Entry into OPEC could hinder western investment – analysts
By Spencer Swartz and Selina Williams
Dec 1, 2006 (CAIRO/LONDON) — The industrialized world’s energy watchdog said plans by Angola, Sudan and Ecuador to join the Organization of Petroleum Exporting Countries could slow investment by Western oil companies in the three countries, potentially hindering new supplies of crude oil coming to thirsty world markets.
“Our main concern would be the impact this could have on investment flows into the upstream sectors of those countries,” said David Fyfe, an analyst with the Paris-based International Energy Agency.
OPEC controls more than a third of world oil supply and sets production quotas among its members to influence world petroleum prices. While the mechanism depends upon the country, Western oil companies doing business in OPEC nations can be subject to supply cuts.
The IEA has identified Angola — a major oil supplier to the U.S. and China — as one of the top growth areas outside OPEC. Angola, like Sudan, has relied heavily on foreign oil investment to develop the sector.
OPEC Secretary-General Mohammed Barkindo confirmed Angola is poised to join the oil-producer group and Sudan was moving closer but said there was no formal time frame for the two countries to join. Venezuela, one of five founding OPEC nations that must approve new members, pledged its support to Angola’s effort to join.
Ecuador’s newly elected president, Rafael Correa, has raised the possibility his country would rejoin the group. The South American nation left the cartel in 1992, and in the past OPEC has said it owes $4.2 million in back dues.
Angola, which currently produces around 1.4 million barrels a day, is on target to ramp up production to two million barrels a day by the end of next year. Sudan hopes to double its current output (500,000 b/d) to one million barrels a day by 2008.
OPEC currently produces almost 40% of the 85 million barrels a day consumed globally. Ambitious expansion programs in Angola and Sudan will add some 3 million b/d to OPEC’s total over the next two years.
Mr. Fyfe said while new members would significantly boost OPEC’s influence over global oil markets, it also could complicate the group’s market management. “Exercising control over individual production levels might become more difficult,” he said.
Separately, Angola has started early discussions with the International Atomic Energy Agency to build a nuclear-power program and is looking to enlist its ally, China, to accelerate the program’s development, Angola’s Vice Minister of Petroleum Anibal Silva said.
Angola is the latest in a growing list of developing countries, including Nigeria, that are pushing forward with early-stage plans to have nuclear power to supplement existing energy supplies.
Currently, there is no timeline for when Angola might start building its own power program, Mr. Silva said on the sidelines of an energy conference in Cairo, Egypt. The Vienna-based IAEA is the first formal step a country often takes when pursuing a nuclear-power program.
It would take Angola, at this stage, at least two to three decades to build a nuclear-power plant, although this could be accelerated depending on how much assistance Angola receives from China, said Hans-Holger Rogner, head of the IAEA’s economics and planning section.
(Wall Street Journal)