Transcript OPEC on Economic Diversification

Expert Meeting on Economic Diversification
Maritim Hotel, Bonn, 16-17 May 2006
Ramiro Ramirez
Energy Studies Department
OPEC Secretariat, Vienna
© 2006, Organization of the Petroleum Exporting Countries
Why is OPEC here?
• Organization of developing countries with a
commitment to bring stability to a historically very
volatile “commodity” market
– Important because it seriously jeopardizes our
economic and social structure
– Important to consumers as it affects their economies
too
• Our countries provide a unique, non-renewable
resource which is traded world-wide as if it were
simply another “commodity”
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Why is OPEC here?
• Huge amounts of capital are required to simply
maintain production and
• Huge amounts of capital are also required to expand
production in order to meet demand forecasts
• Projects do not happen overnight (long lead times)
• Uncertainty regarding project investment is a critical
issue to us
• Kyoto Protocol implementation will affect us
• Economic diversification is of great importance to us
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OPEC profile
•
•
•
•
•
•
Average GDP per capita: $2,500 (2005 estimate)
But there is a very wide range ($730 - >$50,000)
95% of the 544 million people in OPEC live in a
country where GDP per capita is no higher than $5000
This compares with OECD average GDP per capita of
close to $30,000
Average life expectancy: 61 years
Socioeconomic development needs: reflected, for
example in the relatively low values of HDI (Human
Development Index)
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Slide 2
Human Development Index, 2003
1.0
0.9
OPEC member countries HDI:
Most ranked below 70th
0.8
0.7
0.6
0.5
0.4
0.3
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
HDI typically below 0.8
Unemployment levels very high, often as much as 25-30%
Particular problem with youth unemployment
Fast rates of population growth
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Slide 2
OPEC dependency on petroleum
Share of oil exports in total exports 76% (17%-98%)
Share of oil exports in GDP
38% (7%-80%)
Oil reserves: 897 billion barrels (78% of world total)
Crude oil production: ca. 30 mb/d (35% of world total)
Gas reserves: 89 trillion standard cubic metres (49%)
Gas production: 464 billion st cu. m. p.a. (17%)
OPEC study suggest that by 2010 of the 12 most
dependent countries in terms of net fossil fuel exports
as a percentage of GDP, 10 will be OPEC countries
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Slide 2
OPEC dependency on oil
100
90
80
% of exports
70
60
50
40
30
% of GDP
20
10
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
0
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Slide 2
OPEC Real GDP, population and Real
GDP per capita, 1960=100
700
600
500
Real
GDP
400
300
Population
200
Real GDP
per capita
100
0
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
© 2006, Organization of the Petroleum Exporting Countries
Slide 2
Real GDP per capita, 1960=100
350
300
OECD
250
DCs
200
OPEC
150
100
50
0
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
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Slide 2
Impact of Kyoto implementation
Significant impact on OPEC MCs
Why?
• High dependency on oil exports revenues
• High human development needs
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Impact of Kyoto implementation
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What should we be trying to achieve?
Reduce global emissions on a level playing field
(Article 3 of the Convention on Principles)
Sustainable economic growth and development through:
• Stable markets for commodities important to the developing world
• Encourage technology transfer (energy efficient, cleaner, more
sustainable use of our energy resources)
• Encourage investment (win-win-win)
• Encourage trade (on a level playing field)
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The challenges
An OPEC perspective
Encourage initiatives that would bring about economic
diversification for OPEC MCs
(developed countries
commitments under Article 4.8 of the Convention and 2.3 of the
Kyoto Protocol)
•
Investment and transfer of technology (win-win-win)
•
More access for exports into Annex B markets
•
Encourage trade opportunities for oil exporting developing countries
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What does it all mean?
1. Be realistic
 energy efficiency for all
 development and quick deployment of cleaner fossil
fuel technologies for all
 Be fair
 elimination of distorting taxes
 Be cooperative
 lets look for win-win-win opportunities
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Possible areas for diversification
How could they contribute to stop deterioration of our environment
and yet assist them in diversifying their economic dependence on
hydrocarbon exports?
Manufacture of energy intensive goods with CO2 sequestration?
Further development of natural gas projects?
CDM gas flaring reduction projects
Depending upon natural endowments and human resources, other
sectors such as agriculture, manufacturing, and services including
information technology could be expanded
Importance of policies to promote local content development and
technology assimilation.
Greater vertical integration of the petroleum industry, as well as
further expansion of petrochemicals and other products
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Possible areas for diversification: natural gas
Switching to natural gas use and export contributes to
diversification efforts, frees up exports of oil
Need to encourage the development of LNG and pipeline
infrastructure
West African Gas Pipeline
initial talk of a CDM project
Trans-Saharan pipeline from Nigeria to Algeria
Gas sector offers considerable scope for further
exploration
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Expanded gas use and exports through reduced gas flaring
Flared gas as a percentage of gross production
Huge success in reductions in flaring
70
Still scope for improvement (7% vs 2%)
Low population densities prohibit expansion
of domestic markets, large distance to
foreign markets, infrastructure developments
too expensive
60
50
40
%
OPEC
non-OPEC
30
20
10
0
1960
1965
1970
1975
1980
1985
1990
1995
2000
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Carbon capture and storage
40 Gt CO2
<2% of Emissions to 2050
920 Gt CO2
45% of Emissions to 2050
400-10,000 Gt CO2
20-500 % of Emissions to 2050
Source: IEA
© 2006, Organization of the Petroleum Exporting Countries
The Way Forward
• Bonn Agreement/Marrakech Accords give priority to
"assisting developing country Parties which are highly
dependent on the export and consumption of fossil fuels
in diversifying their economies".
• Are there funding possibilities?
– GEF? (has, for example, a history of providing funding to
investigate technical and economic issues associated with
gas flaring)
– SCCF? (includes explicit mention of diversification)
• What about the Kyoto mechanisms?
– CDM? Efforts underway, how to expedite?
• Need for serious, extensive review of the options
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www.opec.org
© 2006, Organization of the Petroleum Exporting Countries
Who gets what from a litre of oil in the G7
2005
USA
21%
Canada
26%
Japan
36%
France
51%
Germany
51%
Italy
54%
United Kingdom
56%
0.00
0.25
0.50
0.75
Purchase of crude oil (FOB)
Industry Margin (e.g. transport, insurance, refining and other costs)
1.00
1.25
USD/litre
National government taxes
Source: OPEC Research Division, 2006. Based on selected secondary sources.
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