing the

Emirate’s output.

international oil major with a ten per cent stake in the

Abu Dhabi’s fields currently produce around 1.6 mil-

new concession to help operate oil fields in the United

lion barrels/day of crude, but are expected to attain the

Arab Emirates (UAE).

level of 1.8m b/d from 2017, under the UAE’s oil capacity expansion programme.

Technical leader Total Chief Executive Officer, Patrick Pouyanne, said in a statement after the signing that the French oil major was honoured to be the first international oil company to be chosen. It has been entrusted with the responsibility of becoming technical leader on two major groups of fields. Meanwhile, ADNOC said in a statement that Total “presented the best technical and commercial offers,” adding that more companies would be added to the concession soon. Reuters

As well as Total, Shell and BP have made new bids,

Patrick Pouyanne, Total Chief Executive Officer.

while ExxonMobil has decided against bidding, Reuters quoted sources as saying. Other firms vying for stakes include Occidental Petroleum of the United States, Italy’s ENI, the China National Petroleum Corporation (CNPC), the Korea National Oil Corporation, Norway’s Statoil and

According to a report by Reuters, in signing the accord Total became the first oil company to renew the 40-year onshore concession in Abu Dhabi, capital of the UAE.

Japan’s Inpex. A Total spokeswoman was quoted as saying that the company’s margin on the new agreement was better than the previous concession arrangement.

It said that some nine Asian and Western companies had

An ADNOC source told Reuters that the state company was negotiating separately with other companies to bring their offers in line with Total’s.

submitted bids for stakes in the Abu Dhabi Company for

Despite the oil price slump and oversupply in global

Onshore Oil Operations (ADCO) concession. The previ-

markets, the UAE remains committed to lifting its oil pro-

ous agreement with oil majors, which dated back to the

duction capacity.

1970s, expired in January last year.

UAE Energy Minister, Suhail Mohamed Al Mazrouei,

Under the previous arrangement, four firms, compris-

told the local National newspaper that plans remain intact

ing ExxonMobil, Royal Dutch Shell, Total and BP, each pos-

to boost the country’s production capacity from 3m b/d

sessed a 9.5 per cent equity stake in the ADCO conces-

to 3.5m b/d by 2017.

sion. After the deal expired last year, ADNOC, the state oil company, took 100 per cent of the concession. The new Total concession is effective from the beginning of this year and relates to Abu Dhabi’s 15 principal

“Most of the projects are committed and under construction and we do not foresee any delays on the capacity expansion,” he was quoted as saying by Energy Intelligence.

OPEC bulletin 1–2/15

Onshore concession

35

Spotlight

Oiling the wheels of transportation:

A glimpse into Venezu When Isaac Capriles, a physician from Caracas, imported the first ever car — a Cadillac B — into Venezuela in 1904 he most probably never realised the significance of his acquisition. Ironically, the event went almost unnoticed. In fact, the first known picture of this automobile was taken decades later. But make no mistake — it was a landmark moment and one that signified the beginning of a new era. Already on the verge of establishing itself as an important global oil producer, the South American nation also became a part of the fascinating newfangled culture of automobiles, the very sector its oil would help fuel. In this article, OPEC Bulletin correspondent, Saúl Castro Gómez, himself a Venezuelan, explores a side of the OPEC Founder Member that epitomizes the indefatigable bond that exists between the automobile industry and the petroleum sector. And the fact is, without the invention of the wheel, made, interestingly, in another Founder Member of OPEC, Iraq, Venezuela’s ties with United States car manufacturing and all that went with it may never have happened. Distance and effect

As if this were somehow a narrative about the very creation of Earth itself, getting from A to B has always posed

OPEC bulletin 1–2/15

Throughout the immense net of roads and highways that

36

two main challenges — how to reach various geographi-

criss-crosses planet Earth there is one sure given — that

cal locations in the best manner possible — and produc-

with each minute of every passing day vehicles of all

ing methods of transport that could offer an ‘antidote’

shapes and sizes are moving people and products from

to counteracting some of the long distances involved.

one place to another. Over the centuries, with the vari-

How quickly is it possible to reach a specific point on

ous modes of ‘moving’ utilized, humans were to call this

the map? In which manner can one best move and carry

process ‘transportation’.

more goods? Does the mode of transportation utilized

The evolution of the wheel — vital for optimizing the various modes of transportation.

ela’s automobile history offer enough reliability to be used repeatedly? Is it worth

developed, including fossil fuels, electricity, even solar,

the effort for the distance covered? These were some of

among others. It was only through the use of these fuels

the questions broached by the early pioneers of transpor-

that the mechanical motion desired by man was made

tation, who, to some extent, came up with a partial solu-

possible. These sources of energy, especially fossil fuels,

tion with the use of the sail and the assistance of certain

were central to the innovations that helped shape the pro-

domesticated quadrupeds.

duction of suitable hardware and the creative processes being applied.

a simple, yet life-changing mechanical invention burst

But returning to the wheel, besides being a symbolic

onto the scene — the wheel. It effectively transformed

allegory related to the automobile, it also helped confirm

the world of transportation. Some evidence suggests

that neither ‘reliability’ nor ‘efficiency’ is more important

that it was in Mesopotamia (today Iraq) circa 3600BC that

than the other, but are rather ‘complementary parts’ in

the wheel was rolled out for the first time. The invention

conceptualizing any given vehicle. In this process of con-

allowed individuals to be able to move objects or persons

ceptualization, the provider of the raw material is of the

more quickly and efficiently and with less physical effort.

utmost importance.

Alongside carriages and equines, the wheel started to change everything.

While fuel is the major aspect of association between the oil and automotive sector, in reality the vehicular

More contemporarily, trains and rail brought new

industry depends heavily on crude oil far beyond the pro-

opportunities in the field of transportation and in par-

vision of just gasoline. This is not so obvious to everyone,

allel with industrial expansion came better and more

but the multitude of ways crude oil is used in specific

advanced vessels. The modern automobile and the air-

areas of automobile production serves to remind us just

plane made their appearances too. Overall, a great deal

how far we have come technology-wise and ultimately

of time is required to talk about the different types of

how this precious commodity has improved our overall

transport that became available.

standards of living.

In tandem with their development, different sources

Today, the vehicle transportation sector continues

of energy became apparent to power the vehicles

to evolve, encapsulated in new visions, new tendencies

OPEC bulletin 1–2/15

Then, under somewhat mysterious circumstances,

37

Spotlight

100 years after, arguably, the first successful electric car — the ‘Electrobat’ — went into production. In 1896, the engineers, Pedro Salom and Henry Morris from Philadelphia, were the creative minds behind this automobile. It was introduced by the company, Morris and Salom Electric Carriage and Wagon, a long corporative name for the production of a car Shutterstock

that was certainly robust. It weighed more than 4,250 pounds (around 2,000 kilogrammes), of which 1,600 pounds was accounted for by several big lead-acid batteries. This, of course, represented the biggest challenge intrinsically related to energy use in the form of a batThe ‘motorwagen’ of 1886 — possibly the world’s first effective vehicle.

and experimenting with a host of new technology, in

tery. There was a problem not only of autonomy, but also

response to the potential changes that will be required

of size.

in the future. A candid look at the history of the automo-

Some would argue that the ‘Flocken Elektrowagen’

bile and its inseparable partner — the wheel — reminds

was actually the world’s first electric car. It was built in

us just why oil-based fuels will be the core ingredient for

1888 by the German, Andreas Flocken. However, between

vehicle propulsion for the foreseeable future.

the Teutonic model and the Electrobat, the latter is considered more referential as it was used regularly in urban

What could have been but never was

Other brands also became icons in the develop-

the events involved in the evolution of car manufactur-

ment of the electric vehicle, such as the case with the

ing and crediting all those individuals that made land-

Baker Motor Vehicle Company, located in Cleveland,

mark decisions or incisive analyses is as difficult as

which enjoyed some success in assembling the models

finding the proverbial needle in a haystack. With cer-

‘Stanhope’ and ‘Runabout’ (there was also another suc-

tainty, it is possible to single out Karl Benz, associated

cessful electric runabout from the Columbia Automobile

with the creation of the ‘motorwagen’ in 1886, possi-

Company in Connecticut). Baker became a major pro-

bly the world’s first effective vehicle. But the history of

ducer of electric vehicles at the dawn of the 20th century,

the automobile goes far beyond the great engineering

or in the period of automobile history known as the ‘Brass

talents of Benz.

Era’.

Should a parallelism be possible, the sheer number

Names like Thomas Parker and the Belgian, Camille

of ideas and patents for car production at the end of the

Jenatzy, can be considered entrepreneurs that played an

19th century was as high as those presented lately in the

important role in the study of electric propulsion for cars.

information technology sector — quite something. In both

Parker, a businessman associated with the industry of

scenarios, the intention was for growth quam celerimme.

locomotives in England, was acknowledged among car

In many cases, there is no evidence to suggest that

buffs of the epoch for creating a very functional electric

neers for one achievement or another. However, as a ‘reference’ to the modern vehicle, despite the overwhelming dominance of gasoline, a topic that cannot be forgotten, considering its historical context, is that of electricity. The revival of the electric car in modern times occurred in 1996 with the introduction and mass-production of the EV1 by General Motors, deemed at the time as being a revolutionary marvel. If the popular conception that things are renewed every century is correct, then the commercialization of the EV1 occurred exactly

Daimler motorized wheelchair (1896).

car in 1894. Shutterstock

yet many people and companies still claimed glory as pio-

OPEC bulletin 1–2/15

of proved operation is evidenced.

The automobile memoir is really extensive. Identifying

car manufacture proceeded beyond the prototype stage,

38

undertakings, such as cabs and taxi lines. Hence, a level

Generally speaking, some aspects that were

the electric car, ‘La Jamais Contente’.

determinant in shaping the

In 1895, the ‘Arnold,’ a vehicle conceived and intro-

development of the modern

duced by British engineer, Frederick Lancaster, was acti-

car include concern for car

vated for the first time with the use of an electric starter.

autonomy; the innovations

Though not assisted by electricity, but combustion, the

of internal combustion tech-

Arnold is probably a fair illustration of early mutual assis-

nology; the possibility to

tance between the internal combustion engine and incip-

refuel quickly, as with gaso-

ient electrical technology.

line; the implementation of

It is even possible to identify the first gasoline-electric hybrid cars. It has been said that between 1910

Shutterstock

In 1899, Jenatzy, nicknamed ‘Le diable,’ was the first person to break the 100 km/hour speed record onboard

mass production (as with the Ford Model-T); accessible prices; and changes in societal values.

and 1917, in the windy city, Chicago, a company called

Of interest, and maybe less publicized, is the fact

Woods Motor sold hybrid cars which claimed a speed of

that none of the above would have been possible, or at

34 mph, with an approximate fuel efficiency of 48 miles

least not so easily, without the provision of an abundant

per gallon.

source of propulsion — crude oil — particularly its refined

From 1890 up to 1920, a conceptual rivalry was seen taking place between the advocates for gasoline-fuelled

Whatever the case – electric or internal combustion – an oil industry running to capacity is needed for both options as most raw materials for car components, including, of course, the synthetic tyres, originate from crude. In the picture, a  vehicle Tesla.

derivatives, in which one certain South American tropical nation began to become prominent.

cars and supporters of the electric vehicle. At the begin-

For decades, Venezuela has occupied the consist-

ning of the 1900s, the market for automobiles was more

ent and reliable position of being a major producer and

or less divided into thirds, taking also into account the

exporter of crude oil. This, combined with its ideal geo-

steam-powered horseless carriages as the other available

graphic location, placed it close to the hub of car-making

option. However, the automobile transportation sector

at the time — the United States. This, in turn, provided a

was to reach the unavoidable turning point of prioritizing

warranty for the entrepreneurial momentum experienced

its progress. The question asked was whether this priority

in the development of the automobile.

was to be based on ‘idealism’ or ‘realism,’ or perhaps a fusion of the two. The characteristics of social interaction and pro-

The first car in Venezuela

ductive apparatus in contemporary societies were indi-

Until very recently it was thought that the first car in

cating a sizeable change in population structures glob-

Venezuela was a vehicle called a Darracq of French man-

ally, not only related to size per se, but also in terms of

ufacturing, brought to the country for the then first lady,

values.

Zoila de Castro, wife of President Cipriano Castro, who

For instance, the family as a social entity was shift-

was in office between 1899 and 1908. This idea was

ing gradually towards a “dual-earner model” for which

accepted and embraced in Venezuelan society as an

proper ‘time’ allocation emerged as crucial for both work

event that took place in 1904. However, over the years,

and leisure routines.

historians and researchers, aiming to better understand

Acute considerations on aspects such as reliability,

the evolution of a country characterized by its produc-

efficiency and distance were present among car man-

tion of crude oil, made in-depth studies to identify with

ufacturers and customers alike. Beyond, nation-states

absolute certainty the arrival of the first car domesti-

also offered views on aspects such as economic growth

cally. After all, oil and vehicle transportation were intrin-

and urbanism (concepts that are linked to the logistics

sically linked.

of road configurations, eg, positive deviations, negative

Unfortunately, the Darracq for Mrs de Castro story

deviations and their effects on distances from suburbs

turned out to be incorrect. In seeking out old newspapers

to factories and offices).

(not always an easy assignment) and contrasting popular

One could say that the never-ending wish among humans to explore far ‘inland’ subjugated the questioning and analysis on what could have been, but never was — the commercialized electric

beliefs with old customs records, Venezuelan historian, Javier González, managed to find out that the Darracq in question actually arrived in the country

car.

39

Spotlight

three years later — in 1907. And it appeared to be a gift from the French government for the Castro family. Furthermore, González discovered through reliable

Overall, and for a variety of reasons that stretches

sources drawn from the now defunct local newspaper,

back to the early times of ‘good choc-

El Monitor, that the actual arrival of the first vehicle in

olate-making’, the connection between France and

Venezuela in 1904 was instigated by one Isaac Capriles,

Venezuela is quite apparent. However, as a result of its

a physician from Caracas, who imported a Cadillac B.

oil exploitation and other aspects, such as sport affinities

In part, the confusion arises out of the fact there are no pictures recording this event. Similarly, and to add

through baseball, the link between the US and Venezuela proved to be ascertained too.

more to the misperception, other investigators, such as

Though with dissimilar processes, throughout mod-

Galo López, highlighted a car’s presence in the country in

ern history these three countries have a common factor

a photo taken in 1905, during a social event in Caracas.

— all have been involved in stamping important ideas on

According to some sources, this other vehicle was most

sovereign democracy within the context of Westphalian

likely a Panhard and Levassor, also of French origin. In

sovereignty.

this way, one could openly infer that there were at least

As a result of the trade links between these

two vehicles operational in Venezuela before the Castro

nations, numerous business opportunities arising from

family’s Darracq.

Venezuela’s progressive and successful oil exploitation

But concerning Capriles’ Cadillac B, the very old cus-

were realized and many North American impresarios,

toms records, which coincided with the note in El Monitor,

alongside certain ‘criollos’ found in Venezuela the pos-

published on April 21, 1904, appear to make it the oldest

sibility of achieving new goals. This was the case with William

car in Venezuela. There is not any documenta-

Henry Phelps from New York City

tion, formal or informal, indicat-

and Edgar Anzola, a native of Villa

ing any automobile on Venezuelan

de Cura, in the Venezuelan central

soil before that year. The Cadillac

state of Aragua.

B was disembarked at the port of

Together, they worked on

La Guaira, known colloquially and

the massive importation of cars

rather aptly as the entrance door

into Venezuela with special atten-

to South America.

tion to the Ford Model-T, which by

Interestingly, the only available photo of the Cadillac in question

The legendary Ford Model-T motor car.

1912 was clearly noticeable on the streets of many Venezuelan towns. In fact, with the help of Phelps,

was actually taken 27 years later in 1931, when the vehicle was still in very good condition.

Anzola trained on the functioning and maintenance of

The picture was found only lately and has helped rein-

the Model-T at the iconic Ford plant in Michigan, today a

force the veracity of Venezuela’s first episode of a car on

national historic landmark in the US.

OPEC bulletin 1–2/15

its territory.

40

As one of the first formal automotive technicians in

Caracas at the end of the 19th century reflected, in one

South America, in the ensuing years Anzola became a

way or another, considerable French influence. This was

respected personality in Venezuela, dabbling in various

visible in the architecture and through its artistic expres-

ventures, including the production of the first Venezuelan

sion. Already, the famous French impressionist painter,

full-length film, ‘La Dama de las Cayenas’ in 1916, which

Camille Pizarro, had made hundreds of water colours and

was directed by Enrique Zimmerman.

drawings, depicting the Euro-tropical Caracas lifestyle of

The motivation of Phelps and Anzola led to other

the 1850s; similarly, Danish marine painter, Fritz Georg

landmark developments as well. For example, in 1910,

Melbye, fashioned various coastal representations.

the Venezuelan engineer, Román Cárdenas Silva, Minister

In the book, Caracas la gentil (2005), recognized author

of Infrastructure during Gómez’s presidency, advocated

and scholar, Pedro Elías Seijas, mentions the provincial

for a comprehensive development of roads throughout

people and locals of 1899, referring to Caracas as a “tiny

the national territory.

tropical Paris, the small town of 90,000 inhabitants, which was the metropolis of Venezuela.”

It turned out to be more than just an infrastructure initiative. Cárdenas’ plan involved a series of daring fiscal

policies that would have positive ramifica-

called sulphur. The vulcanization process, up to the pres-

tions within the national administration and

ent day, has had a profound impact on a variety of mod-

specifically in facilitating growth in specific areas of the automotive industry, such as in rubber and tyres.

ern industrial tasks. The Good Year Tyre and Rubber Company initialized

In 1911, a rather novel resolution was passed

activities serving the production of tyres for bicycles and

exempting vehicles with rubber tyres from paying taxes.

carriages. However, in tandem with the oil boom, which

The decree included an instruction for each state in the

sparked growth in distinct areas internationally, includ-

country to build properly-paved roads, in pursuit of an

ing automobile production, Venezuela found itself par-

overall plan to install a transportation system based on

ticipating in the whole global process.

the use of rubber tyres.

Apart from Petrolia del Táchira, probably best known

Over time, Cárdenas has been considered by some

as the first oil company in Venezuela, another emblematic

Venezuelan academics as being a policymaker that, with

firm also made history in the country before the oil major,

his ground-breaking ideas, effectively influenced eco-

Royal Dutch-Shell, arrived. That was the NY & Bermúdez

nomic growth in the country. Referred to by some as the

Company (1885–1934).

“wizard of public finance”, he knew how to overcome

This entity’s operations covered the exploitation

the classic fluctuations of the Venezuelan economy by

of Venezuela’s ‘Guanoco Lake’, a natural phenomenon

adhering to three simple rules — cost-reduction, income

and one of the world’s biggest ‘pitch’ lakes, or deposits

diversification, and reserving surpluses.

of asphalt. It also became involved in the proper condi-

His vision literally helped to pave the roads of

tioning of oil towers and the training of qualified labour

Venezuela so that modern wheels could roll efficiently,

forces. And all this was occurring from a location that

an example that was closely followed by other countries

made trading with crucial septentrional cities faster and

in the 20th century.

more efficient. Through this company’s operations, the start of con-

The good years in the past and the good years ahead

cessions between Venezuela and countries like the US,

It has been said that the history of the modern tyre began

country responsible for paving the streets of Paris, New

in what the Romans called Caledonia — today Scotland.

York, Amsterdam and London.

France and England not only enabled Venezuela to pay its debts, but provided the possibility of becoming the

A tyre (flexible rubber) in the context of vehicle function-

What followed was a remark-

ality is a pneumatic — that is to say air held under pres-

able alliance of countries bent

sure inside the tyre.

on developing roads, vehicles

In 1846, the young entrepreneur, William Thompson,

Tyres today use materials that show great strength and durability.

and pneumatic tyres.

patented the pneumatic tyre with an inner tube (nowa-

Struggling primarily with the lack of a suitable raw

Goodyear plant in Venezuela launched

material, the Thompson pneumatic tyre did not fully work

In May 1955, in the Venezuelan

commercially until more than 30 years after the first pro-

industrial city of Valencia, the

totypes when another Gaelic, John Boyd Dunlop, applied

construction of a Goodyear

the idea of air under pressure in a practical inflatable tyre

plant was launched. One year

for bicycles. This was commercialized in 1888.

later, the factory’s workers cel-

Ten years later, the inventor, Frank Seiberling, was in

Shutterstock

sion seal with the rim of the wheel).

ebrated the production of the

the process of founding the Goodyear Tyre and Rubber

country’s first pneumatic tyre. It

Company, in Akron, Ohio. The company’s name was cho-

was part of a first consignment of 100 units named the

sen, among other things, to honour the chemist, Charles

‘Cacique Súper Cushion’ (the word cacique, in the pre-Co-

Goodyear, who in the 19th century experimented and

lumbian Taíno language, means a leader characterized

established the vulcanization process, which involved

by strength).

converting polymers and natural rubber in materials with

By 1962, Goodyear Venezuela had attained the one

great durability through the use of a multivalent mineral

million mark of pneumatics sold, not only for domestic

OPEC bulletin 1–2/15

days pneumatic tyres are designed to shape a compres-

41

Spotlight

needs, but also for the international market, including exports to By this stage, the human resources employed at the plant had started to expand into a qualified labour force, dealing with wheels — objects that at first sight appear to be simple, but in reality are an essential product that require precision and quality. Hence, the workforce needed to be skilled, professional and totally committed Obviously, rubber is the main raw material used to create a pneumatic tyre, but nowadays this can be synthetic or natural.

Among them was Carlos Hernández — the first and only candidate selected from the Venezuelan plant. As a member of the factory’s Quality and Technology in maintaining consumers’ level of preference for the pneumatics produced by Goodyear in the country. The plant at Valencia is today renowned for offering products of

Hevea Brasiliensis. On the other hand, liquid synthetic rubber is

excellent quality, in a process that has managed to overcome the

produced from the polymers found in crude oil, yet another valua-

challenging economic dynamics familiar to the region. At the same time, the factory has set important benchmarks in

Another important component for making tyres is carbon black.

various areas. It remains one of the most significant businesses with

When natural gas or crude oil is burned with specific amounts of

a high EBIT (Earnings Before Interest and Taxes). And it has achieved

oxygen, carbon black is obtained as a soft powder.

historical national and regional results within Occupational Safety

Obviously, sulphur, other chemical components and acute pro-

and Health Administration (OSHA) parameters.

cedures are also needed and all combine to play a key role in the

And since 2012, engineer, Maria Luis, has been Goodyear’s

manufacture of pneumatic tyres. Today, even steel is common as

President in Venezuela, the first woman to hold this particular posi-

part of the materials used to strengthen the walls of tyres, making

tion out of all the company’s plants worldwide. The Global BCM programme was initiated by Marcelo Toscani,

them safer. Also today, advanced software is used for different purposes

Vice President for Global Manufacturing, and Greg Smith, Senior

like simulating the potential design of tyres, as well as

Vice President for Global Operations, who were tasked with

determining the consequences of using rubber

the responsibility of determining the future direction of the

with certain characteristics. The use

company and how that could be best attained with the person-

of computers offers the chance to

nel at hand.

visualize possible limitations

The significance of this vision is that it focuses on the impor-

in a given prototype before it

tance of individuals’ performance and know-how, and not solely

is assembled, hence, saving

on technology and the raw materials available to make good tyres.

resources.

The key question for management is to consider whether the

Having mentioned differ-

human resources employed are sufficiently ‘motivated’ and in the

ent aspects and meaningful anecdotes

necessary ‘quantities’ to keep the business running at an optimum



connected with the evolution of cars, with particular focus on Venezuela, the question as to how or what is required to make a product successful finally emerges.

level. Today, certain sectors — the oil sector included — are facing the challenge of overcoming acute shortages of skilled manpower.

For distance and effect, the wheel is here to stay, but beyond

In this sense, it might be that initiatives such as the Global BCM

its impact as a product essential to the transportation sector, as

can be of use in procuring insights on how best to progress busi-

is the case with fuel, in the specific case of Goodyear a great deal

nesses, such as the oil industry.

of its success rests on the assessment of its leadership.

After all, there is a level of dependency between these two

Of the different training courses implemented by the com-

areas. The BCM programme emphasizes a common set of compe-

pany for its employees, one is of special interest. It is a new

tencies aimed at inciting growth. It seeks to positively influence

development programme called Global B (Business) C (Centre)

workers, instilling correct procedures for optimization and prac-

M (Manager), which is based on the premise that the next gen-

tices on ‘real-life projects’, leading to realistic scenarios.

eration of manufacturing at Goodyear will rely on leadership development. OPEC bulletin 1–2/15

tion in Goodyear plants across four global regions.

Natural rubber is found as a whitish liquid in the rubber tree, or

ble use of the multi-purpose raw product.

42

out of thousands of employees for their good professional direc-

Department (QTECH), Carlos Hernández has to work with the team

to safety.

Oil-derived carbon black, is an important component for making tyres

In Akron, Ohio, in February this year, this special programme was initiated with 25 individuals, both men and women, selected

the US.

In this regard, Global BCM selects outstanding employees working in the organization to consolidate their knowledge in a variety of areas concerning the pneumatic tyre industry.

These efforts aspire to consolidate motivation among Goodyear leaders in both the lines of management pursued and in each simple piece of action made within the corporation. As manifested by Chief Executive Officer, Rich Kramer, in one of the sessions: “Do your absolute best job in your current role

Pia Roman

Pictured left are (l–r): Alexander Vreman, representing Germany; Thomas Doss and Ahmad Warraich, both representing the US; Carlos Hernández, representing Venezuela; Serdar Bakirci, representing Turkey; and John Xu representing China.

and the future will take care of itself.” The Global BCM

oil production will be central to the sector for the fore-

development programme has held its second meeting in

seeable future.

Goodyear’s Pulandian factory, in eastern China. Two more

As Carlos Hernández sees it, when it comes to effi-

important gatherings are planned to take place this year.

ciency, “electric cars without high performance tyres will only be auto show cars. The tyre industry is one of the

Global energy needs increasing

most important partners in this journey.” An efficient tyre

As a consequence of the current challenges, 2015 is

the consumption of its fuel is lower.

produces less friction while the car is in motion; therefore

a year that will most probably require great awareness

Whatever the case — electric or internal combus-

and talent in the management of crude oil and its deriv-

tion — an oil industry running to capacity is needed for

atives. Geopolitics is evolving and the energy needs of

both options as most raw materials for car components,

the global population, especially in the developing world,

including, of course, the synthetic tyre, originate from

are increasing.

crude.

The question remains as to whether oil futures prices

The oil industry is the winner on both counts.

will once again reflect the fundamentals of physical sup-

Unfortunately, it does not end there. Due to the fragility

ply and demand, or if they will continue to be driven by

of the global economy, optimization, cooperation, good

hype and speculation, borne out of financial motivation

management and qualified professionals are all required

and gain.

in abundance to deal with the challenges that both the

While oil market volatility is mitigated, the good thing is that countries like Venezuela are producing oil

oil and automobile industries face today and in the years to come.

at steady and reliable rates, cars are continuing to be

But returning to the wheel and tyre, one cannot

produced and run in ever-increasing numbers on all con-

imagine where the world would be today without these

tinents, while the rubber tyre is being manufactured to

two vital commodities, Even visiting a children’s play-

an ever-increasing standard and quality, with safety and

ground in any part of the world, who hasn’t seen a sim-

durability key to the process.

ple, yet effective, swing fashioned out of an old rubber

All studies point to the fact that vehicle transporta-

tyre?

tion will continue to rely heavily on oil as a fuel now and

And who would have thought back in those days in

in the years ahead. There has been the growing notion

Mesopotamia that the wheel and later its most efficient

that, due to policy support from a number of consuming

outer covering would become great symbols of change,

countries, biofuels will contribute its share to powering

progress and leadership? For Venezuela, already with the

vehicle transportation. But the cost of this option, as well

accolade of being one of the Founding Members of OPEC

as other obstacles, most probably means that any signifi-

and a leading global oil supplier, its participation and

cant contribution to the transport sector from this source

drive in the transportation revolution will forever stand

will not happen for many years.

the test of time.

in the use of alternative sources of energy for transport,

OPEC bulletin 1–2/15

It means that, barring the hypothetical case of a rise

43

S epc o t i oi n e ae d in n gt Ap n tH m

Venezuela appoints new Minister of Petroleum and Mining

Eng Asdrubal Chavez J (pictured)



has been appointed Venezuela’s

was assigned to the company,

new Minister of Popular Power of

Bitumenes del Orinoco, SA (BITOR)

Petroleum and Mining, succeeding

as Human Resources Manager,

Rafael Ramirez.

where he led the restructuring of the PDVSA affiliate.

A Chemical Engineer, he completed his studies at Universidad



de Los Andes, Merida State,

Assistant to the Board of Directors

Venezuela, in 1979.

at BITOR and was subsequently Reuters

his career in the Venezuelan oil industry, employed as a Start-up

El Palito Refinery.

In August 2003, he was named

Executive Director of Human

Engineer at the country’s El Palito Refinery in Carabobo State, working on the plant’s Expansion

Resources at PDVSA. In March the following year, he also assumed

Project (ELPAEX).

the responsibilities of Executive Director of Commerce and Supply

Chavez went on to hold various positions in the areas of Industrial Services, Distillation and Specialties, Conversion and Treatment, Crude and Products Movement, Programming and Economics, as well as Process Engineering.

at PDVSA and headed the company’s bargaining team for the Oil Industry Collective Bargaining Agreement 2004–06. In January 2005, Chavez became Director of CITGO and a PDVSA representative to various affiliates and joint ventures.

In 1989, he was assigned to the company, UOP, in the United

He was appointed Vice President of Refining, Commerce and

States, where he worked on processes specialization. The following

Supply at PDVSA in May 2007 and in December 2009 was named

year, he led the Expansion Project of the Crude and Vacuum Units

Deputy Minister of Petrochemistry.

at the El Palito Refinery. In 1993, Chavez was appointed Superintendent of Process Engineering at the plant and the following year led the Comprehensive Study Team for the organization of the refinery. From 1995 to1999, he held various supervisory and managerial positions at the plant. In 2000, Chavez was assigned to the Office of the President of the national oil company, Petroleos de Venezeuela SA (PDVSA). OPEC bulletin 1–2/15

In 2002, Chavez was named

appointed General Manager of the

In that same year he began

44

The following year he

Additionally, Chavez has held positions as President and Director at various PDVSA affiliates in Venezuela and abroad. In June 2013, he was appointed Executive Secretary of Petrocaribe and in January the following year he was ratified under Presidential Decree No 739, as Deputy Minister of Refining and Petrochemistry. In September 2014, Chavez was named Minister of Popular Power of Petroleum and Mining.

He was at first involved in the restructuring of the Ministry of

In early January 2015, he was appointed head of the Oil

Production and Commerce and then took part in the Process of

and Energy Unit of the High Command for Economic Recovery by

Economic Constituent.

Venezuelan President, Nicolas Maduro Moros.

Obituary

In memoriam: Garry J Brennand

OPEC Secretariat loses true professional, mentor and friend By Mario Alvino Fantini

Last month, the OPEC Secretariat in Vienna lost just such a per-

economics — and his facility with numbers — were of obvious use to

son — someone who was a consummate professional, as well as a

him there. And Garry eventually became a Senior Research Analyst

friend and mentor to those around him, and, above all, a devoted

in the Energy Studies Department. He spent the rest of his career

family man: Garry John Brennand.

there, becoming one of its most respected team members.

A British national, Garry was born in London in 1959. He studied

But it was Garry’s quick grasp of the changing complexities of

economics at the University of York in the United Kingdom and then

the energy industry that made him admired and respected within

went on to receive a Master’s degree in economics from McMaster

the Secretariat. One of his colleagues, Dr Jan Ban, also a Senior

University in Canada.

Research Analyst in the Energy Studies Department, underscores

He began working at the OPEC Secretariat in February 1986

this fact: “One thing I was amazed by and admired in Garry was

as a Statistician in the Data Services Department. His training in

how swiftly — I would say almost instantly — he was able to speak

OPEC bulletin 1–2/15

In life, one of the greatest challenges seems to be finding good role models — people who embody principles and values worth emulating. This is true whether one looks at family life, one’s social environment or one’s place of employment. And finding someone who can be a good role model in each and every one of those environments is particularly difficult.

45

Obituary

about various topics and react with a good understanding on the

model, making it an essential tool for the Secretariat’s analytical

spot.”

work.

Ban illustrates this by recalling a visit by a high-level delegation

But Garry was also humble about the model and was always

from Japan. He says he was in the middle of giving a presentation,

quick to point out the limitations of relying too much on mod-

just turning to the kinds of topics that Garry would typically cover,

els. “There is a phrase of Garry’s that I like to repeat,” says Ban.

when to the great surprise of both he and Garry, the Department’s

“Whenever he was talking about models and the issues involved

supervisor suddenly asked Garry to continue with the remainder of

… he used to say: ‘That’s true; but remember that half of the model

the presentation. Ban smiles as he explains that even though Garry

is here [pointing to his head]’.” This was his way of saying that the

had absolutely no idea what was on the slides, he went along with

model was just a reflection of his understanding of how things work

the request — and proceeded to give what turned out to be a fabu-

in the energy markets. “It is not the model that tells you how it will

lous presentation. “Garry managed it in a way that no one realized

be; it is me telling the model how it will work,” Ban explains.

what had happened,” Ban says with a chuckle. “He was really very bright.” With an interest in international affairs, as well as the energy

19, several people spoke fondly of the many different ways that

industry, Garry’s appointment at the Secretariat provided him with

he touched their lives – both in and out of the office environment.

many opportunities to successfully combine his interests and his

For, above all, Garry had extremely admirable human qualities for

academic training. He seemed made for this kind of work. But few

which others will always remember him. As Dr Omar Abdul-Hamid,

expected that his contributions to the Organization would go far

Director of OPEC’s Research Division, said in his eulogy: “… it was

beyond the economic, the technical, or the quotidian. Over time,

perhaps in terms of his character and personality – his qualities

Garry became, as others have said, one of those people one sought

as a human being – that Garry really stood out.”

out for advice — to bounce ideas off, to commiserate, or to simply share a laugh.

said: “Garry and I worked for more than 20 years at OPEC … and

Energy Studies Department, says that “one of the first things that

often gave each other words of encouragement when times were

comes to mind [when I think about Garry] was how much we gave

not easy. There were times when Garry noticed that I was not my

each other mutual support. I can’t even begin to tell you how much

normal self. He would come into my office, ask if there was some-

he supported me work-wise and privately. It was nice to have some-

thing he could help with — and at the same time crack a few jokes

one that I could talk to. He was always the one who would come

to cheer me up.” This personality meant that Garry formed deep relationships

It was this combination of kindness, affability and cour-

and worked well with colleagues. It also meant that he would work

tesy, along with his professionalism and quick grasp of technical

on projects collaboratively, helpfully, patiently explaining difficult

insights, that made Garry truly an outstanding work colleague. Ms

concepts, or particularly complex market trends. Ms Rechbach

Rechbach notes that “of all the people I’ve known at the Secretariat

remembers that “he never minded explaining things. He would

he was probably the one who could sit down and get something

always take the time to explain something that was unclear — or,

done the quickest — and you’d end up with something usable.”

if I wanted to learn something from him, he would just stop what

In fact, Garry’s many work contributions were essential to much

he was doing.”

of the Research Division’s output. And, over the years, he became

And even though his specialized knowledge of the energy

a valuable contributor to a growing amount of the Organization’s

industry — and the oil market in particular — was impressive, Garry

research and analysis. With his mastery of detail and his broad

always remained approachable, willing to help others and, in the

understanding of the always dynamic energy market, Garry became

process, earning the respect of his colleagues, friends and those

someone other analysts, researchers, and officials relied on when

fortunate enough to get to know him.

confronted with market complexities, or when faced with difficult oil industry scenarios.

OPEC bulletin 1–2/15

This is perhaps one of the things most often said about Garry. In her own tribute, Marie Brearley, another longstanding colleague,

Anne Rechbach, another longstanding colleague from the

and encourage us.”

46

In the same way, it is hard not to remember the man behind the work. And at his funeral, held in the Austrian capital on January

In her eulogy, Ms Brearley noted that “Garry was like a teacher or professor to me because whenever he asked me to help him

In time, Garry also became one of the driving forces behind the

find information or material for his work, he would always explain

preparation of the annual World Oil Outlook, one of OPEC’s flag-

to me specifically what information he needed. He never gave me

ship publications, and along with this, he was the principal mod-

the impression that I wouldn’t understand the technical stuff, but

eler behind the OPEC World Energy Model (OWEM), which forms

always explained the details as a teacher would. This made my work

the backbone of much of the Secretariat’s analytical work. Garry

for him much more interesting.”

worked closely with Ban and others as he routinely tweaked the

Even when on mission, Garry never let his good nature and

enjoyment of life be forgotten. “Garry always had a sense of adven-

song — to the degree that the other bandmates apparently felt left

ture when we travelled together,” says James Griffin, a friend and

out! During one of the final songs, the George Harrison character

work colleague. “There was hard work and Garry never slacked.

— in full hippie regalia — leapt to the front of the stage, played this

But he was forever looking for something to add a bit of flavour to

intense solo, and then he looked right at me, and then gave me the

a trip,” he says.

thumbs up — only because I was sitting next to Garry! It was like he

Griffin recalls one particular trip, when both attended the 20th

was showing ‘Paul’ that he had his own fans, too.”

meeting of the World Petroleum Congress in 2011, held in Doha,

Garry had very many of his own fans and they shall all miss him

Qatar. Garry made absolutely sure there was an opportunity to get to

— on stage, at home, around the city of Vienna, and in the hall-

know the local culture and traditions a little better. “I vividly remem-

ways and meeting rooms of the Secretariat. All the people whose

ber the day out he organized at the end of the trip to Qatar,” Griffin

lives he touched and who knew him well shall remember him with

says. “We were looking to see a little bit more of the country, only

great fondness. And when they think of him, they shall remember

to find that Garry had organized us a ride on a camel (see below),

his quick smile, his dry wit, his easy manner, and all those other

followed by a tour of the scariest black runs you could ever dream

qualities that made him stand out.

of — although it wasn’t on skis. It was in a car — and half the time we were going down backwards! He loved it.”

Perhaps a recent letter from OPEC’s Secretary General, Abdalla Salem El-Badri, to the Brennand family best summarizes the sen-

Garry was also a known lover of music. He loved listening to

timents that abound at this time: “Upon receiving the devastating

the classics and he loved even more playing music. And when up

news of Garry’s sudden and unexpected passing, I am writing to

on the stage playing his guitar before an audience, his warmth

convey … on behalf of all the staff of the Secretariat and myself

and friendliness were still apparent, even as he disappeared into

personally, our most heartfelt and deepest condolences. I know

the music he loved so much. “Garry was such a likeable guy,” says

words are of little comfort at such a time, but I would like you to

Douglas Linton, one of his long-time OPEC colleagues and a long-

know that all our thoughts and prayers are with you and your fam-

time musical collaborator. “He had a real enthusiasm about life and

ily. Garry was deeply respected as a professional and colleague by

a deep love of music – particularly for the Beatles and Elton John.”

all who had the pleasure of working with him and the honour of

In fact, he recalls attending a concert with Garry. “I went with

knowing him. Garry will be most sadly missed by us all. May God

him to see a Beatles tribute concert,” recalls Linton. “I had never

rest his soul in peace and give you comfort and strength in this time

been to anything like that before and I wouldn’t have gone with any-

of great sorrow.”

one else. It was one of those concerts where they start off dressed as the Beatles in their early career and then work their way through

Garry Brennand served OPEC for 29 years and passed away tragi-

to the end, changing outfits along the way until they look like they

cally shortly after the New Year. He is survived by Caterina, his wife,

do on the cover of the album Abbey Road. Garry got us front row

and his two daughters, Jennifer and Christina, and his brother, Paul.

tickets and was really being supportive of the band. So much so,

The OPEC Secretariat shall remember his legacy of professionalism,

that the guy playing the role of ‘Paul’ stopped after one song and

kindness and humour for many, many years to come.

pointed at Garry and said: ‘Thanks mate! It is for real fans like you that we love doing this.’ Well, throughout the evening, Garry and the

Garry Brennand, pictured here at one of his many presentations at the OPEC Secretariat in Vienna, and (right) in a much lighter vein, in Qatar.

OPEC bulletin 1–2/15

would-be ‘Paul’ kept smiling and waving at each other after each

47

Secretary General’s Diary

In the course of his official duties, OPEC Secretary General, Abdalla Salem El-Badri, visits, receives and holds talks with numerous dignitaries. This section is dedicated to capturing those visits in pictures.

February 17

Dr Urban Rusnak (l), Secretary General of the Energy Charter Secretariat, visited Abdalla Salem El-Badri, OPEC Secretary General.

OPEC bulletin 1–2/15

February 18

48

Ambassador Marion Paradas, Permanent Representative at the Permanent Mission of France to the UN and the International Organizations in Vienna, visited Abdalla Salem El-Badri, OPEC Secretary General.

Visits

A group of twelve curious political science students from Kuwait

students understood; they learned a lot from this trip and their OPEC

University took a special interest in visiting the OPEC Secretariat on

participation. “What we hear in the media is focused on the political aspect …

The student trip to Vienna — supported by Kuwait’s ministry of

it is very interesting to see how different states with different political

youth— included top, mostly senior students from the faculty. The

ideologies and systems can cooperate in certain interests and make

students spent a week visiting various sites in Vienna to learn about

this successful. It is a good model. It supports the idea to leave poli-

political aspects of various international and intergovernmental

tics behind.”

organizations, according to accompanying professor Hasan Johar, who added that Vienna is known as a site for such institutions.

“We are an OPEC Member, we study about OPEC,” said Kolaud AlReshidi, one of the students in attendance. She said though the UN

“We wanted to be on site and meet people, watch activities and

and other governmental and non-governmental organizations were

decision-making, and compare it with what we learn at home,” said

interesting, “OPEC is important to us, we are a petroleum-exporting

Johar, adding that the tour is a new idea which started over a year

country”

ago. “We earlier visited the EU and EU Parliament, and last summer went to the UN in New York and Washington. “It’s an incentive for students, they need a certain grade-point average to come.” OPEC represents a special stop, he stated: “Our country was one

What was the most important thing she learned? “We thought OPEC is more political, not only a research body. We didn’t know they only do research. We thought it could help countries (politically). “It can help us with research and it’s good for us, and important for Kuwait.”

of the founder countries, and we have seen a sharp drop in oil prices

Mohammed Shafi, also a student in the group, stated that the

the past few weeks. We depend highly on oil production and this may

trip as a whole was very beneficial, expanding his knowledge of sci-

affect our budget and daily life. Therefore, it is important to know the

ence and culture, but the trip to OPEC was “absolutely more impor-

reasons behind it, the impact and changes, procedures to retain bal-

tant, because Kuwait’s economy depends solely on oil revenues.

ance and economic processes. We can learn our obligations as citizens…it is good to support our decision-makers.” Johar added that he learned very much about OPEC from the visit, gaining some in-depth information to better understand the

“Especially because the price of oil is reduced. I wanted to know why it happened, whether it is political or for other reasons,” stated Shafi, adding that now he knows that the economy and markets at large play the biggest role, not politics.

production of oil, cooperation between the Gulf region and Europe,

“I got a positive feeling today. I had no idea how OPEC countries

mutual security, the world’s dependence on oil, statistical analy-

and other countries work together in tandem, now I know how it is

sis, supply and demand. “It was very beneficial for myself, also the

done, especially the call on OPEC (oil).”

OPEC bulletin 1–2/15

January 15.

Briefings

Students and professional groups wanting to know more about OPEC visit the Secretariat regularly, in order to receive briefings from the Public Relations and Information Department (PRID). In some cases, PRID visits schools to give them presentations on the Organization and the oil industry. Here we feature some snapshots of such visits.

49

Briefings A group of students from the University of Debrecen, Hungary, visited the OPEC Secretariat on November 28, 2014.

Students from the European Acadamy Bavaria, Munich, Germany, visited the OPEC Secretariat on December 1, 2014.

OPEC bulletin 1–2/15

Faculty of International Relations, University of Economics in Bratislava, Slovakia, December 1, 2014.

50

Students from Latinomics, visited the OPEC Secretariat on December 2, 2014.

Students from the University of Economics and Business in Vienna, Austria, visited the OPEC Secretariat on December 3, 2014.

Youth cadets of the Federal Armed Forces in Bad Reichenhall, Germany, visited the OPEC Secretariat on December 4, 2014.

Students of the Lycée Jeanne d’Arc, Nancy, France, visited the OPEC Secretariat on December 17, 2014.

A group of students from universities in Costa Rica, visited the OPEC Secretariat on January 12, 2015.

51

OFID’s Al-Herbish honoured by City of Vienna The Director-General of the OPEC Fund for International

one of the richest countries in Europe — that we have a

Development (OFID), Suleiman J Al-Herbish, has been

commitment to join these efforts to reach the Millennium

honoured by the City of Vienna in recognition of his con-

Development Goals,” stated Rathkolb.

tribution to the Austrian capital.

He also spoke of OFID’s contribution of over 50 grants

The award — the Grand Decoration in Gold for the

that helped support the activities of Austrian non-govern-

Meritorious Service to the Province of Vienna — is one

mental organizations (NGOs) and other entities that were

of the highest decorations of the City and Province of

working both at home and in the developing world.

Vienna, as well as of Austria.

“Director-General Al-Herbish is a very distinguished

It was presented to Al-Herbish by Magister Renate

friend of the City and Province of Vienna and an out-

Brauner, Vice Mayor of Vienna, on behalf of Mayor Dr

standing chief executive officer of OFID. He has trans-

Michael Häupl.

formed this institution since 2003 into a leading actor

The ceremony was attended by Al-Herbish’s close

in the global SE4ALL initiative,” said Rathkolb, adding

family members, OFID’s management, ambassadors and

that Vienna would continue providing an inspiring, wel-

the media.

coming and friendly base for OFID’s important global

Other dignitaries present included Li Yong, Director-

operations.

General of the United Nations Industrial Development Organization (UNIDO), Dr Pavel Kabat, Director-General of the International Institute for Applied Systems Analysis (IIASA), and Dr Kandeh Yumkella, Chief Executive Officer

Accepting the award on behalf of OFID’s colleagues, his

of Sustainable Energy for All (SE4ALL).

family and OFID Member Countries and Partner Countries,

In her remarks on the occasion, Ms Brauner praised

Al-Herbish thanked his hosts and spoke of the special rela-

Al-Herbish for his professional accomplishments which

tionship that existed between OFID and Vienna, home to

reflected his close relationship with the City of Vienna.

the institution since its establishment in 1976.

“The city is very grateful to OFID for its involvement in social and cultural activities,” she affirmed

OPEC bulletin 1–2/15

In his citation, Dr Oliver Rathkolb, prominent Austrian

52

Special relationship

He paid special tribute to the former Austrian Chancellor, Bruno Kreisky, for his wisdom and foresight in inviting OPEC to have its headquarters in Vienna.

historian and professor for contemporary history at the

Al-Herbish revealed that during his tenure as Director-

University of Vienna, lauded OFID for its great aspiration

General of OFID, he had received 11 awards, including

and overarching objective to alleviate poverty.

one from the Republic of Austria. “But this latest award

He praised Al-Herbish for his unflagging energy and

holds a very special place in my heart because it comes

wisdom in the development of concrete strategies for

from the city that I love dearly. Ich bin ein Wiener,” he

sustainable development in developing countries.

proclaimed.

“Mr Al-Herbish and other key decision-makers in the

Al-Herbish also paid tribute to King Abdullah Bin

international community remind us here in Austria — today

Abdulaziz Al-Saud who passed away in January. He

OFID

OPEC Fund for International Development (OFID)

Magister Renate Brauner, Vice Mayor of Vienna, on behalf of Mayor Dr Michael Häupl, presented the Grand Decoration in Gold for the Meritorious Service to the Province of Vienna to the Director-General of OFID, Suleiman J Al-Herbish.

recognized the role and contribution of the late King

As a token of his appreciation, the Director-General

towards making Vienna the hub of energy. It was

presented two books to the Mayor of Vienna through

King Abdullah who hosted the Third Summit of OPEC

Ms Brauner. One was the history of Vienna’s famous

Sovereigns and Heads of State in November 2007, in

Deutschmeister Palais — the institution’s headquarters

which the eradication of energy poverty became an objec-

for over 30 years — which was published as a gift from

tive for their aid institutions, including OFID.

OFID to the people and City of Vienna. The other was

He noted that, in June 2008, King Abdullah kept the

the recently-published Energy: the Key for Sustainable

issue of energy poverty eradication at the fore, with the

Development, which contains a collection of the Director-

proclamation of the Energy for the Poor Initiative, which

General’s speeches delivered throughout OFID’s cam-

ever since became OFID’s flagship programme, and was

paign towards energy poverty eradication

in Vienna.

Al-Herbish, a Saudi national, and a former Governor of OPEC, has been at the head of OFID since November

Al-Herbish said he believed OFID, OPEC and the

2003. Since assuming office, he has steered OFID through

King Abdullah Bin Abdulaziz International Centre for

a comprehensive process of institutional transformation,

Interreligious and Intercultural Dialogue would continue

with the aim of making its work more relevant, efficient

to be hosted by the City of Vienna.

and visible.

OPEC bulletin 1–2/15

also behind the SE4ALL Initiative which has its Secretariat

53

OFID-backed aluminium plant to help transform Mozambique The OPEC Fund for International Development (OFID)’s first private sector investment in Mozambique — a greenfield aluminium manufacturing plant — is poised to add a new dimension to the country’s mineral industry, bringing with it a host of opportunities for job seekers, local businesses and the ailing electricity sector.

Part of the larger Midal Group, which has similar opera-

their manufacturing industries and move up the pro-

tions in Bahrain, Australia, Saudi Arabia and Turkey, the

duction ladder.

OFID-sponsored Midal Mozambique aluminium plant is in the final stages of commissioning and expected to come on line before the end of this year.

“OFID’s $12 million loan to Midal is further evidence of our commitment to this goal,” he pointed out. Located on the outskirts of Maputo, the new plant

With an installed annual capacity of 50,000 tons, the

is expected to have a high developmental impact in this

plant will produce aluminium rods, wires and conductors

post-conflict country, which over the past decade has

for use in electricity transmission and distribution. It will be

emerged as one of Africa’s leading economies.

the sole aluminium rod manufacturer in sub-Saharan Africa.

Structural reforms and sound economic management

The plant will be supplied with aluminium ingots

have triggered a boom in foreign investment, led by the

by the adjacent Mozal smelter, making it the first local

Mozal smelter which was the first major foreign invest-

downstream manufacturing operation to add value to

ment in the country following the civil war.

Mozambique’s already profitable aluminium production.

In recent years, Mozambique has become a world-

Until now, the 580,000 tons of aluminium produced

class destination for mining and natural gas development.

annually by Mozal has been exported.

Despite these achievements and the wealth of natural

OPEC bulletin 1–2/15

resources, the country still faces multiple challenges in

54

Developing manufacturing

terms of poverty reduction and sustainable development.

Commenting on OFID’s financial support for countries

plant are the positive foreign exchange implications.

Among the many spin-offs expected from the new

such as Mozambique, the Vienna-based institution’s

The move from raw materials to manufactured goods

Director-General, Suleiman J Al-Herbish, said that as a

will generate significant export revenues and help replace

development organization, OFID is acutely aware of the

products previously imported from South Asia and the

importance of helping its partner countries to develop

Pacific.

OPEC Fund for International Development (OFID)

Finished aluminium products have traditionally been a significant cost burden for the construction industry and

accounting and transportation were just some of the services so far commissioned to local providers. In terms of job creation, Al Zayani indicated that the

the national electricity company, EDM. The factory’s establishment is considered particularly timely, as demand for aluminium conductors is projected to grow significantly, due to increased investment in energy infrastructure in South Africa and across the sub-region. The project will also have a meaningful

new facility would employ over 100 Mozambicans directly in the factory. “Indirectly, however, we expect to generate four to five times that number,” he added. Midal has already trained a team of Mozambicans at its parent company in Bahrain to enable them to run the

impact at the micro level.

operations at the new plant. Midal is also keen to use its expertise to help address

Localization a priority

some of Mozambique’s electricity challenges and, accord-

“Priority has been given to localization at every stage

ing to Al Zayani, is already engaged in discussions on

of project implementation,” explained Midal Chairman,

ways to reduce transmission losses by using more effi-

Hamid Al Zayani, revealing that architectural, construction,

cient materials.

Mozambique at a glance Area: Population:

801,590 sq km 26 million

GNI per capita: $510

• Over the last decade, Mozambique has posted one of the highest real GDP growth rates in the world, averaging eight per cent a year. • Its 2,470km long coastline positions it as a natural gateway to global markets for neighbouring landlocked countries. • Its coastal waters are rich in prawns, one of the country’s leading exports. • Natural gas reserves discovered in 2012 are estimated to be the fourth-largest in the world. • Mozambique plays a significant role in the global production of minerals, in particular ilmenite, zircon and aluminium.

• The country was the world’s leading producer of ruby in 2012.

OPEC bulletin 1–2/15

• In 2012, aluminium accounted for 31.5 per cent of the country’s national exports.

55

Noticeboard

Forthcoming events Nigeria oil and gas 2015, March 16, 2015, Abuja, Nigeria. Details: CWC Associates Ltd, Regent House, Oyster Wharf, 16–18 Lombard Road, London SW11 3RF, UK. Tel: +44 207 978 000; fax: +44 207 978 0099; e-mail: [email protected]; website: www.cwcnog.com.

8th annual European gas transport and storage summit, March 23–24, 2015, Munich, Germany. Details: World Trade Group, 90 Union Street, London SE1 0NW, UK. Tel: +44 207 202 7500; fax: +44 207 202 7600; e-mail: [email protected]; website: www.gtsevent.com.

Nigeria power 2015, March 16, 2015, Abuja, Nigeria. Details: CWC Associates Ltd, Regent House, Oyster Wharf, 16–18 Lombard Road, London SW11 3RF, UK. Tel: +44 207 978 000; fax: +44 207 978 0099; e-mail: [email protected]; website: www. nigeria-power.com.

9th international Fujairah bunkering and fuel oil forum, March 23–25, 2015, Fujairah, UAE. Details: Conference Connection Administrators Pte Ltd, 105 Cecil Street #07–02, The Octagon, 069534 Singapore. Tel: +65 6222 0230; fax: +65 6222 0121; e-mail: [email protected]; website: www.fujcon.com.

Oman refining and petrochemical exhibition and conference 2015, March 16–18, 2015, Muscat, Oman. Details: Omanexpo LLC, 1st Floor, SABCO Building, Wattayah, Muscat, Sultanate of Oman. Tel: +968 24 66 01 24, 99 10 21 07; e-mail: [email protected]; website: www.downstreamoman.com.

Oil and gas mobility Europe, March 23–25, 2015, London, UK. Details: IQPC Ltd, Anchor House, 15–19 Britten Street, London SW3 3QL, UK. Tel: +44 207 368 9300; fax: +44 207 368 9301; e-mail: enquire@iqpc. co.uk; website: www.oilandgasmobilitysummit.com.

Oil and gas industry supply chain 2015, March 17, 2015, Moscow, Russia. Details: NGK. Tel: +495 514 58 56, 514 44 68; fax: +495 788 72 79; e-mail: [email protected]; website: www.n-g-k.biz/?page=meropr47. OSV and subsea vessels North America conference, March 17–18, 2015, Houston, USA. Details: IBC Global Conferences, The Bookings Department, Informa UK Ltd, PO Box 406, West Byfleet KT14 6WL UK. Tel: +44 207 017 55 18; fax: +44 207 017 47 15; e-mail: energycustserv@ informa.com; website: www.informamaritimeevents.com. Russia-Asia energy summit, March 17–18, 2015, Singapore. Details: Adam Smith Conferences, 6th Floor, 29 Bressenden Place, London SW1E 5DR, UK. Tel: +44 207 017 7444; fax: +44 207 017 7447; e-mail: info@ adamsmithconferences.com; website: www.russia-asia-energy.com. 7th annual decommissioning and abandonment summit, March 17–19, Houston, USA. Details: DecomWorld, 7–9 Fashion Street, E1 6PX London, UK. Tel: +44 20 74 22 43 41; e-mail: pchadney@decomworld. com; website: www.decomworld.com/decommissioning. 2nd China international NG/CNG/LNG distribution conference, March 18–19, 2015, Beijing, PR of China. Details: The Oriental ProEnergy Consulting Organization (Topco), Zhujiang Dijing, No 28, Guangqu Rd, Chaoyang Dist, Beijing, PR of China. Tel: +8610 58 63 43 46; fax: +8610 58 63 22 91; e-mail: [email protected]; website: www. chinagasdistribution.com.

OPEC bulletin 1–2/15

Argus-ElitePlus India oil and gas summit 2015, March 18–19, 2015, New Delhi, India. Details: Argus Media Singapore Group, 50 Raffles Place, #10-01 Singapore Land Tower, Singapore 048623. Tel: +65 6496 9966; fax: +65 6533 4181; e-mail: [email protected]; website: www.argusmedia.com/aeiog.

56

Power grid resilience, March 23–25, 2015, Washington DC, USA. Details: IQPC Ltd, Anchor House, 15–19 Britten Street, London SW3 3QL, UK. Tel: +44 207 368 9300; fax: +44 207 368 9301; e-mail: enquire@ iqpc.co.uk; website: www.powergridresilience.com. 2nd offshore safety and risk forum, March 24–25, 2015, Stavanger, Norway. Details: Fleming Gulf Conferences, Dubai Airport Free Zone, PO Box 54772, Dubai, UAE. Tel: +971 4 60 91 555; fax: +971 4 60 91 589; e-mail: [email protected]; website: www.fleminggulf.com. Energy efficiency world Africa 2015, March 24–25, 2015, Johannesburg, South Africa. Details: Terrapinn Holdings Ltd, First Floor, Modular Place, Turnberry Office Park, 48 Grosvenor Road, Bryanston 2021, South Africa. Tel: +27 11 516 4000; fax: +27 11 463 6000; e-mail: [email protected]; website: www.terrapinn.com. The solar show Africa 2015, March 24–25, 2015, Johannesburg, South Africa. Details: Terrapinn Holdings Ltd, First Floor, Modular Place, Turnberry Office Park, 48 Grosvenor Road, Bryanston 2021, South Africa. Tel: +27 11 516 4000; fax: +27 11 463 6000; e-mail: [email protected]; website: www.terrapinn.com. Interspill, March 24–26, 2015, Amsterdam, The Netherlands. Details: Reed Exhibitions Limited (UK), Gateway House, 28 The Quadrant, Richmond, Surrey TW9 1DN, UK. Tel: +44 208 27 12 134; fax: +44 208 91 07 823; e-mail:[email protected]; website: www.reedexpo.com. World heavy oil congress, March 24–26, 2015, Edmonton, Canada. Details: Details: dmg :: events, 6th floor, Northcliffe House, 2 Derry Street, London W8 5TT, UK. Tel: +44 20 3615 2873; fax: +44 20 3615 0679; e-mail: [email protected]; website: www.worldheavyoilcogress.com.

Turkish international oil and gas conference, March 18–19, 2015, Ankara, Turkey. Details: ITE Group plc, Oil and Gas Division, 105 Salusbury Road, London NW6 6RG, UK. Tel: +44 207 596 5233; fax: +44 207 596 5106; e-mail: [email protected]; www.turoge.com.

China-Russia oil and gas 2015, March 25–26, 2015, Beijing, PR of China. Argus Media Singapore Group, 50 Raffles Place, #10-01 Singapore Land Tower, Singapore 048623. Tel: +65 64 96 99 66; fax: +65 65 33 41 81; e-mail: [email protected]; website: www.argusmedia.com/crc.

3rd China small-mid scale LNG world forum, March 19, 2015, Beijing, PR of China. Details: The Oriental Pro-Energy Consulting Organization (Topco), Zhujiang Dijing, No 28, Guangqu Rd, Chaoyang Dist, Beijing, PR of China. Tel: +8610 58 63 43 46; fax: +8610 58 63 22 91; e-mail: [email protected]; website: www.chinasmlng.com.

Georgian international oil, gas, energy and infrastructure conference and showcase, March 25–26, 2015, Tbilisi, Georgia. Details: ITE Group plc, Oil and Gas Division, 105 Salusbury Road, London NW6 6RG, UK. Tel: +44 207 596 5233; fax: +44 207 596 5106; e-mail: [email protected]; website: www.giogie.com.

ly Oil M a r ke t Repo rt 15 Janu

ary 201

January 2015 The monetary policies of the world’s developed economies have been an influential driver of commodity markets since the onset of the global economic recession in 2009, according to the OPEC Secretariat in Vienna. The Organization’s Monthly Oil Market Report (MOMR) for January said that the extraordinary monetary stimulus measures taken have increased monetary supply significantly, affecting commodity markets through three channels. Firstly, it said, low yields in developed economies had led to increased capital flows into emerging and, to some extent, developing economies. “This supported higher GDP growth in these countries and increased demand for commodities.” Secondly, said the MOMR’s feature article, the low interest rate environment allowed for considerable investments to expand commodity production. Finally, it said, inexpensive funding and concerns about higher inflation led to increased speculative and hedging investment flows into commodity markets, particularly in oil and gold. The publication maintained that these measures supported commodity markets up to around the first half of 2013, after which they were negatively impacted by expectations of a tapering by the United States central bank, in combination with excess supply, decelerating inflation, and sluggish growth in the emerging economies.

“In contrast to other commodity markets, the oil market remained relatively stable up to the middle of last year, when it followed the downward trend of other growth-sensitive commodities, such as industrial metals.” The MOMR pointed out that the policies of major central banks will remain an important factor to monitor in the current year. An expected interest rate rise by the Fed by the end of the first half and contrary policies by the European Central Bank (ECB) and the Bank of Japan (BoJ) will continue to impact global economic growth. “Given the inflation-dampening effect of the sharp decline in oil prices, central banks may have more flexibility in keeping or increasing interest rates and for pursuing other monetary policies,” affirmed the report. It said that in the case of the ECB, more accommodative policies may have to be adopted in the face of deflationary pressure. “These differing policies have already had a substantial effect on currency markets and thus impacted oil markets.” The MOMR said the strong appreciation of the US dollar was one of the factors behind the recent decline in oil prices; however, the depreciation of the euro, the yen and some emerging market currencies has so far limited the positive impact on oil demand. Furthermore, it said, an increase in US interest rates would make borrowing costs

5

Monetar y policie Fea s and th eir impa ture artic le ct on th e oil mar : ket Oil mar ket high lights 1 Feature ar ticle Crude oi 3 l price m ovemen ts Commod 5 ity mar kets 12 World ec onomy 17 World oi l deman d 37 Produc World oi t marke l supply ts and re 45 finery op erations 63 Tanker market 70 Oil trade 74 Stock m ovemen Balanc ts 82 e of supp ly and de mand 90

for different industries more expensive, including those for oil. The MOMR observed that in the emerging markets, China’s central bank also recently lowered key interest rates in a push to support economic growth. “With currently less inflationary pressure, this move and potentially further monetary supply measures are expected to support growth at above seven per cent, leading to rising crude oil demand.” It said that, in India, the recent decline in oil prices has provided some room for the country’s central bank to lower its interest rate, in order to support the economy, potentially leading to higher crude oil demand. “Some risk to oil demand growth in the emerging and developing economies might still come if the US central bank were to raise interest rates earlier or faster than currently anticipated, as this might lead to significant capital outflows from these countries, impacting their economic and oil demand growth. “At the same time, structural reforms in the emerging and developing economies could also impact oil demand in 2015,” it added.

Market Review



Month

OPEC bulletin 1–2/15

Monetary policies continue to impact oil demand growth

57

Market Review

MOMR oil market highlights …

The OPEC Reference Basket averaged $59.46/barrel in December 2014, following a decline of $16.11 or 21 per cent. In annual terms, the Basket averaged $96.29/b in 2014, representing a decline of $9.58 from the previous year. ICE Brent in December plunged $16.36 to stand at $63.27/b, averaging $99.45/b for the year. Nymex WTI lost $16.52 to stand at $59.29/b in December, for a yearly value of $92.97/b. The Brent-WTI spread stood at $3.98/b. World economic growth for 2014 and 2015 remains unchanged from the previous month at 3.2 per cent and 3.6 per cent, respectively. The OECD growth estimate is unchanged at 1.8 per cent for 2014, but the 2015 forecast has been revised up to 2.2 percent from 2.1 per cent. The forecasts for China and India remain unchanged at 7.2 per cent and 5.8 per cent in 2015, respectively.

OPEC bulletin 1–2/15

Global oil demand is estimated to have grown by 950,000 b/d in 2014, representing an upward revision of 20,000 b/d from the previous month. The adjustment mainly reflects better-than-expected oil demand data from OECD America and China. In 2015, world oil demand is anticipated to rise by 1.15m b/d, following an

58

upward revision of 30,000 b/d, due to expectations of higher oil requirements in OECD America and Other Asia. Non-OPEC oil supply is estimated to have grown by 1.98m b/d in 2014, following an upward revision of 260,000 b/d from the previous report, driven by higher-thanexpected growth seen at the end of the year. In 2015, non-OPEC oil supply is projected to grow by 1.28m b/d, representing a downward revision of 80,000 b/d from the previous report. Output of OPEC NGLs and non-conventional liquids is expected to average 6.03m b/d in 2015, up from 5.83m b/d in 2014. In December, OPEC crude oil production averaged 30.20m b/d, according to secondary sources, an increase of 140,000 b/d over the previous month. Product markets in the Atlantic Basin weakened in December as margins were affected by the drop in the gasoline and middle distillate cracks amid an oversupply of gasoline in the region. The Asian market experienced only a slight drop as increased distillate supplies were offset by winter seasonal demand and the positive performance at the top and bottom of the barrel.

January 2015

Freight rates for dirty tankers saw mixed movements in December. VLCCs continued to realize the gains seen since the beginning of the fourth quarter of 2014, increasing by 16 per cent from the month before. The improvements seen in VLCC freight rates came as a result of an active market and high Asian tonnage demand. Both Suezmax and Aframax saw a negative performance, declining by nine per cent and 29 per cent, respectively, on average from a month earlier. OPEC spot fixtures dropped by 9.2 per cent from the previous month to average 11.63m b/d. OECD commercial oil stocks fell in November by around 10m b to stand at 2,710m b. At this level, inventories were 20.3m b higher than the last five-year average. Crude indicated a surplus of 38.2m b, while product stocks remained 17.9m b below the five-year average. In terms of days of forward cover, OECD commercial stocks stood at 58.7 days, one day above the five-year average. Demand for OPEC crude is estimated at 29.1m b/d in 2014, representing a revision of 200,000 b/d from the last report. In 2015, required OPEC crude is projected at 28.8m b/d, following a downward adjustment of 100,000 b/d.

The feature article and oil market highlights are taken from OPEC’s Monthly Oil Market Report (MOMR) for January 2015. Published by the Secretariat’s Petroleum Studies Department, the publication may be downloaded in PDF format from our Website (www.opec.org), provided OPEC is credited as the source for any usage. The additional graphs and tables on the following pages reflect the latest data on OPEC Reference Basket and crude and oil product prices in general.

February 2015 The recent fall in international crude oil prices could spell good news for oil demand in the months ahead. According to the OPEC Secretariat, global oil demand in 2015 is currently anticipated to rise by 1.17 million barrels/day. However, its Monthly Oil Market Report (MOMR) for February points out that developments need to be monitored closely, particularly following the sharp drop in crude oil prices seen in recent months. It noted that as prices drop, oil requirements are likely to respond positively, although this can be impacted by other factors. For example, it said, in 2008, prices fell sharply starting in the summer with the onset of the financial crisis and the global economic recession, which also led to a deterioration of demand. “This time the sharp fall in prices has been mainly driven by excess supply. As a result, lower prices are likely to help to accelerate the pace of oil demand growth,” observed a feature article in the report. The publication said that other factors can also impact the degree to which any acceleration in demand takes place. In addition to economic growth, the adoption of energy policies and regulations can also influence oil requirements greatly, it said. “These factors tend to vary considerably from one economy to another and, as a result, their impact will also differ.” The MOMR said a review of oil demand patterns going into 2015 bears this out. Preliminary data for United States oil demand shows a continuation of the positive momentum started in the fourth quarter of last year.

“Gasoline, in particular, remains a key driver behind the growth in US oil demand, largely as a result of lower oil prices.” The report affirmed that gasoline pump prices in the US currently average $2.07/gallon, down by $1.22 from a year earlier. Preliminary data for January shows another significant rise in gasoline demand of 700,000 b/d, continuing the general positive trend seen in the previous three months. The MOMR said that over this period, middle distillates have largely experienced the opposite trend, with preliminary data showing year-on-year growth falling for two consecutive months. “Overall, US oil consumption has seen a noticeable rise and is expected to stay firm in the near term amid lower oil prices and as economic activities improve.” The publication said US oil demand growth is forecast to be around 180,000 b/d and could see further upward revisions as the situation continues to improve. In OECD Europe, it said, the factors contributing to better oil demand in 2015 include the extremely low baseline relative to past years, along with the slight improvement in the overall economy. Meanwhile, OECD Asia Pacific is also expected to see a contraction in 2015. A higher degree of fuel substitution in Japan, resulting from the expected re-start of some nuclear power plants, along with slower economic growth in that country, does not imply an optimistic outlook for oil demand in the region. “Compared with the OECD Americas, the positive impact of lower oil prices is expected to be minimal in OECD Europe and the Asia Pacific.”

ly Oil M a r ke

t Repo rt

9 Febru ary 201 5

Oil dem

Feature artic

and ou

tlook fo

le:

r 2015

Oil mar ket high lights 1 Feature ar ticle Crude oi 3 l price m ovemen ts Commod 5 ity mar kets 11 World ec onomy 16 World oi l deman d 34 Produc World oi t marke l supply ts and re 42 finery op erations 61 Tanker market 67 Oil trade 71 Stock m ovemen Balanc ts 79 e of supp ly and de mand 87

The MOMR said that, as a result, total OECD is anticipated to see only a slight contraction in its oil demand growth, following a 280,000 b/d decline last year. Among the regions, only OECD Americas is expected to see positive growth figures. In the non-OECD countries, any potential for higher oil demand growth due to lower prices is expected to come from China, India and some countries in Other Asia. The report noted that recent data from these countries suggests remarkable oil demand figures compared to a year earlier. Looking ahead, it said, in China and India transportation fuels are the main contributors to forecast oil demand growth. However, some downside risks exist due to rising taxes in China, as well as subsidy cuts in India and in some non-OECD Asian countries. Additionally, it continued, African oil demand is seen having some upside potential, while the outlook for the FSU’s oil demand growth is skewed to the downside. With growth of 1.18m b/d, the non-OECD region is expected to continue to contribute the highest share of oil demand growth in 2015. “In the light of the improvement in economic growth, as well as crude oil market developments, the forecast for global oil demand growth may be subject to further upward revisions as the year progresses,” the article stated.

OPEC bulletin 1–2/15

Oil demand could benefit from drop in crude prices



Month

59

Market Review

MOMR oil market highlights …

The OPEC Reference Basket ended January down $15.08 or 25 per cent to average $44.38/b, reaching its lowest value in six years as excess supply and weak demand continued to weigh on the crude oil market. ICE Brent ended January at $49.76/b, down by $13.51 from the previous month. Nymex WTI lost $11.96 to stand at $47.33/b. The Brent-WTI spread narrowed to $2.43/b. World economic growth for 2014 remains unchanged, while the decelerating trend in emerging and developing countries has led to a revision in the 2015 forecast to 3.4 per cent from 3.6 per cent. OECD growth is unchanged at 1.8 per cent for 2014 and 2.2 per cent in 2015. China’s 2015 growth forecast has been revised to 7.0 per cent from 7.2 per cent, while India’s positive trend has lifted the 2015 growth forecast from 5.8 per cent to 6.0 per cent. Russia’s 2015 growth forecast has been revised from zero growth to show a contraction of 2.4 per cent, while Brazil is now expected to grow by 0.7 per cent in 2015, compared to 1.0 per cent previously.

OPEC bulletin 1–2/15

Global oil demand growth in 2014 is expected to be around 960,000 b/d, broadly unchanged from OPEC’s previous monthly report. In 2015, world oil

60

demand is projected to rise by 1.17m b/d slightly higher than in the previous report, mainly to reflect expectations of an uptick in oil requirements in OECD Americas. Non-OPEC oil supply growth in 2014 has been revised up slightly to 1.99m b/d. This revision was mostly driven by higher output in the OECD, Brazil, Kazakhstan and China in the fourth quarter of 2014, partially offset by downward revisions from Azerbaijan, Other Asia Pacific, Australia and Mexico. In 2015, non-OPEC oil supply is projected to grow by 850,000 b/d, down by 420,000 b/d from the previous assessment. Output of OPEC NGLs is forecast to grow by 200,000 b/d to 6.03m b/d in 2015. In January, OPEC crude production decreased by 53,000 b/d to average 30.15m b/d, according to secondary sources. Product markets strengthened in the Atlantic Basin in January. Lower refinery runs supported light and middle distillate crack spreads in the US, while export opportunities lent additional support to the European market. In Asia, product markets strengthened slightly in January, as limited supplies of naphtha and fuel oil allowed margins to rise, despite the

February 2015

pressure of increasing gasoline and middle distillate supplies. A general improvement in sentiment was seen in the dirty tanker market on the back of weather conditions, port delays and tight tonnage availability. Clean tanker freight rates improved East of Suez, but encountered a decline in the west, partially due to the weak medium-range tanker market. OPEC and Middle East sailings were higher than a month ago with arrivals in North America and West Asia increasing, while arrivals in Europe and the Far East fell from the previous month. OECD commercial oil stocks declined by 18.5m b in December to stand at 2,678m b. At this level, inventories were 43m b higher than the five-year average. Crude showed a surplus of 78m b, while product stocks remained 35m b below the fiveyear average. In terms of days of forward cover, OECD commercial stocks stood at 58.6 days, 1.7 days higher than the fiveyear average. Demand for OPEC crude is estimated at 29.1m b/d in 2014, unchanged from the last report. In 2015, required OPEC crude is projected at 29.2m b/d, following an upward adjustment of 400,000 b/d.

The feature article and oil market highlights are taken from OPEC’s Monthly Oil Market Report (MOMR) for February 2015. Published by the Secretariat’s Petroleum Studies Department, the publication may be downloaded in PDF format from our Website (www.opec.org), provided OPEC is credited as the source for any usage. The additional graphs and tables on the following pages reflect the latest data on OPEC Reference Basket and crude and oil product prices in general.

Table 1: OPEC Reference Basket crude oil prices

$/b

2014 Jan

2015 Feb

Mar

Apr

May

Jun

Jul

Aug

Weeks 1–5/15 (week ending)

Sep

Oct

Nov

Dec

Jan

Jan 2

Jan 9 Jan 16 Jan 23 Jan 30

Arab Light — Saudi Arabia

105.74 106.30 104.80 104.87 105.80 108.61 107.15 102.24

97.23

85.93

76.07

60.13

44.47

53.14

46.45

42.70

43.37

43.84

Basrah Light — Iraq

102.70 103.38 102.10 102.11 103.16 105.80 103.83

99.20

94.49

83.57

73.94

57.94

42.58

50.99

44.50

40.91

41.46

41.93

Bonny Light — Nigeria

110.26 110.77 109.50 110.19 112.22 114.36 109.19 102.26

98.07

88.51

80.10

63.81

48.51

56.99

50.13

47.18

47.52

47.79

Es Sider — Libya

107.86 108.47 107.15 107.39 109.42 111.31 106.19 100.56

96.20

86.31

78.90

61.53

46.76

54.84

48.38

45.43

45.77

46.04

Girassol — Angola

107.96 109.54 108.67 108.80 110.21 111.23 107.02 101.52

97.15

86.78

78.68

61.83

47.98

55.34

49.55

46.42

47.09

47.63

Iran Heavy — IR Iran

104.89 104.96 104.01 104.32 105.40 107.45 106.21 101.42

96.14

84.61

74.46

58.99

42.84

51.94

44.98

40.70

41.75

42.32

Kuwait Export — Kuwait

103.79 104.17 103.05 103.13 104.21 106.56 105.50 100.57

95.30

83.99

74.04

58.25

42.31

51.17

44.35

40.43

41.17

41.71

Marine — Qatar

103.95 104.91 104.07 104.53 105.44 107.85 105.96 101.52

96.08

86.14

75.43

59.48

45.51

53.17

47.44

43.60

44.66

44.78

92.31

88.61

76.17

68.42

51.17

37.96

44.54

38.76

36.55

37.42

37.94

107.66 108.69 107.60 107.75 108.35 110.74 108.87 104.33

98.93

89.10

77.85

62.27

48.41

56.12

50.40

46.06

47.59

48.01

89.53

87.20

76.84

69.52

53.86

42.26

48.46

44.18

41.94

41.29

40.42

Saharan Blend — Algeria

109.96 110.52 108.95 108.09 110.36 112.66 106.74 100.86

97.10

87.61

79.60

62.93

47.91

56.18

49.53

46.58

46.92

47.19

OPEC Reference Basket

104.71 105.38 104.15 104.27 105.44 107.89 105.61 100.75

95.98

85.06

75.57

59.46

44.38

52.65

46.22

42.65

43.38

43.79

Merey* — Venezuela Murban — UAE Oriente — Ecuador

93.72

93.44

94.00

97.44

93.23

94.96

93.99

94.73

96.06

95.47

98.71

98.75

95.06

95.21

Table 2: Selected OPEC and non-OPEC spot crude oil prices

$/b

2014

Crude/Member Country

Jan

2015 Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Weeks 1–5/15 (week ending) Jan 2

Jan 9 Jan 16 Jan 23 Jan 30

Minas — Indonesia

110.60 108.46 113.60 111.12 107.22 112.13 105.06

99.94

95.07

84.46

75.92

59.95

46.37

54.07

48.44

44.81

45.53

45.17

Arab Heavy — Saudi Arabia

102.21 102.34 101.63 101.61 102.72 104.50 103.69

99.14

93.73

82.45

72.18

56.65

40.25

49.49

42.42

38.08

39.11

39.74

Brega — Libya

108.46 109.12 107.80 107.99 110.02 112.01 105.34 100.21

96.05

86.26

79.10

62.43

47.72

55.77

49.37

46.38

46.72

46.99

Brent — North Sea

108.26 108.87 107.55 107.69 109.67 111.66 106.64 101.56

97.30

87.41

78.90

62.53

47.86

55.87

49.48

46.53

46.87

47.14

Dubai — UAE

104.01 105.04 104.32 104.68 105.55 108.03 106.13 101.73

96.47

86.73

76.33

60.25

45.57

53.92

48.09

43.59

44.43

44.48

Ekofisk — North Sea

109.06 110.06 108.60 108.65 110.86 112.67 107.33 102.04

97.75

87.87

79.27

63.15

48.48

56.60

50.31

46.97

47.37

47.83

Iran Light — IR Iran

105.33 106.47 105.63 106.03 107.42 110.27 105.73 101.30

96.41

84.90

76.88

61.32

47.42

55.52

49.51

46.34

47.09

45.35

96.78

93.70

85.40

79.04

59.74

45.52

52.46

46.92

44.78

44.72

44.50

Oman — Oman

104.01 105.04 104.34 104.93 105.71 108.06 106.15 102.15

97.18

86.77

77.81

61.16

46.61

54.06

48.44

44.27

45.49

46.69

Suez Mix — Egypt

103.02 104.77 103.92 104.12 105.14 106.81 103.41

99.34

93.48

83.91

75.58

58.72

44.07

51.46

45.54

42.17

42.90

44.34

Urals — Russia

106.40 107.43 106.66 106.91 107.84 109.44 106.23 101.98

96.13

86.63

78.92

61.53

47.03

54.20

48.26

45.10

46.06

47.42

93.36

84.43

76.04

59.50

47.29

53.35

48.74

47.01

46.70

45.57

1

Isthmus — Mexico

WTI — North America

96.35 100.47

98.87 101.29 102.59 106.47 102.20

94.90 100.78 100.53 102.02 102.03 105.24 102.87

96.38

Note: As per the decision of the 109th ECB (held in February 2008), the OPEC Reference Basket (ORB) has been recalculated including the Ecuadorian crude Oriente retroactive as of October 19, 2007. As per the decision of the 108th ECB, the ORB has been recalculated including the Angolan crude Girassol, retroactive January 2007. As of January 2006, monthly averages are based on daily quotations (as approved by the 105th Meeting of the Economic Commission Board). As of June 16, 2005 (ie 3W June), the ORB has been calculated according to the new methodology as agreed by the 136th (Extraordinary) Meeting of the Conference. As of January 2009, the ORB excludes Minas (Indonesia). * Upon the request of Venezuela, and as per the approval of the 111th ECB, BCF-17 has been replaced by Merey as of January 2009. The ORB has been revised as of this date. 1. Indonesia suspended its OPEC Membership on December 31, 2008. Brent for dated cargoes; Urals cif Mediterranean. All others fob loading port. Sources: The netback values for TJL price calculations are taken from RVM; Platt’s; Secretariat’s assessments.

OPEC bulletin 1–2/15

Crude/Member Country

61

Market Review

Graph 1: Evolution of the OPEC Reference Basket crudes, 2014–15

$/b

85 80 75 70 65 60 55 50 45 40 35 Nov 7 45

Arab Light

Girassol

Merey

Basrah Light

Iran Heavy

Murban

Bonny Light

Kuwait Export

Oriente

Es Sider

Marine

Saharan Blend

OPEC Reference Basket

14 46

21 47

28 48

De c 5 49

12 50

19 51

26 52

Jan 2 1

9 2

16 3

23 4

Graph 2: Evolution of spot prices for selected non-OPEC crudes, 2014–15

30 5

$/b

85 80 75

Minas

Dubai

Oman

Arab Heavy

Ekofisk

Suez Mix

Brega

Iran Light

Urals

Brent

Isthmus

WTI

OPEC Reference Basket

70 65 60 55 50 45 40

OPEC bulletin 1–2/15

35 Nov 7 45

62

14 46

21 47

28 48

De c 5 49

12 50

19 51

26 52

Jan 2 1

9 2

16 3

23 4

Note: As per the decision of the 109th ECB (held in February 2008), the OPEC Reference Basket (ORB) has been recalculated including the Ecuadorian crude Oriente retroactive as of October 19, 2007. As per the decision of the 108th ECB, the basket has been recalculated including the Angolan crude Girassol, retroactive January 2007. As of January 2006, monthly averages are based on daily quotations (as approved by the 105th Meeting of the Economic Commission Board). As of June 16, 2005 (ie 3W June), the ORB has been calculated according to the new methodology as agreed by the 136th (Extraordinary) Meeting of the Conference. As of January 2009, the ORB excludes Minas (Indonesia). Upon the request of Venezuela, and as per the approval of the 111th ECB, BCF-17 has been replaced by Merey as of January 2009. The ORB has been revised as of this date.

30 5

Graph 3 Rotterdam

Table and Graph 3: North European market — spot barges, fob Rotterdam naphtha

regular gasoline unleaded

diesel ultra light

jet kero

fuel oil 1 per cent S

fuel oil 3.5 per cent S

101.62

116.51

121.84

124.57

92.37

89.22

February

101.07

119.89

123.29

124.63

97.55

91.72

130

March

100.82

120.86

121.01

121.71

100.10

91.27

120

April

102.40

128.03

122.13

122.24

98.07

91.32

110

May

103.76

127.36

121.29

123.29

98.66

91.19

100

June

105.38

130.41

121.59

124.73

98.71

93.20

July

90

103.50

128.08

119.20

122.77

93.75

90.81

August

95.76

119.86

116.65

120.02

88.64

89.16

September

93.04

117.23

111.88

114.54

86.50

86.14

2014 January

2015

$/b

140

fuel oil 1%S fuel oil 3.5%S

jet kero diesel

naphtha regular unleaded

80 70 60

October

78.61

103.90

102.35

105.32

76.50

75.06

November

69.44

95.79

96.25

98.35

65.55

65.66

50

December

54.22

73.31

77.45

81.09

49.59

49.44

40

January

43.66

61.80

63.24

66.67

37.20

37.79

30 Jan 2014

Feb

Note: Prices of premium gasoline and diesel from January 1, 2008, are with 10 ppm sulphur content.Graph

Mar

Apr

May

Jun

Jul

Aug

Sep

4 South European Market

Oct

Nov

Dec

Table and Graph 4: South European market — spot cargoes, fob Italy naphtha 2014 January February

premium gasoline 50ppm

diesel ultra light

fuel oil 1 per cent S

fuel oil 3.5 per cent S

98.76

113.28

123.07

92.94

90.16

98.45

116.41

124.05

98.88

91.58

$/b

120

March

97.86

115.23

121.46

100.69

90.48

110

100.23

122.87

122.04

98.72

90.17

100

May

101.83

121.92

122.22

99.73

91.55

103.30

126.37

122.79

100.17

92.20

July

90

101.50

122.91

119.77

94.49

91.00

80

August

93.81

115.19

117.07

89.68

88.87

70

September

90.97

113.54

112.15

88.60

85.92

October

75.96

99.57

101.58

76.56

75.70

60

November

66.15

91.37

95.41

66.33

65.65

December 2015 January

50

Graph 5 US East Coast Market

50.28

68.70

77.48

50.62

48.88

40

39.92

56.54

64.39

39.43

38.01

30 Jan 2014

Feb

Mar

Apr

May

Table and Graph 5: US East Coast market — spot cargoes, New York regular gasoline unleaded 87 2014 January

gasoil

jet kero

fuel oil fuel oil 0.3 per cent S 2.2 per cent S

127.16

128.58

126.38

91.97

127.80

129.67

129.77

96.51

March

115.94

121.77

124.16

118.41

94.11

110

April

122.60

120.79

122.17

112.75

92.74

100

120.49

119.69

121.43

107.82

93.37

120.46

122.17

106.62

95.50

July

118.21

116.19

120.48

109.23

92.39

114.09

115.18

123.25

102.58

88.74

70

110.29

117.10

99.44

87.09

60

October

100.85

101.51

104.76

89.41

75.28

91.42

94.39

103.46

83.40

65.14

Dec

Jan 2015

fuel oil 0.3%S LP fuel oil 2.2%S

50

71.13

77.33

84.20

69.84

50.19

40

57.63

67.44

67.31

57.16

40.53

30

Source: Platts. Prices are average of available days.

Nov

80

113.53

December

Oct

90

August

2015 January

Sep

120

September November

Aug

gasoil reg unl 87

jet kero

112.20

121.86

Jul

130

117.66

May

Jun

$/b, duties and fees included

February

June

fuel oil 1.0%S fuel oil 3.5%S

prem 50ppm diesel

naphtha

130

April June

Jan 2015

Jan 2014

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan 2015

63

Graph 6 Caribbean Market Table and Graph 6: Caribbean market — spot cargoes, fob naphtha 2014 January

gasoil

jet kero

fuel oil 2 per cent S

$/b fuel oil 2.8 per cent S

110.69

121.90

123.68

89.50

84.50

February

107.77

122.19

126.34

92.60

87.60

120

March

108.79

121.01

122.93

91.83

86.83

110

April

110.21

122.28

122.90

92.15

87.15

100

May

110.66

121.27

122.01

91.09

86.09

June

113.92

122.06

122.73

92.18

87.18

July

109.39

118.78

120.25

87.70

82.70

August

103.46

117.51

121.28

86.93

81.93

70

99.20

112.29

116.34

84.72

79.72

60

October

83.11

103.03

105.12

71.56

66.56

November

74.99

94.66

98.86

62.68

57.68

September

December 2015 January

gasoil jet kero

naphtha

130

fuel oil 2.0%S fuel oil 2.8%S

90 80

50

53.81

73.84

77.19

47.07

42.07

40

53.64

65.95

64.93

36.49

31.49

30 Jan 2014

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan 2015

Graph 7 Singapore Table and Graph 7: Singapore market — spot cargoes, fob

2014 January

$/b

naphtha

premium gasoline unl 95

premium gasoline unl 92

gasoil

jet kero

fuel oil 180 Cst

fuel oil 380 Cst

prem unl 95 prem unl 92

naphtha

130

gasoil jet kero

fuel oil 180 Cst fuel oil 380 Cst

104.47

117.98

114.66

121.56

121.63

96.46

94.56

February

102.37

119.71

116.70

123.53

122.78

96.29

94.83

March

102.08

119.37

116.53

121.68

119.99

95.00

93.13

110

April

103.99

121.39

117.64

122.90

120.56

93.81

91.76

100

May

105.31

121.43

117.96

122.35

119.88

95.08

92.86

June

106.17

123.74

120.46

121.24

120.80

97.24

95.13

July

106.34

121.99

119.78

118.96

118.79

94.51

93.35

80

August

98.87

111.35

109.26

116.74

116.60

93.50

91.86

70

September

94.45

110.58

108.61

111.95

112.48

90.86

89.14

60

October

79.79

101.17

98.19

100.22

101.56

79.24

77.41

November

71.86

90.44

87.94

93.85

96.41

71.68

70.38

December

56.33

71.91

69.58

77.10

78.36

55.52

54.60

40

45.23

57.42

54.66

62.67

63.66

43.99

42.59

30 Graph Middle East Oct Jun Gulf Jan Apr Aug Sep Jul Market Feb 8 Mar May

2015 January

120

90

50

2014

Nov

Table and Graph 8: Middle East Gulf market — spot cargoes, fob gasoil

jet kero

fuel oil 180 Cst

101.90

119.31

119.51

91.30

February

99.91

121.01

120.40

91.55

March

99.14

119.00

117.47

90.51

110

April

100.96

120.50

118.30

89.34

100

May

101.74

119.63

117.32

90.66

June

103.22

118.56

118.28

92.58

July

103.28

116.40

116.37

89.56

August

96.28

113.73

113.76

88.51

70

September

92.44

108.99

109.68

86.42

60

October

78.20

97.26

98.76

74.90

November

69.94

90.82

93.55

66.95

December

54.62

74.32

75.73

51.21

40

43.32

59.82

60.98

40.28

30 Jan 2014

2015 January

Source: Platts. Prices are average of available days.

64

Jan 2015

$/b

naphtha 2014 January

Dec

naphtha

jet kero

gasoil

fuel oil 180 Cst

130 120

90 80

50

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan 2015

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