chapter two - OAPEC

PREFACE
As the thirty-sixth Report rolls off the press, the repercussions of the global financial
crisis are still casting shadows over the world economy, and particularly over the oil
industry and its markets. It is true that supply/demand and prices are now relatively stable
following the huge storm that affected them in the last quarter of 2008 and the first months
of 2009. The fall in demand and prices severely affected the social and economic
circumstances of the petroleum exporting countries in general. It particularly affected the
Arab oil exporting countries, where petroleum is still a major national asset and the
backbone of their economies, because it constitutes a principal source of revenue, a large
part of their foreign trade, and an essential factor in their annual budgets.
It is a fact that the petroleum industry plays an important role in the social and economic
stability of many Arab countries, both exporters and other countries that benefit indirectly, either
through worker remittances, trade, or bilateral or joint Arab projects. OAPEC members' revenues
from oil exports in 2009 totaled just $352.8 billion, which was $232.5 billion (or 39.7%) less than
in 2008, when they totaled $585.3 billion. In real terms, the 2009 revenues were no more than
$278 billion in 1995 prices.
The drop in revenues was due to the continued pressure of the global economic financial
crisis on oil and natural gas prices throughout 2009, making them fluctuate. The annual average
of spot prices for the OPEC basket of crude oils dropped 33.4% from $94.4/b in 2008 to about
$61/b in 2009. The average basket price ranged from $42.9/b in the first quarter of 2009 to
$74.3/b in the last quarter.
However, the drop in revenues has affected more than the current economic position of
Arab countries. It has also cut deeply into the projects for expanding crude oil production
capacity that Arab countries had planned to meet the forecast rise in world oil demand in the
coming twenty years. These projects have either been delayed or postponed until the local and
global economies show signs of recovery.
Just as the world financial crisis affected petroleum revenues and oil prices, it also affected
natural gas. It had a negative impact on supply, demand and consumption as world economic
growth declined. In the OECD countries it fell by 3.4%, in the countries in transition by 6.7%,
and in Latin America by 2.5%. Only Asia escaped this fate, as it recorded a growth rate of 6.2%.
As a result, world oil demand dropped 1.6% from 85.7 million b/d in 2008 to 84.3 million b/d in
2009, or by about 1.4 million b/d.
This Report presents and analyzes such issues from A to Z. It provides a clear picture of
the various aspects of the petroleum industry and a more general picture of the energy industry. It
highlights the efforts exerted by OPEC and its Arab member countries, which are also members
of OAPEC, to mitigate the impact of the financial crisis on their countries. An outstanding
example of these efforts was the participation of OAPEC's General Secretariat, as an observer, in
the Arab Economic and Social Development Summit, which was held in Kuwait, 19-20
January 2009. The summit was held in the presence and under the auspices of H.H. Sheikh Sabah
Al-Ahmad Al-Jaber Al-Sabah, Amir of Kuwait, and with the participation of the kings and
presents of Arab states. The General Secretariat presented a study entitled, 'The Global
Financial Crisis and Its Probable Initial Repercussions for the Arab Petroleum Industry,'
which was adopted as a working document of the summit. The General Secretariat also took part
in many activities of a similar vein, such as the First Gulf Conference on Investments in Oil, Gas
and Petrochemicals during the World Financial Crisis, which was held in Manama, Bahrain, 20-
21 October 2009. The Secretary General's speech to this conference concluded that 'investments
in all phases of the oil industry require stable oil markets and guaranteed demand for oil.'