1

Organization of the Petroleum Exporting Countries

Oil and gas: the engine of the world economyDr Maizar Rahman

Indonesian Governor for OPECActing for the Secretary General

Delivered on behalf ofDr Purnomo Yusgiantoro

President of the Conference, and OPEC Secretary GeneralIndonesian Minister of Energy and Mineral Resources

Tenth International Financial and Economic ForumVienna, Austria, 10–11 November 2004

2

Real gross domestic product: 1960–2003Real GDP in 1995 prices and exchange rates

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

1960 1970 1980 1990 2000 2003

Billion US $

OECD

DCs including China

3

GDP versus energy growth (world): 1971–2002

Total primary energy requirement (mtoe)

Real GDP (US $ billion)

40000

45000

50000

55000

60000

65000

70000

75000

80000

13000 18000 23000 28000 33000 38000

4

Energy consumption for OECD and DCs: 1971–2003mboe/d

0

50

100

150

200

250

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

FCPEs

DCs incl. China

OECD

5

Appeal of petroleum

Unique combination of attributesSufficiency, accessibility, versatility,

transportabilityLow costs in many areas

Established infrastructureEver cleaner, safer and more efficient

6

The resource base is not a constraint

Cumulative production, as a percentage of theestimated resource base, has been relatively stable

0

500

1000

1500

2000

2500

3000

3500

4000

4500

1960 1975 1990 2005 2020

bn b

arre

ls

*/ Source: USGC

?

Resource base*

Cumulative production

7

The challenge for gas

Sufficient world resourcesMany shared challenges with oil

Prices linked with oil in many marketsProduction costs falling

Transportation still expensive

8

World energy mix%

2000 2010 2025Oil 40.1 38.7 36.9Gas 23.3 25.7 29.9Solids 26.0 25.8 25.2Hydro/nuclear/ 10.6 9.8 8.0

renewables

OPEC World Energy Model, 2004

9

Annual growth in oil demand: 2002–25million barrels a day p.a.

0.0

0.2

0.4

0.6

0.8

1.0

1.2

OECD DCs Transition economies

Asia

OPEC & other exp.

N. America

W. EuropeOECD Pac.

Africa & M.E.Latin America.

FSUother

Asia: 65% of DCs increase, especially China & India huge potential (e.g. low vehicle ownership)But possible constraints: infrastructure, policies

China

OPEC World Energy Model, 2004

10

Annual global growth in oil demand by sectormillion barrels a day

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

0.8

1

Transport

HH/CommIndustry

Elec. Gen.

1971-1980 1980-1990 1990-2000 2010-20252000-2010

11

World oil production outlook in the reference casemillion barrels a day

2002 2010 2020 2025 Non-OPEC 47.8 54.6 56.9 56.3 OPEC (incl. NGLs) 29.2 34.1 48.9 58.3 World 77.0 88.7 105.8 114.6 OPEC market share % 37.9 38.4 46.2 50.9

12

OPEC crude oil

Proven reserves 891 billion barrels78.3% of world figure

Production 29 million barrels a day40.1% of world figure

Cheaper to exploit than non-OPEC oilIncreasing call on OPEC oil in coming years

51% world oil market projected for 2025

13

OPEC’s objectives

Stable marketsReasonable pricesSteady revenuesSecure supply

Fair returns to investorsShort, medium and long terms

14

Investment in production capacity

To meet increase in overall demandTo replace exhausted reserves

To cope with unexpected shortages

Oil must be cleaner, safer and more efficient

Security of demand is AS IMPORTANT ASsecurity of supply

15

Cumulative OPEC investment requirements:effect of 1% lower world economic growth

0

50

100

150

200

250

300

350

400

450

2000 2005 2010 2015 2020 2025

$(20

03) b

illio

n

If OPEC balances the market, the uncertain volume requirements translate into huge ranges of anticipated capital outlay needs

Already by 2010 an estimated uncertainty of $25 billion exists between the reference case and the low economic growth case

This a central concern: where lies the onus of maintaining sufficient spare capacity?

Reference case

Low economicgrowth

$122-173 billion

$258-382 billion

$70-95 billion

16

Today’s oil market

OPEC concerned about high oil prices and volatility

38.6

16

19

22

25

28

31

34

37

40

43

46

49

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec16

19

22

25

28

31

34

37

40

43

46

49

Min-max range: 2000-03

Avg.'00-'03

2003

2004

Note: orange rings denote OPEC Conferences.

17

Today’s oil market

Market well-supplied with crudebut

Higher-than-expected demandDownstream bottlenecks

Geopolitical tensionsSpeculation

18

OPEC’s production agreements*

Objective: reasonable prices and stability

Three-stage OPEC-10 output ceiling risefrom 23.5 mb/d to:

25.5 mb/d from 1 July26.0 mb/d from 1 August

27.0 mb/d from 1 NovemberTotal rise 3.5 mb/d

*Agreements made at OPEC Conferences in Beirut on 3 June and Vienna on 15 September

19

OPEC crude oil production and capacity

24

26

28

30

32

34

36

1998 1999 2000 2001 2002 2003 200

Capacity

Production

*/ The production ranges for '04 & '05 are based on required OPEC crude for the balance from the survey of forecasts.

04* 2005*

production

min m

ax

20

Dialogue and cooperation

Big advances in recent yearsThe industry is much better off if there is an

underlying consensus on such major issues as price stability, security, investment, the

environment and sustainable development

21

Rising to the challenges

GlobalisationTechnologyEnvironment

Sustainable development

22

23

Energy consumption by primary source: 1960–2003

DCs

OECD

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

Solids Oil Gas Hydro Nuclear

OECD

DCs

mboe/d