OPEC agrees to keep current oil output, secretary general
From staff reports in Vienna
December 12, 2012 -
OPEC ministers meeting in Vienna on December 12 agreed to maintain their
current combined 30 million b/d crude output ceiling into 2013 and
temporarily solved the politically difficult problem of choosing a new
secretary general by extending Abdalla el-Badri's tenure for one year.
"We rolled over, so everything is as is, and we extended one year for
the secretary general," Saudi Arabian oil minister Ali Naimi said as he left
Naimi said there had been no discussion during the meeting of formal
quotas for individual member countries or of bringing Iraq formally into the
OPEC agreed its current 30 million b/d ceiling in December 2011 but did
not assign individual member country allocations under the total.
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Iraq has not formally had an individual crude output quota since it
invaded Kuwait in 1990, although OPEC says the 30 million b/d collective
agreement covers Iraqi production.
In an official statement issued after the meeting, OPEC said the
uncertainty around the global economic outlook was the biggest challenge
facing the oil market in 2013, with an expected increase in oil demand
outweighed by a predicted rise in supply from non-OPEC countries.
"Given the demand uncertainties, the conference decided to maintain the
current production level of 30 million b/d. The conference also agreed that
member countries would, if necessary, take steps to ensure market balance and
reasonable price levels for producers and consumers," the OPEC statement said.
"In taking this decision, member countries confirmed that they will
swiftly respond to developments that might have a detrimental impact on an
orderly oil market," it added.
Challenge of Iran
One challenge facing OPEC next year will be the impact of tightening US
sanctions on Iranian crude exports and production.
Iran's exports have already shrunk as a result of US and EU measures in
effect since July. The International Energy Agency in its latest monthly oil
market report December 12 estimated imports of Iranian crude by countries still
buying oil from Iran at 1.3 million b/d in November, up slightly from 1.24
million b/d in October and 1.07 million b/d in September.
However, the IEA added, "Iranian crude exports are expected to turn
lower next month and into the New Year--reaching a level closer to 1 million
b/d--as EU and Asian countries reduce further their crude imports from Iran
in order to secure continued access to the US financial system."
Iranian members of parliament have said in recent weeks that Iran may
base its budget for the Iranian year beginning in late March 2013 on a crude
export volume of 1 million b/d.
Oil minister Ghasemi declined to say how much crude Iran was currently
exporting but pointed out that the Iranian government had been trying for a
long time to diversify its income away from oil.
"In the past three years we have been able to cut 20% of the oil income
from the current income of the country, and next year we will do the same,"
The US last week extended exemptions from its financial sanctions to nine
Asian countries which have pledged further cuts in their imports of Iranian
crude next year.
But Washington will also tighten further the noose with additional
measures that will expand the existing sanctions to increase the economic
strain on Tehran.
From February 6, any country that has received an exemption from the
US allowing it to keep buying Iranian petroleum will avoid sanctions risk
only if it makes its oil payment into an account at a bank within its
The oil payment can then only be used to facilitate permissible trade
between that country and Iran and cannot be transferred to a third country,
repatriated to Iran or used to facilitate third-country trade.
Another challenge will be to try to find a longer-term solution to the
impasse over appointing a secretary general.
Representatives from Saudi Arabia, Iran and Iraq--OPEC's top three
producers--had been vying this week to succeed Badri, who had been due to
leave the secretariat at the end of December following two three-year terms
as secretary general.
But it came as no surprise when ministers had failed to agree on any one
of the candidates--former Iranian and Iraqi oil ministers Gholamhossein
Nozari and Thamer Ghadban and former Saudi Arabian OPEC governor Majid Moneef.
Despite its claim to be an economic organization, OPEC is riven by
politics and political in-fighting has overshadowed the post every time it
has come up for grabs.
There was some confusion just ahead of the meeting over the status of
Iran's bid for the job when UAE oil minister Mohammad Bin Dhaen al-Hamli said
there were now only two candidates, the Iraqi and the Saudi. It appeared that
Nozari had withdrawn, although Hamli stopped short of saying so.
After the meeting, however, Badri was asked whether Iran had withdrawn.
"No," he said. "All the candidates are still there."
The explanation may lie in comments by OPEC's current president, Iraqi
oil minister Abdul-Karim al-Luaibi, on December 9.
A committee consisting largely of OPEC's board of governors had met in
Vienna in October to assess and interview each of the four candidates. But,
said Luaibi, the Iranian candidate was less than happy with this process.
Luaibi told reporters on December 9 that "there was an agreement where
the candidates would each present himself to the committee to evaluate those
candidates. There was some objection to this. The Iranian representative
objected to this. They did not agree with this method of evaluation."
Despite OPEC's failure to agree on a successor--and on the Saudi
candidate in particular--Saudi oil minister Naimi said he was very happy with
the decision to keep Badri in place for another year.
"We have an experienced secretary general [in] position, extending it
one year is a very, very very good decision," he said.
With Badri extended for another year, the heat is off OPEC's efforts to
appoint a successor for the time being. But questions still remain as to
whether the job will be opened up again to allow new applications and whether
the existing candidates will have to reapply.
In the past, compromise candidates have emerged to break the deadlock
over choosing a secretary general--Badri himself was one--and it may well be
that the year ahead will see the emergence of a new "white knight" who can
win the support of all countries.
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