The OPEC Long-Term Strategy recognises the important role of oil in meeting future global energy demand and for the socio-economic development of OPEC Member Countries, and provides a coherent and consistent vision and framework for the Organization’s future. The objectives for the Strategy relate to the long-term petroleum revenues of Member Countries, the stability of the world oil market with fair prices, and the security of regular supply to consumers, as well as the security of world oil demand.

There are key challenges that may constitute constraints for OPEC in the attainment of the objectives of the Strategy. A major hurdle relates to the uncertainties surrounding future demand for OPEC oil, stemming from, inter alia, future world economic growth, consuming countries’ policies, and technology development, as well as from future non-OPEC production levels.

These uncertainties are explored in three internally-consistent scenarios that depict contrasting futures of the global energy scene. These scenarios, named respectively Dynamics-as-Usual (DAU), Protracted Market Tightness (PMT) and Prolonged Soft Market (PSM), map out a coherent and credible set of assumptions for these drivers of change.

The key implications that emerge from these scenarios are described in the following section.

Foreword:

The Organization of the Petroleum Exporting Countries (OPEC) was established in Baghdad, Iraq, in September 1960. Its Members are Algeria, Indonesia, the Islamic Republic of Iran, Iraq, Kuwait, Nigeria, Qatar, Saudi Arabia, Socialist People’s Libyan Jamahiriya, the United Arab Emirates and Venezuela. The main guiding texts for the Organization are the OPEC Statute, approved in January 1961, the Solemn Declaration, stemming from the first Summit of OPEC Heads of State, held in Algiers in 1975, and the Caracas Declaration from the Second Summit of OPEC Heads of State, held in Venezuela in 2000.

On its 45th Anniversary, OPEC adopted a comprehensive long-term strategy, on the occasion of its Ministerial Conference Meeting in Vienna, 20 September 2005. The Conference expressed its appreciation of the efforts that lie behind the development of this strategy. The Conference thanked HRH Prince Abdulaziz bin Salman Bin Abdulaziz Al-Saud, Chairman of the Meetings of the Deputy Ministers of Petroleum/Energy on Long-Term Strategy; HE Dr Bernard Mommer, Vice-Chairman; all Heads and Members of Delegations to these meetings; as well as the Staff of the OPEC Secretariat involved.

This strategy, which was prepared over a period of two and a half years, provides a coherent and consistent vision and framework for the Organization’s future. It recognises the important role of oil in the world economy at large and for the socio-economic development of OPEC Member Countries. The Strategy defines specific objectives and identifies the key challenges the Organization faces now and in the future. Benefiting from a scenario-approach for the energy scene, it is designed to be robust and adaptive throughout the various possible futures.

This document provides an overview of the key issues which have been addressed.

Vienna. March 2006

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PDF format, 1.7MB, 33Pages.

Organization of the Petroleum Exporting Countries
Obere Donaustrasse 93 , A-1020 Vienna, Austria
Telephone: +43 1 211 12 -0
Telefax: +43 1 216 43 20
www.opec.org

Concluding remarks:

With this document, OPEC reaffirms its longstanding commitment to oil market stability, as embodied in the OPEC Statute. OPEC’s role in this respect is becoming better understood and appreciated, as its continuous efforts at supporting such stability are increasingly acknowledged as beneficial to the world at large. In supporting security of supply to consumers, OPEC will continue to expand its production capacity, both to meet the increased demand for its oil and to offer an adequate level of spare capacity.

This, together with the acceptance that there are clearly sufficient oil resources, should provide a solid foundation for future market stability. Moreover, due regard must be given at all times to the need for fair returns on capital invested throughout the petroleum industry, fundamental to a balance of interest between all parties. At the same time, the important role of oil in the economic development and social progress of OPEC Member Countries must be recognised.

However, the challenge of making these investments is fraught with significant uncertainties, in particular regarding the rate at which oil demand may grow. The risks associated with implementing large capital investments with long lead times in the context of these uncertainties lead to genuine concern over the possible waste of much-needed financial resources. The issue of security of demand must, therefore, be regarded as an inherent factor in supporting longer-term market stability.

Nevertheless, it is also increasingly recognised that a broader set of conditions are needed for long-term oil market stability. In particular, the downstream sector must be a prime focus of efforts in working towards this objective. This draws attention to the need, particularly in consuming countries, to adopt an active, forward-looking approach to this sector, supporting timely investment.

OPEC’s Long-Term Strategy has identified many areas where OPEC Member Countries, both as individual sovereign nations, as well as members of an Organization, can support their own pressing needs for socio-economic development, while playing a vital role in the international community. Open, positive, constructive, pragmatic dialogue, with all parties, must constitute the main means of turning the future challenges into opportunities in the new energy era.

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