OPEC Ministers Keep Status Quo in Venezuela

The world’s oil producing countries met at the 141st OPEC meeting in Caracas on Thursday, and decided to retain production at the “status quo.” They also reaffirmed their “determination to ensure that crude prices remain at acceptable levels.”

The world’s oil producing countries met at the 141st (extraordinary) OPEC meeting in Caracas on Thursday, and decided to retain production at the “status quo.”  They also reaffirmed their “determination to ensure that crude prices remain at acceptable levels.”

Although Venezuela had called for cuts earlier this week, PDVSA President and Minister of Energy and Petroleum, Rafael Ramirez, announced on Wednesday that he did not believe there was “going to be a modification to levels of production.” 

As Venezuelan President Hugo Chavez had commented earlier in the day, OPEC President and Nigerian oil minister, Edmund Daukoru, stated during the press conference at the Eurobuilding Hotel on Thursday that the high oil prices are not due to a lack of supply but rather, the geo-political situation and oil speculation.

“We are mindful that the perception of lack of capacity is part of the problem,” added Daukoru, “It’s the perception alright, but it’s really in somebody’s mind somewhere, and it is an issue to be address to the extent that it affects the market.”

OPEC President Edmund Daukoru
Credito: Silvia Leindecker

Daukoru was not willing to provide further information on the discussions during the three-hour long OPEC meeting, stating that the outcome was “really the essential thing,” and that some of the issues covered where “in-house matters.”

He also explained that at their shorter “extraordinary” meetings, such as this, they generally tend to stick to market trends and snapshots in order to evaluate the necessity for alterations in production, and do not get in to the more profound debates reserved for their longer “ordinary” meetings.

“The very reason we meet so often is to be sure that we are able to micromanage and stabilize markets and to avoid wild swings up or down,” said Daukoru.

 Nevertheless, there was tremendous talk in the lead-up to the summit about the possibility of movement on a number of issues.

According to the Financial Times, OPEC was and perhaps still is considering increasing its membership for the first time in 30 years.  Venezuela has proposed that Bolivia join, which comes on the heals of the Andean nation’s recent nationalization of its hydrocarbons.  Ecuador is also considering re-joining OPEC, which had left the organization 16 yrs ago.

The Financial Times also reported this week that Nigeria has invited Sudan and Angola to join the group, but this invitation was “only the first step in a long process that could still end with the rejection of the proposal either by OPEC or the candidates.”

These countries join a list of many others that have in the past walked along-side OPEC as observer nations including Mexico, Russia, Syria and Egypt. 

OPEC delegates field questions from the press
Credito: Silvia Leindecker

Although Daukoru declined to answer specific questions regarding official OPEC membership, he did state that the inclusion of non-member observer nations is "part of the effort to stabilize markets.”

“We want responsible behavior in the marketplace.  We want people who can share responsibility as well as reap benefits,” he said, “so if a major producer takes the interest to share responsibility, I think it’s a welcome development.”  

Various ministers stated their willingness to welcome new official members in to the organization, if they follow the rules of the group.

“It is possible [to join the organization], according to criteria, especially according the principles of OPEC,” said Dr. Purnomo Yusgiantoro, Indonesian Minister of Energy and Mineral Resources on Thursday,  “but non-OPEC members must also cooperate, because oil is the number one motor in the world.”

President Chavez re-iterated the call on Thursday morning, to fix minimum oil prices at a rock-bottom $50 a barrel, with infinite ceilings.  “We would not want to debate that in public,” said Daukoru at the press conference “Although we take good note of any ideas coming from an important OPEC country.”  Nevertheless, Chavez’ proposal did not seem to be overwhelmingly accepted.

Analysts were also prepared for the non-forthcoming possibility that OPEC might recognize Venezuela’s Orinoco Heavy Crude reserves, thus officially deeming the South American nation with the largest petroleum reserves in the world.      

There was also talk about the possible conversion of OPEC oil sales to Euros, a move which both Venezuela and Iran have considered embracing within the last month.  But Daukoru waved away possible developments saying that the Euro transition is something that had been discussed “some time back”, but not recently.  “We did not discuss pricing or mechanisms,” he said. 

During the press conference on Thursday, Daukoru spoke briefly about general OPEC concerns for the environment, which was not directly discussed at this week’s summit.

“OPEC member countries have shown great responsibility and signed on to Kyoto,” he said, “CO2 administration is one of the key issues on the OPEC-EU dialogue agenda, we are hoping that will progress in to some point where we might try a pilot project.”

“Greens, who go for alternatives, are worried because they think we are not doing enough to deal with the CO2 issue, but we are going to show them that we take the CO2 issue very seriously, and we are spending billions of dollars in proven technology.  We say we have oil, and we have plenty and we are going to deal with the CO2 issue, so if you take the two and a fraction of investment you can effectively deal with the CO2 issue before fuel cells and exotic things like that become commercial at affordable prices,” he said

The delegation from Iraq was the only OPEC member absent from this week’s meeting. Daukoru commented briefly in his opening address to the Conference that he would like to congratulate “the people of the Republic of Iraq on the recent inauguration of its new Government and in congratulating His Excellency Dr. Hussain Al-Shahristani on his appointment as Minister of Oil of the Republic of Iraq.  Unfortunately, HE Dr. Al-Shahristani cannot personally be with us today, but we send him our greetings and look forward to welcoming him to our next Meetings.”

The next Ordinary OPEC Meeting is set to take place in Vienna, Austria on September 11, 2006, although delegates left the possibility open for an earlier Extraordinary meeting “should market condition so warrant.”