July/August 2002 1

Printed in Austria by Ueberreuter Print and Digimedia

P u b l i s h e r sOrganization of the PetroleumExporting Countries, Obere Donau-strasse 93, 1020 Vienna, Austria.

Telephone: +43 1 211 12/0;Telefax: +43 1 216 4320;Public Relations & InformationDepartment fax: +43 1 214 9827.E-mail: prid@opec.orgE-mail: OPEC News Agency: opecna@opec.orgWeb site: http://www.opec.org.Hard copy subscription: $70/12 issues.

M e m b e r s h i p a n d a i m sOPEC is a permanent, intergovernmental Or-ganization, established in Baghdad, September10–14, 1960, by IR Iran, Iraq, Kuwait, SaudiArabia and Venezuela. Its objective is to co-ordinate and unify petroleum policies amongMember Countries, in order to secure fair andstable prices for petroleum producers; an effi-cient, economic and regular supply of petro-leum to consuming nations; and a fair returnon capital to those investing in the industry.

The Organization comprises the fiveFounding Members and six other Full Mem-bers: Qatar (joined in 1961); Indonesia (1962);SP Libyan AJ (1962); United Arab Emirates(Abu Dhabi, 1967); Algeria (1969); andNigeria (1971). Ecuador joined the Organiza-tion in 1973 and left in 1992; Gabon joined in1975 and left in 1995.

S e c r e t a r i a t o f f i c i a l sSecretary General Dr Alvaro Silva Calderón

Director,Research Division Dr Adnan Shihab-Eldin

Head,Energy Studies Department Mohamed Hamel

Head, Petroleum MarketAnalysis Department Javad Yarjani

Head, Data ServicesDepartment Dr Muhammad A Al Tayyeb

Head, PR & InformationDepartment Farouk U Muhammed, mni

Head, Administration &Human Resources Department Senussi J Senussi

Head, Office of theSecretary General Karin Chacin

Legal Officer Dolores Dobarro

W e b s i t eVisit the OPEC Web site for the latest news andinformation about the Organization and itsMember Countries. The URL is

http://www.opec.org

T h i s m o n t h ’ s c o v e r . . .shows an Algerian exploration and production conces-sion map, representative of the country’s recent award-ing of seven new oil and gas blocks (see Newslinebeginning on page 9).

2 N O T I C E B O A R DForthcoming conferences and other events

3 C O M M E N T A R YRecognizing realityThe WSSD outcome clearly reflected the need for sensibleapproaches to energy issues

4 F O R U MThe OPEC/non-OPEC relationship: meeting the global 4energy needs of the futureJavad Yarjani, Head of OPEC’s Petroleum Market Analysis Dept

The failure of electricity deregulation 7Prof Ferdinand E Banks, Uppsala University, Sweden

9 N E W S L I N EEnergy stories concerning OPEC and developing countries

17 E N V I R O N M E N T A L N O T E B O O KSenate Committee approves bill mandating big cuts inGHG emissions from utility companies

19 M A R K E T R E V I E WOil market monitoring report for June 2002

36 M E M B E R C O U N T R Y F O C U SFinancial and development news about OPEC Countries

40 O P E C F U N D N E W SRecent loans and grants made by the OPEC Fund

58 S E C R E T A R I A T N O T E SOPEC Secretariat activities

59 A D V E R T I S I N G R A T E SHow to advertise in this magazine

60 O R D E R F O R MPublications: subscriptions and single orders

61 O P E C P U B L I C A T I O N SInformation available on the Organization

Indexed and abstracted in PAIS International

Vol XXXIII, No 7 ISSN 0474-6279 July/August 2002

2 OPEC Bulletin

N O T I C E B O A R D

Bangkok, ThailandOctober 21–22, 2002

4th ASEANEnergy business forum

Details: RAI Exhibitions (Thailand)226/36-37 BondSt Riviera Tower 1Muang Thong ThaniChaengwattanaNonthaburi 11120ThailandFax: +662 960 0140E-mail:ladda@bangkokrai.com

Venezuela appoints newMinister of Energy and MinesVenezuela appointed Rafael D Ramírez (pic-tured here) as the country’s new Minister of

Energy andMines in July.Ramírez re-places AlvaroSilva Calderón,who was ap-pointed as theOPEC Secre-tary Generalwhen the thenincumbent, AlíR o d r í g u e zAraque, as-

sumed the position of the President of Ven-ezuela’s state oil and gas company, Petróleosde Venezuela SA (PDVSA). Born in 1963,Ramírez is the former head of the Venezuelanstate gas regulator, Enagas, which he foundedin 2000. Prior to that he worked as an engi-neering manager, developing and co-ordinating lead projects in the petrochemical,refining, gas and oil sectors. He started hisprofessional career in the Venezuelan Insti-tute of Oil Technology Institute (INTEVEP),an affiliate of PDVSA, where he was assignedto the area of handling the transportation ofextra heavy crude from the Orinoco oil belt.He is considered to be a leader in the area ofmechanical design and has been awarded theVertice prize for technological innovation.The new Minister has a degree in mechanicalengineering from the Los Andes University inVenezuela and a master’s degree in energyfrom the University of Venezuela. Currentlyhe attends a postgraduate course in projectmanagement at Andrés Bello Catholic Uni-versity in Venezuela and is an active speakeron the international circuit on topics relatingto gas. Ramírez is married with two sons.

Forthcoming eventsLondon, UK, September 30–October 1,2002, North Sea oil and gas. Details: SMi,Bethan Jones. Tel: +44 (0)20 7827 6176; e-mail: bjones@smi-online.co.uk; Web site:www.smi-online.co.uk.

Cape Town, South Africa, October 1, 2002,6th annual Africa downstream 2002. Details:Global Pacific & Partners. Tel: +27 11 7784360; fax: +27 11 880 3391; e-mail: info@glopac.com; Web site: www.petro21.com.

Almaty, Kazakhstan, October 1–4, 2002,KIOGE 2002, 10th Kazakhstan internationaloil & gas exhibition & conference. Details: ITEGroup, 105 Salusbury Road, London, NW66RG, UK. Tel: +44 (0)20 7596 5223; fax:

Doha, QatarOctober 13–16, 2002

Gastech 2002

Details: Turret RAI plcArmstrong House38 Market Square,Uxbridge, MiddlesexUB8 1TG, UKTel: +44 (0)1895 454 545Fax: +44 (0)1895 454 647E-mail: info@gastech.co.ukwww.gastech.co.uk.

+44 (0)20 7596 5106; e-mail: oilgas@ite-exhibitions.com; www.ite-exhibitions.com.

London, UK, October 2, 2002, IP discussiongroup: energy — economics, environment: ‘Enron— the fallout’. Details: The Institute of Pe-troleum, 61 New Cavendish St, London, W1G7AR, UK. Tel: +44 20 7467 7100; fax: +4420 7255 1472; e-mail: iviscione@petroleum.co.uk; www.petroleum.co.uk.

Cape Town, South Africa, October 2–4,2002, 6th annual Africa upstream 2002. De-tails: Global Pacific & Partners. Tel: +27 11778 4360; fax: +27 11 880 3391; e-mail:info@glopac.com; www.petro21.com.

Paris, France, October 2–4, 2002, Floatingproduction, storage and offloading systems (FPSP)training course. Details: IBC Global Confer-ences, Informa House, 30-32 Mortimer Street,London W1W 7RE, UK. Tel: +44 (0)1932893 851; fax: +44 (0)1932 893 893; e-mail:cust.serv@informa.com; www.ibcenergy.com.

Tunis, Tunisia, October 3–5, 2002, Oil &gas North Africa 2002. Details: SpearheadExhibitions Ltd, Coombe Hill House,Beverley Way, London SW20 0AR, UK. Tel:+44 (0)20 8949 9222; fax: +44 (0)20 89498186; e-mail: oilandgasnafrica@spearhead.co.uk; Web site: www.oilgasnafrica.co.uk.

Okavango Delta, Botswana, October5–8, 2002, Global energy safari 2002. Details:Global Pacific & Partners. Tel: +27 11 7784360; fax: +27 11 880 3391; e-mail: info@glopac.com; Web site: www.petro21.com.

Oxford, UK, October 6–11, 2002, Liquefiednatural gas (LNG), management training course.Details: Alphatania Group, Rodwell House,100 Middlesex Street, London E1 7HD, UK.Tel: +44 20 7650 1402; fax: +44 20 76501401; e-mail: training@alphatania. com; Website: www.alphatania.com.

Dubai, UAE, October 7–8, 2002, Crude oilmarketing & valuation. Details: The Confer-ence Connection Administrators Pty Ltd,212A Telok Ayer Street Singapore 06845.Tel: +65 6226 5280; fax: +65 6226 4117; e-mail:info@cconnection.org; www.cconnection.org.

Nice, France, October 7–8, 2002, McCloskey’sEuropean coal outlook conference. Details:Informa. Tel: +44 (0)1932 893 860; fax: +44(0)1932 893 893; e-mail: cust.serv@informa.com; www.amend.informa.com.

London, UK, October 7–8, 2002, African oil& gas finance forum. Details: IBC Global Confer-ences, Informa House, 30-32 Mortimer St,London W1W 7RE, UK. Tel: +44 (0)1932893 851; fax: +44 (0)1932 893 893; e-mail:cust.serv@informa.com; www.ibcenergy.com.

London, UK, October 8–11, 2002, trainingcourse on Planning and economics of refineryoperations. Details: The Institute of Petro-leum, 61 New Cavendish Street, London,W1G 7AR, UK. Tel: +44 20 7467 7100; fax:+44 20 7255 1472; e-mail: nwilkinson@petroleum.co.uk; www.petroleum.co.uk.

Hamburg, Germany, October 9–11, 2002,Chances for innovative processes at the interfacebetween refining and petrochemistry. 10th Topi-cal Conference. Details: DGMK, Petrochem-istry Division, Dr Gisa Tessmer/Christa Jenke.Tel: +49 40 63900411/2; e-mail: dgmk@online.de; Web site: www.dgmk.de.

London, UK, October 13–18, 2002, train-ing course on Liquefied natural gas. Details:The Institute of Petroleum, 61 NewCavendish St, London, W1G 7AR, UK. Tel:+44 20 7467 7100; fax: +44 20 7255 1472;e-mail: nwilkinson@petroleum.co.uk;www.petroleum.co.uk.

July/August 2002 3

C O M M E N T A R YE d i t o r i a l p o l i c yOPEC Bulletin is published by the Public

Relations & Information Department. The

contents do not necessarily reflect the official

views of OPEC or its Member Countries.

Names and boundaries on any maps should not

be regarded as authoritative. No responsibility

is taken for claims or contents of advertise-

ments. Editorial material may be freely repro-

duced (unless copyrighted), crediting OPEC

Bulletin as the source. A copy to the Editor-in-

Chief would be appreciated.

C o n t r i b u t o r sOPEC Bulletin welcomes original contribu-

tions on the technical, financial and environ-

mental aspects of all stages of the energy indus-

try, including letters for publication, research

reports and project descriptions with support-

ing illustrations and photographs.

E d i t o r i a l s t a f fEditor-in-Chief Farouk U Muhammed, mni

Editor Graham Patterson

Assistant Editor Philippa Webb

Production Diana Lavnick

Design Elfi Plakolm

Circulation vacant

A d v e r t i s e m e n t sOPEC Bulletin reaches the decision-makersin Member Countries. For details of its rea-sonable advertisement rates see the appropri-ate page at the end of the magazine. Ordersfrom Member Countries (and areas not listedbelow) should be sent directly to the Editor-in-Chief at the Secretariat address. Other-wise, orders should be placed through thefollowing Advertising Representatives:

North America: Donnelly & Associates,PO Box 851471, Richardson, Texas 75085-1471, USA. Tel: +1 972 437 9557; fax: +1972 437 9558.

Europe: G Arnold Teesing BV,Molenland 32, 3994 TA Houten, The Neth-erlands. Tel: +31 30 6340660; fax: +31 306590690; e-mail: grim@terep.nl.

Middle East: Imprint International, Suite3, 16 Colinette Rd, Putney, London SW156QQ, UK. Tel: +44 (0)181 785 3775; fax:+44 (0)171 837 2764.

Southern Africa: International MediaReps, Pvt Bag X18, Bryanston, 2021 SouthAfrica. Tel: +2711 706 2820; fax: +2711 7062892.

The WSSD outcome clearly reflected the needfor sensible approaches to energy issues

he recently concluded United NationsWorld Summit on Sustainable Devel-

opment (WSSD) held in Johannesburg,South Africa — which brought together 104Heads of State and Government and 21,000delegates, NGOs and members of the press —can only be described as a mammoth event. Butit was one worth attending, especially for OPECMember Countries, considering the main themesof the agenda were to address ways in which toalleviate the growing levels of chronic povertyin the world, which includes access to energy,while recognising the global commitment toprotecting the environment.

OPEC Member Countries, all developingcountries, have always supported any initiativesthat address the issues of economic and socialdevelopment. The Organization’s Solemn Dec-laration clearly states that the eradication ofpoverty should be an overriding global priorityand, in fact, such wording has been put intoconcrete action since 1976, when the OPECFund for International Development wasfounded. Since then, the Fund has committedbillions of dollars worth of soft loans and grantassistance without conditionality for developingcountries.

Nevertheless, these relentless and persistentefforts to address the needs of the poor can neverbe adequate enough and, accordingly, the Jo-hannesburg Summit was designed to bringtogether governments, NGOs and the privatesector in an attempt to refocus the world’sattention on the lack of action to address theissues of sustainable development since the EarthSummit was held in Rio de Janeiro in 1992.Despite the good intentions of the participatingcountries in Johannesburg, the conclusion of theWSSD was criticised by many for failing toimplement concrete timetables for some of thethemes on the agenda, including renewableenergy. Such a conclusion, however, should beseen in its correct context, in that mega worldgatherings cannot hope to unanimously agree toimplement concrete programmes for all themes.Failure to agree on timetables should in no waydetract from the Summit’s more positive out-comes, which reflect more realistic approachesto immediate problem solving, rather thanchasing pie-in-the sky goals which are unattain-able.

In this sense, it must be said that the decisionnot to implement concrete timetables for re-newable energy at the WSSD recognises the factthat fossil fuels will account for 90 per cent of

the future increase in energy demand — duemainly to take place in the electricity and trans-portation sectors in the developing world. Theconcluding commitments of the Summit speci-fied the need to increase access to modern energyservices, energy efficiency and renewable en-ergy. This would be to provide energy to theworld’s two billion people, who are currentlywithout it. So there is a clear commitment tothe provision of energy — whether it be prima-rily fuelled by fossil fuels, or renewable energy— but the singling out of the latter, in attrib-uting a timetable to it, at the expense of achiev-ing the overall goals of the Summit, would havebeen imprudent. The decision taken in Johan-nesburg clearly recognises that the setting up ofinfrastructure for renewable energy remains fartoo expensive, in terms of its associated output,to have any fixed goal attributed to it, at the riskof real, workable solutions. Clearly, it is under-stood that what was agreed at the WSSD shouldin no way be seen as a ceiling, but rather as anindicator as to what all parties can achieve ingoing beyond what was formally agreed on.

For OPEC Member Countries, continuedresearch and development into cleaner fuels,better gas infrastructure and transport, and thedevelopment of carbon dioxide sequestrationtechnology remain high priorities to ensure thatthe use of fossil fuels are entirely compatible withsustainable growth. Better technology transfercan only improve energy efficiency, which wouldrequire increased co-operation between govern-ments and the private sector alike.

Important to the achievement of energy-related goals are the necessary, collaborativeefforts to ensure that the entire energy chain isfunctional. This also requires the need for in-creased dialogue between governments and otherindustry players to make sure that meticulous-ness in planning and adequate levels of invest-ment are accounted for when determining howenergy markets evolve. This will be the funda-mental challenge in adequately catering for theworld’s future energy needs. Considering thatdeveloping countries are going to account for asubstantial proportion of the increase in thefuture demand for energy, increased dialogueand co-operation between oil producers and con-sumers should be seen as an overriding priority.Energy markets are too important to be leftto the free market alone and developing coun-tries need solutions by governments that willguarantee that the poor people of our world doget access to energy, and at the right price.

T

Recognizing reality

4 OPEC Bulletin

F O R U M

the most important oil producing prov-inces of the time. Previously, this wasTexas and the other oil producing states inthe United States. More recently, OPECand other oil producers have taken overthe task from major oil companies. Thisfact needs to be recognized. Consumers,investors and producing governments areall interested in stabilizing the price of oil.We have seen over the years, clear evidencethat OPEC, with its excess capacity, hasbeen able to calm down markets and coun-teract real or perceived shortages.

But if there is one thing that the oilmarket has taught us over the years, it is thatit cannot be successfully managed singlehandedly. Co-operation and co-ordinationof oil policies is the only way forward.OPEC Member Countries currently con-trol only around 40 per cent of global oilproduction, so it is unrealistic to expectthese 11 producers to cure all market imbal-ances. Now, more than ever, with the chang-ing nature of the global oil industry, weneed all key producers to adopt a co-ordinated approach to account for the mar-ket’s future needs. Co-operation is centralto this cause — firstly among producers,and also between producers and consum-ers. All producers are affected when pricesfall, so it is only fair that all producersshould face any crisis together. Oil prices —whether low or high — do not discriminatefrom one producer to another. We learnedin 1998, with the situation of the Asianfinancial crisis and the accompanying oilsupply levels, that sharply fluctuating pricesare a common problem, which require co-ordinated policies and action.

If we look at non-OPEC oil output,OPEC figures show that it increased by over700,000 barrels per day last year, comparedwith the levels achieved in 2000, whileOPEC production fell by around the sameamount in 2001. With a further expansionof around 1.3 million b/d projected for

The OPEC/non-OPEC relationship:meeting the global energy needs of the future

Co-operation between oil producersis essential for lasting oil marketstability, especially considering theanticipated levels of investmentrequired to satisfy the future supply/demand outlook. The Head ofOPEC’s Petroleum Market Analy-sis Department, Javad Yarjani,*looks at how essential the OPEC/non-OPEC relationship is — bothfor producers and consumers.

* Based on a speech delivered by Mr Yarjani,on behalf of the OPEC Secretary General,Dr Alvaro Silva Calderón, to the 7th An-nual Asia Oil and Gas Conference, KualaLumpur, Malaysia, June 9–11, 2002.

Up until a few years ago, co-opera-tion between OPEC and leadingproducers outside the Organiza-

tion was limited. While OPEC MemberCountries have sought to effectively re-spond to the roller-coaster nature of oilprices through production control, otheroil producers have tended to maximizeoutput and only follow their short-terminterests. Recently, however, a new reali-zation appears to have emerged in therecognition that a concerted, joint ap-

proach to market management is the bestway forward in securing a stable and fair oilprice, both for producers and consumers.

The co-operation between OPEC andnon-OPEC gained fresh impetus in 1998during the Asian financial crisis. However,it was last December’s landmark decisionby several non-OPEC producers whichrepresented a major step forward in rela-tions between the two sides after the de-mand for crude dropped significantly dueto a weaker global economy in 2001, exac-erbated by the terrorist attacks on theUnited States on September 11. Norway,Russia, Mexico, Oman and Angola de-cided to support the Organization’s mar-ket stabilization measures with their ownproduction cuts. Their support has gone along way to help OPEC restore somesemblance of equilibrium to the market.

It is perhaps becoming more and moreapparent to non-OPEC oil producers thatin a world of growing inter-dependenceand globalization, it is now more impor-tant than ever before that these links benurtured and developed. Co-operationbetween oil producers is especially vitalduring difficult periods in the market, aswe have recently experienced. However,long-term co-operation between all oilproducers is also desired so that the energychallenges and opportunities of the 21st

Century can be approached in a well-planned and co-ordinated way.

At this point, one might raise the ques-tion of why oil market stability cannot beachieved by market forces alone. We haveenough evidence from the past, such as thecrude price collapse of 1986, and morerecently the US energy crisis, that thesmooth functioning of the oil market maynot be possible without some interventionto correct severe imbalances. It must beremembered that the global petroleummarket has been regulated over the last 70years — and this has always been done by

July/August 2002 5

F O R U M

“The globalpetroleum markethas been regulatedover the last 70years…previously,this was Texas andthe other oilproducing statesin the UnitedStates.”

non-OPEC supply in 2002, the call onOPEC oil this year will again fall consider-ably. This imbalance will be reversed in thefuture as OPEC production expands andnon-OPEC output naturally declines. Butif we can extend the co-operation we haveseen between the two sides, even to take inthe marginal producers, then we can ensurethat the move to the increased reliance onOPEC oil is conducted in an orderly fash-ion, with minimal disruption to the market.The more producers we can bring under theumbrella of co-operation, the better chancewe have of securing a stable market and alevel of price that is fair for all. In anyuncontrolled situation, the danger of pricescontinuing to fluctuate, or even collapsing,is much more likely. If we do not makevoluntary sacrifices in the short term, toensure prices remain at a reasonable level,then all oil producers will be condemned tosuffer involuntary losses in the long run, atthe additional expense of endangering fu-ture energy security. As experience hasshown, if we do not act together, the out-come will be less than optimal for all partiesinvolved.

Oil market stabilityThe method of market management

through co-operation is nothing new forOPEC. For over four decades now, theOrganization has been committed to co-ordinating and unifying the petroleumpolices of its Members to ensure marketstability and secure a fair price for thecommodity. These goals have been intrin-sic to the principal aims and objectives ofOPEC since its formation in September1960, when it set out to maintain oil pricestability, which guaranteed adequate lev-els of revenue for the Organization’s Mem-ber Countries. Equally important, OPEChas always supported the idea that oilprices should be at levels which will notharm global economic growth, and indoing so, ensure a regular supply of petro-leum to consuming nations.

Over the years, the international oilmarket has been plagued by price volatil-ity, mainly due to the nature of the indus-try. OPEC has had to endure a series ofboom-bust periods, which have threat-ened the livelihoods of its Members, alldeveloping countries, and have had severerepercussions on the oil industry in gen-eral. Consumers, too, have suffered from

oil price volatility, which has had adestabilizing affect on their economies. Inan attempt to rid the market of theseunfavourable scenarios, OPEC has imple-mented numerous mechanisms to avoidsuch volatility. But due to the complexnature of the oil industry, volatility is stillvery much with us today.

This year we have experienced a pro-tracted global economic downturn, which

was exacerbated by the effects of the Sep-tember 11 attacks in 2001. Even beforethose tragic events, projections for oil de-mand growth were being revised down-wards in the first half of last year as theeconomy slowed in the US, and then spilledover into other major economies aroundthe world. Even though OPEC last yearcut oil output on three separate occasions,amounting to a considerable 3.5m b/d toensure that prices stayed within the Or-ganization’s price band, the effect of thesecuts was neutralized by the continuingretraction in economic growth, coupledwith an expansion in non-OPEC oil supply.

OPEC figures show that global crudedemand fell by around 530,000 b/d in thelast three months of 2001, compared withthe same period the previous year, afterdeclining by around 501,000 b/d in thethird quarter. This was in stark contrast tothe first and second quarters of the year,which saw world demand grow by 724,000

b/d and 631,000 b/d, respectively. Thisacute contrast between growth and retrac-tion hit home to producers the need forconcerted action to prevent prices againfalling to the precarious levels last seen in1998–99.

The current state of the global economyhas again brought difficult times for oilprices, which have been unstable and fluc-tuating since September last year. In fact, inOctober 2001, the price of the OPECBasket of seven crudes slumped by over$4/b. But it is worth noting that untilSeptember last year, OPEC’s efforts at keep-ing the Basket price in the desired $22 to$28/b range had been very successful, withthe price averaging very close to $25/b forthe first nine months of 2001. However,with the global economic downturn gradu-ally easing, there are indications that oildemand may improve. The OPEC Basketprice is now averaging well over $21/b so farthis year, up from just over $18/b in thefourth quarter of 2001. Admittedly, theunstable political developments in the Mid-dle East have boosted prices, and a war riskpremium has been built into the currentpricing levels. Apart from these latest de-velopments, there is no doubt that theOPEC/non-OPEC co-operation at the be-ginning of this year prevented oil pricesslipping to dangerously low levels. How-ever, the need for caution remains sinceglobal oil demand is forecast to grow byonly around 400,000 b/d this year, puttingpressure on the supply/demand balance.

The OPEC price bandThe price band system adopted by

OPEC Member Countries has gone a longway in terms of helping the Organizationrespond quickly and decisively to the mar-ket’s needs. The fact that the OPEC Bas-ket is currently lying comfortably withinthe $22–$28/b range is testament to thissuccess. Through this system of monitor-ing price fluctuations, the Organizationcan gauge more accurately as to when, andby how much, to cut production, or evenadd barrels to the market, as was seen inthe year 2000. This system has representeda major change in the Organization’s ap-proach to its production agreements, giv-ing Member Countries reinforcedconfidence in their decision making proc-ess. In fact, the price band has acted as areliable gauge for many industry observ-

6 OPEC Bulletin

F O R U M

ers, as well as other crude oil producingand consuming nations.

Even though other global producersand consumers have voiced preferences foroil prices to be in the range, of say, $18–$21/b, or even $22–$25/b, a general un-derstanding appears to exist that we are atleast on the same track. This is an importantdevelopment, since the nearer we can get tofinding a level of price acceptable to all, thesooner we can put one of the requisites forlasting market stability firmly in place. An-other important element when we considercurrent price levels, and targets, is the realvalue of a barrel of crude. When we take theprice of $25/b, and adjust it for inflationand currency fluctuations, it reduces thevalue to just under $8/b in 1974 prices andexchange rates, which is around the realprices the Organization experienced in themid-1970s. So, a price of $25/b for today’soil ought not to be considered as being ahigh price by any means.

Expanding capacityI would now like to turn to matters

that will be of increasing importance as welook ahead. For the foreseeable future, oilis set to maintain its leading position insupplying the world’s energy needs. OPEC,in accounting for around 78 per cent of theworld’s proven oil reserves, will continueto play a fundamental role in the worldenergy scene, especially as the key supplierof the incremental barrel.

In the latest OPEC World EnergyModel (OWEM) forecasts, global economicgrowth is expected to expand by over threeper cent annually over the next 20 years. Inkeeping with this projection, global oil de-mand is set to rise from around 76m b/d in2000 to exceed 81m b/d in 2005. In an-other five years, demand will be over 89mb/d, and is set to reach over 106m b/d by2020. With non-OPEC oil production inthe first two decades of the 21st centuryforecast to most likely remain stable, OPECMember Countries will be relied upon tosupply the lion’s share of the increaseddemand, which will mostly come fromdeveloping nations in Asia. In fact, by 2010,OPEC will likely produce over 37m b/d ofcrude, compared to its current output ca-pacity of around 32.3m b/d. In another tenyears, the Organization’s production willincrease to more than 52m b/d, with itsglobal share standing at around 50 per cent.

Oil producers will, of course, need toexpand their production capacity to meetthis extra demand. The scale of investmentrequired for OPEC Member Countries tosatisfy these demand needs is enormous.OPEC projects that $97 billion of invest-ment outlay is needed in its Member Coun-tries by 2010, and a massive $209bn by

2020. But for the high-cost non-OPECproducers, investment forecasts are evenhigher — around $600bn by 2010 andover $860bn ten years later. To accountfor these levels of investment, all producerswill require a reasonable level of incomefrom their petroleum exports.

This is precisely why an equitable andstable price for crude oil is so essential forthe welfare of producers and for the futureof the industry as a whole. The distributionof the future global investment require-ment is strongly influenced by both thelower costs for expanding capacity in OPEC,as well as the differences in decline rates,since net investment requirements will needto cover not only additional capacity, butalso the maintenance of existing produc-tion potential. According to recent analysisundertaken by the International EnergyAgency (IEA), the investment requirementsin OPEC amount to $5.0bn (per 1.0mb/d of additional production), while theestimate for non-OPEC output is four timesas high as that of the Organization’s Mem-ber Countries. For decline rates, a five percent natural decrease for OPEC and anaverage seven per cent fall for non-OPECare assumed, based on an approximationthat decline rates are the inverse of thereserves-to-production ratio.

Meeting common challengesIt has become more and more apparent

of late that fluctuations in international oilprices are not only the result of changes inthe supply and demand balance. This makesOPEC’s efforts to maintain the balance ofmarket fundamentals, by either increasingor decreasing output, more difficult, andthe need for extended co-operation withother oil producers even more vital. Thereality is that a number of factors outsideour control have had — and continue tohave — a considerable impact on prices.Speculation and sentiment are serious prob-lems affecting the market. Players who takespeculative positions can distort the marketquite easily by entering and exiting thefutures markets, purely for financial gain.

The volumes traded in crude futuresoften exceeds 150m b/d, which is twice thedemand of global crude oil. Massive paperpurchases may lead to strong price rises attimes when the physical market remains inequilibrium, or is even oversupplied. Theimpact of this type of speculation can bereduced by removing the level of uncer-tainty over the oil market’s future direction.OPEC Members speak with one voice whenit comes to implementing measures essen-tial to securing a stable market. However,this unselfish action will be fruitless if otherproducers outside our Organization takeadvantage of our Members’ gestures of good-will by capitalizing on OPEC’s sacrifices.Relations between OPEC and non-OPECproducers have improved over the yearsafter the challenging experiences of the past,but more needs to be done. This will be-come increasingly important as demandincreases and OPEC will be called on toincrease its output.

Following the structural changes wehave witnessed in the oil industry over thelast two decades, coupled with the consid-erable experience all oil producers havegained, we are now better prepared tomeet future challenges. However, we canachieve this goal only if we can count onthe support of all participants in the oilindustry. We need all players to pursuecommon aims, rather than opting for poli-cies that are advantageous only in the shortterm, and are at the expense of otherparticipants. If collaborative efforts arerealized, we shall all stand to benefit, in-cluding consumers, and the industry willmove from strength to strength.

“Consumers,investors andproducinggovernments areall interested instabilizing theprice of oil.”

July/August 2002 7

F O R U M

Following his previous article on the illsof electricity deregulation, featured inthe Bulletin in March 2001, ProfessorFerdinand E Banks* again points tothe importance of not leaving either theelectricity or gas sectors to the freemarket.

* Professor Banks teaches economics atUppsala University, Uppsala, Sweden. He isthe author of Energy Economics.

In the June 18, 2002, issue of theFinancial Times, there were two men-tions of violent incidents in connec-

tion with the deregulation of electricity.The countries involved were the Domini-can Republic and Peru. The second ofthese was of particular interest to me be-cause, many years ago in Lima, Peru, I hadthe opportunity to deliver a keynote addressat a conference on electricity economics thatwas attended by a large number of energyeconomists and engineers from the Carib-bean and South America. Somewhere in themiddle of my talk, I took the liberty to stressthat it would be an enormous mistake if anattempt were made to deregulate electricity.

Recently, a conference was convenedin Stockholm for the purpose of reassuringconsumers that — despite its many obvi-ous and repeated shortcomings — elec-tricity deregulation has a brilliant future.My reaction to all this was that sinceelectricity deregulation has failed, is fail-ing, or will fail everywhere, a conference ofthis nature could hardly be taken seriously— even if it were intended as a problem-solving forum, instead of a public relationsexercise. Needless to say, I am always will-ing to give a free lesson in economics toanyone who openly expresses his or herconviction that electricity (or gas) deregu-lation is a sensible option, but even I

The failure of electricityderegulation

FINANCIAL TIMES, June 18, 2002

refrained from attending that meeting. Idid so, because one of the unfortunatefacts of life is that when you confront manypeople with the mechanics of the monu-mental deregulation failures that have takenplace, for example, in California, Alberta,Canada, or Brazil, they tend to becomeoverly emotional.

Prior to deregulation, Swedish elec-tricity was produced at perhaps the lowestcost in the world, and it featured an un-precedented level of reliability and/or avail-ability. All that has changed because, aseconomic theory indicates, when regu-lated monopolies are replaced by unregu-lated oligopolies, it is inevitable that priceswill rise (and likely that reliability/avail-ability will decrease). Everyone knowsabout California, but what many do notknow is that Professor John Kay — widelyrecognized as an important player in theupper echelons of the UK academic world,as well as a warm friend of deregulation —admits that “electricity prices (in the UK)have been too high because generatorswere able to manipulate the pool to theiradvantage”. Similarly, what happened inSweden is that politicians were hoodwinkedby bogus economic arguments that boththey and their advisors were unable tounderstand and, even more amazing, theywere able to convince both wholesale andretail buyers that they should be willing toaccept more uncertainty about the price ofelectricity (and gas).

Apparently, the good citizens of the

Dominican Republic and Peru took to thestreets because they were unable to ignorethe threat posed to their already low stand-ards-of-living by deregulation. On the otherhand, the fairly comfortable voters of Swe-den and Norway accept rising electricityprices with resignation because they be-lieve that eventually their political masterswill ensure that they obtain the low elec-tricity prices that are supposed to accom-pany an increase in ‘competition’. In takingthis position, they overlook the followingobservation by the important deregulationscholar, Professor Alfred Kahn: “I amworried about the uniqueness of the elec-tricity markets. I’ve always been uncertainabout eliminating vertical integration. Itmay be one industry in which it worksreasonably well”. Another person whogradually came to this conclusion is Pro-fessor Kay. He said that “…complete de-regulation of the electricity business isimpossible”.

As a former head of BG (British Gas),Robert Evans, noted, the “half-baked frac-turing” of firms to bring about competi-tion is not likely to be successful. Bothelectricity and gas deregulation involve thekind of engineering and economic impru-dence that could turn out to be bad newsfor all of us.

News and features from the

OPEC Member Countries

Extensive OPEC conference coverage

Daily and weekly OPEC Basket prices

World oil price movements

Highlights of the Monthly Oil Market Report

Keep abreast of developments in OPEC

and its Member Countries by subscribing to OPECNA.

Our three daily transmissions are available by e-mail,

fax or post. For further details, including subscription

rates, please contact:

OPEC News Agency

OPECPR & Information DepartmentObere Donaustrasse 93A-1020 Vienna, AustriaTel: (+43 1) 21112 376Fax: (+43 1) 214 9827E-mail: opecna@opec.org

OPEC NEWS AGENCY

N E W S L I N E

July/August 2002 9

N E W S L I N E

lgiers — Algeria’s Minister of En-ergy and Mines, Chakib Khelil,and the Chairman and Chief

Executive of the country’s state oil and gascompany Sonatrach, Abdelhak Bouhafs,signed seven exploration contracts worthmore than $100 million with internationaloil firms in July.

The contracts, awarded following anopen tender, were signed with the PetrolInvestment and Development Company(PIDC) of Vietnam, Gaz de France, theTunisian-Cypriot concern of Medex, theSpanish-German-Italian syndicate ofRepsol/RWE DEA/Edison, the French-Spanish consortium of TotalFinaElf/Cepsa and the US-Danish association ofAnadarko/Maersk.

The awarded blocks, which are locatedin the southwestern region of the countrycovering around 66,000 square kilometres,would be developed under a production-sharing contract with Sonatrach, the Al-gerian national oil and gas company said.

This round of exploration contracts ispart of Algeria’s plan to double its oil pro-duction capacity by 2004 and increase theamount of foreign companies operating inthe country, Sonatrach said.

On a visit to France a few days beforethe contracts were signed, Algeria’s Eco-nomic Advisor to the President, AbdelatifBenachenhou, said the tenders had beenawarded in “full transparency…and notunder private contracts”.

In this regard, he urged French oilcompanies to take part in such tenders to“help Algeria in its transparency policy”.

To assist the country in encouraginginvestment in the oil and gas sectors,Benachenhou pointed out that Algeria’s newlaw on hydrocarbons would be submittedto parliament for endorsement shortly.

But he stressed that Sonatrach wouldremain the major operator in the coun-try’s mining sector, and would retain 25per cent of all the discovered oil.

Under the terms of the signed explo-ration agreements, the foreign contractingparties are committed to covering the costs

Algeria’s Sonatrach signs sevennew exploration contracts with

oil majors following an open tenderrelated to the first stage of the schemes,including exploration, seismic research,and the drilling of wells.

Sonatrach said the levels of investmentto explore these seven blocks would involvean outlay of $16.5m for TotalFinaElf/Cepsa (block 325a-329), $27.5m for Gazde France (block 352a-353), $7.3m forAnadarko/Maersk (block 403c), $13.3mfor Repsol/RWE DEA/Edison (block351c-352c), $21m for PIDC (block 433a-416b) and $19m for Medex ($7.5m and$11.5m for blocks 226-229b and 242,respectively).

To accommodate the expansion of itscrude output capacity, Algeria plans to startenlarging its oil ports in October this year.

The Algerian Minister of Transport,Abdelmalek Sellal, said a call for tendersfor work on the country’s ports, at firsttargeting oil installations, had already beenlaunched.

Work at the oil ports of Arzew, Bejaia,and Skikda, located in the west, centre,and east of the country, respectively, wouldstart within three months, he said.

Sellal noted that his Ministry and theMinistry of Energy and Mines were ex-amining the establishment of offshoreloading techniques for the export of addi-tional volumes of hydrocarbons.

As for the enlargement of the coun-try’s other trade ports, Sellal said thisproject would be the subject of a Euro-pean Union (EU) support programme,while development of the port of Algierswould be boosted by a contribution fromthe United States.

Indonesia to earn$2.9bn from trans-ASEANMalaysian gas dealJakarta — The Indonesian treasury willearn $2.9 billion from its new $6.2bn gasexport contract with Malaysia, which wasdue to commence in August, it was re-vealed in the Jakarta Post newspaper.

The report said the 20-year deal wouldinitially start delivering 100 million stand-ard cubic feet per day (scfd) of gas througha 96 km pipeline from Block B in the WestNatuna Sea in Indonesia to facilities andpipelines in Malaysia’s Duyong field in theSouth China Sea.

The report said the initial deliveryvolume was due to be ramped up to thecontracted 250m scfd from 2007.

The subsea pipeline link was com-pleted recently and a ceremony to markthe gas delivery was due to be held in earlyAugust on site in West Natuna, the news-paper said, quoting officials from Indone-sia’s state oil and gas firm, Pertamina, andthe Indonesian unit of the recently-mergedConocoPhillips.

“We are now ready to deliver the gasto Malaysian waters,” the President andGeneral Manager of the Indonesian sub-sidiary Conoco Inc, Patrick L Meyer, said.

ConocoPhillips recently completed allgas-delivery facilities and the pipeline tothe Malaysian field, the first field-to-fieldlink between the two countries in South-east Asia, which comprised a major por-tion of the multi-billion dollar trans-asso-ciation of Southeast Asian nations(ASEAN) pipeline that will be assembledthrough bilateral links over the next twodecades for regional gas trade.

ConocoPhillips along with its recentlyacquired Gulf Canada Resources and otherpartners, the Japan Petroleum ExplorationCompany Ltd (Japex) and ChevronTexacoof the United States, have jointly invested$2.6bn in developing the facilities andrelated pipelines for exporting gas to theregion.

The gas is being imported by theMalaysian national oil corporation,Petronas, under a March 2001 contractsigned with Pertamina.

Industry sources, who declined to benamed, said Petronas was also aiming toimport 1,000m scfd of gas from Indone-sia’s Alpha-D field in West Natuna from2010. It was now working on farm-innegotiations, the sources said.

The trans-ASEAN pipeline, plannedmore than a decade ago, has already startedtaking shape with other inter-country linksand cross-border joint agreements betweenIndonesia, as the major supplier, andMalaysia, Singapore and Thailand as thebuyers.

A

N E W S L I N E

10 OPEC Bulletin

with TotalFinaElf for further developmentof the Al Khalij field by 2004.

The Qatari Minister of Energy andIndustry, Abdullah Bin Hamad Al Attiyah,said on the occasion that the developmentof the field entailed an investment of $150million and targeted new reservoirs, in ad-dition to increasing existing capacity.

Accordingly, QP agreed to grantTotalFinaElf the rights to appraise anddevelop an extension of the field on thenorthern side of block six.

An appraisal well would be drilled in2003 in this extension, which would bedeveloped from the new production plat-form, in case of success, Al Attiyah noted.

QP said offshore exploration had re-vealed that block six accounted for about2.8 billion barrels of “oil in place” andabout 300m barrels of “recoverable oil”.

Production began at the Al Khalij field,located some 130 km from Doha, inMarch 1997. Oil produced from the fieldis transported to Halul export island, 42km away, by means of two pipelines. Theoil is then processed at Halul.

Takreer signs two majorrefinery contractsvalued at $480mAbu Dhabi — The Abu Dhabi Oil Re-fining Company, Takreer, signed an agree-ment last month on an unleaded gasoline(ULG) and low sulphur gas oil (LSGO) projectwith Technip Italy and CBI EasternAnstalt.

Both contracts were valued at around$480 million.

In a statement, Takreer said theprojects which included the Engineering,Procurement and Construction (EPC),commissioning start up and maintenance,as well as the training of refinery person-nel, would be completed within 36months from the day of the award of thecontract, according to the official UnitedArab Emirates (UAE) news agency (WAM).

The scope of work for the ULG/LSGO

project includes the installation of newprocess units together with the requiredexpansion of offsites and utilities. It alsoincludes the refurbishment of some of theexisting process units within the Ruwaisrefinery in the UAE.

Once operational, the project wouldenable Takreer to strengthen its positionin the local as well as the internationalrefined petroleum products markets, thestatement said.

It would also allow the company topromote a cleaner environment throughthe production of superior quality prod-ucts.

The report said the company’s long-term commitments to its customers wouldbe further strengthened once the projectwas implemented.

US based Fluor Daniel carried out theproject’s conceptual study in 2000, whilethe UK’s Bechtel office carried out theFront End Engineering Design (FEED).The EPC tender enquiry was issued on acompetitive bid basis in July 2001 and USbased Oster Wheeler acted as the ProjectManagement Consultant (PMC) duringthe period.

New oil and gasregulatory authorityestablished in IndonesiaJakarta — The Indonesian President,Megawati Soekarnoputri, signed a regula-tion last month on the establishment ofthe new oil and gas authority, known inIndonesia as Balak, which is now the high-est body in the industry, taking over themanagement of these sectors from state-owned Pertamina.

Balak, which was formed under oil andgas law 22/2001, will award oil and gasconcessions, sign contracts, supervise com-panies operating in Indonesia, and regu-late the industry. It will also be independ-ent and accountable to the President who,in consultations with the House of Rep-resentatives, will appoint the top officials.

The former Director General of theOil and Gas Office at the Ministry ofEnergy and Mineral Resources, RachmatSudibyo, has been appointed as the firstChairman of Balak.

While Rachmat’s appointment wasconfirmed by the House of Representa-tives, it was revealed that the Vice Chair-man and the five deputies at Balak werestill to be appointed by the Minister ofEnergy and Mineral Resources, PurnomoYusgiantoro.

ASEAN energy ministers who met re-cently in Bali agreed to accelerate thedevelopment of the regional gas pipeline.

The Indonesian Minister of Energy andMineral Resources, Purnomo Yusgiantoro,told the 20th meeting of ASEAN Minis-ters that plans were also being studied toconnect a pipeline network to supply gasfrom Indonesia to Thailand.

Indonesia would be a major player inthe trans-ASEAN gas pipeline projectbecause of its enormous gas reserves,Purnomo said.

The Philippines, Vietnam and Cam-bodia are the future gas markets beingstudied by the ASEAN energy officials.

The pipeline would be a catalyst tobuild new regional markets, taking morethan half of the over 300 trillion cu ft ofnatural gas in the region, generating a neweconomy.

Qatar signs deal toboost Al Khalij oiloutput capacityDoha — TotalFinaElf Exploration andProduction Qatar has signed a multi-mil-lion dollar contract with the Abu Dhabibased National Petroleum ConstructionCompany (NPCC) for the Engineering,Procurement and Construction (EPC)activities to almost double the oil outputcapacity from the Al Khalij North devel-opment project.

The 20-month project would boost theproduction of the Al Khalij oil field, lo-cated on block six offshore, from its cur-rent capacity of 40,000 b/d to 80,000b/d by 2004, TotalFinaElf said in a state-ment.

Under the terms of the new contract,the NPCC would set up a wellhead andprocess platform, around 16 km of subseapipeline, and 10 km of power cable.

The agreement was signed on behalfof TotalFinaElf Exploration and Produc-tion Qatar by its Managing Director,Patrick Pouyanne, and for the NPCC byits General Manager, Aqeel Madhi.

Qatar Petroleum (QP) and TotalFina-Elf manage the field under a partial oper-ating agreement.

Last month, QP also signed an explo-ration and production-sharing agreement

N E W S L I N E

July/August 2002 11

In briefLocal media reports said Rachmat’s

first task would be to sign the transfer ofa large coastal plains Pekanbaru conces-sion in Riau province from the American-owned PT Caltex Pacific Indonesia overto the government.

With Balak in place, Pertamina is nowbeing relieved of its national responsibil-ity and turned into a commercial entitywith limited liability that will eventuallybe listed on the stock exchange, accordingto sources in the Ministry of Energy andMineral Resources.

All 600 employees of Pertamina’s pro-duction-sharing contract managementdirectorate would be transferred to Balakfor one year, following which employeeswould have a choice to either stay with thenew body or move back to the state oiland gas company.

Strategic oil storagefacility inaugurated inSaudi ArabiaRiyadh — The Saudi Crown PrinceAbdullah recently inaugurated anotherstrategic oil storage project in the Makkahregion of the country.

It is one of five strategic storage facili-ties planned for various parts of the King-dom to ensure energy supplies in emer-gency situations.

The government has invested around$2.9 billion to build the five storage fa-cilities at Riyadh, Jeddah, Abha, Madinah,and Qassim, which are all managed by thestate-owned oil and gas company, SaudiAramco.

Prince Abdullah opened the first stor-age facility in Alkharj, near Riyadh, inFebruary 1999.

The new project covers an area of 41sq km on the old Makkah road, the SaudiPress Agency (SPA) reported.

Each stockpiling facility was designedto store millions of barrels of petroleumand products and could meet the King-dom’s requirements for months, the reportsaid.

All the storage facilities were due to belinked to the operation control centre ofSaudi Aramco in Dhahran, which moni-tors the level of storage and the quality ofpetroleum, SPA said.

“They are also linked to the Defenceand Aviation Ministry to take decisions inemergency situations,” the report added.

Singaporean powerfirm considers use ofVenezuela’s OrimulsionSingapore — Singapore’s Power Serayasaid recently that it was in the final stageof evaluating the use of Orimulsion, Ven-ezuela’s boiler fuel, for use in its electricitygenerating plant.

The firm had tested the fuel for thepast two years and was now assessing itsviability, the Deputy Managing Directorof Power Seraya, Lee Sin Chong, told theOPEC news agency, OPECNA.

He said a final decision had not beenmade on the use of the heavy fuel, whichhe added was competitive, from a costperspective, with natural gas.

The 750 megawatt (mw) power plantwas in the process of selecting a suitablefuel in the near future, maintaining anoption for natural gas and Orimulsion, Leesaid, adding that a decision was expectedsoon.

Power Seraya’s earlier agreement withVenezuela on the use of Orimulsion wassubject to the viability of the project, hepointed out.

It was the only electricity generatingplant in Southeast Asia which had triedand tested Orimulsion within the last twoyears.

Lee noted that there would be changesto the electricity market in Singapore withthe government’s proposed privatization ofits power sector, along with the plan tobuild more plants to satisfy the anticipatedincrease in demand.

He said that Power Seraya was one ofthe three state-owned electricity-generat-ing plants that would be privatised.

At least two more new power plantswere due to be built within the next threeto four years by independent investors,including Anglo-Dutch concern, RoyalDutch/Shell, to supply electricity to theopen market, Lee said.

At the same time, natural gas importswould be increased from 2003 onwardswhen another 350 million standard cubicfeet per day of natural gas from Indonesia

Experts to devise EU energy policyBRUSSELS — The European Commission(EC) has set up a panel of industry experts toarticulate a comprehensive European Union(EU) policy on energy and transportation.The EC said in a statement recently that thenew Energy and Transportation Forum (ETF)would debate EU energy and transportationpolicy with the goal of restructuring the in-dustries and making them more competitive.The forum’s 34 members are drawn from abroad spectrum within the two industries, in-cluding unions, managers of networks andinfrastructure, users and consumers, and en-vironmental protection and safety organiza-tions. “The wealth of expertise and experiencewithin this forum will help to enhance ourenergy and transport policies,” EC for En-ergy and Transport, Loyola de Palacio, said.The forum is expected to make public itsopinions based on EC initiatives, monitorenergy and transport issues, and serve as aninformation resource for devising EU policy.

Norway offshore reserves to last 50 yearsBRUSSELS — The Norwegian Minister of Pe-troleum and Energy, Einar Steensnaes, saidthat Norway’s offshore oil fields could keepproducing crude for another 50 years withnew technologies and government policies inplace to encourage E&P. Steensnaes said thatalthough his country has been producing oilfrom the North Sea for 30 years, some 60per cent of its reserves remained untapped.Norway is the world’s third largest oil exporterand a key non-OPEC producer. Steensnaessaid that his country “has a potential formaintaining its oil production for another 50years and its gas production for another 100years.” But he said government policy wascrucial to provide the incentives needed.Norway is currently considering changes inits offshore oil licensing policies to give oilcompanies a longer-term view of whichblocks would become available in the futurein the hope of stimulating greater interest.

Venezuela resumes oil exports to CubaCARACAS — Petróleos de Venezuela SA(PDVSA) President, Alí Rodríguez Araque,announced that his country would resumeoil supplies to Cuba commencing August 1.PDVSA had suspended exports of Venezue-lan oil to Cuba after an unsuccessful militarycoup was launched against the VenezuelanPresident, Hugo Chávez, in April. Rodríguezsaid that the two countries had agreed to re-store supplies. “Thus far, Cuba has paid al-most $1bn, and, while that agreement ismaintained, Venezuela will continue receiv-ing the benefits of counting on a market thatis the most important in the Caribbean,” he said.

N E W S L I N E

12 OPEC Bulletin

In briefflowed into a receiving station, the con-struction of which started recently, Leesaid.

Singapore has been importing 325mscfd of natural gas from Indonesia sincethe beginning of 2001 and another 150mscfd from Malaysia since 1991, as part ofthe planned extension of the trans-ASEANgas pipeline network.

Officials pointed out that natural gaswas becoming the preferred fuel for thepower sector through the use of combined-cycle gas turbine technology, which wasaccounting for 40 per cent of the electric-ity demand in Singapore and was expectedto account for 50 per cent by 2004.

In a separate story, Morocco’s Ambas-sador to Venezuela, Brahim Moussa, hassaid that his country also was interested inpurchasing Orimulsion.

“We have a plan to purchaseOrimulsion. It will be very fruitful touse it in our electricity and energy-gener-ating centres because it is an economicand non-contaminating product,” theMoroccan diplomat said in an interviewwith the Venezuelan state news agency,Venpres.

Emirates oil company,Djibouti form LPGjoint-venture firmDubai — The Emirates National OilCompany (ENOC) has entered into ajoint venture with the Djibouti govern-ment to set up ENOC Djibouti Ltd SAZF,which will bottle and distribute liquefiedpetroleum gas (LPG) in the East Africancountry.

The move represents the formation ofthe ENOC’s 24th company and was set upin response to Djibouti’s LPG market con-ditions.

The agreement is expected to lead toa drastic reduction in the retail cost percylinder of LPG, making the product ac-cessible to the bulk of Djibouti’s popu-lation of 600,000 people.

ENOC is also considering setting upa Djibouti-wide retail network based onits specifications and design.

“Africa’s untapped potential is hugewith its growing power and energy sectorinfrastructure needs, and our Djibouti

operations could be the stepping stone tointroduce ENOC’s diverse products andservices portfolio to the rest of Africa,”ENOC Chief Executive, and Member ofthe Board, Hussain Sultan, said.

The official United Arab Emirates(UAE) news agency (WAM) reported thatENOC Djibouti would initially use stand-ard 12 kilogramme cylinders, but wouldsoon launch a market-specific product tofurther bring down end-consumer costs,achieving greater economies of scale inDjibouti’s 36,000 annual LPG cylindermarket.

ENOC is currently evaluating plans tointroduce other petroleum products toDjibouti and its bordering countries.

“Djibouti’s critical geographical posi-tion with its port will drive our expansioninto the larger landlocked market of Ethio-pia, as well as Eritrea, Somalia and Sudan,”Sultan said.

First shipment ofQatari LNG to Indiadue in December 2003Doha — The first shipment of Qatariliquefied natural gas (LNG) to India willset sail in December 2003, the Qatari Min-ister of Energy and Industry, Abdullah BinHamad Al Attiyah, said last month.

Al Attiyah made the announcementin the Qatari capital after holding talkswith a visiting Indian delegation led by theIndian Petroleum Secretary, BKChaturvedi.

“We held fruitful discussions. Thecurrent efforts of exporting Qatari gas toIndia are going as per schedule,” the QatariMinister said.

The head of the Indian delegationpointed out that all the facilities for re-ceiving Qatari gas in his country were wellplaced.

Malaysia’s Petronet LNG entered intoa sales and purchase agreement withQatar’s RasGas in July 1999, under whichQatar would export 7.5 million tonnes peryear of gas to India, Chaturvedi said.

Of this amount, 5.0m t/y would go tothe Dahej terminal in Gujarat, while therest was destined for Kochi in Kerala.

Meanwhile, the Indian PetroleumSecretary said that the construction of the

Malaysia calls for ASEAN oil stockpileBALI — Malaysia’s Minister of Energy, Tel-ecommunications and Multimedia, DatukLeo Moggie, called on Southeast Asian oilproducers to establish a joint crude stockpilefor the regional market to ensure security ofsupply. He also encouraged Indonesia to workwith his country in initiating a feasibilitystudy towards the creation of such a stock-pile. “We have not yet made the detailedmechanism. We are just floating the idea to(ASEAN) member countries,” the Ministersaid in Indonesia. He said it was importantto ensure “comfort of oil supply” as Malaysiawould become a net importer by 2008 andIndonesia some time afterwards. Comment-ing on the Minister’s proposal, the DirectorGeneral of Oil and Gas at the IndonesianMinistry of Energy and Mineral Resources,Rachmat Sudibyo, said he supported the idea,but that further discussion among othermembers of the Association of SoutheastAsian Nations (ASEAN) was needed.

Ageing facilities lift oilrig demandSINGAPORE — Demand for new rigs and theupgrade of existing production facilities wasbeing buoyed by the need to replace or sub-stantially improved ageing units, the Singaporebased Keppel Corporation said recently. Theoffshore market remained active in the Ameri-cas, West Africa and the Asia-Pacific with ahealthy number of enquiries being made forrelated vessels and services, the company said.Keppel builds, upgrades and converts rigs, pro-duction platforms, as well as provides upstreampetroleum exploration related services. Al-though the market remained competitive,Keppel said that as of the end of June it hadreceived orders worth $1.2bn for rigs, floatingproduction storage and offloading (FPSO)vessels, processing platforms, barges, boats andtugs, to be delivered from the second half ofthis year through to 2004.

EC to use co-generation to reduce oil useBRUSSELS — The European Commission(EC) plans to use co-generation plants tominimize greenhouse gases and reduce itsreliance on oil and other fossil fuels. The ECsaid the co-generation plants, which produceheat and electricity in a single process, are asmuch as 10 per cent more efficient than con-ventional plants, where heat and electricityare produced separately. EU Commissionerfor Energy and Transport, Loyola de Palacio,said the move was an attempt to meet thechallenges set out in the November 2000energy Green Paper. “This new proposal willhelp limit the growing external dependencefor energy and (the production of ) harmfulgreenhouse gas emissions,” she said.

N E W S L I N E

July/August 2002 13

In briefDahej terminal was going to plan, and thatmechanical completion was scheduled forDecember 2003. The supply of gas toDahej would be on a free-on-board (fob)basis for 25 years and 2.5m t/y of LNG

would be imported during the first year ofoperation.

He added that the supply for the Dahejproject would commence in Decembernext year and for Cochin in January 2005.

“We will establish a special portin Dahej to receive the LNG carriers,”Chaturvedi commented.

He cited huge demand for Qatari gasin India. “LNG demand in India was esti-mated at 120m t/y, while the actual needwas put at 65m t/y,” he said.

Indian sources said Petronet was alsosetting up a re-gasification plant in Dahej.The supply of re-gasified LNG would bemade through the 2,000 km Hazira-Bijaipur-Jagdishpur pipeline to the sixIndian states of Gujarat, Madhya Pradesh,Rajasthan, Uttar Pradesh, Delhi, andHaryana, the sources said.

Meanwhile, Qatar plans to boost itsoverall LNG sales to 40m t/y by 2010. Bythen, it expects half of its LNG exports togo to Asian Pacific markets, with the otherhalf expected to go to Europe.

Qatar currently has LNG supply con-tracts with Japan, Korea and Italy, and hassigned MOUs with Spain and Taiwan,amongst others. The Gulf State is also indiscussions with France, China, Lebanonand with its closer regional neighbours re-garding their supply requirements.

To ensure adequate infrastructure forexpanding such markets, Qatar plans toset up three new LNG berths and fourcondensate berths by 2008.

It currently has two berths for loading135,000 cubic metres of LNG and anothertwo for condensates for vessels up to300,000 deadweight tons (dwt).

There is also a 600 metre long drycargo-and-container berth for accommo-dating vessels up to 45,000 dwt.

The new berths are proposed to meas-ure around the same length as the existingfacility in Ras Laffan industry city.

Government officials from Qatar Gassaid rising natural gas production andexports were expected to sustain the state’sreal gross domestic product (GDP) growthat an annual rate of around 5.9 per centfor a long time to come.

Last year, Qatar became the fourth-largest producer of LNG, almost six yearsafter launching its first plant. Indonesiawas the top producer, with 24m t/y, Alge-ria assumed second place with 19.3m t/y,while Malaysia produced 15.4m t/y.

Unocal in accord withPertamina over Indonesiangeothermal dealJakarta — A Unocal subsidiary and itsequity investor have reached an agreementover the issues concerning pricing andproduction for the Gunung Salakgeothermal project in Indonesia.

Unocal subsidiary, Unocal Geothermalof Indonesia (UGI) and a 50-per centequity investor of UGI, Dayabumi SalakPratama (DSPL), reached an agreementwith the Indonesian state-owned electric-ity company, PT PLN, and the Indone-sian state-owned oil and natural gas com-pany, Pertamina.

The new agreement extends the con-tracts to 2040 and includes a commitmentby PLN to accept as much steam andelectricity as possible from plants such asGunung Salak to meet increased demandin the Java-Bali electricity distribution sys-tem.

Gunung Salak is a 330 megawatt (mw)geothermal steam production and electric-ity generation project on the western sideof the island of Java.

UGI operates the steam fields as acontractor to Pertamina and delivers steamto PLN, which operates three electricity-generating plants at Salak.

UGI also delivers steam to DSPL forthree other generating plants that supplyelectricity to PLN on behalf of Pertamina.

The accord lowers the selling price ofelectricity delivered by DSPL and steamsupplied to PLN by UGI.

It also provides for payment by PLNof a portion of the past due receivablebalances to Unocal, while Unocal foregoesa portion of the receivable amounts.

“This is a win-win solution for allparties,” President of UGI, Brian Marcotte,said.

“The people of Indonesia get cost-effective, environmentally friendly electri-cal power, and UGI has the opportunity

Ecuador to revive slumping oil exportsQUITO — Ecuador said it would guaranteeinvestment openings amounting to $4.88billion in the domestic oil sector involvingseven schemes, according to governmentsources recently. The major part of the in-vestment — around $3.5bn — is earmarkedfor the Ishpingo-Tambococha-Tiputini Petro-leum Project. About $800 million in addi-tional investment would be made in refiningfor the construction of a plant for the con-version of oil to process residuals. Another$362m would be needed for the explorationand exploitation of six oil blocks that wouldfeature in the government’s ninth round ofinternational bidding. The investment shouldhelp boost Ecuadorian oil exports, which arecurrently lying well below the target set forthis year by the state oil company,Petroecuador.

Worldwide drilling activity mixed in JuneNEW YORK — Baker Hughes has announcedthat the worldwide rig count for June was1,778, which amounted to an increase of 120rigs from the previous month, but down 555from last June. The international rig count,which includes world totals excluding the USand Canada, stood at 730 for June, up 12from the previous month, but down from the760 counted in 2001. The international off-shore rig count for June stood at 232, whichis 13 more than in May and unchanged fromthe same time last year. The US rig count forJune was 843, up 17 from May, but downfrom the 1,271 recorded the previous June.The Canadian rig count for June was 205,higher by 91 from the 114 counted in Mayand down by 97 from the 302 recorded in2001. The Baker Hughes rotary rig tallies arecounts of the number of drilling rigs activelyexploring for, or developing oil or natural gasaround the world.

US drilling slows in 2Q02NEW YORK — Estimated completions of USoil, natural gas and dry wells fell by 33 percent in the second quarter of this year, com-pared with the same period in 2001, theAmerican Petroleum Institute (API) reported.According to the API’s quarterly report onwell completion, an estimated 6,565 oil,natural gas and dry wells were completed inthe second quarter this year, down from 9,850in the same quarter in 2001. Gas comple-tions were down by 37 per cent to 3,979, oilwells decreased by 33 per cent to 1,668, anddry holes fell 10 per cent to 918 year-on-year. Total exploratory completions weredown 31 per cent in the second quarter thisyear and development completions lower by33 per cent, respectively.

N E W S L I N E

14 OPEC Bulletin

In briefto maximize the sale of steam to powerthese facilities and receive a return on itslong-term investment in the geothermaland power sector.

“This is an important step towardsrestoring investor confidence in Indone-sia,” he added.

In a related story, Indonesian legisla-tors last month endorsed a plan to drafta law on geothermal power to help pro-vide legal certainty for investors in thefield.

In a rare show of unity, the nine po-litical factions of the Indonesian House ofRepresentatives approved the plan andinitiated the drafting of the law to helpthe government formulate its geothermalpolicy.

Currently, Indonesia only has a Presi-dential decree concerning geothermalpower.

Indonesia has sufficient geothermalresources to generate 20,000 megawatts ofelectricity, or 40 per cent of the estimatedglobal geothermal resources.

GCC must tap privatesector to finance energyprojects — GOICDoha — Gulf Co-operation Council(GCC) member states need to resort totheir wealthy private sectors to financecostly mega-projects in gas and electricity,instead of turning to foreign markets andputting further pressure on their exhaustedbudgets, it was stated recently in the Qataricapital.

The Gulf Organization for IndustrialConsulting (GOIC) that advises on themanufacturing policies in the GCC, saidthe six members of the Council, whichincludes Bahrain, Kuwait, Oman, Qatar,Saudi Arabia and the United Arab Emir-ates, already operated around 402 jointprojects worth nearly $30 billion, but thefuture trend was for expensive high value-added ventures, including industry, elec-tricity and liquefied natural gas (LNG)schemes.

“There is no doubt that the GCCcountries are moving into the new millen-nium with massive projects that focus onhigh value-added, long-term developmentventures that will enable them to face

UK offshore oil output at eight-month lowLONDON — Oil production from the UKsector of the North Sea fell in May to its low-est level for eight months, according to theRoyal Bank of Scotland. Oil output averaged2.1 million barrels per day, down 5.6 per centfrom April and 3.0 per cent lower than theprevious May. The decline represents a con-tinuing slide in British oil output, which hasfallen steadily over the past three years. Inthe 12-month period following May 2001,daily output fell by 6.5 per cent, comparedwith the same period in 2000. The fall,exacerbated by a drop in crude prices to$25.50/b, and a decline in the value of theUS dollar, reduced average daily revenue byover $4.5 million to $55.05m.

Oman signs oil deal with Thai firmMUSCAT — Oman signed a new oil conces-sion agreement with the Thai company,PTTP-Middle East Ltd. The accord coversoil and gas exploration and production inblock 44 in northern Oman, over an area of1,162 square kilometres. The company willconduct a three-year intensive explorationprogramme, including drilling one well andconducting geological and geophysical sur-veys. It may extend its exploration activitiesfor additional periods to carry out other pro-grammes on the block. It was expected thatmore than $19 million would be spent onthe company’s operations, while the Omanigovernment would bear no investment risks.The Omani Minister of Oil and Gas, Mo-hammed Bin Hamad Al-Rumhy, noted thatthe Thai company was one of the major oilplayers in Southeast Asia. It had developedexpertise in the sector and had record suc-cesses in southeast Asia, he said.

Algeria and Peru hold energy talksALGIERS — The Algerian Minister of Energyand Mines, Chakib Khelil, held talks withthe Peruvian President, Alexandra Toledo, inLima, according to a recent statement car-ried by the Algerian Press Service (APS). Thediscussions centred on strengthening bilat-eral energy co-operation between the twocountries, including the participation of Al-geria’s Sonatrach in the Peruvian gas fieldproject of Camisea, the statement said. TheAlgerian oil company, which holds a 10 percent share in the scheme, will exploit the fieldalong with five other international oil firms— Argentina’s Pluspetrol and Teggas, HuntOil Company of the US, the SK Corpora-tion of South Korea, and Grana y Monteroof Peru. During his stay in Lima, Khelil alsoheld talks with his Peruvian counterpart,Quindira Salmon, with whom he set up aprogramme of energy sector co-operation.

competition and globalization,” the GOICsaid in a recent study.

“Since such giant projects hinge onsufficiency of capital, their financing re-mains a major impediment. Thus, attract-ing the private sector’s resources will be aneffective financing settlement against theexisting burdened GCC budgets,” itadded.

The GOIC study said that the gasindustry in the GCC, whose states holdnearly 17 per cent of the world’s totalnatural gas reserves, presented itself as aperfect opportunity for both the govern-ment and the private sector to collaboratein funding-related projects.

It cited the Dolphin project, involv-ing a pipeline between the United ArabEmirates (UAE) and Qatar’s giant Northfield, and the proposed Gulf gas network,which could be either an extension ofDolphin or a separate pipeline networkpumping natural gas to regional countries.

As part of that scheme, Bahrain wouldneed 500 to 750 million cubic feet ofnatural gas a day, while between 850m and1.0 billion cu ft/d could be supplied toKuwait.

Dolphin, which was initiated by theUnited Arab Emirates Offsets Group,involves investment of more than $3.5bnand the supply of nearly 2.0bn cu ft/d ofgas to the UAE.

“The gas industry has succeeded inbecoming a tempting aspiration for theGulf private sector, which has shown will-ingness to contribute to building a gaspipeline network to transport natural gasbetween GCC countries,” the GOIC said.

“The private sector could also play amajor role in the electricity networkproject, which has been endorsed by GCCcountries.

“This project is expected to save up to$3.6bn in its initial phase only and itinvolves expanding the capacities of mem-ber states to make them more efficient infacing the steady growth in consumption.”

According to the GOIC, electricitydemand was growing as fast as 10 per centin the UAE and this meant that around5,500 megawatts (mw) would be addedto its existing power capacity of 7,600 mw.

In Saudi Arabia, nearly 13,400 mwwould be added to its 21,500 mw capac-ity, while an additional 5,000 mw wouldbe set up in Kuwait, 1,500 mw in Qatar,

N E W S L I N E

July/August 2002 15

In brief1,075 mw in Oman, and around 700 mwin Bahrain, the report showed.

It said the contribution by the privatesector to such projects would support theGCC’s drive to establish more joint ven-tures within economic integration plans.

A breakdown showed that the UAEhad the lion’s share of joint projects in theGCC, with around 124 ventures. It wasfollowed by Saudi Arabia with 108schemes.

On a sectorial basis, trade topped thelist, attracting 167 projects, while therewere 88 schemes in industry, 75 in con-tracting, and 40 in services. The rest cov-ered finance and farming.

UAE distributorsseeking increase indomestic fuel pricesAbu Dhabi — Distributors of gasolineand other petroleum products in theUnited Arab Emirates (UAE) have askedthe government to approve another in-crease in fuel prices to avert further lossescaused by strong crude prices and thehigher costs associated with the buildingof petrol stations.

The Abu Dhabi National Oil Com-pany for distribution (ADNOC-FOD)made the recommendation to the federalgovernment, along with other UAE dis-tributors of petroleum products, follow-ing large losses accrued from fixed petrolprices.

“We have made a joint recommenda-tion to the federal government to agree onincreasing the prices of gasoline,”ADNOC-FOD’s Director General, JamalAl Dharif, said.

“ADNOC-FOD alone lost nearly 80per cent of its income in 2000, due to asurge in crude prices (and) other UAE oilproduct companies also suffered fromlosses,” he told reporters.

Al Dharif said an increase in gasolineprices had also become necessary becauseof the growing costs associated with build-ing modern fuel stations to replace olddepots.

“We urge the government to raisegasoline prices, which normally fluctuatein world markets along with crudeprices...but here in the UAE, the govern-

ment has set their prices at fixed levels,despite the continuous fluctuations incrude prices,” he noted.

Concerning ADNOC-FOD’s futureplans, Al Dharif said 25 new petrol sta-tions would be opened in the UAE thisyear at a cost of around $55m, comparedwith an outlay of nearly $47m in 2001.

Kuwaiti study urgesuse of erosion agentson oil pipelinesKuwait — A three-year study on petro-leum pipelines indicates that the use ofanti-calcification and erosion agents couldprolong the life of crude oil productionpipelines, a specialist from the KuwaitInstitute for Scientific Research (KISR)said recently.

Dr Abdulhameed Al-Hashem said thecalcification and erosion of pipelines werethe two major problems facing oil produc-tion.

While erosion led to holes and there-fore leakage, calcification (limestone build)gradually reduced the diametre of thepipes, inhibiting smooth flow and ulti-mately leading to blockage, he explained.

The findings of the study were of greatimportance because the petroleum indus-try accounted for over 95 per cent ofKuwait’s income, he was quoted by theKuwaiti news agency (KUNA) as saying.

The move to correct the problemswould save colossal sums already spent onpipelines and industry infrastructure andwould facilitate better management andsmoother operation, he noted.

The study was a joint project carriedout by KISR and the Kuwait PetroleumCompany (KPC). Funding was providedby the KISR.

EIA estimatesKuwaiti oil reservesat 96.5bn barrelsNew York — Kuwait possesses 96.5 bil-lion barrels of proven oil reserves (includ-ing its share of the Neutral Zone), orroughly nine per cent of the world’s totaloil deposits, the Energy Information Ad-

US petroleum imports fall to decade-lowNEW YORK — Imported crude oil and for-eign refined products fell by an average of8.5 per cent in the first half of 2002, the larg-est half-year decline in more than 10 years,the American Petroleum Institute (API) saidrecently. The reasons for the decline wereincreased production from deepwater Gulfof Mexico platforms, newly developedAlaskan reserves and “exceptionally” weakdomestic demand. Total imports, compris-ing gasoline, other fuels and crude oil were11.17m b/d from January through to June,and last month they declined by 3.6 per cent,compared with June 2001, the API monthlystatistical report said. Imports in the first halfof the year represented about 58 per cent ofthe total US consumer demand. Gasolineoutput of 8.25m b/d set a record for the firstsix months, albeit by a scant one-sixth of apercentage point.

Natural gas usage increases in USNEW YORK — For the fourth year in a row,seventy per cent of the single-family homescompleted in the US last year used naturalgas heating. According to the US CensusBureau Report Characteristics of New Hous-ing, 2001, electric heating captured 27 percent of the market, followed by heating oil atthree per cent. “Natural gas remains so popu-lar because it is comfortable, reliable and easyto use,” the American Gas Association’s Di-rector of Marketing and Customer Care,Thedra Lewis, said. “It is good value, too,costing less than other forms of home energy.”The US Department of Energy reported thatin 2002 natural gas cost $6.56 per metricBritish thermal units, less than electricity(costing $24.27), propane ($9.53), orNumber 2 heating oil ($7.79).

Omani firm, Dolphin Energy sign gas dealABU DHABI — The Oman Oil Company(SAOC) and Dolphin Energy Ltd of AbuDhabi have announced plans to supplyOmani natural gas to new power and waterplants currently under construction in theFujairah Emirate. Under the terms of thememorandum of understanding (MOU) signedin Abu Dhabi, SAOC will deliver the gas bypipeline to the Omani border and Dolphinwill transport the gas within the United ArabEmirates (UAE). The anticipated deliveriesof gas during the contract period lasting upto five years would average around 120 mil-lion cubic feet per day, the UAE news agency(WAM) reported. Dolphin’s CEO, AhmedAli Al Sayegh, said his company was “de-lighted to take another step in the creation ofa gas network for the Gulf Co-operationCouncil with our colleagues in Oman”.

N E W S L I N E

16 OPEC Bulletin

In briefUS approves oil, gas leasing programmeNEW YORK — The US Interior Secretary, GaleNorton, recently approved a five-year pro-gramme for the sale of oil and natural gasleases on the country’s Outer ContinentalShelf (OCS) beginning 2003. The approvalwould allow the US Minerals ManagementService (MMS) to sell 20 leases in eight plan-ning areas in the Gulf of Mexico and off thecoast of Alaska. “The Secretary’s approval ofthe new programme is the culmination of an18-month process, during which the MMSand the Department of the Interior consultedwith coastal states, the public at large, theenvironmental community and the naturalgas and oil industry,” MMS Director, JohnnieBurton, said. “The new programme supportsthe President’s national energy policy and willhelp meet the future energy needs of ourcountry in an environmentally sound man-ner,” he said in a statement.

Iraq, India sign energy co-operation accordBAGHDAD — Iraq and India recently signedan agreement to bolster trade ties, includingthose in the oil sector, the two sides an-nounced following a meeting of the jointcommission. After meeting the Iraqi Minis-ter of Oil, Amer Mohammed Rasheed, theIndian Minister of Petroleum, Ram Naik, de-clined to identify any specific areas of co-op-eration between the two countries, but saidthat “work is progressing” on an oil conces-sion in southern Iraq controlled by India’s Oiland Natural Gas Corporation (ONGC). Naikalso announced that ONGC would open anoffice in Baghdad. At the last joint meeting acontract was signed awarding explorationBlock No 8 in Iraq to the Indian oil company.

US oil pipeline inspections to accelerateNEW YORK — US oil pipeline operators ex-pect the pace of internal inspections to stepup in the years ahead, according to a recentsurvey conducted by the American PetroleumInstitute (API). The survey, presented by APIGeneral Manager, Marty Matheson, at ameeting hosted by the US Department ofTransportation’s Office of Pipeline Safety, fo-cused on the inspection plans of 15 pipelineoperators which have around 70 per cent of theinterstate oil pipeline mileage regulated bythe office. Matheson said the inspection ratefor oil pipelines would more than double. Ifthis rate were projected to include the entirepipeline system, about 36,800 km of pipelinesout of a total of 256,000 km would be in-spected each year. In-line inspections are con-ducted with instrumental tools called “smartpigs” which are slowly propelled through pipe-lines to identify and evaluate metal loss, dents,deformations and other potential problems.

ministration (EIA) reported in its latestupdate on the country.

Along with Saudi Arabia and theUnited Arab Emirates (UAE), Kuwaitremained one of the few oil-producingcountries in the world with significantexcess oil production capacity, the EIAnoted.

It pointed out that, as one of theworld’s leading oil-producing states, Ku-wait’s economy was heavily dependent onrevenue from crude.

With the rebound in oil prices seensince late 1999, the country had reaped arevenue windfall, the EIA observed.

For 2001/02, Kuwait had been fore-casting a budget deficit of around $6.0billion, but this assumed an oil price ofonly $15 per barrel.

With oil prices averaging significantlyabove that level during fiscal 2001/02,Kuwait appeared to have experienced amodest budget surplus of around $1.5bninstead, the EIA said.

But it noted that the Gulf State wasaiming to diversify its economy away fromnear-complete dependence on oil and statesubsidies.

Currently, the State relied on oil rev-enue for around 95 per cent of its totalexport earnings and two-fifths of the na-tion’s gross domestic product (GDP), the re-port said.

Kuwait channelled around 10 per centof its oil revenue into its “Future Genera-tions Fund” for the day when its oil in-come would run out. As of 2000, the Fundwas worth around $50bn.

Zangeneh calls formore investment inIranian gas industryTehran — The Iranian Minister of Pe-troleum, Bijan Namdar Zangeneh, saidlast month that Iran had lost many chancesof securing contracts in its gas industryover the past few years, hampering itsability to boost exports.

He told reporters in the Iranian capi-tal that despite holding 18 per cent of theworld’s total gas reserves, the country’sexports were at a record low.

Quoted by the Islamic Republic NewsAgency (IRNA), the Minister said a nega-

tive balance between natural gas exportsand imports was unjustifiable and he calledfor more efforts to be made for exportingnatural gas.

Commenting on the meagre volumeof Iranian natural gas exports to neigh-bouring countries, Zangeneh said Indiawas the biggest market for Iran’s naturalgas.

He noted that phase 11 and the sub-sequent phases of the South Pars gas de-velopment project in Iran would be ear-marked for the export of natural gas andliquefied natural gas (LNG).

However, Zangeneh observed that theexport of natural gas to India by an over-land pipeline would face many securityrisks, proposing that Iran export LNG in-stead.

He pointed out that no considerableinvestment had been made between 1997to 2001 to raise the country’s gas produc-tion capacity, adding that most of the 15buy-back contracts concluded over recentyears concerned the development of Ira-nian gas fields.

The buy-back contracts were signed toincrease the country’s oil production ca-pacity by 610,000 b/d, he said by meansof clarification.

The Minister noted that the annualvalue of products yielded by the eightphases of South Pars stood at around $5.5billion.

He said new projects for developmentin the petrochemical industry, includingphase one of the Amir Kabir Petrochemi-cal Complex, aromatic III, and engineer-ing polymers, would be commissionedboth this year and in 2003.

Zangeneh expressed the hope thatIran’s share in global petrochemical pro-duction would rise to 2.5 per cent by 2005,from 0.74 per cent at present.

The share of Iran’s petrochemical ex-ports should also rise to 5.8 per cent by2005 from the current 0.75 per cent. Onthe impact of the sanctions imposed onIran’s oil industry by the United States,Zangeneh said they had been in place formany years and had proved to be ineffec-tive.

The US aim in imposing the sanctionshad been to prevent the conclusion ofcontracts for the development of oiland gas fields in Iran, but to no avail, headded.

July/August 2002 17

E N V I R O N M E N T A L N O T E B O O KE N V I R O N M E N T A L N O T E B O O K

he US Senate Environment andPublic Works Committee ap-

proved a bill (the Clean Power Act)at the end of June that would requiresubstantial reductions in emissions byutility companies, over the objections ofdetermined opponents who said the meas-ure would never become law. Under theJeffords bill, utilities would have to reduceemissions of sulphur dioxide and nitrogenoxides by 83 per cent from current levels,mercury by 90 per cent and carbon dioxideby 23 per cent by 2008. The measurewould also give operators of older powerplants until 2013 to adopt the newestemissions technology.

Californian Governor, Gray Davis, isexpected to sign a controversial bill thatwould make the state the first in the nation

to regulate vehicle greenhouse gas emis-sions. The legislation would require thestate’s Air Resources Board to adopt regu-lations that would achieve “the maximumfeasible reduction” in emissions of green-house gases, including carbon dioxide,emitted by cars and light-duty trucks, thecategory that includes Sport Utility Vehi-cles (SUVs). The regulations, which shouldbe completed by 2005, would not takeeffect until January 1, 2006.

The South Korean government ap-proved the Kyoto Protocol in its weeklyCabinet meeting on June 30 and sent thebill to the National Assembly for ratifica-tion. Korea is exempt from the countriesrequired to cut emissions in the first com-mitment period, 2008–12.

Toyota Motor Corporation said it

would begin limited marketing of its fuelcell hybrid car by the end of this year, ayear earlier than originally planned, inorder to raise social awareness of the clean-running vehicle. The vehicle, which willrun on pure hydrogen, will be available onlease. The firm expects some 20 units tobe leased to limited customers in Japanand the United States in the first year.Toyota expects full-scale commercialisa-tion of its fuel cell vehicles in 2010 at theearliest, on condition that the infrastruc-ture and support for such vehicles are inplace.

Dams and their reservoirs are signifi-cant sources of heat-trapping greenhousegases, contrary to hydropower industryassertions, environmentalists said in June.According to a report by the US based

The OPEC Secretariat established its own Environ-mental Task Force (ETF) in 1994 to monitor devel-opments in the field of energy use and the environment.Its principal objective is to keep OPEC’s Ministerscontinuously informed about the status of the energy/environmental debate, as it affects the Organizationand its Member Countries. The ETF’s work is also seenas adding impetus and authority to the discusssions athigh-level meetings involving OPEC.

A Quarterly Environmental Report (QER) is cir-culated to Member Countries, in which the ETFreviews recent activities in the various international

environmental fora, monitors changes in energy taxa-tion, and provides background information on relevantforth-coming events, etc. Although this is an internalOPEC document, selected extracts from the publicationappear regularly in the OPEC Bulletin for the benefitof a wider readership.

This month’s selection comes from the QERpublished at the end of the second quarter of 2002.It features the highlights of the issue (below),which includes the Senate Committee approving abill mandating big cuts in emissions, and a calendarof events.

Senate Committee approves billmandating big cuts in GHG emissions

from utility companies

Issue highlights

T

18 OPEC Bulletin

E N V I R O N M E N T A L N O T E B O O K

International Rivers Network (IRN), sci-entific field studies at around 30 damreservoirs, mostly in Canada and Brazil,have found varying amounts of the green-house gases carbon dioxide and methane.Other research estimated that the amountof methane released from reservoirs world-wide was equal to 20 per cent of the totalmethane from all known sources tied tohuman usage and that dam reservoirscontributed an estimated four per cent ofall carbon dioxide emissions caused byhuman activity.

Finland’s parliament on May 24, 2002,backed in principle the construction of anew nuclear power station, marking thefirst such approval in Europe for over adecade and bucking a trend towards phas-ing out nuclear power in several other EUcountries. The decision deeply angered

the coalition Green party, which decidedto leave the government in protest twodays later.

The EU member states approved adeal on May 5, 2002, which ensured thatGermany would be able to continue itsmulti-billion euro annual coal subsidies,in return for allowing France, Italy and theNetherlands to subsidise truck fuel. Thefour countries gave tax breaks to haulersin response to truckers’ protests at soaringfuel prices in 2000 — subsidies the Euro-pean Commission said were illegal. Ger-many has insisted its coal aid protects jobsand secures a key energy source, eventhough emissions from coal are far higherthan from oil or gas.

Japan has agreed a deal with Kazakhstangiving it the right to emit 62,000 tons ofcarbon dioxide a year under an arrange-

ment designed to help Japan meet itsemission targets under the Kyoto Proto-col. The deal involves Japan agreeing torenovate thermal power plants in theCentral Asian nation, cutting Kazakhstan’scarbon dioxide emissions. In return Japancan count the reduction towards its owncuts in gas emissions. The Kazakhstanagreement marks Japan’s first use of theClean Development Mechanism option.

On May 31, 2002, the EuropeanCommunity collectively ratified the KyotoProtocol. Japan ratified on June 4, 2002.The Russian Federation indicated thatratification would be forthcoming by theend of 2002. As of June 4, 2002, thenumber of Parties that had ratified was74. The emissions total of the Annex IParties that had ratified was 35.8 percent.

October 23–November 1, 20028th Session of the Conferenceof the Parties (COP8)

New Delhi, India (to be confirmed).For more information, contact: UnitedNations Framework Convention on Cli-mate Change (FCCC) Secretariat, HausCarstanjen, Martin-Luther-King-Strasse 8, D-53175 Bonn, Germany.Tel: +49 228 815 1000; fax: +49 228815 1999; e-mail: secretariat@unfccc.de; Web site: www.unfccc.de.

November 19–21, 2002USDA Symposium on Natural Re-source Management to Offset Green-house Gas Emissions

Raleigh, NC, USA. This symposiumwill examine natural resource manage-ment opportunities for sequestering at-mospheric CO

2 across multiple biomes.

Included in the scope of this sympo-sium are the following ecosystems: for-

est, agriculture, range, tundra, desert, grass-land, and wetland. The purposes of thismeeting are to: 1) Present recent researchon management options for increased stor-age of terrestrial carbon. 2) Present moni-toring information on current terrestrialcarbon stocks. 3) Present new and inno-vative technologies and methodologies formeasuring and monitoring carbon stockin terrestrial ecosystems. 4) Present eco-nomic projections for alternative carbonsequestration practices in different terres-trial ecosystems. 5) Provide a panel forumfor discussing the policy implications ofscientific carbon research findings. Themeeting will serve as a means to networkand inform research scientists, land man-agers, and policy makers studying carbonsequestration. For more informationcontact: Ms Stephanie Arnold, SouthernGlobal Change Program, USA. Tel:+1 919 513 2975; e-mail: Stephanie_Arnold@ncsu.edu; Web site: www.sgcp.ncsu.edu.

May 14–16, 2003Energy & the Environment 2003

Halkidiki, Greece. International Confer-

Calendar of meetings ence on Sustainable Energy, Planning& Technology in Relationship to theEnvironment. Details: GabriellaCossutta, Conference Secretariat, En-ergy and the Environment, Wessex In-stitute of Technology, Ashurst Lodge,Ashurst, Southampton, SO40 7AA, UK.Tel: +44 (0)238 029 3223; fax: +44(0)238 029 2853; e-mail: gcossutta@wessex.ac.uk; www.wessex.ac.uk.

June 2–13, 2003Sessions of the Subsidiary Bodies

Bonn, Germany (to be confirmed). Con-tact: FCCC Secretariat. Tel: +49 228815 1000; fax: +49 228 815 1999; e-mail: secretariat@unfccc.de; Web site:www.unfccc.de.

December 1–12, 20039th Session of the Conference ofthe Parties (to be confirmed)

Contact: FCCC Secretariat. Tel: +49228 815 1000; fax: +49 228 815 1999;e-mail: secretariat@unfccc.de; Web site:www.unfccc.de.

July/August 2002 19

M A R K E T R E V I E WM A R K E T R E V I E W

Crude oil price movements

The monthly average price of OPEC’sReference Basket2 fell for the second con-secutive month in June, losing nearly fourper cent, or 96¢/b, to average $23.80/b.On a year-on-year basis, the Basket lost$2.30/b, or almost nine per cent withrespect to June 2001. The yearly average todate revealed an even gloomier picture.The cumulative average for the first half of2002 (end of June) shows a decline ofmore than 11 per cent with respect to thesame period last year. In dollar-per-barrelterms, the Basket lost $2.83/b in the Janu-ary-June 2002 period when compared withthe first half of last year (see Table A).

The Basket made several turns duringthe month starting with a fall of 33¢/b toaverage $23.47/b; then it suffered anotherset-back during the second week shedding50¢/b, to average $ 22.97/b, a level notseen since March of this year. The Basketthen underwent a solid recovery in thesecond half of the month, gaining almostfive per cent during the third week and afurther 2.5 per cent in the last week. Therising trend extended to the first week ofJuly, with the Basket gaining 40¢/b. None-theless, it retreated during the second week,losing 22¢/b to average $24.85/b.Disaggregating the Reference Basket intoits seven components, we find that all thecrudes registered losses, with Mexico’s Isth-mus leading the decline, while Venezuela’sTia Juana Light posted the smallest loss.

Atlantic Basin benchmark crude oilprices weakened during the first half ofJune, with Dated Brent retreating to levelsnot seen since end-February this year, whileWTI hit a three-month low in the secondweek of the month. The Atlantic Basinmarkets then underwent a recovery thatextended for three consecutive weeks intothe first week of July, only to retreat againduring the second week of the month.

International oil markets came underpressure at the beginning of June on newsthat Russia had begun to raise output,signalling that it would abandon its agree-ment beyond June on export restraint withOPEC. Inventory figures released by boththe API and the EIA, showing large rises incrude oil and distillate stocks, gave moreimpetus to the bear to bring the marketfurther down. Meanwhile, preliminary fig-ures showed that OPEC-10 productionhad risen in May, with respect to April.

Crude prices continued to weakenthroughout the second week, carrying overthe falling trend from the previous week.The prevailing market psychology re-mained bearish on the back of what wasperceived as being a well supplied market,a considerable rise in US crude oil inven-tories reported in the previous week, newsthat OPEC-10 production was on the rise,and continued to exceed the present-agreedoutput level, and speculation that the Or-

ganization would leave output levels un-changed in the forthcoming June Meet-ing, until at least the end of 3Q. Marketsfocused their attention on the seasonallysensitive gasoline figures. According to theAPI, gasoline stocks remained marginallyhigher, by 1.0m b, on a year-on-year basis,while refinery output was down, both com-pared with the previous week as well as lastyear. Meanwhile, the Asian markets, espe-cially for sour grades, were showing signsof imbalances between supply and de-mand. These markets were under pressurefrom rising supply, in part due to arbitragemovements, while demand remained sub-dued. The narrowing of the Brent/Dubaispread induced the flow of Brent relatedcargoes to the region.

Crude markets changed direction andbegan to recover from the dip of the lastfew weeks, consolidating the upward move,underpinned by the relative bullish out-look of the US gasoline market. Earlier inthe week, prices found support in thepronounced decline in Iraq’s exports as aresult of the ongoing dispute with the UNover the retroactive pricing scheme. How-ever, market’s sentiment turned bearishahead of the release of the weekly industrystock figures. The API report showed mixeddevelopments — builds in crude oil anddistillate stocks, while seasonably sensitivegasoline inventories were down by almost

June1

1. This section is based on the OPEC MonthlyOil Market Report prepared by the ResearchDivision of the Secretariat — published inmid-month and containing up-to-date analy-sis, additional information, graphs andtables. Researchers and other readers maydownload the publication in PDF formatfrom our Web site (www.opec.org), providedOPEC is credited as the source for any usage.

2. An average of Saharan Blend, Minas, BonnyLight, Arabian Light, Dubai, Tia JuanaLight and Isthmus.

Table A: Monthly average spot quotations of OPEC Reference Basket andselected crudes including differentials $/b

Year-to-date averageMay 02 June 02 2001 2002

Reference Basket 24.76 23.80 25.00 22.17Arabian Light 25.33 24.42 24.48 22.66Dubai 24.77 23.87 24.36 22.23Bonny Light 25.10 23.98 26.56 23.07Saharan Blend 24.77 23.60 26.87 22.64Minas 25.66 24.60 26.47 22.76Tia Juana Light 22.87 22.54 22.21 19.94Isthmus 24.80 23.57 24.02 21.90

Other crudesBrent 25.31 24.04 26.54 23.05WTI 27.13 25.42 28.36 23.86

DifferentialsWTI/Brent 1.82 1.38 1.82 0.81Brent/Dubai 0.54 0.17 2.18 0.82

20 OPEC Bulletin

M A R K E T R E V I E W

500,000 b year-on-year. The report alsoshowed a draw of 3.34m b with respect tothe same period last year. Crude pricesfirmed towards the end of the week, sup-ported by the escalation of violence in theMiddle East. However, the gains of theprevious days were capped when the Nor-wegian Minister of Petroleum and Energysaid his country would abandon the pro-duction restraint agreement by the end ofJune.

Expectedly, during the last week ofJune, the market’s attention was focusedon OPEC’s Extraordinary Ministerial Con-ference. Crude prices started the week ona firm note, with major benchmarks set-tling with hefty gains as markets becameconcerned about the rising violence in theMiddle East, and in the absence of otherrelevant market-moving news. Analysts’expectations that OPEC would leave out-put cuts unchanged during the forthcom-ing Ministerial Meeting, albeit widelyexpected, lent additional support to themarket. The price rise was capped by com-ments made by Russia’s Deputy Ministerof Energy regarding higher export levels.The weekly API stock report showed amixed picture, with crude inventories fall-ing considerably while seasonally sensitivegasoline stocks were higher by 1.49m b.For the remainder of the week, crudeprices climbed slowly in the absence of anyrelevant market-moving news. Modestgains were realized towards the end of theweek due to some book squaring ahead ofthe long July 4 holiday in the USA.

US and European marketsBrent’s small premium to the Far East

benchmark Dubai kept the arbitrage ofWest African and Russian crudes wideopen. The arbitrage to Asia, which wascompounded by the deficit in fuel oil,resulted in the move of some 7.0m b ofWest African crudes and some 2.0m b ofUrals to the region. Asian Pacific demanddeprived the US Gulf market from itsusual imports. It is not surprising to see,according to the API weekly statistics, thatcrude oil imports fell to 8.49mb/d in the first week of June and to 8.40mb/d during the second week. The morepositive gasoline demand outlook in theUSA and the continued decline in stockscontributed to the strengthening in WTI.This opened WTI’s premium against

Dated Brent, which resulted in the west-bound movement of European grades.Crude imports rose by more than 1.0m b/din the third week and stood at 9.48m b/dand strengthened further during the lastweek. Improved refining margins, tight-ened availability as many cargoes movedeast (Asia), as well as west (US Gulf andEast Coast) during the second part of themonth, and renewed demand by Euro-pean refiners, pushed prices of sweet NorthSea grades above dated Brent for the firsttime since the beginning of the year.

Far East marketThe sale of West African crudes to the

Asia Pacific weakened Middle Easterngrades. Regional Asian refiners were alsoengaged in acquiring Russian Urals whichfurther dampened interest in Middle East-ern sour grades for August. Around 2.0mb of the early June loading of Urals went toAsia, amid the exceptionally narrow Brentpremium to Dubai. Perceptions that theunusually small Brent/Dubai spread wouldwiden kept sentiment over the regionalmedium sour benchmark Oman firm, andbrought a premium to its official price.Nonetheless, towards the last week of June,Oman’s differential to the official sellingprice sank as regional key end users startedto cut refinery runs of sour grades. Theexclusion of Oman in the Taiwanese andIndian buying tender provided anotherblow to the benchmark. Adding to thealready depressed picture was the fact that

China and South Korea, usually two keyregional buyers, emerged to resell part oftheir term supplies of Oman crude.

Product markets andrefinery operations

The resilience to crude price losses switchedfrom the heavy end of the barrel (fuel oil inall three markets) to the gasoline marketsin the Atlantic Basin, driven essentially byrobust US demand. As a result, refiningmargins in the US Gulf retained theirgood profits, while they recovered mod-estly in Europe, paving the way for risingrefinery throughput in both markets (seeTable B).

US Gulf marketProduct price losses took their lead

from global falls in crude prices in June,with particular severity noted for WTI’svalue compared to the other marker crudes.The gasoline price, however, was slightlyaffected, dropping only by 17¢/b in theUS Gulf Coast, while rising by 61¢/b inthe US East Coast. These price moves weredriven, more than anything else, by theresurgence in gasoline demand which ap-proached nearly 9.0m b/d, or about 2.1per cent higher than the previous month’slevel, according to the four-week movingaverage. The rise in demand helped bal-ance the gasoline market that was charac-terized by sharp increases in gasoline

Table B: Selected refined product prices $/b

ChangeApril 02 May 02 June 02 June/May

US GulfRegular gasoline (unleaded) 33.01 31.37 31.20 –0.17Gasoil (0.2%S) 27.16 27.05 26.26 –0.79Fuel oil (3.0%S) 21.93 21.95R 21.38 –0.57

RotterdamPremium gasoline (unleaded) 30.14 28.94R 29.02 +0.08Gasoil (0.2%S) 26.53 26.54R 25.97 –0.57Fuel oil (3.5%S) 20.01 21.02R 19.94 –1.08

SingaporePremium gasoline (unleaded) 30.11 29.73 28.54 –1.19Gasoil (0.5%S) 27.62 28.72 27.82 –0.90Fuel oil (380 cst) 21.75 22.99 21.99 –1.00

July/August 2002 21

M A R K E T R E V I E W

imports, as well as a further rise in refinerythroughput (see Table B).

Distillate demand showed signs of re-covery, particularly in the transportationsector. But this recovery failed to alleviatethe fall in the gasoil price, which plunged by79¢/b, amid the prevailing and more-than-sufficient distillate stocks that offset bothdwindling refinery supply, due to their op-eration modes in enhancing the productionof gasoline at the expense of gasoil, as well aslower import flows. The fuel oil price de-clined by 57¢/b, as its market became bettersupplied for the first time this year, owing toa number of factors. The first was the arrivalof large volumes of Latin American fuel oilcargoes. The second was the restoration ofcrude runs on improving refining marginsinstead of feedstocks, and, finally, heftycrude price losses. These factors outpacedthe healthy demand by the asphalt industryand sporadic arbitrage opportunities to theAsian market.

Refining margins in the US Gulf werevolatile, largely reflecting the rise and fallin the gasoline price, in addition to crudemarket developments. Refining marginsimproved steadily during most of June,with the exception of the last week, whenthey fell to around breakeven point. On amonthly basis, however, refining marginsrebounded after last month’s negative lev-els (see Table C).

US refinery throughput rose furtherby 280,000 b/d to 15.68m b/d in June,induced by improved margins. The corre-sponding utilization rate of 94.7 per centindicated the highest US refinery through-put since last August.

Rotterdam marketIn June, gasoline firmed on the back of

the prevailing transatlantic arbitrage to theUS East Coast, combined with tightenedsupply due to continuous problems at keyrefineries in the Rotterdam area. The loweravailability of Russian distillate products,which were diverted to the Asian market,coupled with satisfying increased domes-tic demand, resulted in a less suppliedmarket. This mitigated the impact of size-able crude price losses on distillate productvalues and, hence, restricted the gasoilprice loss to 57¢/b. The fuel oil priceplummeted by $1.08/b, in line with fewershipments to Asian markets, together witha smaller refinery intake for feedstocks,although fuel oil fundamentals were stillcharacterized by tight supply that origi-nated from OPEC’s restrained sour crudeproduction (see Table B).

A moderate loss of the gasoil price (iethe main European refined product), com-bined with the sharp decrease in the priceof Brent, failed again to drive refiningmargins out of their negative territory,despite their continued recovery.

Prompted by rising earnings, refinerythroughput in the Eur-16 countries movedhigher by 440,000 b/d to hover at 11.70mb/d. The equivalent utilization rate was85.7 per cent, representing 3.2 per centand 1.7 per cent increases compared withthe levels in both the preceding month andlast year, respectively (see Table C).

Singapore marketThe lack of considerable demand for

light and distillate products was extended

to include fuel oil in June, leaving productprices to fall in tandem with crude pricelosses. The gasoline price plunged by$1.19/b, amid abundant supply that origi-nated largely in heavy exports from Chinaas well as the giant Reliance refinery inIndia. A buying spree for distillates by alocal trader, which attracted many Rus-sian, European and Middle Eastern car-goes, together with the prevailing reducedregional refinery throughput, was not suf-ficient to lend support to the gasoil price,which dropped by 90¢/b, as the distillatemarket was well supplied as the monthprogressed (see Table B).

After their large buying in May, re-gional key buyers of fuel oil were absentfrom the market in June causing the fueloil price to plummet by $1.00/b. Despitethis, fuel oil market fundamentals re-mained bullish, due to sustainable tightsupply, with the fuel oil stock level at7.6m b, representing its lowest level in sixmonths.

Dubai’s refining margins continued tooscillate around the break-even pointthroughout June, as both crude and prod-uct prices had fallen by almost the samemagnitude (see Table B).

As the annual maintenance pro-grammes continued in May, refinerythroughput in Japan fell further by 38¢/bto register 3.53m b/d, representing a 73.9per cent utilization rate, which was mar-ginally above last year’s level.

The oil futures market

The futures market of WTI went througha continuous downward trend in the firsthalf of June. Market participants lackedinterest while news failed to give the mar-ket any direction. High volatility in theenergy and stock markets and the dollarexchange rates were further reasons forplayers to take sidelines. The downwardpressure came from comfortable productinventories in the USA, especially gasolinestocks, which resulted from record levelsof imports. High imports were also associ-ated with crude, the level of which stood at9.6m b/d, causing crude stocks to rise byover 6m b. The sources of extra supplywere thought to be from Brent, Venezuela,and leakage from OPEC and non-OPECexporters.

Table C: Refinery operations in selected OECD countries

Refinery throughput (m b/d) Refinery utilization (%)1

April 02 May 02 June 02 April 02 May 02 June 02

USA 15.31 15.39 15.68 92.4 92.9 94.7France 1.53 1.65R 1.65 80.8 86.9 87.3Germany 2.14 2.02R 2.08 94.8 89.6R 92.1Italy 1.68 1.46R 1.77 73.6 64.0R 77.8UK 1.58R 1.52 1.53 88.7R 85.1 85.9Eur-162 11.39R 11.26R 11.70 83.4R 82.5R 85.7Japan 3.91 3.53 n.a 81.6 73.9 n.a

1. Refinery capacities used are in barrels per calendar day. na Not available.2. European Union plus Norway. R Revised since last issue.Sources: OPEC Statistics, Argus, Euroilstock Inventory Report/IEA.

22 OPEC Bulletin

M A R K E T R E V I E W

In tandem with the downward trend,a weakening in the front month of thefutures curve developed, causing it to slideinto a contango. This came despite datashowing that US demand in June wasslightly above that of last year and thecontinued tension in the Middle East.News that Iraq might change its pricingpolicy, which led to the speculation ofincreased Iraqi oil flows, also contributedto the downward trend.

The market, however, changed direc-tion in the second half of the month, anda rally was triggered by a 2.6m b draw onUS crude oil stocks. The draw was contro-versial in light of the cuts of refinery runsannounced by Valero, Vitol and Orion.But the US Department of Energy (DoE)attributed the decline to the lower level ofimports, which was down to 8.9m b/d.The rally was entrenched as prices rose by$1/b in a day’s trade in the third week ofthe month on the back of an outage of aConoco refinery. This attracted good fund,paper and trade buying, thereby changingthe shape of the forward curve into back-wardation again. The rally received fur-ther support from short-covering and WTIrose to $26.09/b. But a price rise of over$2/b in three days would not be explainedby the above factors alone. Rather, thesteep reduction in the long positions ofnon-commercials from 12,528 to only214 attracted buying again.

But the market lost direction and wasconfused by the contradictory data an-nounced by the API and the DoE. Whilethe first showed a 2.5m b build in crude oilstocks, the second indicated a 500,000 bdraw on these stocks. Contradictions werealso shown in import figures, with the APIputting it at 8.4m b/d while the DoE re-ported it at 9.4m b/d. The market’s confu-sion was reflected in the flipping of thestructure between contango and backwar-dation. The market was also baffled by thedeep contango structure that developed ata time when PADD II (US Midwest)stocks were at a low level (62m b) and as towhy crude was not moving from the GulfCoast to the Midlands. One possible ex-planation of these distortions was the lackof interest in the market, as was reflected inthe open interest numbers which reachedlows not seen since February.

News about Russia increasing its out-put after June did not excite the market

because it was widely known that theynever adhered to their production restraintsand the rumour that Venezuela wouldincrease its production by 400,000 b/dwere not taken seriously. However, themarket strength came from the uncer-tainty over whether OPEC would increaseproduction in 4Q, implying a tighter mar-ket condition.

The tanker market

OPEC area spot-chartering declined by3.12m b/d to a monthly average of 10.12mb/d in June, due to weaker oil marketfundamentals. Moreover, the current levelof OPEC fixtures remained at a deficit of1.17m b/d, when compared with the cor-responding period last year. Meanwhile,non-OPEC spot-chartering decreasedslightly, by only 110,000 b/d, to a monthlyaverage of 10.12m b/d, which neverthelessincreased its market share in June to about50 per cent. Global spot fixtures moveddown by 3.23m b/d to 20.24m b/d, mainlyattributed to the reduction of OPEC fix-tures. Compared with the same month in2001, global chartering for June was320,000 b/d lower.

As a consequence, OPEC area’s shareof global spot chartering declined signifi-cantly, by 6.41 percentage points to about50 per cent, and this level was 4.89 per-centage points below the previous year’sshare. Spot fixtures from the Middle Easton the eastbound and westbound long-haul routes edged lower in June by 1.68mb/d to 3.05m b/d, and by 1.29m b/d to1.08m b/d, respectively.

Thus, OPEC’s Middle East eastboundshare of total fixtures declined by 5.60percentage points to 30.19 per cent, whilethe share of westbound chartering wors-ened by 7.24 percentage points to 10.70per cent. Together, they accounted for40.89 per cent of total chartering in theOPEC area, which was 12.84 percentagepoints below the previous month’s level.According to preliminary estimates, sailingsfrom the OPEC area improved slightly, by160,000 b/d, to a monthly average of20.65m b/d. Sailings from the MiddleEast also improved by 180,000 b/d, to amonthly average of 13.63m b/d, whichaccounted for 66 per cent of total OPECsailings.

However, preliminary estimates of ar-rivals in the US Gulf Coast, the US EastCoast and the Caribbean reversed the pre-vious month’s trends as they declined by740,000 b/d to a monthly average of 8.54mb/d. Similarly, arrivals in the Euromeddeclined by 390,000 b/d to 5.08m b/d,while arrivals in North-West Europe in-creased by 150,000 b/d to 6.47m b/d.The estimated oil-at-sea on June 30 was442m b, which was 7m b above the levelobserved at the end of last month.

VLCC freight rates in the Middle Eastslowed down in June, after considerableimprovement was witnessed last month,due to a limited demand for tankers andreduced fixture volumes. Charterers wereconcerned about tensions in the marketand started to hold back fixtures, waitingfor more tonnage to arrive to balance themarket. Freight rates, therefore, under-went a marked correction after soaringfrom a low of Worldscale 28 to about W66during the previous month. Hence, themonthly average VLCC freight rates onthe Middle East eastbound and westboundlong-haul routes plunged by 19 points toW34, and by eight points to W37, respec-tively. However, on the routes across theAtlantic, the Suezmax market was activewith sufficient cargoes, but tonnage avail-ability and VLCC competition preventedlarge rate movements.

The monthly average freight rates forSuezmax voyages from West Africa andfrom North West Europe to US destina-tions improved by nine points to W75,and by seven points to W74, respectively.Meanwhile, the short-haul Aframax mar-ket reversed the upward trend in the pasttwo months and showed a sign of slowdownwith the biggest drop in freight rates oc-curring along the route from the Carib-bean to the US Gulf Coast, as theyplummeted by 44 points to W113. Therates declined moderately on the routesacross the Mediterranean, and from theMediterranean to North West Europe, byfour points to W152, and by six points toW140, respectively. Freight rates for 70–100,00 dwt tankers on the route fromIndonesia to the US West Coast softenedby two points to W89.

The clean product tanker market dis-played different trends during June, asfreight rates and activity improved forvoyages to Far East destinations, while

July/August 2002 23

M A R K E T R E V I E W

they worsened along all other major trad-ing routes. Freight rates on the MiddleEast/Far East route continued to progressfor the third consecutive month, as theygained another six points to W160, whileon the route from Singapore to Japan, theysurged by 29 points to W193. Meanwhile,freight rates slowed down for the smallerclean tankers heading to US destinations,as they dropped by 16 points to W184 onthe Caribbean/US Gulf Coast route, whilethey decreased by 14 points to W178 onthe route from North West Europe to theUS East Coast, undermined by weakenedarbitrage opportunities.

In the Mediterranean, the producttanker market weakened and freight ratesplunged significantly by 39 points to W173on the route across the Mediterranean,while they decreased by 17 points to W205on the route from the Mediterranean toNorth West Europe.

World oil demand

Estimates for 2000 and 2001

WorldDue to adjustments in historical data,

average world oil demand for the year2000 has been revised down by 160,000b/d to 75.66m b/d, compared with 75.82mb/d reported in the previous report. Ac-cording to the latest available figures, worldoil consumption during 2001 grew by140,000 b/d, or 0.18 per cent, to 75.79mb/d. This latest estimate translates into adownward revision of 150,000 b/d, com-pared with the figure presented in theprevious report. However, due to a similardownward revision of the year 2000 aver-age, the volume and the percentage ofchange in the 2001 average show very littlechange. Specifically, for 2001, the latestavailable data shows that demand grewremarkably in the FSU, by 170,000 b/d,or 4.53 per cent.

While developing countries also expe-rienced a moderate demand growth of50,000 b/d, or 0.28 per cent, the OECDwitnessed a minor decline of 80,000 b/d,or 0.18 per cent. On a quarterly basis, the2001 world demand enjoyed healthygrowth at 780,000 b/d, or 1.03 per cent,and 710,000 b/d, or 0.96 per cent, in 1Qand 2Q, respectively. The 3Q and 4Q,

however, experienced significant declinesof 420,000 b/d, or 0.55 per cent, and510,000 b/d, or 0.66 per cent, respec-tively, due to the worldwide economicslowdown, the effects of which were accel-erated by the tragic events of September11. The resulting quarterly averages were76.53m b/d, 74.61m b/d, 75.60m b/dand 76.43m b/d, respectively.

Projections for 2002For the present year, the projection for

world oil demand once again has beenrevised down, due to weaker than antici-pated consumption during the first half ofthe year. World oil demand is now esti-mated to rise by 300,000 b/d, or 0.40 percent, to average 76.09m b/d, comparedwith a 400,000 b/d, or 0.53 per cent,increment and an average 76.34m b/dpresented in the last report.

On a regional basis, demand is pro-jected to decrease moderately by 30,000b/d in the OECD, following a significantdecline of 120,000 b/d in 2001. But it isexpected to rise sharply by 190,000 b/d indeveloping countries, following a muchlower growth of 70,000 b/d in 2001.Former CPEs are expected to witness aconsumption growth of 150,000 b/d, com-pared with 170,000 b/d in 2001.

On a quarterly basis, compared withthe 2001 figure, world oil demand for2002 has declined by 0.50 per cent, or380,000 b/d, to average 76.15m b/d in theJanuary–March period. For the rest of theyear, demand is projected to rise, acceler-ating during 2Q, 3Q and 4Q. The antici-pated growth rates are 20,000 b/d, or 0.03per cent, 430,000 b/d, or 0.56 per cent,and 1.13m b/d, or 1.48 per cent, respec-tively. The figures indicate that there hasbeen a 380,000 b/d drop in 1Q. Based onestimates of the actual 1Q consumption,the OECD was solely responsible for this,with a substantial 890,000 b/d decline,partly offset by 120,000 b/d and 390,000b/d rises in developing countries’ andFormer CPEs’ demand. However, a mi-nor recovery of 20,000 b/d is expected in2Q. The growth is forecast to continue in3Q and 4Q.

Forecast for 2003Our preliminary demand forecast for

the year 2003 has been made based on thefollowing assumptions:

— a world GDP growth forecast of 3.9 percent for 2003 compared with the 2.9per cent estimate in 2002, pointing toan expected improvement, on average,in global economic performance;

— average world oil prices of about thesame level as in the first half of thecurrent year; and

— the return of weather to normal con-ditions, compared to the last mildwinter; this would imply a positiveimpact on demand in the NorthernHemisphere.Under these assumptions, world oil

demand is expected to rise by 1.24 percent, or 940,000 b/d, to 77.03m b/d. Thisgrowth level is higher than those experi-enced in 2001 and expected in 2002.However, this is only a preliminary assess-ment. It would be subject to further ad-justments as more information becomesavailable on major factors such as theeconomic growth outlook, crude pricesand the weather.

World oil supply

Non-OPEC

Forecast for 2002The 2002 non-OPEC supply figure

has been revised up by 30,000 b/d to47.85m b/d. The 2Q has been reviseddown by 30,000 b/d to 47.61m b/d, whilethe other three quarters have been revisedup by 40,000 b/d to 47.69m b/d, by40,000 b/d to 47.68m b/d and by 50,000b/d to 48.40m b/d, respectively, com-pared with the last report. The yearlyaverage increase is estimated at 1.35m b/d,compared with the downwardly revisedfigure for 2001.

Expectations for 20032003 non-OPEC supply is expected to

rise by another 920,000 b/d. The expectedmajor contributors to the increase are NorthAmerica and the FSU. The expected 2003quarterly distribution is 48.60m b/d,48.52m b/d, 48.60m b/d and 49.34mb/d, respectively, resulting in a yearly aver-age of around 48.77m b/d.

The FSU’s net oil export estimates for1999-2001 remain unchanged, while the2002 forecast has been revised up by about10,000 b/d to 5.30m b/d. For 2003, net

24 OPEC Bulletin

M A R K E T R E V I E W

oil exports are expected to reach a level of5.65m b/d (see Table D).

OPEC natural gas liquidsThe OPEC NGL figures for 1999-2002

remain unchanged at 3.07m b/d, 3.23mb/d, 3.37m b/d and 3.39m b/d, respec-tively, compared with the figures pub-lished in the last report. The expected2003 figure of 3.42m b/d has been intro-duced for the first time.

OPEC NGL production, 1998–2002m b/d

1999 3.072000 3.232001 3.371Q02 3.372Q02 3.373Q02 3.374Q02 3.372002 3.39Change 2002/2001 0.022003 3.42Change 2003/2002 0.03

OPEC crude oil productionAvailable secondary sources indicate

that, in June, OPEC output was 24.74mb/d, which was 150,000 b/d lower thanthe revised May level of 24.89m b/d.Table E shows OPEC production, as re-ported by selected secondary sources.

Rig count

Non-OPECJune witnessed another rise in rig ac-

tivity. In North America, the major con-tributor, the rig count increased by 117,compared with the figures for May. In

Canada, the rig count rose sharply by 91 to205, compared with 114 in May. Also, theUSA witnessed another increase by 17 to843 rigs, compared with 826 last month.

OPECOPEC’s rig count declined by 6 to

225, compared with the figure for May.Most of the change was contributed byIndonesia whose rig count declined by 5rigs to 43 compared with last month’sfigures.

Stock movements

USAUS commercial onland oil stocks con-

tinued to increase, adding 6.6m b, or240,000 b/d, to 1,031.4m b during theperiod May 31–June 28, 2002. This buildresulted mainly from the rise of 10.6m b to200.7m b in ‘other oils’ stocks, and, to alesser degree, of distillates and gasolinestocks. Distillate stocks moved up margin-ally by 800,000 b to 128.3m b, due tostagnant demand and high output, andgasoline stocks by 500,000 b to 216.4m bon rising imports, respectively. The slightdraw of 3.7m b to 321.2m b on crude oilstocks, which was due to relatively lowercrude oil imports, capped this build. Over-all stocks were 12.4m b, or about one percent, above last year’s level.

During the first week of the month,

which ended June 5, total oil stocks in theUSA decreased slightly by 3.2m b to1,028.2m b on the back of the draws oncrude oil and gasoline stocks, which de-clined by 4.20m b to 317.0m b and by1.70m b to 214.70m b, respectively. Lowercrude oil imports and relatively healthyseasonal gasoline demand were behindthis draw. Meanwhile, the build in distil-lates of 3.1m b to 131.4m b partly dimin-ished the draw.

During the period May 31–June 28,the Strategic Petroleum Reserve (SPR)registered a further build of 4.7m b to575.4m b (see Table F).

Western EuropeCommercial onland oil stocks in the

Eur-16 showed a marginal seasonal buildof 2.5m b, or a rate of 80,000 b/d, to1,065.3m b during June. Crude oil stockscontributed mainly to this build, rising by7.7m b to 443.3m b, due to higher importvolumes, especially from Iraq and the FSU.Distillate stocks also added to this in-crease, when they moved up by 1.1m b to341.3m b on lower demand. This overallbuild was reduced by a draw of 4.9m b to146.3m b on gasoline stocks, due to in-creasing export quantities to the US mar-ket. The draw of 1.8m b to 110.6m b onfuel oil stocks occurred due to higher de-mand in the Asia Pacific region. Total oilstocks were 20.3m b, or about two percent, above year-ago levels (see Table G).

Table D: FSU net oil exports m b/d

1Q 2Q 3Q 4Q Year

1999 3.12 3.62 3.52 3.49 3.442000 3.97 4.13 4.47 4.01 4.142001 4.30 4.71 4.89 4.47 4.5920021 5.00 5.46 5.48 5.26 5.3020032 5.06 5.61 5.96 5.98 5.65

1. Estimate.2. Forecast.

Table E: OPEC crude oil production, based on secondary sources 1,000 b/d

June 02/2000 2001 1Q02 May 02* June 02* 2Q02* May 02

Algeria 808 820 793 837 835 827 –2Indonesia 1,278 1,214 1,138 1,126 1,127 1,130 1IR Iran 3,671 3,665 3,352 3,368 3,373 3,365 5Iraq 2,552 2,383 2,386 1,700 1,606 1,510 –94Kuwait 2,101 2,032 1,848 1,884 1,887 1,878 3SP Libyan AJ 1,405 1,361 1,274 1,312 1,320 1,310 8Nigeria 2,031 2,097 1,963 1,942 1,893 1,933 –49Qatar 698 683 605 650 637 637 –14Saudi Arabia 8,273 7,946 7,230 7,404 7,455 7,410 51UAE 2,251 2,163 1,967 1,977 1,960 1,971 –17Venezuela 2,897 2,831 2,564 2,691 2,652 2,611 –40

Total OPEC 27,965 27,194 25,122 24,893 24,744 24,583 –148

* Not all sources available.Totals may not add, due to independent rounding.

July/August 2002 25

M A R K E T R E V I E W

Table F: US onland commercial petroleum stocks1 m b

ChangeMar 29, 02 May 31, 02 June 28, 02 June/May June 28, 01 July 5, 022

Crude oil (excl SPR) 325.1 324.9 321.2 –3.7 310.3 317.0Gasoline 211.5 215.9 216.4 0.5 219.9 214.7Distillate fuel 119.7 127.5 128.3 0.8 113.2 131.4Residual fuel oil 34.6 35.0 34.6 –0.4 41.6 33.7Jet fuel 41.0 41.0 40.3 –0.7 43.1 40.0Unfinished oils 93.6 90.4 89.9 –0.5 93.5 88.3Other oils 171.1 190.1 200.7 10.6 197.4 203.2Total 996.6 1,024.8 1,031.4 6.6 1,019.0 1,028.2SPR 560.9 570.7 575.4 4.7 543.3 576.4

1. At end of month, unless otherwise stated. 2. Latest available data at time of publication. Source: US/DoE-EIA.

Table G: Western Europe onland commercial petroleum stocks1 m b

ChangeDec 01 Mar 02 May 02 June 02 June/May June 01

Crude oil 436.0 440.9 435.7 443.3 7.7 425.9Mogas 151.8 156.5 151.2 146.3 –4.9 144.0Naphtha 26.4 24.2 23.3 23.8 0.4 25.0Middle distillates 331.2 340.9 340.1 341.3 1.1 328.6Fuel oils 119.1 111.7 112.5 110.6 –1.8 121.6Total products 628.5 633.3 627.1 621.9 –5.2 619.1Overall total 1,064.5 1,074.2 1,062.8 1,065.3 2.5 1,045.0

1. At end of month, and includes Eur-16. Source: Argus Euroilstocks.

Table H: Japan’s commercial oil stocks1 m b

ChangeDecember 01 March 02 April 02 May 02 May/April May 01

Crude oil 113.4 106.8 106.2 105.2 –1.0 126.1Gasoline 12.3 15.8 15.3 15.6 0.3 14.7Middle distillates 37.8 29.5 29.6 31.9 2.3 33.8Residual fuel oil 18.5 18.7 20.0 20.4 0.4 20.9Total products 68.6 64.0 64.9 67.9 3.0 69.4Overall total2 182.0 170.9 171.0 173.1 2.1 195.5

1. At end of month. Source: MITI, Japan.2. Includes crude oil and main products only.

JapanIn May, commercial onland oil stocks

displayed a slight seasonal build of 2.1m b,or a rate of 70,000 b/d, to 173.1m b. Totalmajor product inventories were mainlyresponsible for this build when they roseby 3.0m b to 67.9m b.

Middle distillate stocks led this in-crease, rising by 2.3m b to 31.9m b, due toweak demand. Crude oil stocks experi-enced a draw of 1.0m b to 105.2m b onreduced imports. Total oil stocks widenedthe year-on-year deficit to 22.4m b (seeTable H).

Balance of supply/demandTable I shows a downward revision for2002 to the world oil demand forecast of240,000 b/d to 76.09m b/d, while totalnon-OPEC supply was revised up by20,000 b/d to 51.24m b/d, resulting in anexpected annual difference of around24.86m b/d, down by 270,000 b/d com-pared with the figures published in the lastreport, with a quarterly distribution of25.07m b/d, 23.63m b/d, 24.95m b/dand 25.77m b/d, respectively. The bal-ance for 1Q has been revised up by 40,000

b/d to 50,000 b/d, and the balance for 2Q,which is introduced for the first time, isestimated at 950,000 b/d. The 2001 bal-ance has been revised up by 100,000 b/d to1.27m b/d.

The supply/demand balance table for2003 is being published in this issue for thefirst time. It shows a world oil demandforecast of 77.03m b/d and a total non-OPEC projected supply of 52.19m b/d,resulting in an expected difference of around24.85m b/d, with a quarterly distributionof 25.88m b/d, 23.38m b/d, 24.19m b/dand 25.93m b/d, respectively.

26 OPEC Bulletin

M A R K E T R E V I E W

Table I: World crude oil demand/supply balance m b/d

1999 2000 2001 1Q02 2Q02 3Q02 4Q02 2002 1Q03 2Q03 3Q03 4Q03 2003

World demandOECD 47.7 47.7 47.7 47.9 46.3 47.6 48.7 47.6 49.0 46.3 47.3 49.3 48.0North America 23.8 24.0 23.9 23.7 23.8 24.2 24.0 23.9 24.0 23.7 24.2 24.5 24.1Western Europe 15.2 15.1 15.3 15.2 14.6 15.3 15.8 15.2 15.6 14.7 15.1 15.8 15.3Pacific 8.7 8.6 8.6 9.1 7.9 8.1 8.9 8.5 9.3 7.8 8.0 9.1 8.6Developing countries 18.6 18.7 18.8 18.7 18.8 19.1 19.2 19.0 18.8 19.2 19.3 19.5 19.2FSU 4.0 3.8 3.9 3.9 3.6 3.8 4.2 3.9 4.3 3.9 3.8 4.0 4.0Other Europe 0.8 0.7 0.7 0.8 0.7 0.7 0.7 0.7 0.8 0.7 0.7 0.8 0.7China 4.2 4.7 4.7 4.8 5.1 4.8 4.7 4.9 5.0 5.1 5.1 5.1 5.1(a) Total world demand 75.2 75.7 75.8 76.2 74.6 76.0 77.6 76.1 77.9 75.3 76.2 78.7 77.0

Non-OPEC supplyOECD 21.3 21.8 21.8 22.1 22.0 21.7 22.1 22.0 22.4 22.3 22.0 22.3 22.2North America 14.1 14.2 14.4 14.6 14.6 14.5 14.5 14.5 14.9 14.8 14.7 14.7 14.8Western Europe 6.6 6.7 6.7 6.7 6.7 6.5 6.9 6.7 6.7 6.7 6.6 6.9 6.7Pacific 0.7 0.8 0.8 0.8 0.7 0.7 0.7 0.7 0.8 0.7 0.7 0.7 0.7Developing countries 10.8 11.0 11.0 11.4 11.3 11.4 11.5 11.4 11.5 11.5 11.5 11.7 11.6FSU 7.5 7.9 8.5 8.9 9.1 9.3 9.5 9.2 9.3 9.5 9.7 9.9 9.6Other Europe 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2China 3.2 3.2 3.3 3.4 3.3 3.4 3.5 3.4 3.4 3.3 3.4 3.5 3.4Processing gains 1.6 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.8 1.8 1.8 1.8 1.8Total non-OPEC supply 44.6 45.7 46.5 47.7 47.6 47.7 48.4 47.8 48.6 48.5 48.6 49.3 48.8OPEC NGLs 3.1 3.2 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.4(b)Total non-OPEC supply andOPEC NGLs 47.6 49.0 49.9 51.1 51.0 51.1 51.8 51.2 52.0 51.9 52.0 52.8 52.2

OPEC crude oil production1 26.5 28.0 27.2 25.1 24.6Total supply 74.2 76.9 77.1 76.2 75.6Balance2 1.0 1.3 1.3 0.1 1.0

Closing stock level (outside FCPEs) m bOECD onland commercial 2446 2530 2623 2600OECD SPR 1228 1210 1222 1237OECD total 3674 3740 3844 3837Other onland 983 1000 1028 1026Oil on water 808 876 842 839Total stock 5465 5617 5715 5702

Days of forward consumption in OECDCommercial onland stocks 51 53 55 56SPR 26 25 26 27Total 77 78 81 83Memo itemsFSU net exports 3.4 4.1 4.6 5.0 5.5 5.5 5.3 5.3 5.1 5.6 6.0 6.0 5.7[(a) — (b)] 27.6 26.7 25.9 25.1 23.6 25.0 25.8 24.9 25.9 23.4 24.2 25.9 24.8

Note: Totals may not add up due to independent rounding. na not available.1. Secondary sources.2. Stock change and miscellaneous.

Table I above, prepared by the Secretariat’s Energy Studies Department, shows OPEC’s current forecast of world supply and demand for oil and naturalgas liquids.

The monthly evolution of spot prices for selected OPEC and non-OPEC crudes is presented in Tables One and Two on page 28, while GraphsOne and Two (on pages 27 and 29) show the evolution on a weekly basis. Tables Three to Eight, and the corresponding graphs on pages 30–35, showthe evolution of monthly average spot prices for important products in six major markets. (Data for Tables 1–8 is provided by courtesy of Platt’s EnergyServices).

July/August 2002 27

M A R K E T R E V I E W

Graph 1:Evolution of spot prices for selected OPEC crudes

March to June 2002

10

15

20

25

30

35

OPEC Basket

Tia Juana Light

Dubai

Arab Heavy

Arab Light

Bonny Light

Brega

Kuwait Export

Iran Light

Minas

Saharan Blend

JuneMayAprilMarch11 22 33 44 11 22 33 44 11 22 33 44 11 22 33 44

$/barrel

55

28 OPEC Bulletin

M A R K E T R E V I E W

1. Tia Juana Light spot price = (TJL netback/Isthmus netback) x Isthmus spot price.2. OPEC Basket: an average of Saharan Blend, Minas, Bonny Light, Arabian Light, Dubai, Tia Juana Light and Isthmus.Kirkuk ex Ceyhan; 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 Oilgram Price Report; Reuters; Secretariat’s calculations.

Table 1: OPEC spot crude oil prices, 2001–2002 ($/b)

2001 2002Member Country/ June July Aug Sept Oct Nov Dec Jan Feb Mar Apr May Junetype of crude (API°) 4Wav 5Wav 4Wav 4Wav 5Wav 4Wav 4Wav 5Wav 4Wav 4Wav 5Wav 4Wav 1W 2W 3W 4W 4Wav

AlgeriaSaharan Blend (44.1) 28.16 24.82 25.96 26.13 20.65 19.00 19.08 19.64 19.73 22.84 25.34 24.77 22.92 22.60 24.05 24.81 23.60

IndonesiaMinas (33.9) 27.86 25.32 24.82 24.59 19.53 18.29 17.64 18.88 18.91 22.92 25.78 25.66 24.51 23.77 24.88 25.23 24.60

IR IranLight (33.9) 25.80 23.78 24.68 24.54 20.04 17.64 17.69 18.95 18.95 22.31 24.10 23.76 22.08 21.70 22.93 23.38 22.52

IraqKirkuk (36.1) — — — — — — — — — — — — — — — — —

KuwaitExport (31.4) 24.25 22.47 23.13 22.99 18.49 16.09 16.14 18.11 18.69 22.74 24.28 24.48 23.81 23.17 23.96 24.26 23.80

SP Libyan AJBrega (40.4) 28.18 24.96 25.73 25.91 20.62 19.00 18.81 19.71 20.32 23.00 25.48 24.96 23.12 22.80 24.17 24.68 23.69

NigeriaBonny Light (36.7) 28.06 24.81 25.41 25.98 20.60 18.92 18.78 19.65 20.30 23.76 25.79 25.10 23.32 23.05 24.50 25.06 23.98

Saudi ArabiaLight (34.2) 26.17 24.03 24.92 24.73 20.16 17.82 17.99 18.83 19.47 23.33 24.98 25.33 24.51 23.76 24.56 24.85 24.42Heavy (28.0) 24.88 22.61 23.77 23.63 19.36 17.00 17.21 18.00 18.61 22.51 24.02 24.41 23.61 23.11 23.51 23.74 23.49

UAEDubai (32.5) 25.86 23.45 24.70 24.37 19.93 17.62 17.60 18.54 19.02 22.97 24.54 24.77 23.92 23.23 24.01 24.32 23.87

VenezuelaTia Juana Light1 (32.4)22.30 20.55 21.54 20.72 17.66 15.28 14.89 15.37 16.05 20.15 23.01 22.87 22.06 21.69 22.76 23.66 22.54

OPEC Basket2 26.10 23.73 24.46 24.2924.2924.2924.2924.29 19.64 17.65 17.53 18.33 18.89 22.64 24.88 24.76 23.47 22.97 24.08 24.67 23.80

Table 2: Selected non-OPEC spot crude oil prices, 2001–2002 ($/b)

2001 2002Country/ June July Aug Sept Oct Nov Dec Jan Feb Mar Apr May Junetype of crude (API°) 4Wav 5Wav 4Wav 4Wav 5Wav 4Wav 4Wav 5Wav 4Wav 4Wav 5Wav 4Wav 1W 2W 3W 4W 4Wav

Gulf AreaOman Blend (34.0) 25.53 23.61 24.44 24.49 19.93 17.67 17.87 18.54 19.06 23.02 24.62 24.87 24.00 23.40 24.24 24.49 24.03

MediterraneanSuez Mix (Egypt, 33.0)23.83 21.37 22.48 23.11 17.75 16.09 16.68 16.74 17.11 20.38 23.26 22.57 20.84 20.69 22.20 22.78 21.63

North SeaBrent (UK, 38.0) 27.96 24.66 25.78 25.84 20.54 18.80 18.58 19.48 20.22 23.73 25.75 25.31 23.47 23.15 24.52 25.03 24.04Ekofisk (Norway, 43.0)27.59 24.55 25.70 25.73 20.35 18.70 18.51 19.35 19.88 23.35 25.07 24.87 23.20 22.87 24.33 25.08 23.87

Latin AmericaIsthmus (Mexico, 32.8) 24.25 22.67 23.86 23.49 18.94 16.61 16.73 17.42 18.74 22.54 24.72 24.80 23.07 22.68 23.80 24.74 23.57

North AmericaWTI (US, 40.0) 27.67 26.53 27.41 26.40 22.20 19.49 19.40 19.71 20.67 24.35 26.32 27.13 25.07 24.67 25.57 26.37 25.42

OthersUrals (Russia, 36.1) 25.60 23.08 24.46 25.05 19.80 17.83 18.37 18.58 18.95 22.47 24.12 23.98 22.31 22.14 23.60 24.12 23.04

July/August 2002 29

M A R K E T R E V I E W

Graph 2:Evolution of spot prices for selected non-OPEC crudes

March to June

10

15

20

25

30

35

OPEC Basket

Urals

West Texas

Isthmus

Ekofisk

Brent

Suex Mix

Oman

JuneMayAprilMarch11 22 33 44 11 22 33 44 11 22 33 44 11 22 33 44

$/barrel$/barrel

55

30 OPEC Bulletin

M A R K E T R E V I E W

Table 3: North European market — bulk barges, fob Rotterdam ($/b)regular gas premium gas fuel oil

2000 naphtha unleaded 87 unleaded 95 gasoil jet kero 1%S 3.5%SJune 30.41 40.57 44.28 31.40 34.40 23.79 21.23July 29.89 36.51 37.67 33.02 36.07 24.13 19.79August 29.79 34.82 36.20 36.46 38.69 21.47 19.69September 33.28 36.87 37.70 42.09 43.84 24.29 23.04October 33.15 34.72 35.28 40.06 43.64 27.06 23.82November 32.51 32.72 33.46 40.68 43.61 25.61 22.18December 29.27 27.77 28.05 34.25 37.50 23.24 18.312001January 27.36 29.44 29.85 30.15 32.03 20.54 15.48February 29.23 32.11 32.49 30.88 33.41 20.48 18.21March 27.19 30.69 31.52 29.38 31.72 20.56 17.58April 27.86 36.47 37.57 30.37 32.45 20.49 17.05May 29.71 37.93 39.09 31.18 34.17 20.48 18.21June 27.21 30.27 31.73 31.06 33.69 19.23 17.97July 22.28 27.06 27.82 29.33 31.55 17.97 17.19August 22.51 27.93 29.36 30.18 31.58 18.18 18.40September 23.19 28.49 29.88 30.87 32.18 19.84 19.23October 19.72 22.36 23.27 27.41 28.53 16.50 16.07November 16.88 19.27 20.20 23.03 24.38 15.49 14.68December 17.48 18.41 19.16 21.35 23.11 14.98 14.952002January 21.42 20.87 20.93 21.55 23.46 16.20 15.25February 23.77 20.12 21.17 21.69 23.43 14.70 15.52March 28.27 24.68 25.74 25.05 26.73 17.25 17.86April 29.29 29.77 29.94 26.53 28.01 19.51 19.93May 27.68 29.14 29.33 26.54 28.99 19.93 21.02June 25.50 28.90 29.02 25.97 28.04 19.32 19.94

Sources: Until September 2000 Platt’s Oilgram Price Report & Platt’s Global Alert; as of October 2000 Reuters. Prices are average of available days.

Graph 3: North European market — bulk barges, fob Rotterdam

2000 2001

0

10

20

30

40

50

fuel oil 3.5%S

fuel oil 1%S

jet kero

gasoil

premium

regular

naphtha

JunMayAprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJanDecNovOctSepAugJul

$/barrel

2002

July/August 2002 31

M A R K E T R E V I E W

Table 4: South European market — bulk cargoes, fob Italy ($/b)gasoline fuel oil

2000 naphtha premium unleaded 95 gasoil jet kero 1%S 3.5%SJune 28.93 44.06 30.14 31.99 24.50 19.95July 28.26 38.25 32.92 34.18 23.20 18.76August 28.14 36.67 36.09 36.60 20.85 17.85September 31.58 37.87 41.97 41.89 25.00 21.49October 32.48 37.20 41.53 41.85 27.16 23.58November 32.47 33.57 40.44 40.33 24.71 19.47December 27.74 27.79 34.92 35.99 23.46 17.962001January 26.35 28.76 27.32 28.73 20.13 14.35February 26.04 31.89 31.32 29.11 18.80 16.86March 24.13 30.53 27.55 27.89 18.39 16.28April 27.07 36.43 29.00 28.28 19.23 14.96May 29.54 39.45 29.37 29.72 19.39 15.84June 27.15 32.21 30.98 29.40 17.71 15.89July 21.95 25.55 27.77 27.15 17.73 15.59August 22.26 26.60 n.a 27.74 18.20 16.93September 23.46 29.93 n.a 29.36 18.99 17.44October 19.14 23.55 n.a 23.61 15.61 15.07November 16.22 19.41 n.a 20.54 13.61 12.48December 16.91 19.11 n.a 19.16 15.15 13.152002January 17.55 19.89 22.37 21.50 17.26 14.18February 19.42 20.06 21.29 21.88 15.37 14.77March 23.43 24.07 24.15 25.07 17.99 16.33April 24.48 28.27 25.51 26.22 20.31 18.39May 22.88 27.80 25.48 26.29 20.01 19.18June 22.05 26.23 25.48 25.59 20.21 18.56

Sources: Until September 2000 Platt’s Oilgram Price Report & Platt’s Global Alert; as of October 2000 Reuters. Prices are average of available days. na not available

0

10

20

30

40

50

fuel oil 3.5%S

fuel oil 1%S

jet kero

gasoil

premium

naphtha

JunMayAprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJanDecNovOctSepAugJul

$/barrel

2000 2001 2002

Graph 4: South European market — bulk cargoes, fob Italy

32 OPEC Bulletin

M A R K E T R E V I E W

Table 5: US East Coast market — New York ($/b, duties and fees included)gasoline fuel oil

2000 regular unleaded 87 gasoil jet kero 0.3%S LP 1%S 2.2%SJune 40.12 32.62 33.69 30.69 27.11 23.20July 36.04 32.53 34.42 29.28 24.44 22.20August 36.33 37.17 38.59 29.48 24.50 21.57September 39.90 41.25 43.80 37.21 29.42 25.39October 39.83 41.04 42.86 36.86 29.51 25.96November 39.56 43.46 45.52 35.43 28.66 25.26December 30.96 39.52 40.97 34.59 25.63 22.042001January 34.81 35.51 36.03 33.09 25.40 22.34February 34.68 32.99 34.90 31.51 23.38 19.73March 32.96 31.12 32.91 27.61 23.31 20.30April 39.78 32.83 33.92 27.82 22.80 17.47May 39.06 32.48 35.60 27.84 23.09 18.58June 30.07 31.74 32.92 24.89 20.22 17.64July 28.69 29.31 30.10 23.71 19.33 16.72August 32.56 30.80 32.88 23.69 20.14 18.23September 31.61 30.71 31.77 24.02 20.24 19.80October 25.15 26.40 26.84 20.70 17.91 16.97November 21.68 22.97 23.63 20.28 15.98 14.97December 21.73 21.90 22.52 20.01 16.52 15.282002January 22.53 22.23 23.35 19.23 16.08 15.30February 23.01 22.51 23.96 18.09 14.83 14.42March 28.94 26.48 27.00 21.79 19.43 19.05April 31.00 27.78 28.61 25.24 22.24 21.59May 29.18 27.70 28.70 25.62 23.37 21.73June 29.78 26.89 28.34 24.63 22.70 21.54

Sources: Until September 2000 Platt’s Oilgram Price Report & Platt’s Global Alert; as of October 2000 Reuters. Prices are average of available days.

0

10

20

30

40

50

fuel oil 2.2%S

fuel oil 1%S

fuel oil 0.3%S LP

jet kero

gasoil

regular

JunMayAprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJanDecNovOctSepAugJul20002000 20012001

$/barrel

20022002

Graph 5: US East Coast market — New York

July/August 2002 33

M A R K E T R E V I E W

20002000 20012001

$/barrel$/barrel

0

10

20

30

40

50

fuel oil 2.8%S

fuel oil 2.0%S

jet kero

gasoil

naphtha

JunMayAprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJanDecNovOctSepAugJul20022002

Table 6: Caribbean cargoes — fob ($/b)fuel oil

2000 naphtha gasoil jet kero 2%S 2.8%SJune 36.24 32.27 32.78 22.27 21.40July 31.06 32.35 33.38 20.84 19.67August 32.92 36.63 37.80 19.78 18.54September 35.32 41.01 42.78 23.59 20.46October 34.77 39.90 41.32 23.95 21.71November 34.37 40.93 43.64 22.96 17.96December 29.73 34.63 36.40 19.89 16.902001January 34.10 35.56 36.17 20.21 16.48February 29.87 31.85 32.42 18.14 16.31March 28.63 28.97 30.11 18.26 17.16April 33.60 30.51 31.37 15.81 15.03May 29.65 32.07 34.46 17.50 17.10June 25.85 31.58 32.13 16.64 16.27July 25.06 28.84 29.57 15.54 14.45August 29.04 30.49 31.68 17.20 17.11September 26.30 30.10 30.28 18.70 18.71October 19.86 25.47 25.83 16.28 16.23November 18.74 22.07 22.44 14.26 14.11December 19.32 21.10 21.26 14.35 13.882002January 19.63 21.49 22.24 14.50 13.89February 21.30 21.80 23.41 13.62 13.54March 25.86 25.77 26.72 18.25 18.09April 28.55 27.31 28.33 20.79 20.59May 27.14 27.28 28.31 20.95 20.65June 26.85 26.49 27.66 20.79 20.36

Sources: Until September 2000 Platt’s Oilgram Price Report & Platt’s Global Alert; as of October 2000 Reuters. Prices are average of available days.

Graph 6: Caribbean cargoes — fob

34 OPEC Bulletin

M A R K E T R E V I E W

0

10

20

30

40

50

fuel oil 380C

fuel oil 180C

fuel oil 0.3%S

jet kero

gasoil

premium

naphtha

JunMayAprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJanDecNovOctSepAugJul20002000 20012001

$/barrel$/barrel

20022002

Table 7: Singapore cargoes ($/b)gasoline fuel oil

2000 naphtha premium unleaded 95 gasoil jet kero 0.3%S 180C 380CJune 28.13 33.08 30.69 31.23 26.78 25.30 25.31July 27.80 36.05 31.86 33.25 25.45 22.00 22.09August 30.19 38.31 37.46 37.98 27.08 21.57 21.64September 34.53 35.05 40.13 42.21 28.44 24.81 24.87October 33.50 33.03 38.96 43.30 26.77 26.35 26.55November 30.43 32.96 34.85 39.88 26.50 24.36 24.49December 25.52 29.97 29.61 32.92 24.45 19.78 19.742001January 25.50 30.02 28.41 29.70 22.54 18.37 17.99February 27.83 31.33 27.57 30.48 22.68 19.91 19.69March 27.43 29.88 26.83 28.72 22.43 20.08 20.04April 28.14 32.76 29.80 30.25 22.60 20.48 20.47May 28.89 32.64 30.79 30.74 23.72 22.02 22.07June 27.57 26.89 30.00 30.84 25.11 20.26 20.16July 24.38 24.36 28.54 28.93 24.08 19.03 19.19August 24.33 26.68 28.71 29.37 21.03 20.70 20.94September 24.67 29.47 29.44 31.05 20.38 21.74 21.85October 20.58 22.23 25.53 25.92 19.10 18.53 18.72November 18.15 20.75 21.87 22.40 15.84 15.47 15.46December 18.36 22.61 20.11 21.77 15.78 16.15 16.442002January 18.97 21.00 21.66 22.93 16.30 16.07 16.24February 21.04 24.16 22.54 22.54 16.83 17.04 17.37March 24.92 27.93 25.71 25.16 17.28 19.37 19.73April 26.11 30.11 28.64 27.27 19.23 21.45 21.75May 24.88 29.73 28.72 27.82 19.45 22.61 22.99June 23.84 28.54 27.82 26.49 19.95 21.66 21.99

Sources: Until September 2000 Platt’s Oilgram Price Report & Platt’s Global Alert; as of October 2000 Reuters. Prices are average of available days.

Graph 7: Singapore cargoes

July/August 2002 35

M A R K E T R E V I E W

Table 8: Middle East— fob ($/b)fuel oil

2000 naphtha gasoil jet kero 180CJune 27.63 28.76 29.40 23.60July 27.07 29.73 31.24 20.27August 29.12 35.24 35.88 19.49September 33.03 37.79 40.01 22.98October 31.51 36.62 40.97 24.39November 28.88 32.42 37.38 22.05December 24.19 26.46 29.73 17.062001January 24.29 25.05 26.38 15.68February 26.86 24.40 27.31 17.58March 26.28 24.31 26.41 17.93April 27.42 28.05 28.49 18.83May 28.57 29.11 29.02 20.74June 26.95 28.08 28.93 18.92July 23.53 26.77 27.16 17.65August 23.49 27.15 27.78 19.28September 24.07 28.00 29.64 20.57October 20.47 24.05 24.42 17.51November 18.24 20.91 21.44 14.55December 17.61 19.33 20.48 14.612002January 18.55 19.50 21.62 14.95February 20.11 20.21 21.12 16.00March 24.27 23.28 23.65 18.41April 26.03 26.30 25.92 20.52May 24.98 26.63 26.56 21.60June 23.82 25.89 25.09 20.64

Sources: Until September 2000 Platt’s Oilgram Price Report & Platt’s Global Alert; as of October 2000 Reuters. Prices are average of available days.

0

10

20

30

40

50

fuel oil 180C

jet kero

gasoil

naphtha

JunMayAprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJanDecNovOctSepAugJul2000 2001

$/barrel

2002

Graph 8: Middle East — fob

36 OPEC Bulletin

M E M B E R C O U N T R Y F O C U SM E M B E R C O U N T R Y F O C U S

UAE balance of payments remainin surplus despite oil price slump

Abu Dhabi — The United Arab Emirates (UAE) recordedanother year of surplus in its balance of payments in 2001,despite a sharp decline in oil export revenue, a rise in importsand an increase in the transfer of funds by its expatriate com-munity, according to official figures released recently by theCentral Bank of the UAE.

A decline of nearly $4 per barrel in oil prices last year sharplyupset the country’s balance of payments, current account, andtrade balance, but they all remained in surplus, thanks to growthin industrial exports, high gas sales, and large returns fromoverseas investment.

Central Bank figures showed that the balance of paymentsrecorded a surplus of around $485 million in 2001, comparedwith a mammoth surplus of $2.83 billion in 2000.

The current account surplus stood at $18.86bn in 2001,compared with $13.7bn in 2000, while the trade balancerecorded a surplus of $10.38bn last year, as against $14.8bn inthe same period the previous year.

Total exports declined to around $46.6bn from $49.8bn,mainly because of a drop in crude oil sales to nearly $18bn in2001 from around $21.6bn in 2000.

Natural gas and liquefied natural gas (LNG) exports also fellslightly to around $3.4bn from nearly $3.7bn, while non-oilexports, mostly manufacturing products, grew to around $11.6bnfrom $11.2bn.

The figures showed that the transfer of funds out of thecountry by the UAE’s large foreign community were still puttingheavy pressure on the balance of payments as they peaked ataround $3.89bn in 2001, compared with $3.67bn in 2000.

But such outflows were offset by returns from the country’soverseas assets, which yielded around $5.08bn last year, almostequivalent to earnings in 2000.

The figures showed that UAE imports grew to around$36.2bn in 2001 from $35bn in 2000, as a result of a businessupswing in the Emirates.

Such an upswing was also reflected in high figure for re-exports, mostly from Dubai, as they totalled around $13.5bnlast year, compared with $13.1bn in 2000.

Qatar’s economy grew by1.8 per cent in first quarter

Doha — Qatar’s Central Bank reported that the country’seconomy grew by about 1.8 per cent in the first three monthsof this year, while its gross domestic product (GDP) reached avalue of $3.83 billion during the same period.

GDP in the non-oil sector expanded by 2.3 per cent to $1.76bn,while in the oil and gas sectors it remained stable at $2.03bn.

“The stability in the oil and gas sectors was mainly due tothe higher oil price being balanced by lower output,” the bank’sDepartment of Economic Policies said.

The consumer price index rose by 0.4 per cent in the firstquarter after an increase of 0.8 per cent in the previous threemonths, it noted.

The surplus of Qatar’s trade balance declined to $1.56bnin the first quarter with falling exports and increasing imports.

Exports decreased by about 2.1 per cent over the previousquarter and registered a value of $2.41bn in the first threemonths of the year. Total imports in the first quarter cost thecountry $849 million.

The overall balance of payments was at a deficit of $23min the first quarter, mainly due to government servicing ofexternal debts and local banks stepping up investment abroad.

Foreign direct investmentin GCC at $31bn

Doha — Foreign investors have pumped nearly $31 billioninto the economies of the six Gulf Co-operation Council (GCC)member states with the bulk of the capital concentrated in oiland services, away from the technology-oriented ventures neededfor economic diversification programmes.

Figures by the Doha-based Gulf Organization for IndustrialConsulting (GOIC) showed that joint oil and petrochemicalprojects attracted around $30.3bn, while the rest was investedin food and beverages, textiles, furniture, basic metal industries,publishing materials and other manufacturing industries. Totalinvestment in the combined group’s manufacturing sector reached$84.2bn at the end of 2000, including $39.4bn in joint ventures.

The GOIC, which advises on industrial policies in the GCC,gave no investment figures for 2001, but industry sources putthat figure at around $12bn. The GCC members are Bahrain,Kuwait, Oman, Qatar, Saudi Arabia and the United ArabEmirates (UAE).

Saudi Arabia, by far the largest GCC member, has attractednearly $60bn of the investment, while capital invested in theindustrial sector in the UAE was estimated at $7.0bn. The thirdlargest industrial power in the GCC, Kuwait, attracted $5.0bnin investment, the GOIC said.

The report said that industrial investment in the GCC wasset to surge in the coming years as the six nations intensified anindustrialization drive within their overall economic reforms,aimed at expanding non-oil income and offsetting volatile crudeoil sales. However, despite massive investment, the contributionof the GCC’s non-oil industrial exports to gross domesticproduct (GDP) continued to be dwarfed by the oil and gas sectors.

The six GCC countries have repeatedly urged their maineconomic partners — the European Union (EU), Japan and theUnited States — to invest in heavy industry to help them acquirethe technology needed to ease their reliance on oil. But theindustrial giants have argued that GCC members needed to takemore measures to improve their investment climates.

The slow pace of investment had prompted most memberstates to launch programmes to attract capital, including priva-tisation, additional incentives, and the creation of investmentbodies.

July/August 2002 37

M E M B E R C O U N T R Y F O C U S

“GCC states need tech capital more than financing capital.Modern investment tools must be available and the pace toprepare commercial banks to enter the Internet era and decreasetraditional transactions must be accelerated,” the GOIC said inits report.

Indonesia suffers 42 per cent dropin FDI in first half

Jakarta — Foreign direct investment (FDI) approvals inIndonesia dropped by 42 per cent to $2.5 billion in the first halfof this year, compared with $4.3bn in the same period of 2001.Officials are blaming the change on the global economic down-turn.

“The global downturn prompted investors to be more care-ful and selective in investing their money,” a report in the JakartaPost newspaper, quoting a senior official from the office ofIndonesia’s co-ordinating Minister for the Economy, FirmanTamboen, said.

Indonesia had also been going through a series of politicaland economic upheavals, which made it a less competitiveinvestment destination for foreign investors, economists andanalysts observed.

FDI approval for last year was down by 41.5 per cent year-on-year to $9.02bn from 2000 figures.

The investment co-ordinating board’s latest figures showedthat the country’s domestic investment dropped by more than70 per cent to 11.1 trillion rupiahs in the first half of this year,compared with 39.8tr in the same period of 2001. Domesticinvestment in 2001 was 58tr rupiahs.

The economists said the Indonesian economy was on thepath of recovery, and projected it to expand by four per centthis year, however, this recovery would be based on strongsupport from FDI, which was vital for rejuvenating businessesthrough new projects.

Firman also gave assurances that the government was deter-mined to regain the confidence of foreign investors.

“We are determined to create a favourable climate forinvestment, including the immediate completion of a newinvestment law being drafted by the investment board,” headded.

Saudi Arabia to use gas for industry,power and desalination plants

Jeddah — The Saudi Arabian government is proposing theuse of natural gas in the Mecca region to fuel industry, powerstations and desalination plants. The switchover to gas is ex-pected to cut 40 per cent of production and maintenance costs.

The Kingdom’s state oil and gas company, Saudi Aramco,has already constructed pipelines to Riyadh and the EasternProvince to supply gas for the use in industries and electricityplants. According to Al-Watan newspaper, the Governor of

Mecca, Prince Abdul Majeed, requested that Saudi Aramco fixa date for the supply of natural gas to the industrial city of Jeddah.

The Director General of the Saudi Consolidated ElectricCompany, Western Province, Fouad Al-Shuraibi, said con-sumption of electricity by industries in Jeddah reached morethan 1.7 million megawatts last year and was expected to increaseby seven per cent this year.

The renewed interest over gas usage comes after Saudi Arabiasigned accords with eight international oil companies on June3 to develop its gas fields. The gas deal is expected to bring aninitial investment of $25 billion to the Kingdom. The availabil-ity of gas at competitive prices will boost industries specializingin transforming methane, ethane, propane, butane and benzeneinto value-added products. The Minister of Petroleum andMineral Resources, Ali I Naimi, said Saudi Aramco was cur-rently working on a similar project that would supply Yanbuwith 300m cubic metres per day of gas.

Nigeria looking to boost bilateraltrade with Singapore

Singapore — Nigeria hopes to expand its bilateral trade withSingapore to a value of $5.0 billion a year over the next threeyears, according to the Nigerian High Commissioner to Singa-pore, Alex Anigbo.

Speaking recently at a ceremony to launch a $450 millionfloating, production, storage and offloading (FPSO) facility builtin Singapore, Anigbo said the trade between the two countriesstood at $1.0 billion, more than double last year’s figure whenNigeria first opened its High Commission office in Singapore.

Nigeria has become Singapore’s major offshore marine serv-ices market, recently having taken delivery of two FPSO vesselsfor the country’s offshore oil and gas fields.

Anigbo said the growth in trade would also cover Nigeria’sinterest in sourcing telecommunications-, computer- and infor-mation technology-related services.

Singapore’s Sembawang shipyard fitted the $50m top-sideon the FPSO Sea Eagle, which would become a major productioncentre at Nigeria’s offshore EA field. Last month, the Keppelshipyard of Singapore also delivered an FPSO for Nigeria’s Yohofield.

FPSO Sea Eagle would be commissioned in the shallow waterEA field late in August and start production in September.

South Korea’s Samsung shipyard built the $100m hull ofthe new FPSO earlier this year. The rest of the $350m costassociated with the building of the FPSO covered facilities on thevessel, which has the capacity to store up to 1.4m barrels of oil,produce 170,000 b/d of oil and 100m standard cubic feet perday of natural gas for Nigeria’s Bonny LNG complex over thefield’s 18-year and 363m b lifespan.

The field, nearing development completion, at a cost of$1.2bn, was one of the largest upstream projects currentlyunderway in Nigeria, according to officials from the concessionoperator, the Nigerian unit of Royal Dutch/Shell, and contrac-tor Halliburton West Africa.

38 OPEC Bulletin

M E M B E R C O U N T R Y F O C U S

Indonesia to benefit from rise inSouth Korean development aid

Seoul — In a move designed to deepen economic ties, theSouth Korean government is set to increase development aid tosix member countries of the Association of Southeast AsianNations (ASEAN), including Indonesia, according to a seniorofficial in the South Korean Ministry of Finance and Economy.

The South Korean government has reached a decision tomobilize the Economic Development Co-operation Fund(EDCF) in a region that has proved to be an increasinglyimportant market for the country’s exporters.

“We will increase official development aid to the ASEANcountries because they are emerging as a potential market forKorean exporters,” the official from the Ministry of Finance andEconomy, who declined to be named, said, highlighting theimportance of the markets in Indonesia, the Philippines andVietnam.

The aid would help South Korean companies increase theirexports and make inroads into the three countries, the largestmarkets within the 10-nation grouping.

The South Koreans have so far provided 460.8 billion wonin EDCF loans to all ASEAN states, accounting for 29.6 percent of total foreign aid, according to news reports.

This included 162.5bn won for Indonesia, 156.3bn won forVietnam, 53.8bn won for the Philippines, as well as 61.9bn wonfor Burma and 26.3bn won for Cambodia.

Myanmar, Laos and Cambodia, the three poorer nationswithin ASEAN, would also be getting new aid, other officialssaid.

South Korean experts would be helping to establish an early-warning system in ASEAN to detect a possible financial turmoil,according to the officials.

Indonesia, the Philippines and Vietnam, together withThailand, suffered their worst economic slump following the1997 financial crisis, which forced the suspension of many majorprojects, some of which involved South Korean investors, es-pecially in the power-generating and electronics-manufacturingsectors.

Saudi Arabia to complete newdesalination plants by year-end

Riyadh — Saudi Arabia plans to complete a number ofdesalination plants by the year-end, bringing the number ofoperational units in the Kingdom to 30.

A report in the Asharq Al-Awsat newspaper recently said thecombined production capacity of the plants stood at 2.9 millioncubic metres per day of water and more than 3,400 megawattsof electricity.

On completion of the projects, the Kingdom would have 29pumping stations and 10 mixing stations. The total length ofpipelines would be more than 4,000 km.

The Governor of the Saline Water Conversion Corporation

(SWCC), Abdullah Al Hussein, said in a report that the King-dom was one of the largest producers of desalinated water inthe world.

Mitsubishi consortiumwins $26m deal in Dubai

Dubai — The Dubai Electricity and Water Authority (DEWA)recently awarded a Mitsubishi consortium a $26 million con-tract to design, construct and commission three 132/11 kilovoltelectricity substations in the Emirate.

Dubai’s English-language daily Gulf News reported that theconsortium consisted of the Mitsubishi Corporation and theMitsubishi Electric Corporation.

The General Manager of DEWA, Saeed Mohammed AlTayer, said that project designs were currently being drawn up,with actual work on the site due to start by the end of the year.Some initial procurement had also started, he noted.

“The new project fits in with the development of Dubai andthe three substations will further meet the power requirementsof Dubai city,” Al Tayer commented.

According to a senior Mitsubishi Corporation official, whodeclined to be named, full commissioning of the three trans-mission stations was scheduled for August 2003. The threesubstations were being constructed at Hudheiba, Hadeeqa andIttihad, he added.

The Japanese industrial giant has been associated withDEWA in earlier projects, notably a scheme at Al Aweer.

DEWA General Manager said he hoped Mitsubishi ob-served the completion period as specified, owing to the impor-tance of the project, and that the substations entered into servicewithin the agreed time.

Al Tayer also confirmed that DEWA had pushed back theclosing date for tenders for the authority’s ambitious ‘L’ stationproject.

The new ‘L’ power and desalination station project wouldadd 700 megawatts of power and 70m gallons per day of watercapacity to Dubai’s existing utility sector.

The tender process, which had opened in June, was initiallyexpected to close in August, but would be extended a fewmonths, he said.

“We have received a lot of interest internationally for theproject. So far, 42 parties have taken up the tender documentsand we expect more during the next few weeks,” Al Tayer noted.

Iran’s petrochemical output toreach 14m tons in 2002

Tehran — Iran’s petrochemical production is due to reach14m tons this year from 12.5m tons recorded in 2001, accordingto the Public Relations Department at the Ministry of Petroleum.

A report by the Islamic Republic News Agency (IRNA) saidpetrochemical sales on the domestic market rose to 4,100,000

July/August 2002 39

M E M B E R C O U N T R Y F O C U S

tons in 2001 from 600,000 tons in 1989. Sales were expectedto increase to 4,400,000 tons this year, IRNA reported.

The report said the export of petrochemical products in 2001stood at $780 million. Current production was expected to reachthe value of $900m this year, IRNA said.

Ten petrochemical projects were underway, the report added,and when completed they were expected to generate an addi-tional 5m tons of products.

German firms keen to invest inSaudi Arabian infrastructure

Riyadh — A group of German companies has expressedinterest in investing in Saudi Arabia’s infrastructural projects,according to the Kingdom’s Council of Saudi Chambers ofCommerce and Industry (CSCCI) and published in the English-language daily newspaper of Arab News.

A consortium of German and international banks was study-ing prospects of financing Saudi Arabian infrastructural projects,according to the report. The Kingdom is the second largestimporter of German products.

The CSCCI said a high-level German business delegationwould visit the Kingdom early next year to explore investmentprospects. There have already been contacts between the Coun-cil and the German firms regarding investments, the reportnoted.

CSCCI Secretary General, Osama Kurdi, said German andinternational banks were motivated to finance projects in theKingdom because investment prospects in Saudi Arabia werenot affected by global economic changes, the report said.

Saudi-German joint investments in the Kingdom now standat a value of $1.12 billion, which is distributed among 94projects — industry accounting for 38 and service companies56 — with total German investment reaching 30 per cent inthese firms.

The report said Saudi Arabia and Germany were workingtowards signing two major agreements — one to avoid doubletaxation and the other to promote maritime shipping.

Indonesia seeking foreigninvestment for electricity sector

Jakarta — Indonesia is seeking $28.5 billion in new foreigninvestment for its domestic electricity sector, to help cope withan anticipated increase in demand which is expected to reach16.93 gigawatts (gw) by 2004, compared with 14.26 gw thisyear, according to data released recently by the state powercompany, PT PLN.

Company officials said the country’s power planners werealso working on reviving suspended projects of around 27independent power producers (IPPs), in a move to avoid a majorelectricity crisis by 2004–05.

Future electricity demand was projected to grow by nine per

cent a year, which was compelling the government to resolveall its differences with the IPPs and their power purchase agree-ments, the Co-ordinating Minister for the Economy, DorodjatunKuntjoro-Jakti, said.

He disclosed that in a move designed to attract new foreigninvestment, the government was seeking to pass a new bill onthe electricity industry. Indonesia has not received any foreigninvestment in the power sector since 1997.

Meanwhile, PT PLN has reported a 60 per cent drop inpower generation from hydropower plants, due to the lack ofrain. The plants were expected to generate 2,100 megawatts(mw) of electricity, or more than 10 per cent of the total 20,000mw of power anticipated to be generated by PLN this year.

Severe drought has affected the dam-based generation facili-ties. Indonesia recorded less rainfall during the June to Augustperiod, but industry observers said the drought could last longer.

PT PLN President, Eddie Widiono, said this shortfall wouldbe covered by intensifying power generation from the country’sgeothermal plants. However, experts have pointed out that PLNwould have to produce an additional 1,000 mw from thegeothermal plants, which only have a combined generationcapacity of 800 mw.

World Bank cautious of Nigeria’strillion-naira budget

Abuja — Nigeria cannot sustain a trillion-naira budget with-out major long-term macro-economic distortions, the WorldBank’s Chief Economist, Nick Stern, said.

“A trillion-naira budget is not consistent with macro-eco-nomic stability and national economic growth,” the World Bankofficial said during a recent visit to Nigeria.

Stern said that the country’s budget was one of the issuesraised at his meeting with the Nigerian President, OlusegunObasanjo, and the Minister of Finance, Mallam Adamu Ciroma,including members of the National Assembly.

Stern expressed his concern over the budget and urgedNigerian officials to look at the issue critically. Discussionsincluded conditions for private sector investment in the ruralareas and providing infrastructure to local communities tostimulate growth and development.

On the World Bank’s support for the New EconomicPartnership for African development (NEPAD), Stern said thatthe African Development Bank must come in forcefully insupport of the programme.

Meanwhile, he said the World Bank would continue to worktoward the reduction in tariff and trade barriers worldwide.

Stern acknowledged that there was a need for fair compe-tition in world trade. He said the industrialised countries shouldnot be talking of the need for developing countries to removesubsidies in trade and agriculture “when (developed countries)are subsidising trade and agriculture to the tune of $300 billionannually”.

“This amount is roughly the total GDP of the entire sub-Saharan Africa,” he stressed.

40 OPEC Bulletin

O P E C F U N D N E W S

OPEC Fund for International Development,Parkring 8, PO Box 995, 1011 Vienna, Austria.Tel: +43 1 515640; fax: +43 1 513 9238; tx: 1-31734 fund a; cable: opecfund; e-mail:info@opecfund.org; Web site: http://www.opecfund.org.

No 53/2002Vienna, Austria, June 12, 2002

OPEC Fund MinisterialCouncil holds23rd Annual Session

The Ministerial Council of the OPECFund for International Development, theinstitution’s highest policy-making body,held its 23rd Annual Session in Vienna,Austria. The Council re-elected the Stateof Kuwait to the Chair and the UnitedArab Emirates as Vice-Chair for a periodof one year. In his acceptance address, theMinister of Finance and Planning of theState of Kuwait, HE Dr Yousef H Al-Ebraheem, thanked the members of theCouncil for their support and for the trustplaced in him.

Addressing the Council, Dr Al-Ebraheem reflected on one of the mostimportant events of 2002 — the UnitedNations International Conference on Fi-nancing for Development (FfD), a meet-ing attended by a record number ofsovereigns and heads of state, including

representatives from all OPEC FundMember Countries. The FfD, said theChairman, had “brought out the best inall participants”. Donor countries had notonly pledged larger amounts of their re-sources towards the global aid effort, buthad also displayed a “renewed enthusi-asm” for development activities, acceptingthat there was “no workable alternative tolifting the world’s masses out of poverty”.

Dr Al-Ebraheem pointed to “increas-ing marginalization, weak policies andgovernance, civil conflict and ill health” assome of the greatest problems facingdeveloping countries today. Growing ex-ternal debt and decreases in official devel-opment assistance, he added, were creatingfurther obstacles. There remained a need,he continued, to find sustainable solutionsthat focused on the quality of growthrather than just the rate of growth. For theOPEC Fund’s part, he said, the institutionhad diligently kept pace with current trendsby adjusting its mode of operation andexpanding its range of activities in orderto “keep up with new thinking”.

In his own statement to the Council,the Chairman of the Fund’s GoverningBoard, HE Dr Saleh A Al-Omair, gave abrief overview of developments in the worldeconomy during 2001. Although a numberof events had adversely affected economicgrowth, he pointed out that the ensuingslowdown had been less severe than antici-pated. Nevertheless, he said “the slide inglobal output and demand resulted in job

losses, falls in income and hardship formillions of people”. Against this back-ground, the Fund had remained steadfastin its solemn promise to fight poverty andmarginalization “by making optimal useof all tools and instruments at its disposal”.

Dr Al-Omair referred, with satisfac-tion, to the successful conclusion of theFund’s 14th Lending Programme, underwhich, for the first time, 100 per cent ofallocated resources had been committed.The Chairman described this achievementas testimony to the Fund’s “ever-increas-ing capacity for judicious planning andcareful monitoring of resources”.

Dr Al-Omair also announced theimminent launch of an OPEC Fund Ini-tiative against HIV/AIDS in Africa, whichhe depicted as a “major, groundbreakingscheme”. The initiative will benefit 12severely affected countries in sub-SaharanAfrica by delivering prevention, care, train-ing and equipment.

The Director-General of the Fund,HE Dr Y Seyyid Abdulai, presented Min-isters with an overview of the institution’soperational status. Cumulatively, and tothe end of 2001, he reported, commit-ments had reached $6.2 billion and ben-efited 109 developing countries.Furthermore, over one half of the Fund’spublic sector lending approvals in 2001had been directed towards the least devel-oped countries.

This “remarkable record” he said waslargely due to the “unflagging support” of

OPEC Fund’s Ministerial Council holdsits 23rd Annual Session in Vienna

In June, the OPEC Fund for International Development held its 23rd Annual Session. The most importantevents of 2002 were highlighted at the Session, including the holding of the United Nations International Conferenceon Financing for Development; the successful conclusion of the Fund’s 14th Lending Programme, under which100 per cent of allocated resources had been committed; and the imminent launch of the OPEC Fund Initiativeagainst HIV/AIDS in Africa. There was also a substantial increase reported in the Fund’s private sector financingprovision.

July/August 2002 41

O P E C F U N D N E W S

Member Countries, who had helped theFund evolve into “a dynamic, highly re-spected development partner, with theexperience, the drive and the means toprovide real solutions to real needs”.

In addition, Dr Abdulai drew atten-tion to the “significant progress” madeduring 2001 with respect to the Fund’sprivate sector window, which he said hadexpanded to include directly financedprojects in sectors such as the agro-indus-try, industry and services. “Such diversi-fication is wholly in line with our statedobjective to support a wide range of op-erations,” he stated.

Private sector commitments in 2001,he informed Ministers, had been morethan double those of the previous year, andsolid steps had been taken to set up “stra-tegic partnerships that would greatly en-hance the Fund’s operational capacity (inthe private sector).”

The Ministerial Council consideredand adopted the Fund’s Annual Report for2001. It also reviewed and approved theaudited financial statements of the Fundfor the fiscal year 2001.

Also at the meeting, a progress reporton the implementation of the Private SectorFacility was discussed and a note on thestatus of the Fund’s participation in theHeavily Indebted Poor Countries (HIPC)debt initiative was examined. Ministersalso reviewed a status report on the imple-mentation of the Fund’s HIV/AIDS Spe-cial Account established in June 2001.

The next session (24th) of the Minis-terial Council will be held in the UnitedArab Emirates on June 11, 2003.

No 54/2002Vienna, Austria, June 12, 2002

OPEC Fund releasesAnnual Report 2001The 2001 Annual Report of the OPECFund for International Development wasreleased, following its adoption by theFund’s Ministerial Council meeting inVienna. Published in English, Arabic,French and Spanish, the report details the

Fund’s activities during 2001 and gives anoverview of operations since the institu-tion’s inception in 1976. Some importanthighlights are described below:

— By the end of 2001, cumulative com-mitments stood at $6,209.1 millionand total disbursements had reached$4,108.2m (see Table 1).

— In the course of 2001, $396.1m wascommitted in loans and grants, and$187.2m was disbursed (see Table 2).

The OPEC Fund, a multilateral devel-opment finance institution established byOPEC Member Countries, seeks to rein-force financial co-operation between itsmember states and other developing na-tions, principally by providing much-needed financial resources to assist thecountries of the South in their pursuit ofeconomic and social advancement.

The Fund has been active in financingprojects and programmes in the publicsector in all economic and social areas,helping to promote economic develop-

Table 1: Total commitments and disbursements, as of December 31, 2001 ($ million)

Commitments Disbursements

Public sector lending operationsProject financing 3,698.320 2,095.303BoP support 724.230 713.930Programme financing 305.296 268.991HIPC Initiative financing 145.830 9.600Sub-total 4,873.676 3,087.824

Private sector lending operations 111.730 7.797

Grant programmeTechnical assistance 99.132 91.646Special contribution to IFAD 20.000 20.000Project preparation 0.327 0.260Research and similar activities 4.716 3.657Emergency aid 44.067 42.808Common Fund for Commodities 83.560 11.528Sub-total 251.802 165.899

IFAD 861.142 731.989

IMF Trust Fund 110.721 110.721

Total 6,209.071 4,108.230

42 OPEC Bulletin

O P E C F U N D N E W S

Table 2: Commitments and disbursements in 2001 ($ million)

Commitments Disbursements

Public sector lending operationsProject financing 273.830 159.820Programme financing — 6.000HIPC Initiative financing 58.500 9.600Sub-total 332.330 175.420

Private sector operations 58.600 7.800

Grant programmeTechnical assistance 3.036 2.927Research and similar activities 0.671 0.475Emergency aid 1.500 0.541Sub-total 5.207 3.943

Total 396.137 187.163

ment and social welfare, and improve liv-ing standards. In 1998 it set up a facilityfor the financing of private sector activi-ties, with a view to encouraging the growthof productive private enterprise in devel-oping countries. In addition, the institu-tion has been active in extending grants fortechnical assistance and research and simi-lar activities, as well as for emergencyhumanitarian aid. Moreover, the Fundfinancially assists other institutions whoseactivities benefit developing countries.Since its inception and up to the end of2001, the Fund has extended develop-ment assistance in loans and grants to atotal of 109 countries in Africa, Asia, LatinAmerica and the Caribbean, and Europe.

In his foreword to the Annual Report— in a year that marked the 25th anniver-sary of the Fund’s establishment — theDirector-General, HE Dr Y SeyyidAbdulai, paid tribute to the “generoussupport” of Member Countries, which, hesaid, reflected the “unambiguous commit-ment of OPEC nations to South-Southco-operation and the ideals of solidarityamong developing countries”.

The flexibility endowed on the Fundby its Members, he continued, had placedit in a “key position to respond to thechanging needs of its beneficiaries” andmade it a valued development partner.One of the Fund’s other strengths, he said,was its “diversified and long-establishednetwork of co-operating agencies, includ-

ing sister institutions”. The goodwill ofbeneficiary countries, he noted, was alsoworth highlighting.

Dr Abdulai spoke about some of theFund’s major achievements in recent years,describing them as a “clear indication ofits (the Fund’s) ability to stay relevant andadapt easily to current and new thinkingin development co-operation”. These suc-cesses include the opening up of a privatesector window, participation in the HIPCInitiative aimed at alleviating the debtburdens of the heavily indebted poor coun-tries, and the launch of an HIV/AIDSSpecial Account to finance activities ad-dressing the pandemic.

Looking to the future, the Director-General acknowledged the inevitability ofnew problems and fresh challenges, butasserted that the Fund would “anticipatethe next 25 years with optimism…bybroadening partnerships…and keeping itsfocus on issues of vital concern to co-operating countries”.

Public sector lending operationsIn 2001, the Fund approved 47 loans

worth $332.33m to 39 countries: projectlending totalled $273.83m and went to 33countries, helping to finance developmentoperations in a range of sectors, with trans-portation (37.5 per cent), education (22.2per cent) and water supply and sewerage(9.6 per cent) taking the largest shares.Substantial resources were also directed

towards the sectors of health and agricul-ture, as well as energy and telecommuni-cations projects. Nine loans valued at$58.5m were approved to provide debtrelief within the framework of the HeavilyIndebted Poor Countries (HIPC) Initia-tive.

Cumulatively to the end of 2001, theFund had approved 913 public sector loans,amounting to $4,873.7m. These loans fellinto the following categories:

Project:666 loans totaling $3,698.3m

BOP support:185 loans amounting to $724.2m

Programme:41 loans valued at $305.3m

HIPC Initiative:21 loans worth $145.8m

Countries in all developing regions ofthe world have benefited from the Fund’slending activities, with Africa receiving atotal of 521 loans, Asia 245 loans, LatinAmerica and the Caribbean 140 loansand Europe seven loans. All economicsectors have been covered by the Fund’slending operations, but the focus in re-cent years has been on the main socialsectors of education, health, water supplyand sewerage, and transportation. In linewith its mandate to target the neediestnations, $2,822.7m or 58 per cent of theFund’s total lending commitments has

July/August 2002 43

O P E C F U N D N E W S

been channelled into the least developedcountries.

Private sector lending operationsBy the end of December 2001, cumu-

lative private sector approvals had reached$111.73m in support of operations inAfrica, Asia, Latin America, the Caribbeanand Europe. Approvals for 2001 com-prised five lines of credit worth a total of$20.0m to private entities in Bolivia, In-dia, the Maldives, Paraguay and Peru,which will be used to provide credit facili-ties to small, medium and micro enter-prises in the concerned countries. Twolines of credit totalling $20m were alsoapproved for regional development banksin East and West Africa to allow theseinstitutions to provide medium-term fund-ing to development projects in their sub-Saharan Africa member countries.Additionally, private sector financing tothe amount of $18.6m was approved foractivities in the agro-industry, services andindustrial sectors.

GrantsIn 2001, the Fund approved 37 grants

totalling $5.21m, of which $3.04m wentto finance technical assistance schemes,$671,000 to research and similar activitiesand $1.5m helped support emergency reliefoperations. The technical assistance grantsbenefited a diverse range of causes andincluded, among others, a number of healthand education initiatives; biosaline andsustainable agriculture schemes; assistancetowards an ongoing river blindness eradi-cation campaign; and support to healthcare schemes for the benefit of Palestin-ians.

In the sphere of emergency assistance,aid was extended to earthquake victims inIndia, to help survivors of devastating floodsand mudslides in Algeria, and to providerelief to Afghan refugees in Pakistan. Grantsdrawn from the Research Account helpedfinance various research studies, as well asa number of training courses and develop-ment conferences.

In all, some 568 grants valued at$251.8m had been cumulatively commit-ted by the Fund as of December 31, 2001.Of this sum, $99.1m was made availableas technical assistance; $44.1m was ap-proved in support of emergency reliefoperations; $4.7m sponsored research and

similar activities; and a further $327,000was committed for project preparation. Inaddition, a special grant of $20m wasextended to the International Fund forAgricultural Development (IFAD), and acontribution of $83.6m made to theCommon Fund for Commodities.

Support to other institutionsAmong the various international

institutions which have received OPECFund support since 1976 are the IFADwhich supports rural development($861.1m) and the IMF Trust Fund whichbenefits low-income member countries($110.7m).

No 55/2002Vienna, Austria, June 12, 2002

OPEC FundGoverning Boardholds 99th Session

The Governing Board of the OPEC Fundfor International Development has con-vened its 99th Session at the Fund’s head-quarters in Vienna, Austria.

Following adoption of the meeting’sagenda, the Director-General of the Fund,HE Dr Y Seyyid Abdulai, reporting to theBoard on the Fund’s activities, indicatedthat on a cumulative basis, and as of theend of May 2002, $4,961.8 million hadbeen approved in loans to the public sectorand $3,176.5m disbursed. These loans,which were extended for project and pro-gramme financing and balance of pay-ments support, as well as within theframework of the HIPC Initiative, number922. All major economic and social sectorshave benefited from the Fund’s assistance,including agriculture, transportation,health, education, water supply and sew-erage, industry, energy, etc.

The Director-General further indicatedthat a total of 28 operations had beenapproved under the Fund’s Private SectorFacility. As of the end of May 2002,cumulative commitments through thiswindow totalled $137.8m.

In addition, the Fund has approved atotal of 580 grants in support of variousactivities in the areas of technical assist-

ance, food aid, emergency relief and re-search. Cumulative grant commitments,as of the end of May 2002, amounted to$253.2m, of which $171.2m has beendisbursed. Moreover, the Fund has con-tributed, in grant form, substantialamounts to the resources of other inter-national development institutions bene-fiting the South; these contributionstotal $971.8m, most of which has beendisbursed. To date, the Fund has provideddevelopment assistance to 109 countriesin Africa, Asia, Latin America and theCaribbean, the Middle East and Europe.

In this session, the Board approvedseven public sector project loans wortha total of $36.31m which are detailed asfollows:

Country/project $ million

BoliviaOtorongo-Cerro Pucara road 5.60Eritrea: Hirgigo thermal powerplant rehabilitation 0.91EthiopiaMetu-Gore road 4.80Guinea: Telimele integratedrural development 5.00JamaicaRural roads rehabilitation 5.00TanzaniaSingida water supply 5.00Uzbekistan: Karshi pumpingcascade rehabilitation 10.00

Total 36.31

All of the above loans have a maturityof 20 years, including a grace period of fiveyears, and carry interest at rates rangingfrom one per cent to 2.5 per cent, with theexception of the loans to Bolivia and Ja-maica, which bear interest rates of threeper cent and 3.5 per cent respectively.

The projects will be co-financed withthe governments of the beneficiary coun-tries and with other donors includingfive OPEC aid institutions — the AbuDhabi Fund for Development, the ArabBank for Economic Development inAfrica, the Islamic Development Bank,the Kuwait Fund for Arab EconomicDevelopment and the Saudi Fund forDevelopment. Other contributors in-clude the World Bank and the Frenchgovernment.

44 OPEC Bulletin

O P E C F U N D N E W S

In addition, the Board approved a grantof $8.11m for the OPEC Fund Initiativeagainst HIV/AIDS in Africa. This grantwill be drawn from the Fund’s HIV/AIDSSpecial Account, which was launched inJune 2001.

The Board also approved two newgrants aimed at financing activities in theagriculture sector. They total $600,000,and are broken down as follows:

— $400,000 towards a Rift Valley Feversurveillance and control scheme in theArab region.

— $200,000 in support of a market crea-tion programme for the rural poor inBangladesh, China, India, Nepal andZambia.

The Board also discussed the Fund’sPrivate Sector Facility; three new privatesector investment proposals were approvedand a number of pipeline proposals con-sidered.

Within the context of the EnhancedHeavily Indebted Poor Countries (HIPC)Initiative, the Board approved assistanceto Ghana to help ease that country’s debtburden.

Also in this session the Board reviewedfinancial and budgetary matters; discussedmatters that arose from the 23rd AnnualSession of the Ministerial Council; andlooked at operations under active consid-eration in the public sector.

The next Governing Board Sessionwill take place in Vienna, Austria on Sep-tember 24, 2002.

No 56/2002Vienna, Austria, June 12, 2002

OPEC Fund launchesmajor initiative againstHIV/AIDS in Africa

The OPEC Fund for International Devel-opment has approved a grant of $8.11million to finance an OPEC Fund Initia-tive against HIV/AIDS in Africa. Target-ing 12 sub-Saharan countries, namely,Burkina Faso, Burundi, the Central Afri-can Republic, Ethiopia, Kenya, Malawi,

Mozambique, Rwanda, Togo, Uganda,Tanzania and Zambia, the scheme is thefirst of a series to be financed from theFund’s dedicated HIV/AIDS account. Itwill be implemented in co-operation withthe World Health Organization.

Concern has grown worldwide overthe stubborn spread of the HIV/AIDSvirus, which has so far infected some 60mpeople and claimed the lives of an esti-mated 22m, one-fifth of them children.The disease knows no boundaries, but isparticularly prevalent on the Africancontinent where over three-quarters ofthe world’s AIDS-related deaths have oc-curred.

The overall goal of the Fund initiative,which will be implemented over a periodof 18 months, is to scale up prevention,support and care to the infected, and toreduce vulnerability to HIV/AIDS in par-ticipating countries. This will be done byhelping to formulate national action plans,strengthening the capacities of the involvedhealth care sectors, and implementing keyactivities on the ground. Each country hasidentified fields of need that are mostrelevant to its actual context.

Seven key areas of focus include: youth-friendly services for information and edu-cation; voluntary counselling and testing;mother-to-child HIV transmission pre-vention strategies; provision of care andsupport to those infected; the preventionand treatment of sexually-transmittedinfections; the continual provision of safeblood supplies; and, monitoring and sur-veillance measures at both national anddistrict levels.

In recent years, the Fund has grownincreasingly distressed about the humansuffering and extensive loss of life causedby AIDS, and is particularly troubled bythe developmental impact of disease. Bydestroying human capital, eroding pro-ductivity and reducing growth, AIDS isundermining long-term efforts to promoteeconomic and social development, reducepoverty and improve living standards inthe most disadvantaged regions of theworld.

The HIV/AIDS Special Account waslaunched in June 2001 in response to thisescalating crisis. With an initial endow-ment of $15m, it aims to provide muchneeded financing for targeted mitigationefforts on the ground.

No 57/2002Vienna, Austria, June 12, 2002

OPEC Fund extends$400,000 grant for RiftValley Fever control

The OPEC Fund for International Devel-opment has approved a grant of $400,000in support of a Rift Valley Fever (RVF)surveillance and control initiative. Spon-sored by the Arab Organization for Agri-cultural Development (AOAD), thescheme aims to formulate an effective co-ordination system in six affected Arabcountries, with the view to expandingefforts to other high risk areas.

Rift Valley Fever is a virus spread byseveral different mosquito species, as wellas sand flies and other biting insects. Al-though many types of animals can con-tract RVF, the disease is much more severeamong domesticated animals, especiallylivestock such as sheep, goats, cattle andcamels. Animals less than one-week oldare particularly vulnerable, with mortalityrates reaching as high as 90 per cent. Firstisolated in Kenya’s Rift Valley in 1930, thevirus has been endemic in sub-SaharanAfrica, and emerged for the first time inthe Arabian Peninsula in September 2000.Cases have been confirmed in Egypt,Mauritania, Saudi Arabia, Somalia,Sudan and Yemen, endangering the coun-tries’ 205 million-strong livestock popu-lation, and in turn, constraining foodsecurity and impeding local and nationaltrade.

Humans are also susceptible to con-tracting RVF, especially while handlingblood or other fluids while butcheringinfected animals, or possibly from ingest-ing milk. Although the virus occurs lessfrequently in humans, the symptoms gen-erally manifest themselves in the form ofocular disease, meningitis, or haemorragicfever, where the highest prevalence offatalities occur.

AOAD is launching a regional preven-tion and containment project that com-prises several major components. An earlywarning system will be established usingremote sensing data and field surveillanceinformation on virus activity on bothanimal hosts and insect vectors. Advanced

July/August 2002 45

O P E C F U N D N E W S

technological equipment will be used tofacilitate the prediction of potential epi-demics. In order to ensure that the in-creased demand for RVF vaccines is met,Egypt’s existing vaccine manufacturingfacility will be expanded to boost produc-tion. At both regional and national levels,veterinarians and technicians will receivetraining in the surveillance, diagnosis andmanagement of RVF and be providedwith the necessary educational materials.The Fund’s grant will be used specificallyfor the purchase of operational supplies forthe early warning system and vaccine-producing facility.

Data summary

Sector:Agriculture.

Project:Surveillance and control of Rift ValleyFever in the Arab region.

OPEC Fund grant:$400,000.

Beneficiary countries:Egypt, Mauritania, Saudi Arabia, So-malia, Sudan and Yemen.

Total cost:$2.9m.

Co-financiers:Arab Organization for AgriculturalDevelopment (AOAD); governmentsof beneficiary countries.

Executing agencies:AOAD; Ministries of Animal Re-sources/Ministries of Agriculture ofbeneficiary countries.

Grant administrator:OPEC Fund.

Programme duration:Two years.

No 58/2002Vienna, Austria, June 12, 2002

Fund supports programmeto assist small farmerswith $200,000 grant

The OPEC Fund for International Devel-opment has approved a grant of $200,000in support of a scheme to assist smallfarmers in poverty afflicted regions. Spon-

sored by International DevelopmentEnterprises (IDE), the project aims to in-troduce productivity enhancing, income-generating technologies that will enablesmallholders to rise above subsistence levelfarming and integrate into local, regionaland global markets.

Of the world’s 1.3 billion people wholive on less than $1 per day, some 600million live in rural areas and dependprimarily on subsistence farming for sur-vival. Owning less than two hectares ofland, these smallholders cannot afford topurchase inputs or invest in new cultiva-tion technologies, and are thus unable toproduce a surplus that could be sold fora profit. Scarce water resources and/orpoor control of available sources are otherconstraints that limit agricultural yieldsand, as a result, most of these communi-ties have no opportunity to break thecycle of poverty and improve their livingstandards.

IDE was established in 1982 as a non-profit, non-governmental organizationdedicated to eliminate rural poverty byhelping small farmers overcome thesebarriers and help them become producersof saleable, profitable crops.

The IDE programme will developsustainable smallholder market systemsin field locations across Bangladesh,China, India, Nepal and Zambia. Theseareas represent a wide cross-section ofconditions that have an important bear-ing on market creation for the poor (dif-ferences in water availability, populationdensity and access to markets).

The first step will be to identify anddevelop suitable technologies to helpincrease agricultural productivity, such asthe introduction of low cost micro-irri-gation technologies, and the identifica-tion of high value cash crops that can becultivated using the smallholders’ rela-tively abundant source of family labour.A training and capacity building compo-nent will help strengthen the farmers’knowledge and skills.

Other activities include the establish-ment of farmers’ associations, setting uplinks between smallholders and market-places and the design and provision ofcredit services.

Over 47,000 households are expectedto benefit from this initiative. Using theexperience gained from the present scheme,

a continuation of the programme is envis-aged in the future to expand coverage toother rural regions.

Data summary

Sector:Agriculture.

Programme:Market creation for the rural poor.

OPEC Fund grant:$200,000.

Beneficiary countries:Bangladesh, China, India, Nepaland Zambia.

Total cost:$8.4m.

Co-financiers:United States Agency for InternationalDevelopment; Sir Dorabji Tata Trust;Swiss Development Co-operation;OXFAM, UK; Canadian InternationalDevelopment Agency.

Executing agencies:International Development Enter-prises; national authorities; benefici-ary smallholders; community-basedorganizations; NGOs.

Grant administrator:OPEC Fund.

Programme duration:Three years.

No 59/2002Vienna, Austria, June 13, 2002

OPEC Fund extends$200,000 humanitarianaid to Palestine

The OPEC Fund for International Devel-opment has approved an emergency assist-ance grant of $200,000 in support of aninitiative launched by the Arab Gulf Pro-gramme for the United Nations Develop-ment Organization (AGFUND). Theinitiative, which aims at bringing relief toPalestinians in the West Bank and GazaStrip, will help strengthen local health careservices by providing urgently neededmedical supplies and equipment.

The past few months have marked asevere escalation in violence in the WestBank and Gaza Strip, which has been

46 OPEC Bulletin

O P E C F U N D N E W S

seeing the increased use of military forceagainst the Palestinian population, result-ing in tremendous human suffering andloss of life, as well as widespread destruc-tion of medical centres, homes and basicinfrastructure.

In response to this crisis, AGFUND,under the auspices of HRH Prince TalalBin Abdulaziz of Saudi Arabia, has devel-oped a scheme to deliver emergency medi-cal care to Palestinian cities, refugee campsand rural areas. Specific objectives include:providing clinics and major health carecentres with drugs, medical supplies, equip-ment and ambulances; boosting the deliv-ery of rehabilitation services to the injured;extending psychological counselling toindividuals, particularly children, suffer-ing post-traumatic distress as a result of theviolence; and, training of health care per-sonnel.

The Welfare Association, the UnitedNations Development Programme(UNDP) and the United Nations Reliefand Works Agency for Palestinian Refu-gees in the Near East (UNRWA) are alsoparticipating in this initiative.

AGFUND is a regional developmentinstitution established in 1981 with thesupport of the leaders of the Arab statesthat constitute its membership and con-tribute to its budget. The organization isconcerned with support to sustainablehuman development efforts, and targetsthe neediest groups in developing coun-tries, particularly women and children.It also co-operates closely with other or-ganizations and institutions active in thisfield.

No 60/2002Vienna, Austria, June 21, 2002

Fund extends São Toméand Principe debt reliefunder HIPC initiative

The OPEC Fund for International Devel-opment has signed an agreement with theDemocratic Republic of São Tomé andPrincipe for the provision of debt reliefwithin the framework of the EnhancedHeavily Indebted Poor Countries (HIPCII) Initiative. Endorsed by the Interim and

Development Committees of the WorldBank and the International Monetary Fundin September 1996, the Initiative repre-sents a united effort by the internationalcommunity to address the external debtproblems of the world’s heavily indebtedpoor countries. Specifically, it aims toreduce the debt of eligible countries tosustainable levels, subject to satisfactorypolicy performance, in order to ensure thatadjustment and reform efforts are not putat risk by continued high debt and debtservice burdens. As the Initiative requiresparticipation by all relevant creditors, debtrelief efforts entail co-ordinated action bythe international finance community in-cluding multilateral institutions.

In October 1999, the internationalcommunity agreed to make the Initiativebroader, deeper and faster by increasingthe number of eligible countries, raisingthe amount of debt relief each countrywould receive and speeding up delivery.Both HIPC and the subsequent HIPCEnhanced Framework foresee this beingachieved through a strategy of fully pro-portional burden-sharing among all offi-cial creditors. About 38 countries couldultimately qualify for HIPC assistance, ofwhich 34 are in sub-Saharan Africa. Todate, 26 countries have reached their de-cision point under the Enhanced HIPCInitiative and of these, four have reachedtheir completion point under the originalHIPC Initiative.

These 26 countries are now receivingdebt relief which will amount to some $41billion over time. They qualify for debtrelief in two stages: in the first stage, thedebtor country will need to demonstratethe capacity to use prudently the assistancegranted by establishing a satisfactory trackrecord, normally for three years; in thesecond stage, the country will implementa full-fledged poverty reduction strategyand an agreed set of measures aimed atenhancing economic growth.

The OPEC Fund — committed as itis to strategies aimed at securing economicgrowth for the countries it works with andin helping to alleviate poverty — has fromthe very beginning expressed its support ofthe Initiative and has participated activelyin its design.

The OPEC Fund has approved debtrelief under the HIPC Initiative and theEnhanced framework to 24 countries, 20

of which are in Africa and four in LatinAmerica.

In December 2000, the decision pointwas reached for São Tomé and Principe,and support for a comprehensive debtreduction package to this country underthe HIPC Initiative was agreed upon bythe IMF and the World Bank. Over time,total nominal debt service relief from allof São Tomé and Principe’s creditors willamount to approximately $200 million,which represents $97m in net present value(NPV) terms, or 83 per cent of total NPVof debt outstanding at the end of 1999.Nominal debt relief savings over the next20 years are expected to total $131m, orsome $6.5m annually. This reduction indebt-service payments will help the coun-try free up resources to fund expenditurein education, basic infrastructure develop-ment, and health and poverty reductionschemes.

The OPEC Fund has assisted São Toméand Principe with its development activi-ties for some 20 years, providing balanceof payments support and assisting projectsin the sectors of education, water supplyand sewerage, agriculture and energy.Under this agreement, financing to theamount of $3.5m will be made availableto ease São Tomé and Principe’s debtburden.

The agreement was signed in Viennaby the Minister of Planning and Financeof the Democratic Republic of São Toméand Principe, HE Ms Maria dos SantosTebús Torres, and by the Director-Gen-eral of the OPEC Fund, HE Dr Y SeyyidAbdulai.

No 61/2002Vienna, Austria, June 24, 2002

OPEC Fund extendshumanitarian aid toIran’s earthquake victims

The OPEC Fund for International De-velopment has approved an emergencyassistance grant of $200,000 to the Is-lamic Republic of Iran to help purchaserelief items for victims of an earthquakethat struck the Qazvin and Hamedanprovinces in the northwest of the country

July/August 2002 47

S E C R E T A R I A T N O T E S

on June 22. Measuring 6.3 on the RichterScale, the quake left over 230 peopledead, around 1,000 people injured, andat least 25,000 lost their homes. In addi-tion to the loss of life, scores of villageshave been damaged or destroyed entirely,and many were cut off from electricity,water and phone services. Current reliefworks are focusing on search and rescueefforts, as well as evacuation of the injured.

In co-ordination with the InternationalFederation of Red Cross Red CrescentSocieties (IFRCS) and the Iranian RedCrescent Society, over 500 relief workershave been deployed to the affected areasand, so far, some 100 tonnes of food andnon-relief items have been delivered. TheIFRCS is also forming a delegation todetermine additional emergency needs,particularly in the areas of water supply andsanitation, health care and re-construction.Urgently-needed items include blankets,tents, food, stoves, shovels and lanterns.

The OPEC Fund’s contribution to theaid effort will be used to help procure reliefitems, and will be channelled through theIFRCS.

No 62/2002Vienna, Austria, June 27, 2002

Fund extends $200,000grant for humanitarianaid for Palestinians

The OPEC Fund for International Devel-opment has approved a grant of $200,000in support of an initiative to restore basicmedical services for Palestinians. Spon-sored by the United Nations Fund forPopulation Activities (UNFPA), the pro-gramme aims to repair health care infra-structure, provide equipment and supplies,and implement a wide range of supportservices, placing a strong emphasis on ad-dressing the needs of women and children.

As a result of the escalation in violencein the West Bank and Gaza Strip and theincreased use of military force, vital infra-structure and homes have been destroyed,and thousands have been injured or killed.Movement restrictions and the erection ofbarriers have limited the delivery of medi-cal supplies and have prevented many

people from reaching health care centres.This has meant extreme hardship for thepopulation, particularly among womenand children, as is reflected in the in-creased maternal/infant mortality rates. Inaddition to the high number of physicalinjuries, this crisis is also causing wide-spread psychological trauma.

UNPFA, in co-ordination with otherUN agencies and donors such as the USAgency for International Development,the Department for International Devel-opment, the United National Children’sFund, the United Nations DevelopmentProgramme, the United Nations Reliefand Works Agency for Palestine Refugeesin the Near East, the European Commis-sion and the World Health Organization,has launched a humanitarian assistanceprogramme that will be implemented overa six to eight-month period.

A number of activities will be carriedout, such as the rehabilitation and recon-struction of hospitals, clinics, family plan-ning and women’s health centres andnursing schools. Medical supplies andequipment will be provided, especiallythose required for handling obstetricalemergencies. Integrated psycho-socialcounselling and support programmes fortraumatized women and their families willalso be established.

Capacity-building schemes will pro-vide extra training to healthcare workersand trainers, covering topics such as re-productive health, gender-based issuesand communication skills. Communityawareness programmes will also be im-plemented, and the function of the Pal-estinian Central Bureau of Statistics willbe restored so that it will be able toprovide the basic demographic and eco-nomic data necessary for reconstructionand development efforts.

No 63/2002Vienna, Austria, July 11, 2002

OPEC Fund andHonduras signinvestment agreement

An agreement for the encouragement andprotection of investment has been signed

between the OPEC Fund for Interna-tional Development and the Republic ofHonduras. Drawn up within the frame-work of the Fund’s Private Sector Facility,the convention was initialed by the Min-ister of Industry and Commerce of theRepublic of Honduras, HE Dr JulietteHandal de Castillo, and by the Director-General of the OPEC Fund, HE Dr YSeyyid Abdulai.

The Fund’s Private Sector Facility is afinancing window, endowed with its ownresources, through which the Fund chan-nels support directly to the private sectorin developing countries. The objectives ofthe Facility are to promote economicdevelopment by encouraging the growthof productive private enterprise and sup-porting the development of local capitalmarkets. Under the Facility, loans are madeto financial institutions for on-lending tosmall-, medium- and micro-enterprises, aswell as directly to specific projects.

Equity participation in private enter-prises is also undertaken, either directly orthrough country or regional investmentfunds. As a pre-condition to such invest-ment, the Fund requires signature of astandard agreement with the country con-cerned for the encouragement and protec-tion of investment. The agreement accordsthe OPEC Fund the same privileges asthose normally given to international de-velopment institutions in which the coun-try holds membership.

In 2000, Honduras’ population wasestimated at 6.5 million and the country’sgross national income (GNI) amounted to$5.5 billion, while GNI per capita stood at$850. Services account for 53 per cent ofGDP followed by industry with 32 per cent,manufacturing at 20 per cent and agricul-ture at around 15 per cent. The country’seconomy is still recovering from the dev-astation sustained in 1998 by HurricaneMitch.

The government has implemented anumber of reforms that focus on achievingsustainable economic growth through theimplementation of poverty-reduction strat-egies, developing its human resource po-tential, and supporting environmentalprotection measures. Honduras is alsocreating a favorable environment for thecountry’s private sector, which is regardedby the government as being critical to theeconomic development of the country.

48 OPEC Bulletin

O P E C F U N D N E W S

No 64/2002Vienna, Austria, July 26, 2002

Dr Mahsoun Jalal,former Governing BoardChairman dies aged 66

It is with deep regret that the OPEC Fundfor International Development announcesthe passing of a former Chairman of theGoverning Board, Dr Mahsoun Jalal, onJuly 24, 2002, in Tunis, Tunisia.

Born in Saudi Arabia in 1936, Dr Jalalwas the Representative of the Kingdomof Saudi Arabia on the Governing Boardof the OPEC Fund for International De-velopment from 1976, the year of theinstitution’s inception, until November1979, and then served as the Chairman ofthe Board from that date on until Novem-ber 1982.

Dr Jalal was educated at CairoUniversity in Egypt, and in the UnitedStates at Rutgers University in New Jerseyand the University of California, wherebe obtained a doctoral degree in econom-ics. He was a Professor of Economicsat the University of Riyadh from 1967–75, during which time he was also aconsultant for various government agen-cies.

Dr Jalal was extremely involved inthe area of development planning andfinance, and between 1975 and 1979 wasthe first Vice-Chairman and ManagingDirector of the Riyadh-based Saudi Fundfor Development, the Kingdom’s agencyfor bilateral aid to other developing coun-tries.

He also served as a Director of theSaudi Basic Industries Corporation,Chairman of the Saudi Investment Bank-ing Corporation, Chairman of the East-ern Petrochemical Company and Directorof the Saudi International Bank in Lon-don.

Dr Jalal authoured a number of booksand articles on economic developmentand theory. Prior to assuming his respon-sibilities at the OPEC Fund, he wasthe Executive Director for Saudi Arabia onthe Board of the International MonetaryFund.

His loss will be keenly felt by all hisfriends and associates.

No 65/2002Vienna, Austria, July 31, 2002

Benin receives $5.8mloan from OPEC Fundfor road rehabilitation

The OPEC Fund for International Devel-opment has signed a $5.8 million loanagreement with the Republic of Benin insupport of an initiative to upgrade the 89kilometre long Akpro-Kpedekpo Road,an important corridor that passes throughkey agricultural territory. This project fallswithin the framework of a governmentstrategy to rehabilitate the country’s trans-portation network, and ultimately, reducepoverty.

Benin’s 17,269 km road system rep-resents the dominant mode of transport,connecting agricultural regions to market-places and shipping ports, as well as out-lying food-deficit regions. However, mostrural roads consist of poorly-maintainedearth or track, making travel slow andexpensive, and are often rendered impass-able during the rainy season. The road,which is situated in the southeast cornerof the country, provides access to the twofertile provinces Oueme and Zou, as wellas serving as a vital trade link to neighbour-ing countries. This earth road is in sub-standard condition and frequently becomesflooded, hindering income generation andperpetuating poverty for the region’s320,000 inhabitants who rely on agricul-ture for their livelihood.

Under the project, the entire Akpro-Kpedekpo stretch will be upgraded tobitumen standard with a seven metre widecarriageway. Shoulders will be added; thosein rural regions will be 1.5 m wide, whileportions passing through the more heavilytravelled urban areas will be 2.5 m inwidth. Drainage systems will be installedto curb flooding, and two 45 m bridgesconstructed. Once completed, the move-ment of people and goods will be greatlyimproved, and those living in remote re-gions will benefit from better access to jobsand social services, thereby raising livingstandards for thousands of families.

The OPEC Fund has previously ex-tended 19 other loans to Benin. Of these,two were for balance of payments support,

one was extended to finance a commodityimports programme, one provided debtrelief under the Heavily Indebted PoorCountries Initiative, and the remaindersupported projects in the education, watersupply and sewerage, multi-sectoral andtransportation sectors. Benin has alsobenefited from two technical assistancegrants which went towards regional pro-grammes in the energy and water supplyand sewerage sectors.

The agreement was signed in Viennaby the Ambassador of the Republic ofBenin to Germany, HE Issa Kpara, and bythe Chairman of the Governing Board ofthe OPEC Fund, HE Dr Saleh A Al-Omair.

Data summary

Project:Akpro-Kpedekpo road.

Sector:Transportation.

OPEC Fund loan:$5.8m.

Lending terms:Interest rate of one per cent per an-num, with an annual service charge ofone per cent on amounts withdrawnand outstanding; maturity of 20 years,including a grace period of five years.

Borrower:Republic of Benin.

Executing agency:Ministry of Public Works andTransport.

Implementation period:3½ years.

Appraising agency:Islamic Development Bank (IDB).

Loan administrator:IDB.

Co-financiers:IDB; Government of Benin.

Total cost:$19.74m.

Project description:The project will comprise the following:— upgrading an 89 km road to bitu-

men standard, with a 7 m carriage-way, including 1.5 m wide shoulderson either side (2.5 m wide in urbanareas);

— construction of two 45 m long bridges;— drainage works;— provision of traffic signs; and— consultancy and supervisory services.

July/August 2002 49

O P E C F U N D N E W S

No 66/2002Vienna, Austria, July 31, 2002

Fund extends $19.8min loans to Ethiopiafor road improvement

The OPEC Fund for International Devel-opment has signed two loan agreementsworth a total of $19.8 million with theFederal Democratic Republic of Ethiopiato help upgrade connecting stretches ofthe Metu-Gore-Gambella Road, one ofthe country’s most important West-Eastlinks that passes through rich agriculturalareas where a number of food and cashcrops are grown.

Road density in Ethiopia is among thelowest in Africa, with just an estimated 27kilometres of road available per 1,000 sqkm of land. Only a small percentage of thenetwork is paved, leaving rural areas servedprimarily by earth tracks that are in poorcondition and prone to flooding duringthe wet months.

These shortfalls perpetuate poverty andthreaten food security for thousands ofagricultural communities, who depend onroad transport for bringing produce tomarketplaces and outlying food deficitregions. This situation holds particularlytrue for Ethiopia’s Metu-Gore-Gambellaroad, a 171 km gravel stretch that hasdeteriorated to a point where travel isdangerous and virtually impossible duringheavy rains, halting income generationand leaving villages isolated from vitalsocial services.

Under the project, this road will beupgraded to double bitumen standard,including a seven metre wide carriageway(6.5 m wide in mountainous areas) and1.5 m paved shoulders on either side.Drainage structures will be installed toensure year-round travel, and worn bridgeswill be repaired. Once completed, thou-sands of families living in the project areawill enjoy safer, more efficient travel, andthe entire country will benefit from theexpected boost to the economy from in-creased agricultural activity.

Ethiopia has previously benefitedfrom OPEC Fund loans totalling $94.2m.One loan provided balance of paymentssupport, while others helped finance

projects in the transportation, agriculture,national development banks and educa-tion sectors. Ethiopia has also received fivetechnical assistance grants in the areas ofagriculture and education, as well as threeemergency grants to help alleviate foodshortages.

The agreements were signed in Viennaby the Ambassador of the Federal Demo-cratic Republic of Ethiopia to Austria, HEMrs Halima Mohammed, and by theChairman of the Governing Board of theOPEC Fund, HE Dr Saleh A Al-Omair.

Data summary

Project:Gore-Gambella and Gore-Metu road.

Sector:Transportation.

OPEC Fund loans:$15m and $4.8m.

Lending terms:Interest rate of one per cent per an-num, with an annual service charge ofone per cent on amounts withdrawnand outstanding; maturity of 20 years,including a grace period of five years.

Borrower: Federal Democratic Republicof Ethiopia.

Executing agency:Ethiopian Road Authority.

Implementation period:4½ years.

Appraising agency:OPEC Fund.

Loan administrators:Arab Bank for Economic Develop-ment in Africa (BADEA); OPEC Fund.

Co-financiers:BADEA; Government of Ethiopia.

Total cost:$33.83m and $5.6m.

Project description:The project will comprise the following:— upgrading 171 km of gravel road

to double bitumen standard, in-cluding a 7 m wide carriageway(6.5 m wide in mountainous ter-rain) and 1.5 m paved shoulders oneither side;

— excavation and backfill for drain-age structures, including masonryworks, concrete pipe culverts, andinstallation of drainage ditches;

— repair of bridges;— construction of retaining walls, pro-

vision of road signs and markingsand erosion protection measures;and

— consultancy services.

No 67/2002Vienna, Austria, July 31, 2002

OPEC Fund extends$6.25m loan to Senegalfor road rehabilitation

The OPEC Fund for International Devel-opment has signed a $6.25 million loanagreement with the Republic of Senegal tohelp finance an initiative to rehabilitatethe country’s deteriorated rural roads. Itsobjectives are to facilitate rural communi-ties’ access to main villages and towns,thereby linking key agricultural regions tomarketplaces.

Although Senegal has limited naturalresources and relatively poor soil for cul-tivation, agriculture still provides overthree-quarters of its ten million-strongpopulation with jobs. The country’s ex-treme climatic fluctuations, ranging fromheavy rains and flooding to long periodsof drought, have adversely affected outputover the last few decades, and as a result,an estimated 80 per cent of Senegal’s in-habitants live in poverty.

The government has recently launcheda rural recovery programme, under whichthis scheme falls. Roads will be rehabili-tated in nine regions, namely, Diourbel,Louga, Fatick, Kaolack, Kolda, Saint-Louis, Tambacounda, Thiès andZinguichor. Some 1,800 km of roads willbe upgraded, with the communities them-selves defining the level of service requiredthrough the help of training programmes.This information, along with a study toevaluate which roads are in the most criti-cal need of rehabilitation, will determinethe type of works to be undertaken.

The improved network will help boostSenegal’s economic activity through easieraccess to commercial centres, and allowmany previously isolated villages to reacheducational facilities, health services andjobs. In all, some 90 rural communities,representing around 1.4m people, areexpected to benefit from the project.

50 OPEC Bulletin

O P E C F U N D N E W S

Senegal has benefited from 19 earlierOPEC Fund loans. Of these, four wereextended for balance of payments support,one for debt relief under the HeavilyIndebted Poor Countries Initiative, onefinanced a commodity imports pro-gramme, and the remainder supportedprojects across a range of sectors, includingtransportation, agriculture, education,industry and water supply and sewerage.The country has also benefited fromtechnical assistance grants which wenttowards regional programmes in the en-ergy, agriculture and health sectors, andone emergency grant to help alleviate foodshortages.

The agreement was signed in Viennaby the Minister of Economy and Financeof the Republic of Senegal, HE AbdoulayeDiop, and by the Chairman of the Gov-erning Board of the OPEC Fund, HE DrSaleh A Al-Omair.

Data summary

Project:Rural roads.

Sector:Transportation.

OPEC Fund loan:$6.25m.

Lending terms:Interest rate of 1.25 per cent per an-num, with an annual service charge ofone per cent on amounts withdrawnand outstanding; maturity of 20 years,including a grace period of five years.

Borrower:Republic of Senegal.

Executing agency:National Implementation Unit,under the auspices of the SteeringCommittee.

Implementation period:Five years.

Appraising agency:African Development Bank (AfDB).

Loan administrator:AfDB.

Co-financiers:African Development Fund; ruralcommunities; Government of Senegal.

Total cost:$26.13m.

Project description:The project will comprise the following:— rehabilitation of 1,800 km of roads

in accordance to results of techni-cal studies to evaluate requiredworks;

— consultancy services.

No 68/2002Vienna, Austria July 31, 2002

Fund extends $10mloan to Cuba for watersupply and sanitation

The OPEC Fund for International Devel-opment has signed a $10 million loanagreement with the Republic of Cuba tohelp finance a water supply and sanitationproject in the capital city Havana. Theproject aims to rehabilitate infrastructureand, at the same time, protect the 402 sqkm Almendares-Vento watershed, the city’smain water source.

The Vento aquifer is located directlybeneath the Almendares River and pro-vides Havana with around one-third of itspotable water supply. Over the years,however, the watershed and its tributarieshave become polluted due to the improperdisposal of industrial and residential waste,posing a real risk of drinking water con-tamination among the city’s 2.2m strongpopulation.

Under the proposed project, sanita-tion infrastructure in the municipalities ofCotorro, Maria del Carmen and PuentesGrandes will be upgraded and constructed.Wastewater treatment plants will be ex-tensively rehabilitated and new ones built,and some 260 km of adduction and dis-tribution sewerage pipes, as well as houseconnections, will be installed. Environ-mental protection measures will also beintroduced, including the reforestation andcleaning of all catchment areas.

Upon completion, at least 1.5m peo-ple will be connected to a reliable sewersystem. The proper disposal of wastewaterwill reduce pollution in the AlmendaresRiver and alleviate the infiltration ofwastewater into the Vento aquifer. This,along with better-functioning treatmentplants, will boost the city’s drinking waterquality and curtail the risk of waterbornediseases. Better environmental conditionsare also expected to help strengthen local

economic activities, particularly tourism,which represents an important revenuesource for the country.

This project represents the Fund’sfirst lending operation in Cuba, althoughan emergency grant was extended tothe country in 2001 to aid hurricane vic-tims.

The agreement was signed in Viennaby the Economic and Commercial Coun-sellor of the Republic of Cuba to Austria,Ms Georgina Fajardo Díaz, and by theChairman of the Governing Board of theOPEC Fund, HE Dr Saleh A Al-Omair.

Data summary

Project:Almendares River Basin rehabilitation.

Sector:Water supply and sewerage.

OPEC Fund loan:$10m.

Lending terms:Interest rate of three per cent perannum, with an annual service chargeof one per cent on amounts withdrawnand outstanding; maturity of 20 years,including a grace period of five years.

Borrower:Republic of Cuba.

Executing agency:National Institute of HydraulicResources.

Implementation period:Four years.

Appraising agency:OPEC Fund.

Loan administrator:OPEC Fund.

Co-financier:Government of Cuba.

Total cost:$17.83m.

Project description:The project will comprise the follow-ing:— rehabilitation and construction of

sanitation infrastructure such assewers and wastewater treatmentplants;

— installation of 260 km of adduc-tion and distribution sewerage pipesand house connections;

— protection, reforestation and clean-ing of catchment areas; and

— consultancy services.

July/August 2002 51

O P E C F U N D N E W S

No 69/2002Vienna, Austria July 31, 2002

Fund supports roadrehabilitation scheme inMalawi with $9.5m loan

The OPEC Fund for International Devel-opment has signed a $9.5 million loanagreement with the Republic of Malawi insupport of a project to upgrade an impor-tant stretch of road in the country’s south-ern region. The new road will help boostMalawi’s economy by reducing transportcosts, promoting economic activity andfacilitating the integration of both domes-tic and regional markets.

Malawi’s tropical climate and fertilesoils provide an ideal growing environ-ment for cash crops, as well providing its10.8m strong population with food. As alandlocked country, road transportationplays a vital role in the movement ofexports as well as providing links to traderoutes with neighbouring countries. Thequality of the 14,594 km network, how-ever, is poor, with only around 2,900 kmbeing paved. As a result, transport effi-ciency has become severely limited, hin-dering the livelihood of numerousagricultural communities and leaving manyvillages isolated. Malawi’s Liwonde-Naminga corridor serves rich agriculturalareas, but over the years it has becomeextremely worn, and associated bridgesand drainage structures have fallen intodisrepair.

Under the project, 23 km of this stretchwill be rehabilitated to bitumen standard,including a 6.7 m wide carriageway and1.5 m shoulders on each side, and 3 kmof new road will be built to serve as theLiwonde bypass. A new bridge will beconstructed over the Nubuzi River, and anexisting one repaired. Road safety will beenhanced through the provision of newtraffic signs, road markings and guardrails,and culverts will be installed to preventflooding.

The improved road will provide aswifter and more reliable route for thetransportation of both goods and people,not only within the district, but also toneighbouring provinces and to Mozam-bique. On completion, it will facilitate

international and inter-regional exchangeof goods, benefiting both rural and urbanpopulations. Additionally, social servicessuch as hospitals, schools and other facili-ties will become more accessible.

This is the fifth development opera-tion to be undertaken by the OPEC Fundin Malawi. Earlier loans helped financeprojects in the transportation and healthsectors.

The agreement was signed in Viennaby the Deputy Minister of Finance andEconomic Planning of the Republic ofMalawi, HE Phillip Bwanali, and by theChairman of the Governing Board of theOPEC Fund, HE Dr Saleh A Al-Omair.

Data summary

Project:Liwonde-Naminga road.

Sector:Transportation.

OPEC Fund loan:$9.5m.

Lending terms:Interest rate of one per cent per an-num, with an annual service chargeof one per cent on amounts with-drawn and outstanding; maturity of20 years, including a grace period offive years.

Borrower:Republic of Malawi.

Executing agency:National Road Authority.

Implementation period:3½ years.

Appraising agency:OPEC Fund.

Loan administrator:OPEC Fund.

Co-financier:Government of Malawi.

Total cost:$10.51m.

Project description:The project will comprise the follow-ing:— upgrading 23 km of the Liwonde-

Naminga Road to bitumen stand-ard with a 6.7 m wide carriagewayand 1.5 m shoulders on each side;

— construction of 3 km of new road;— rehabilitation of one bridge and

construction of new bridge overthe Nubuzi River;

— extension of existing culverts andconstruction of new ones; and

— provision of traffic signs, road mark-ings, guard rails.

No 70/2002Vienna, Austria, July 31, 2002

Mauritania secures$3.5m OPEC Fund loanfor rural development

The OPEC Fund for International Devel-opment has signed a $3.5 million loanagreement with the Islamic Republic ofMauritania to help finance a multi-prongedscheme that falls within the scope of agovernment initiative to combat povertyby providing under-served communitieswith access to potable water, safe sanita-tion and housing, as well as education andhealth facilities.

Mauritania faces a number of chal-lenges, including a fragile environment, aweak human resource base and widespreadpoverty, particularly in rural areas. Socialindicators are particular poor in the prov-inces of N’Bout, Kankossa and Ould Yengein the southern part of the country, whereagriculture remains the primary incomegenerating activity.

Under the project, these regions willbenefit from institution strengthening andcapacity building across all sectors, as wellas the upgrading of basic infrastructuresuch as roads, schools and health andsanitation facilities. Agricultural produc-tion will be promoted through the reha-bilitation of land, implementation oferosion control and soil conservationmeasures, and the provision of specialistswho will introduce a wide range of modernfarming and cultivation techniques.

Literacy courses will be made availableto some 14,000 people, half of whom willcomprise women. Sensitization campaignswill disseminate information about pre-ventative health care, hygiene and safesanitation.

Twelve micro-credit institutions willbe established to assist landless individualsand women in setting up their own smallbusinesses. Throughout the project’s im-plementation, participation of the rural

52 OPEC Bulletin

O P E C F U N D N E W S

population in the community develop-ment process will be encouraged. Aftercompletion, at least 170,000 people willbe able to enjoy improved living condi-tions, better health and access to essentialsocial services.

The OPEC Fund has previously ap-proved 21 other loans for Mauritania. Ofthese, five provided balance of paymentssupport, one financed a commodity im-ports programme, one was extended fordebt relief under the Heavily IndebtedPoor Countries Initiative, while the re-maining 14 co-financed projects in thetransportation, energy, education andagricultural sectors.

The Fund has also made investmentsto help promote the country’s privatesector. In addition, Mauritania has ben-efited from technical assistance grantswhich went towards regional programmesin the areas of agriculture, health, energyand transportation, and two others inthe area of social development. One re-search grant was given for the purchaseof educational materials, and one emer-gency grant approved to alleviate foodshortages.

The agreement was signed in Viennaby the Ambassador of the Islamic Republicof Mauritania to Germany, HE MelainineOuld Moctar Neche, and by the Chair-man of the Governing Board of the OPECFund, HE Dr Saleh A Al-Omair.

Data summary

Project:Multisectoral poverty alleviation.

Sector:Multi-sectoral.

OPEC Fund loan:$3.5m.

Lending terms:Interest rate of 1.25 per cent per an-num, with an annual service charge ofone per cent on amounts withdrawnand outstanding; maturity of 20 years,including a grace period of five years.

Borrower:Islamic Republic of Mauritania.

Executing agencies:Project Implementation Unit; Com-missariat for Human Rights to Com-bat Poverty.

Implementation period:Seven years.

Appraising agency:International Fund for AgriculturalDevelopment (IFAD).

Loan administrator:United Nations Office for ProjectServices.

Co-financiers:IFAD; beneficiaries; Government ofMauritania

Total cost:$22.94m.

Project description:The project will comprise the following:— upgrading of rural roads;— rehabilitation of rural infrastruc-

ture such as agricultural plots, waterpoints, markets, fences, etc;

— establishment of health and hy-giene campaigns and literacy classes;

— implementation of erosion controlmeasures and other conservationtechniques, as well as the provisionof training in modern agriculturalmethods;

— setting up 12 micro credit institu-tions; and

— institutional strengthening and ca-pacity building across all sectors.

No 71/2002Vienna, Austria July 31, 2002

OPEC Fund extends$15m loan to Moroccofor water supply project

The OPEC Fund for International Devel-opment has signed a $15 million loanagreement with the Kingdom of Moroccoto help finance a project to alleviate watershortages along the country’s coastal areabetween Rabat and Casablanca. Oncecompleted, the scheme is expected to boostpotable water supplies by some 100 mil-lion cubic metres.

The availability of water in Moroccovaries widely, ranging from an annualprecipitation of one metre in mountain-ous areas to less than three centimeters inthe south of the country. This unequaldistribution has necessitated the use ofdams for maintaining water supplies, andover the past decade a number of newdams have been constructed to help main-

tain an adequate supply of water duringperiods of drought. In light of Morocco’srapidly rising population and increaseddemand for irrigation water, however,concerns have arisen regarding capacitylevels, and studies predict widespread watershortages if current infrastructure is notexpanded. This situation holds particu-larly true in the coastal region thatconnects the capital city Rabat with Casa-blanca, where dams represent the primarysource of water for both domestic andindustrial consumption. This region ishome to around 5.25m people and gov-ernment has accorded high priority toexpanding its dams in order to increaseavailable drinking water and intensifyagricultural production through improvedirrigation.

The Sidi Mohammed Ben Abdullahdam, which is situated on the Bou RegregRiver around 10 kilometres from Rabat,will be raised by approximately 7.5 mthrough the installation of a second 42 kmlong spillway, more than doubling itscurrent storage capacity. Additionally, anew retention dam will be built at BouKhmis on the Grou River, along with anoutlet canal for transporting water to dis-tribution centres in neighbouring villages.The resulting reservoir will be capable ofholding up to 180m cu m of water. Thecombined extra storage volume will notonly help meet present and future waterneeds, but will also provide flood protec-tion in high-risk provinces during the wetseasons.

Morocco has been the recipient ofFund financing on 10 previous occasions,with loans supporting projects in the sec-tors of energy, agriculture and nationaldevelopment banks. The country has alsobenefited from technical assistance grants;one towards a regional programme in thearea of agriculture and another to helpfinance a pilot wind energy project.

The agreement was signed in Viennaby the Ambassador and Permanent Rep-resentative of the Kingdom of Morocco inAustria, HE Dr Tajeddine Baddou, and bythe Chairman of the Governing Board ofthe OPEC Fund, HE Dr Saleh A Al-Omair.

Data summary

Project:Water supply.

July/August 2002 53

O P E C F U N D N E W S

Sector:Water supply and sewerage.

OPEC Fund loan:$15m.

Lending terms:Interest rate of 3.5 per cent per annum,with an annual service charge of oneper cent on amounts withdrawn andoutstanding; maturity of 20 years,including a grace period of five years.

Borrower:Kingdom of Morocco.

Executing agency:Department of Water within theMinistry of Public Works.

Implementation period:Four years.

Appraising agency:Arab Fund for Economic and SocialDevelopment (Arab Fund).

Loan administrator:Arab Fund.

Co-financiers:Arab Fund; Government of Morocco.

Total cost:$87.9m.

Project description:The project will comprise the following:— raising the Sidi Mohammed Ben

Abdullah dam by approximately7.5 m by constructing a 42 m longreinforced concrete spillway;

— procurement and installation of hy-draulic and mechanical equipment;

— construction of new reinforced,compressed concrete dam andoutlet canal at Bou Khmis, includ-ing spillway and drainage and outletcanal;

— acquisition of land and resettle-ment of population;

— construction of 2 km primary watermain; and

— consultancy services.

No 72/2002Vienna, Austria, July 31, 2002

Mozambique educationsector receives boostwith $9.2m Fund loan

The OPEC Fund for International Devel-opment has signed a $9.2 million loan

agreement with the Republic of Mozam-bique to help finance a multi-facetedscheme that aims to improve educationstandards, placing particular emphasis onproviding equitable access to schools forgirls and children from deprived commu-nities.

After experiencing years of civil strifethat resulted in over 3,400 schools beingeither damaged or destroyed, Mozam-bique’s educational system has fallen intodisarray. Classrooms are overcrowded,textbooks and equipment scarce and out-dated, and many schools lack appropriatesanitation and boarding facilities, short-comings that act as a disincentive for at-tendance, especially among girls.Additionally, there is a shortage of quali-fied teaching staff, so student/teacher ra-tios are inadequate. The country’sTechnical and Vocational Education(TVE) centres are similarly under-served,hampering the development of Mozam-bique’s human resource potential.

Under the project, works will focus onfour rural provinces with the least amountof coverage, namely Cabo Delgado,Nampula, Niassa and Zambezia, where sixsecondary schools will be upgraded andtwo new ones constructed. Each will befully supplied with books and laboratoryequipment, and dormitories will be builtto house some 200 female students. ThreeTVEs will be rehabilitated, while anotherwill be modified and converted into ateacher training college. Teachers andtrainees across all levels will receive pre-and in-service instruction, and scholar-ships will be set up for female teachingapprentices. A number of capacity-build-ing programmes will be implemented tostrengthen the entire education system.Gender sensitive curricula will be intro-duced that will have a positive impact onsocietal attitudes towards women bothwithin and outside the school system.

These enhancements will reduce drop-out and repetition rates, and provide thou-sands of children with the incentive tocomplete their education. Additionally,strengthening of the country’s skilledworkforce will have a positive socio-eco-nomic impact, and in turn, help reducepoverty levels.

The OPEC Fund has previously ap-proved loans to Mozambique totalling$122.27m. These loans delivered debt relief

under the Heavily Indebted Poor Coun-tries Initiative, provided balance of pay-ments support, and helped financedprojects in the agriculture, transportation,health, energy and education sectors.Mozambique has also benefited from threetechnical assistance grants in the areas ofhealth care, food safety and agriculture, aswell as one emergency grant to help floodvictims.

The agreement was signed by theChargé d’ Affaires of the Embassy ofMozambique to Germany, FernandoMichone Torcida, and by the Chairmanof the Governing Board of the OPECFund, HE Dr Saleh A Al-Omair.

Data summary

Project:Education IV.

Sector:Education.

OPEC Fund loan:$9.2m.

Lending terms:Interest rate of one per cent per an-num, with an annual service charge ofone per cent on amounts withdrawnand outstanding; maturity of 20 years,including a grace period of five years.

Borrower:Republic of Mozambique.

Executing agency:Ministry of Education.

Implementation period:4½ years.

Appraising agency:African Development Bank (AfDB).

Loan administrator:AfDB.

Co-financiers:African Development Fund; Govern-ment of Mozambique.

Total cost:$24.29m.

Project description:The project will comprise the follow-ing:— rehabilitation of six secondary

schools and construction of twonew ones;

— upgrading of three TVEs and con-version of another into a teachertraining college;

— provision of furniture, equipment,books and other learning materials;

54 OPEC Bulletin

O P E C F U N D N E W S

— implementation of a training com-ponent for pre- and in-serviceteaching staff across all levels; and

— the conducting of studies for la-bour market monitoring, develop-ment of curricula and teachingmethods, and the establishment ofa national training council.

No 73/2002Vienna, Austria July 31, 2002

Ghana receives $6.67mFund loan for roadrehabilitation project

The OPEC Fund for International Devel-opment has signed a $6.67 million loanagreement with the Republic of Ghana insupport of an initiative to upgrade thecountry’s Anyinam-Kumasi Road. Theproject is one of many schemes beingundertaken as part of a wider governmentprogramme for the phased rehabilitationof the country’s transportation sector.

Representing the dominant mode oftransport, and carrying the majority of allfreight and passenger traffic, Ghana’s roadsplay a crucial role in its socio-economicdevelopment. Although a number of re-pair programmes are in place, many roadsare still in very poor condition. The 85 kmlong Anyinam-Kumasi route is an impor-tant stretch that passes through majoragricultural and commercial areas, as wellas forming an integral part of the corridorlinking the capital city Accra withneighboring Burkina Faso and Côted’Ivoire. This road has deteriorated con-siderably, making travel slow and expen-sive, and placing undue hardship onfarming communities that rely on roadsfor the transport of inputs and produce.

Under the project, damaged sectionswill be repaired and the entire stretchasphalted, with a 7.6 m wide carriagewayand 2 m shoulders on both sides. A two-lane bridge will be constructed in Anyinam,and flood protection measures will entailthe installation of drainage works andculverts. These works complement anongoing Fund co-financed initiative toupgrade the Achimoto-Anyinam road.

After completion, the newly renovated

road will bring many benefits to the sur-rounding population through better ac-cess to social services and commercialcentres. Farmers will be able to move theirgoods more quickly and cheaply andwomen, who comprise the main vendorsof agricultural produce along the Anyinam-Kumasi road, will enjoy a substantial boostin household incomes.

This loan represents the Fund’s 17th

lending operation in Ghana. Earlier initia-tives include one loan for balance of pay-ments support, one which provided debtrelief under the Heavily Indebted PoorCountries Initiative, while fourteen otherssupported projects in the transportation,national development banks, multi-sectoral, water supply and sewerage, healthand education sectors.

The agreement was signed in Viennaby the Minister of Finance of the Republicof Ghana, HE Yaw Osafo-Maafo, and bythe Chairman of the Governing Board ofthe OPEC Fund, HE Dr Saleh A Al-Omair.

Data summary

Project:Anyinam-Kumasi road rehabilitation.

Sector:Transportation.

OPEC Fund loan:$6.67m.

Lending terms:Interest rate of one per cent per an-num, with an annual service charge ofone per cent on amounts withdrawnand outstanding; maturity of 20 years,including a grace period of five years.

Borrower:Republic of Ghana.

Executing agency:Ghana Highway Authority.

Implementation period:Four years.

Appraising agency:OPEC Fund.

Loan administrator:African Development Bank.

Co-financiers:African Development Fund; Govern-ment of Ghana.

Total cost:$22.17m.

Project description:The project will comprise the following:— upgrading 85 km of road to bitu-

men standard, with a 7.6 m widecarriageway and 2 m paved shoul-ders on either side;

— construction of a two-lane bridgein Anyinam;

— excavation and installation of newpipe culverts; and

— consultancy services.

No 74/2002Vienna, Austria, July 31, 2002

OPEC Fundand Ghana signinvestment agreement

An agreement for the encouragement andprotection of investment has been signedbetween the OPEC Fund for Interna-tional Development and the Republic ofGhana. Drawn up within the frameworkof the Fund’s Private Sector Facility, theconvention was initialed by the Ministerof Finance of the Republic of Ghana, HEYaw Osafo-Maafo, and by the Director-General of the OPEC Fund, HE Dr YSeyyid Abdulai.

The Fund’s Private Sector Facility is afinancing window, endowed with its ownresources, through which the Fund chan-nels support directly to the private sectorin developing countries. The objectives ofthe Facility are to promote economicdevelopment by encouraging the growthof productive private enterprise and sup-porting the development of local capitalmarkets. Under the Facility, loans are madeto financial institutions for on-lending tosmall, medium and micro-enterprises, aswell as directly to specific projects. Equityparticipation in private enterprises is alsoundertaken, either directly or throughcountry or regional investment funds. Asa pre-condition to such investment, theFund requires signature of a standardagreement with the country concerned forthe encouragement and protection of in-vestment. Recognized as a gesture of trustand confidence, the agreement accords theOPEC Fund the same privileges as thosenormally given to international develop-ment institutions in which the countryholds membership.

Ghana is a country of more than 18.9

July/August 2002 55

O P E C F U N D N E W S

million people with a GNP of around 7.5billion (1999) and a GNP per capita of$390. The country is well endowed withnatural resources, namely cocoa, timberand pineapples, which are the main exportcrops, and gold, which represents one ofthe biggest sources of foreign exchange. Inrecent years, the government has beenimplementing a programme of economicand structural reform with the objective ofincreasing growth and reducing poverty.This and other measures have helped tocreate a hospitable, enabling environmentfor the promotion of private enterprise.

No 75/2002Vienna, Austria, July 31, 2002

OPEC Fund extendsdebt relief to Ghanaunder HIPC initiative

The OPEC Fund for International Devel-opment has signed an agreement with theRepublic of Ghana for the provision ofdebt relief within the framework of theEnhanced Heavily Indebted Poor Coun-tries (HIPC II) Initiative. Endorsed by theInterim and Development Committees ofthe World Bank and the InternationalMonetary Fund in September 1996, theInitiative represents a united effort by theinternational community to address theexternal debt problems of the world’sheavily indebted poor countries. Specifi-cally, it aims to reduce the debt of eligiblecountries to sustainable levels, subject tosatisfactory policy performance, in orderto ensure that adjustment and reform effortsare not put at risk by continued high debtand debt service burdens.

As the Initiative requires participationby all relevant creditors, debt relief effortsentail co-ordinated actions by the interna-tional finance community, includingmultilateral institutions.

In October 1999, the internationalcommunity agreed to make the Initiativebroader, deeper and faster by increasingthe number of eligible countries, raisingthe amount of debt relief each countrywould receive and speeding up delivery.Both the HIPC and the subsequent HIPCEnhanced Framework foresee this being

achieved through a strategy of fully pro-portional burden-sharing among all offi-cial creditors. About 38 countries couldultimately qualify for HIPC assistance, ofwhich 34 are in sub-Saharan Africa. Todate, 26 countries have reached their de-cision point under the Enhanced HIPCInitiative and, of these, four have reachedtheir completion point under the originalHIPC Initiative. These 26 countries arenow receiving debt relief which will amountto some $41 billion over time. They qualifyfor debt relief in two stages: in the firststage, the debtor country will need todemonstrate the capacity to use prudentlythe assistance granted by establishing asatisfactory track record, normally for threeyears; in the second stage, the country willimplement a full-fledged poverty reduc-tion strategy and an agreed set of measuresaimed at enhancing economic growth.

The OPEC Fund — committed as itis to strategies aimed at securing economicgrowth for the countries it works with andhelping alleviate poverty — has from thevery beginning expressed its support of theInitiative and has participated actively inits design.

The OPEC Fund has approved debtrelief under the HIPC Initiative and theEnhanced framework to 24 countries, 20of which are in Africa and four in LatinAmerica.

In February 2002, the decision pointwas reached for Ghana, and support for acomprehensive debt reduction package tothis country under the HIPC Initiativewas agreed upon by the IMF and theWorld Bank. Over time, total nominaldebt service relief from all of Ghana’screditors will amount to approximately$3.7bn, which represents $2.18bn in netpresent value (NPV) terms, or 56 per centof total NPV of debt outstanding. Thisreduction in debt-service payments willhelp the country free up resources to fundexpenditure in education, health and ruralinfrastructure development, as well as otherkey poverty-reduction schemes.

The OPEC Fund has assisted Ghanawith its development activities for some 20years, providing balance of payments sup-port and assisting projects in the sectors oftransportation, national developmentbanks, multi-sectoral, water supply andsewerage, health and education. Underthe agreement, financing to the amount of

$6 million will be made available to easeGhana’s debt burden.

The agreement was signed in Viennaby the Minister of Finance of the Republicof Ghana, HE Yaw Osafo-Maafo, and bythe Chairman of the Governing Board ofthe OPEC Fund, HE Dr Saleh A Al-Omair.

No 76/2002Vienna, Austria, July 31, 2002

Albania obtains $2.7mloan to rehabilitatewater supply network

The OPEC Fund for International Devel-opment has signed a $2.7 million loanagreement with the Republic of Albania insupport of an initiative to rehabilitate thecountry’s water distribution network. Oncecompleted, some 1.3m people in 11 citieswill have access to a safe, consistent supplyof drinking water.

Although around 80 per cent of Alba-nia’s population is connected to a piped-in water supply, delivery is unreliable, withurban areas receiving service for only a fewhours per day. Remote rural regions enjoyeven less coverage, often being left withoutwater for days at a time. These shortages,however, are not due to inadequate sup-plies, but the result of losses caused by adilapidated and poorly maintained distri-bution network. In some cities such lossesare estimated at over 50 per cent. Waterquality is also substandard because of a lackof purification facilities, so health risks re-lating to water-borne illnesses are high. Thesituation is worsening as a result of rapidurban migration, insufficient operatingresources and financial constraints.

To address these shortfalls, rehabilita-tion measures will be extended across theentire country. These will include thesupply and installation distribution pip-ing, fittings, material and spare parts, aswell as on-site repairs of any visible leaksin the distribution network. Water qualitywill be brought up to World HealthOrganization standards through the in-stallation of water purification chlorina-tors. The bulk of the work will take placein the municipalities of Durres, Fier, Lezheand Saranda, areas experiencing the most

56 OPEC Bulletin

O P E C F U N D N E W S

acute shortages, where wells, reservoirs,central pumping stations and transmissionmains will be repaired and reconstructed.

As a result of these efforts, thousandsof households will be able to enjoy a re-liable, round-the-clock supply of runningwater, and the general health of the popu-lation will improve from its better quality.The project is also expected to deliverindirect benefits to Albania’s key sectors,industry and agriculture, helping to cutcosts and increase productivity, and ulti-mately, boost the economy.

The Republic of Albania has benefitedfrom four other OPEC Fund loans, sup-porting projects in the health, agriculture,education and transportation sectors. Thecountry has also been the recipient of oneemergency grant.

The agreement was signed in Viennaby the Ambassador of the Republic ofAlbania to Austria, HE Mrs ShpresaKureta, and by the Chairman of the Gov-erning Board of the OPEC Fund, HE DrSaleh A Al-Omair.

Data summary

Project:Water supply rehabilitation.

Sector:Water supply and sewerage.

OPEC Fund loan:$2.7m.

Lending terms:Interest rate of 1.75 per cent per an-num, with an annual service charge ofone per cent on amounts withdrawnand outstanding; maturity of 20 years,including a grace period of five years.

Borrower:Republic of Albania.

Executing agency:Ministry of Public Works.

Implementation period:Three years and three months.

Appraising agency:International Development Associa-tion (IDA).

Loan administrator:OPEC Fund.

Co-financiers:IDA; Government of Albania.

Total cost:$11.27m.

Project description:The project comprises the following:

— repair and replacement of wells,storage reservoirs, pumping sta-tions, transmission mains and dis-tribution networks;

— supply and installation of chlo-rinators, pipes, fittings, materialand spare parts for maintenanceworks;

— on-site repairs of visible leaks in thedistribution network;

— consultancy services.

No 77/2002Vienna, Austria, July 31, 2002

Loans totalling over$94m extended by theOPEC Fund

Twelve agreements for loans totalling$94.42 million were signed between theOPEC Fund for International Develop-ment and ten developing countries inAfrica, Europe and the Caribbean. Thefinancing was extended to Albania, Benin,Cuba, Ethiopia, Ghana, Malawi, Mauri-tania, Morocco, Mozambique and Sen-egal. Eleven of the loans will help supportpublic sector projects in the areas of trans-portation, education, multi-sectoral andwater supply and sewerage, while one willprovide debt relief within the context ofthe Enhanced Heavily Indebted PoorCountries Initiative.

All 11 public sector projects will be co-financed by the concerned governmentsand by a number of international devel-opment institutions, including the ArabBank for Economic Development in Af-rica, the Arab Fund for Economic andSocial Development, the Islamic Develop-ment Bank, the African DevelopmentFund, the African Development Bank, theInternational Development Associationand the International Fund for Agricul-tural Development. The majority of OPECFund project loans carry interest at ratesranging from one per cent to 1.25 per centand have a maturity of 20 years, includinga grace period of five years.

As of the end of May 2002, cumulativepublic sector lending of the OPEC Fund,for project and programme financing,balance of payments support and HIPC

debt relief stood at $5.0 billion. A further$137.8 million had been extended insupport of private sector operations. Totalcommitments, inclusive of grants andcontributions to other international insti-tutions, had reached $6.3bn and benefited109 countries. Total disbursements hadamounted to $4.2bn.

No 78/2002Vienna, Austria, July 31, 2002

OPEC Fund providesassistance to West Bankfor traumatized children

The OPEC Fund for International Devel-opment has extended a grant of $160,000in support of a project designed to providepsychosocial support to Palestinian chil-dren traumatized by conflict. The initia-tive will target youngsters between the agesof three and eight and is the brainchild ofthe Jerusalem-based non-profit NGO theEarly Childhood Resource Centre(ECRC). Over an initial period of twelvemonths, the project will benefit a total of25,000 people, including children, par-ents and specialized teachers.

Founded in 1985 by a group of Pal-estinian educationalists, ECRC was set upto address the urgent needs of Palestinianchildren, many of whom have developedsevere psychological problems as a directresult of the unstable environment in whichthey live. As well as witnessing killings andhorrific injuries, large numbers of young-sters have had their homes destroyed andseen family members arrested and detained.Such experiences threaten to have a det-rimental and lasting impact on their emo-tional, social, physical and cognitivewellbeing.

With co-financing from the OPECFund, ECRC has devised a project toprovide support to these youngsters bytraining teachers, parents and communityleaders to identify and work with trauma-tized children across Palestine. The pri-mary aim will be to integrate affectedchildren back into the community bydeveloping their self-esteem, strengthen-ing their coping mechanisms, and provid-ing them with the skills to face and

July/August 2002 57

O P E C F U N D N E W S

overcome trauma and loss resulting fromthe conflict and military occupation.

Initially providing coverage in Bethle-hem, Hebron, Jenin, Jerusalem, Nablusand Ramallah, the project will offer therapyfor traumatized children, along with work-shops for parents and teachers. It will alsoestablish a network of volunteer traumaworkers, set up a national helpline, andproduce and distribute learning materials,toys and games.

No 79/2002Vienna, Austria July 31, 2002

OPEC Fund extendshumanitarian aid towomen in Palestine

The OPEC Fund for International Devel-opment has approved a humanitarian grantof $150,000 to provide assistance tomarginalized women in Palestine. Spear-headed by the non-profit NGO, CAREWest Bank and Gaza Strip (WBG), andco-financed by the European Union, theproject aims to promote food security andself-sufficiency in female-headed house-holds in the Jenin area of the West Bank.A total of 375 poor families will benefitfrom the initiative.

Recent months have witnessed a severeescalation of violence and use of militaryforce against Palestinians, resulting inintense human suffering. Women areparticularly vulnerable, with the loss ofmale family members exposing them togreatly increased social responsibility, asituation compounded by soaring unem-ployment and poverty.

Active in the Territories since 1948,WBG’s mission is to promote dignity,social justice and self-sufficiency amongminority groups in Palestinian society. Inthe Jenin governorate, circumstances areexceptionally grave and economic activityis severely constrained. Farmers are unableto market their products, compelling house-holds to find alternative sources of food.

The WBG project seeks to address thisproblem by providing women in 10 ruralcommunities with the means to meet theneeds of their families. Beneficiaries willreceive sheep, goats, animal housing, seeds,

tools and a water tank, along with trainingin animal husbandry, gardening, and foodprocessing and preservation. This willenable them to engage in small-scale farm-ing, become self sufficient in food, andeventually sell excess produce for profit.

The OPEC Fund grant will directlyfinance the above requirements for 75women in the villages of Sielataldaher,Alshuhada and Fahmeh.

No 80/2002Vienna, Austria, July 31, 2002

Vulnerable womenand children receivesupport in Cambodia

The OPEC Fund for International Devel-opment has approved a grant of $100,000to help finance a scheme that aims toexpand the activities of the Hagar Project,a non-governmental organization that hasprovided social support to destitute Cam-bodian women and children for over eightyears. However, since funding limitationshave placed constraints on these pro-grammes, the Hagar Project will be priva-tizing one of its enterprises, Hagar Soya,in order to reduce its dependency on donorcontributions and ensure the programmes’sustainability.

Although Cambodia’s economy isslowly recovering from 30 years of civilconflict, poverty levels remain high, withhousehold incomes averaging around only$40/month. Malnutrition is rife and, asoften is the case, women and childrenrepresent the most vulnerable group amongthe country’s 12 million-strong popula-tion. Many Cambodian women, either asa result of being widowed or abandoned,are homeless. As they usually lack the skillsor means to support themselves and theirfamilies, they are unable to break the cycleof poverty.

In order to alleviate this situation, theHagar Project, an organization based inPhnom Penh, Cambodia, provides womenand their children with temporary homes,and offers vocational training in areas suchas sewing, food preparation and soya milkproduction. This programme aims toempower women and help them prepare

for re-integration into society. In order toensure the sustainability of these activities,the Hagar Project has created small enter-prises that offer these women on-the-jobtraining and employment opportunities.

With technical assistance provided byMekong Project Development Facility,which is managed by the InternationalFinance Corporation, the private sectorarm of the World Bank Group, Hagar’sexisting soya milk production will be ex-panded through establishing a manufac-turing plant employing internationalstandard technology in processing andpackaging. A substantial portion of theprofits earned by the soya milk-produc-tion facility will be channelled back intothe Hagar Project’s social programmes.The population as a whole will also benefitas soya milk plays an important role inproviding an inexpensive, protein-richsource of nutrition.

Not only will this scheme help pro-mote the social development for some ofthe neediest people of Cambodia, but itwill also serve as a model for other NGOsseeking to privatize their income-generat-ing activities to help sustain their pro-grammes and lessen their dependence ondonor funding.

No 81/2002Vienna, Austria, July 31, 2002

OPEC Fund extends$100,000 for legaltraining centres

The OPEC Fund for International Devel-opment has approved a grant of $100,000to help finance an initiative of the Inter-national Law Institute (ILI), that aims toestablish a network of Centres for LegalExcellence in countries of the South.

Proper legal expertise plays a vital rolein the development process, where projectfinancing, contracting and investmentinvolve complex negotiations and thedrafting of intricate agreements. How-ever, many developing countries fail toderive the full benefits of internationaltransactions as their representatives oftenlack the specialized legal skills to dealwith the technical issues that frequently

S E C R E T A R I A T N O T E S

58 OPEC Bulletin

arise. As a result, these shortfalls under-mine the countries’ ability to negotiateon an equal footing. Additionally, asmany of these countries are in the pro-cess of implementing comprehensive re-forms, the need to possess skills in solvinglegal, economic and financial problems isvital.

ILI was founded in 1955 at George-town University and was established as anindependent, non-profit, internationalorganization in 1983. Its mandate wasexpanded in the early 1970s to include thepromotion of economic development andto help solve legal problems faced by de-veloping countries. To this end, ILI pro-vides training and technical assistance todeveloping nations and, for over two dec-ades, has educated some 10,000 profes-sionals from 185 countries.

In 1997, ILI opened a full-time train-ing facility in Kampala, Uganda, the ILIAfrican Centre for Legal Excellence, whichprovides a wide range of courses thatbenefit both the local population and theEast African region. Expanding on thesesuccesses, ILI plans to establish a globalnetwork of campuses that will link localneeds with the knowledge and experience

June/JulyOPEC meetings

The 38th Meeting of the Ministerial Monitor-ing Sub-Committee (MMSC) was held inVienna, Austria, June 25, 2002.

The 120th (Extraordinary) Meeting of theConference was held in Vienna, Austria,June 26, 2002.

Secretariat missions

The 16th Sessions of the Subsidiary Body forScientific and Technological Advice (SBSTA)and the Subsidiary Body for Implementation(SBI), organized by UNFCCC were held inBonn, Germany, June 5–14, 2002.

of international experts. Under the cur-rent scheme, centres will be createdin Beijing, China; Jakarta, Indonesia;Kiev, Ukraine; Cairo, Egypt; SantoDomingo, Dominican Republic; andAbuja, Nigeria. As the campuses will beinterconnected through the use of theInternet and other interactive technolo-gies, educational opportunities will beexpanded, helping reduce the “digitaldivide” that exists between developed anddeveloping nations.

No 82/2002Vienna, Austria July 31, 2002

OPEC Fund supportsconference to promotescience and technology

The OPEC Fund for International Devel-opment has approved a grant of $35,000to help finance the 12th scientific confer-ence of the Islamic Academy of Sciences(IAS). Convening under the title Bridgingthe Science Divide, the gathering is due to

The 7th Annual Asia Oil and Gas Conference wasorganized by Petronas and held in Kuala Lumpur,Malaysia, June 9–11, 2002.

The Centre for Global Energy Studies 20th

Executive Retreat Meeting was held in Bagshot,England, June 10–11, 2002.

The 23rd Session of the Ministerial Council of theOPEC Fund was held in Vienna, Austria, June12, 2002.

The UNECE Committee on Sustainable Energy,an international meeting to launch an initiativeaimed at harmonizing the terminology for theevaluation and assessment of world energy re-serves and resources, was organized by the UnitedNations Economic Commission for Europe andheld in Geneva, Switzerland, June 12–13, 2002.

The Annual Meeting of the International EnergyWorkshop was organized by EMF/IEA/IIASAand held at Stanford University, USA, June18–20, 2002.

A workshop on Strategic Leadership & Creating

PR Strategy was organized by the Instituteof Public Relations (IPR) and held in Lon-don, UK, July 10–11, 2002.

The 4th Informal Support Group Meeting(ISG) in preparation of the 8th InternationalEnergy Forum was organized by the Govern-ment of Japan and took place in Osaka,Japan, July 15–16, 2002.

The Interim Meeting of International Or-ganizations (IEA/Eurostat/APEC/OLADE/UN/OPEC) in relation to the 8th Inter-national Energy Forum was organized bythe IEA/OECD and held in Paris, France,July 18, 2002.

Forthcoming OPEC meetings

98th Meeting of the Economic CommissionBoard, Vienna, Austria, September 9, 2002.39th Meeting of the MMSC, Osaka, Japan,September 18, 2002.121st Meeting of the Conference, Osaka,Japan, September 19, 2002.

take place in Islamabad, Pakistan, onOctober 14–17, 2002.

The conference will focus on the sub-ject of materials science and technology,highlighting, in particular, the influenceof materials on healthcare, environment,communications and education. A seriesof sub-topics will examine the importanceof developments in materials research toan improved quality of life.

The event will bring together around100 scientists working at the cutting edgeof new materials research. Along with theIAS itself, co-sponsors include the IslamicDevelopment Bank, the Arab Potash Com-pany of Jordan, the Pakistan Academy ofSciences, the Ministry of Science and Tech-nology of Pakistan and the Organizationof the Islamic Conference Committee onScientific and Technical Co-operation.

IAS is an international, non-political,non-governmental institution, whichworks to enhance the utilization of scienceand technology for the general develop-ment of Islamic countries and humanityat large. The OPEC Fund has helpedfinance two earlier IAS conferences on thethemes of information technology andbiotechnology.

July/August 2002 59

A D V E R T I S I N G R A T E S & D A T A

Reach decision-makers through OPEC BulletinThe OPEC Bulletin is distributed on subscription and to a selected readership in the following fields: oil and gas industry; energyand economics ministries; press and media; consultancy, science and research; service and ancillary industries. Recipients includeOPEC Ministers, other top-level officials and decision-makers in government and business circles, together with policy advisersin key industrial organizations.

The magazine not only conveys the viewpoints of OPEC and its Member Countries but also promotes discussion and dialogueamong all interested parties in the industry. It regularly features articles by officials of the Secretariat and leading industry observers.Each issue includes a topical OPEC commentary, oil and product market reports, official statements, and the latest energy andnon-energy news from Member Countries and other developing countries.

General termsOrders are accepted subject to the terms and conditions, current rates and technical data set out in the advertising brochure. Thesemay be varied without notice by the Publisher (OPEC). In particular, the Publisher reserves the right to refuse or withdraw advertisingfelt to be incompatible with the aims, standards or interests of the Organization, without necessarily stating a reason.

Advertising RepresentativesNorth America: Donnelly & Associates, PO Box 851471, Richardson, Texas 75085-1471, USA. Tel: +1 972 437 9557; fax: +1 972 437 9558.Europe: G Arnold Teesing BV, Molenland 32, 3994 TA Houten, The Netherlands. Tel: +31 30 6340660; fax: +31 30 6590690.Middle East: Imprint International, Suite 3, 16 Colinette Rd, London SW15 6QQ, UK. Tel: +44 (0)181 785 3775; fax: +44 (0)171 837 2764Southern Africa: International Media Reps, Pvt Bag X18, Bryanston, 2021 South Africa. Tel: +2711 706 2820; fax: +2711 706 2892.Orders from Member Countries (and areas not listed below) should be sent directly to OPEC.

Black & white rates (US dollars)Multiple: 1X 3X 6X 12Xfull page 2,300 2,150 2,000 1,8501/2 (horizontal) 1,500 1,400 1,300 1,2001/3 (1 column) 800 750 700 6501/6 (1/2 column) 500 450 400 3501/9 (1/3 column) 300 275 250 225Colour surcharge Special position surchargeSpot colour: 400 per page; 550 per spread. Specific inside page: plus 10 per cent3 or 4 colours: 950 per page; 1,300 per spread. Inside cover (front or back): plus 35 per cent

The back cover: plus 50 per cent

DiscountsPayment sent within 10 days of invoice date qualifies for two per cent discount. Agency commission of 15 per cent of gross billing(rate, colour, position, but excluding any charges for process work), if client’s payment received by Publisher within 30 days.

Technical data about OPEC BulletinFrequency: Published 12 times per year.Deadlines: Contact Publisher or local advertising representative at the address above.Language: Advertisement text is acceptable in any OPEC Member Country language, but orders should be placed in English.Printing/binding: Sheet-fed offset-litho; perfect binding (glued spine).Page size: 210 mm x 275 mm (8 1/

4" x 10 7/

8").

Full bleed: +3 mm (1/4") overlap, live material up to 5 mm (1/

2") from edge.

Text block: 175 mm x 241 mm (6 7/8" x 9 1/

2").

Readership: Estimated to be on circulation to around 20,000 readers in 151 countries.Material: Originals preferred as film positives (right-reading when emulsion side down). Design and typesetting charged at 15 per

cent of advert cost. Artwork accepted (but deadline advanced by one week). Reversing and artwork processing charged atcost and billed separately. Printer requires proof or pre-print.

Screen: 60 dots per cm (133dpi) ±5 per cent (North America: 133 line screen).Colour indication: Use Pantone matching scheme, or send proof (otherwise no responsibility can be accepted for colour match).Proofs: Sent only on request; approval assumed unless corrections received within two weeks of despatch.Payment: Due upon receipt of invoice/proof of printing, either by direct transfer to the following account number: 2646784

Creditanstalt, Vienna, Austria. Or by banker’s cheque, made payable to OPEC. Net 30 days. Payment may also be madeby the following credit cards: American Express, Visa, Euro Card/Master Card and Diners’ Club.

60 OPEC Bulletin

O P E C F U N D N E W S

OPEC Annual Statistical Bulletin 2000This 144-page book, including colour graphs and tables, comes with a 3.5" diskette featuring all the data in the book and more(for Microsoft Windows only). The book plus diskette package costs $85.

❐ Please send me ................. copies of the OPEC Annual Statistical Bulletin 2000 (book plus diskette)

OPEC Bulletinis published monthly and a subscription costs $70 for 12 issues. Subscription commences with the current issue (unless otherwiserequested) after receipt of payment.

❐ I wish to subscribe to the OPEC Bulletin for a one-year period

OPEC News Agencyprovides a twice-daily news service on energy developments within Member Countries as well as reports from the key world energycentres. OPECNA also carries up-to-date data and reports prepared by the OPEC Secretariat. Charges depend on the mode oftransmission (e-mail, telefax or post) and location of subscriber.

❐ I would like information on subscription prices to OPECNA

OPEC Monthly Oil Market ReportPublished monthly, this source of key information about OPEC Member Country output also contains the Secretariat’s analyses ofoil and product price movements, futures markets, the energy supply/demand balance, stock movements and global economictrends. $525 per year (including airmail delivery) for an annual subscription of 12 issues.

❐ I wish to subscribe to the MOMR for a one-year period ❐ Please send me a sample copy

OPEC Reviewcontains research papers by international experts on energy, the oil market, economic development and the environment. Availablequarterly only from the commercial publisher. For details contact: Paula O’Connor, Blackwell Publishers Journals, PO Box 805,108 Cowley Road, Oxford OX4 1FH, UK. Tel: +44 (0)1865 244083; fax: +44 (0)1865 381381; e-mail:jnlinfo@blackwellpublishers.co.uk; www.blackwellpublishers.co.uk. Institutional subscribers £177/yr (North/South America $274);Individuals £67/yr (North/South America $104).

Shipping address (please print in block letters): Invoicing address (if different from shipping address):

Name: Name:Address: Address:

How to pay:Invoice me ❐ Credit card ❐ (American Express, Visa, Eurocard/MasterCard and Diners Club)Credit card company: Credit card no: Expiry date:

Holder: Signature:

Please mail this form to:PR & Information Department or telefax to:OPEC Secretariat PR & Information DepartmentObere Donaustrasse 93, A-1020 Vienna, Austria +43 1 214 98 27

Windows™ is a trademark of the Microsoft Corporation.

O R D E R F O R M

July/August 2002 61

O P E C F U N D N E W S

OPEC offers a range of publications that reflect its activities. Single copies and subscriptions can be obtained by contacting this Department,which regular readers should also notify in the event of a change of address:

PR & Information Department, OPEC SecretariatObere Donaustrasse 93, A-1020 Vienna, AustriaTel: +43 1 211 12-0; fax: +43 1 214 98 27; e-mail: prid@opec.org

OPEC Monthly Oil Market ReportCrude oil and product prices analysisMember Country output figuresStocks and supply/demand analysisAnnual subscription $525 (12 issues)

To order, please fill in the form on the facing page

O P E C P U B L I C A T I O N S

Annual Report 2000Free of charge

OPEC Review(published quarterly)

Institutional subscribers £177/yr (North/South America

US$274);Individuals £67/yr

(North/South AmericaUS$104).

Orders and enquiries:Blackwell Publishers Journals,PO Box 805, 108 Cowley Rd,

Oxford OX4 1FH, UK.Tel: +44 (0)1865 244083;fax: +44 (0)1865 381381;

e-mail: jnlinfo@blackwellpublishers.co.uk;

www.blackwellpublishers.co.uk

OPECAnnual

StatisticalBulletin 2000

144-page book plus disketteSingle issue $85

The 3.5" diskette contains all thedata in the book and much more

(Microsoft Windows only).• Easy to install and display

• easy to manipulate and query• easy to export to spreadsheets such as Excel

OPEC BulletinAnnual subscription $70 (12 issues)

Vol. XXVI, No. 2 June 2002

Oil outlook to 2020

Short-term forecasting ofnon-OPEC supply —

a statistical analysis

Using non-time-series todetermine supply elasticity:

how far do prices changethe Hubbert curve?

A simple economic analysisof electricity deregulation failure

Rezki Lounnas andGarry Brennand

S.M.R. Tayyebi Jazayeriand A. Yahyai

Douglas B. Reynolds

Ferdinand E. Banks