: 'International oil companies are the real dinosaurs'
OPEC Secretary-General Abdalla Salem el-Badri
at his office in Vienna:
world is a better place because of OPEC."
Petroleumworld.com Jan 21, 2008
an exclusive SPIEGEL interview, OPEC Secretary-General
Abdalla Salem el-Badri discusses the dangers of a further
dramatic rise in the oil price, the failures of multinational
oil companies and considerations within the cartel of oil-exporting
nations to trade in euros rather than dollars.
oil field complex in Shaybah in eastern Saudi Arabia: "We
at OPEC don't want extremes, prices that are too high or
too low. What we do want is a stable
Mr. Secretary-General, the price of a barrel of crude oil
hit the $100 mark for the first time in early
January. While consumers are burdened with high prices,
the producers are busy filling their pockets. Did you celebrate
at OPEC on that day?
El-Badri: No, why should we? We are interested in reasonable
prices. We want stability. Besides, the average price per
barrel was $69 last year. Only a very small amount of oil
was traded at above $100, and only for a very short time.
It is a gamble. It was a single dealer who miscalculated
and lost money as a result.
ABOUT ABDALLA SALEM EL-BADRI
Abdalla Salem el- Badri is secretary- general of the Organization
of Oil- Exporting States (OPEC). Established in Baghdad in
1960, the organization has 13 members today -- including
the world's biggest oil producer, Saudi Arabia, the political
heavyweight Iran, Iraq and Venezuela as well as smaller members
like Ecuador and Qatar. Badri, 67, was born in Ghamminis,
Libya, and is considered one of the world's leading experts
on the international energy market. He studied in the United
States, worked for the oil concern Esso, led a domestic oil
company and served as Libya's energy minister and deputy
prime minister. In 1994, he temporarily served as OPEC's
leader. Badri lives with his wife and five children in Vienna,
where OPEC's headquarters are located.
Now you are downplaying a dramatic development that has
the whole world
deeply concerned. The price of oil has quadrupled in four
years, and last year it rose by an alarming 57 percent.
Experts at the German Institute for Economic Research believe
a price increase to $200 within 10 years is likely. Do
El-Badri : The oil price should be based primarily on supply
and demand. If that's the case, an increase to $200 is highly
unlikely. But when other factors play a key role, like speculators
or geopolitical factors ...
SPIEGEL: ... in other words wars in the producing countries,
or the sort of unrest that's currently happening in Nigeria
El-Badri : ... that is your interpretation. We also have
the drop in the dollar value against the euro as well as
the final bottlenecks in US oil refining. Then you may see
Many experts already believe that the current level is
dangerous and fear a worldwide recession. During his visit
to Riyadh, US President George W. Bush reprimanded OPEC and
called upon the organization to do something about the current
record high prices. Expensive gasoline, he said, is hitting "American
families where it hurts."
El-Badri : If there is a recession, it won't be because
of the oil price. It will be caused by the subprime mortgage
crisis in the United States and other financial market problems.
SPIEGEL: It's certainly an important factor, next to oil.
Nevertheless, OPEC has been accused of driving up prices.
You don't think that $100 for a barrel of oil hurts OPEC's
El-Badri : Why should it hurt our reputation? I have a proposal: We at OPEC
give you our member states' oil revenues from our exports and you give us,
in return, the money from the taxes you assess on oil products. That would
be a fair deal, right?
SPIEGEL: We can't do that. But we're also not entirely sure
that the finance ministers of the major consumer nations
would even be interested in that sort of a deal.
El-Badri : You see? For many of our member nations, petroleum
is the only source of revenue, and that's why we need a fair
SPIEGEL: What does that mean? Two and a half years ago,
we spoke with Adnan Shihab-Eldin, your predecessor as head
of OPEC. He mentioned a price range of $50 to $60. You yourself
said in November that there was no evidence to suggest that
the important psychological threshold of $100 would be reached.
El-Badri : I have no concrete sense of target prices, not
even of a specific range. We at OPEC don't want extremes,
prices that are too high or too low. What we do want is a
stable price. This would benefit the producers and the consumers.
But, as I said, the market determines that.
SPIEGEL: A market over which you don't have decisive influence?
Has OPEC lost so much power, OPEC, the feared organization
that dictated prices in the 1970s and 1980s and has even
used oil as a political weapon -- during the Yom Kippur War,
SPIEGEL: But OPEC can exert important influence by cutting
back or expanding production volume.
El-Badri : That's true, and we do this as we see fit. Beginning
in 2004, we increased production by close to 5 million barrels
per day by the end of 2006. Then we reduced production by
1.7 million barrels when we felt that the price was too low.
It was a very good decision as far as OPEC is concerned.
SPIEGEL: Some experts doubt that OPEC can even expand production
volume to a significant degree anymore. These specialists
say that Saudi Arabia, for example -- the world's only oil
superpower -- is already putting too much pressure on its
oil fields today, and that the reserves are generally smaller
than was previously assumed.
El-Badri : Don't worry, we still have capacity. We are currently
able to increase production by 3.5 million barrels. And we
have also invested up to 2012 in new projects at a total
cost of $150 billion, which will give us additional capacity
of 6 million barrels in four years. However, we have to know
how high the demand for oil will be in the future, so that
we can plan our investments accordingly.
You cannot deny that the reserves are finite. Have we already
oil" -- the maximum level of petroleum production that can be reached
before reserves will inevitably begin to shrink?
El-Badri : No, I don't think so. I also don't believe that
we will reach this point in the near future.
SPIEGEL: Experts outside of OPEC have a less optimistic
view of our energy future.
El-Badri : Perhaps. But I believe that even your grandchildren
will still have enough fossil fuel. There will be an end
to the oil, for sure. But I'm convinced it will not be in
the next 100 years.
SPIEGEL: Even a study published on behalf of OPEC concludes
that, by as early as 2024, your cartel may no longer be able
to fully meet customers' demands and deliver as much oil
as they need.
El-Badri : This is not our own study, it does not reflect
the official OPEC view. I am convinced that its conclusions
are wrong. There is enough oil. And there are enough discovered
reserves. Our real problem lies in the correct assessment
of demand. We would like to know how fast it is growing.
SPIEGEL: That depends on many factors, including energy
conservation in the industrialized nations and the thirst
for energy in major emerging economies like China and India.
Do you have a clear idea of what's going on there?
El-Badri : I have visited China and spoken with the political
leadership there. We are in talks with the EU and I am going
to visit Japan. The most important thing for us is dialogue.
The individual countries do not provide us with exact demand
figures for the future, but at least they give us some indication
of how much oil will be needed.
OPEC Adopt the Euro?
SPIEGEL: You paint a rather rosy picture.
But isn't OPEC also affected by the diverging interests
of its members?
Wasn't there a substantial dispute at your last major
meeting -- one that pitted Iran and Venezuela, with their
ideas about high prices and their anti-Western agenda,
against the "moderates"?
El-Badri : We leave politics up to the individual member
nations. OPEC is an economic organization. Besides, it wasn't
a real dispute. We speak with one voice. However, we did
have a lively discussion in November over whether and how
we should generally shift from the reserve currency, the
dollar, to the euro for purposes of trading. Some of our
member nations have enormous dollar reserves, while others
sell in dollars and buy in euros.
SPIEGEL: And are you in favor of abandoning the practice
of trading in dollars as Venezuela and Iran have demanded?
El-Badri : The euro is currently the world's strongest
currency. A change can be made, but it will take some time.
It took many years for the dollar to become a dominant currency
in the oil business. But in the future it will not be that
difficult to change.
SPIEGEL: Angola and Ecuador were accepted as members of
OPEC last year. Should Russia join?
El-Badri : We don't knock on anybody's door.
SPIEGEL: But wouldn't you like to see Moscow knocking on
your door? With the Russians on board, with their enormous
production capacities and even bigger reserves, OPEC could
truly set prices.
El-Badri : Once again, we don't want to dictate anything.
SPIEGEL: (Russian) President Vladimir Putin
certainly has other ideas. Last year he called the idea
of a cartel for
natural gas -- the world's second-most important natural
resource, which is tied to the oil price -- a "very
interesting idea." He has already begun promoting the
concept in Iran, Qatar and Algeria. Are you concerned about
this sort of a "counter-OPEC," and do you think
it has potential?
El-Badri : This sort of organization may be an option in
the longterm, but the gas producers are tied to supply agreements,
some for 30 years -- it's not like crude. But we at OPEC
do not see this as a threat.
SPIEGEL: There has been a worldwide trend toward re-nationalization
of energy reserves in recent years. While multinational
companies like Exxon, Shell and BP controlled the market
two decades ago, nowadays 77 percent of all oil reserves
are in the hands of national and, in many cases, relatively
inefficient oil companies in the production countries. Wouldn't
it be better if more private, and thus more transparent,
companies dominated the market instead of these national
El-Badri : The international oil companies are the real
dinosaurs, not we at OPEC. The multinationals have changed
their philosophy in recent years, but they still have a
long way to go. They need to hire and train more local people.
And they should invest more in the exploration of fields
and in new technologies. They also have to be very gentle
with the production profile of every country.
SPIEGEL: You recently spoke out against biofuels. Why?
El-Badri : I have nothing against biofuels, or against
any other forms of alternative energy. All I wanted to say
was that one shouldn't invest in something that ultimately
cannot be brought to fruition, at least not on a large scale.
Biofuels are not a savior at all. The production of biofuel
comes at the expense of food reserves and water. It requires
precious agricultural land that could be planted with other
crops. At the end of the day the consumer will pay the price.
SPIEGEL: How do you feel about the international resurgence
of nuclear energy? Does nuclear power belong in the energy
mix of industrialized countries?
El-Badri : As long as safety can be guaranteed -- why not?
SPIEGEL: You're not convinced that modern nuclear power
plants are safe?
El-Badri : It's an extremely dangerous technology. As we
have seen in Chernobyl, even a single accident can have
SPIEGEL: And yet countries rich in natural resources, like Iran and your native
Libya, are investing heavily in nuclear technology. Tripoli has just placed
an order with the French for a nuclear power plant.
El-Badri : Before this technology can benefit Libya, it
will have to train many specialists and it will require
a great deal of technology transfer.
SPIEGEL: You recently said that OPEC is deeply concerned
about climate change and does a lot to protect the environment.
Really? Did we miss something?
El-Badri : We are significantly reducing flaring, tremendously.
Besides, the leaders of the OPEC countries believe that
they should also invest in other environmentally friendly
technologies. Saudi Arabia, Kuwait, Qatar and the United
Arab Emirates have agreed to pay $750 million into a fund
to research environmental problems. I am convinced that
other members will follow their example.
SPIEGEL: In other words, the environmental initiative is
not binding for all OPEC countries.
El-Badri : No, it's not. Saudi Arabia invited other members
to contribute, but its up to the countries themselves.
SPIEGEL: You have been familiar with OPEC for a long time.
You have observed the organization from very different perspectives,
including as a manager of both private and state-owned oil
companies and as an energy minister. How has the cartel
El-Badri : OPEC is the oldest surviving organization that
consists exclusively of Third World countries. It's now
almost 48 years old, and it has members from Africa, Asia
and South America. It is a success story. It is getting
stronger and stronger, year in and year out. We are able
to control our reserves. OPEC promotes energy security for
the entire world and doesn't limit itself to the individual
interests of its members.
SPIEGEL: What would the world look like without OPEC?
El-Badri : I think the world is a better place because
of OPEC. The world would not be as safe a place without
this organization, because we guarantee a stable petroleum
market. In doing so, we also contribute to overall world
stability on the energy side.
SPIEGEL: Last Wednesday, President Bush practically issued
an ultimatum to OPEC to increase production volume, which
would bring down prices. Will you comply with his request
at your next OPEC meeting on Feb. 1.?
El-Badri : The problems we are currently seeing in the
United States have nothing to do with OPEC. I already mentioned
the homegrown financial crisis. The Americans have also
let things go when it comes to oil refining. They've invested
far too little in their refinery capacities in the last
30 years. They consume 21 million barrels a day but can
only refine 17 million. Even if you were to add more oil
to the US market, they don't have the capacity to refine
it -- and it won't solve the bottleneck problem.
SPIEGEL: Are you saying that no decisions will be made
in Vienna next week?
El-Badri : I didn't say that. We are carefully analyzing
the market, day in and day out. If we conclude that the
fundamentals require that, our ministers will not hesitate
to increase production. But at the moment we do not see
any need for that.
SPIEGEL: Mr. Secretary General, we thank you for this interview.
conducted by Erich Follath and Marion Kraske from Spiegel
Spiegel 20 01 08
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