1

Indonesian National Committee, World Energy CouncilJakarta, Indonesia

29 July 2004

OPEC: Vision, Mission and DevelopmentWorld Oil Outlook to 2025

Dr Maizar RahmanIndonesian Governor for OPEC

Acting for the Secretary General

Organization of the Petroleum Exporting Countries

2

OPEC Member Countries

Islamic Republic of Iran 1960 Iraq 1960 Kuwait 1960 Saudi Arabia 1960 Venezuela 1960 Qatar 1961 Indonesia 1962 Socialist People’s Libyan Arab Jamahiriya 1962 United Arab Emirates 1967 Algeria 1969 Nigeria 1971

3

OPEC Statute

“The Organization shall devise ways and means of ensuring the stabilisation of (oil) prices in international markets, with a view

to eliminating harmful and unnecessary fluctuations

“Due regard shall be given at all times to the interests of the producing nations and to the necessity of securing: a steady

income to the producing countries; an efficient, economic and regular supply of petroleum to consuming nations; and a fair

return on their capital to those investing in the petroleum industry”

4

OPEC’s landmark declarationsDeclaratory Statement of Petroleum Policy in Member Countries

Vienna, 1968Inalienable right, as expressed by the UN, of all countries to exercise permanent

sovereignty over their natural resources in the interests of their national development

Conference of Sovereigns and Heads of State of OPEC Member Countries(First Summit) Algiers, 1975

First “Solemn Declaration”. Led to establishment of:

OPEC Fund for International DevelopmentUS $7.0 billion committed*US $4.7 billion disbursed*

*Since 1976

Second Summit of Heads of State and Government of OPEC Member CountriesCaracas, 2000

Second “Solemn Declaration”

5

OPEC’s development1960

Five Founder MembersOPEC formed to safeguard legitimate national interests, when petroleum industry

dominated by established industrial powers

Intervening yearsNew Members

OPEC faced formidable challenges, impacting across spread of pricing spectrum and compounded by factors far removed from simple market economics

TodayVast experience of petroleum issues

Acute awareness of realities and sensitivities of performing on world stageProduction agreements make major contribution to market stability

6

Cooperation within OPEC

OPEC founded on premise of cooperation

“The principal aim of the Organization shall be the unification of petroleum policies for the Member Countries and the determination of

the best means for safeguarding the interests of Member Countries, individually and

collectively”

7

OPEC/non-OPEC cooperation

Big advances since mid-1980sSupport for OPEC’s market-stabilisation measures

Many other benefits for oil industry

8

Producer-consumer dialogueBig advances since 1990

International Energy ForumOPEC’s prominent role in development

Saudi Arabia hosts 7th ForumSecretariat in Riyadh

OPEC Member of Executive BoardJoint Oil Data Initiative

International Energy AgencyCloser working relationship between OPEC and IEA

First joint press conference in 2002Two Joint Workshops on Investment

Informal discussions calmed oil market in early 2003

9

Cooperation will better prepare the

industry to meet the challenges that

lie before it in the early 21st century

10

Today’s oil marketOPEC concerned about high oil prices

Market well-supplied with crude, buthigher-than-expected demand

geopolitical tensionsdownstream bottlenecks

speculation

OPEC seeking to restore order and stability

2-stage OPEC-10 output ceiling rise25.5 mb/d from 1 July

26.0 mb/d from 1 August

Support needed from non-OPEC and other parties

11

G-7 Economic Growth Rates (Y-o-Y % change)

-4

-2

0

2

4

6

1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05

USAJAPANGERMANYG7

World economic growth rates (%):

2001 2.42002 2.82003 3.82004 4.82005 4.3

12

Regional economic growth ratesRegional economic growth rates(percentage change from previous year)(percentage change from previous year)

Estimate

2001 2002 2003 2004 2005 2003 2004

OECD 1.0 1.7 2.2 3.5 3.0 0.0 0.0N.America 0.6 2.2 2.9 4.3 3.6 0.0 -0.1Europe 1.4 1.3 1.2 2.4 2.5 0.0 0.0Pacific 1.2 1.2 2.8 4.2 2.7 0.0 0.0

Japan 0.4 -0.3 2.7 4.0 2.0 0.0 0.2DCs 2.7 2.7 4.4 5.3 5.1 -0.1 0.1OPEC 2.7 2.4 3.2 5.4 5.2 -0.3 0.3China 7.5 8.0 9.1 8.8 7.7 0.0 0.0Russia 5.1 4.7 7.3 7.0 5.7 0.0 0.0

World 2.4 2.8 3.8 4.8 4.3 0.0 0.0Source: OPEC Secretariat

*/ As presented to the 131st (Extraordinary) Conference in June, 2004.

Forecast from Jun '04*Revisions

13

2.1

0

1

2

3

4

5

1q04 2q04 3q04 4q04 1q05 2q05 3q05 4q05

OPEC Max Min Mean (exc. OPEC)

1.7

0

1

2

3

4

5

1q04 2q04 3q04 4q04 1q05 2q05 3q05 4q05

Range of quarterly oil demand estimations Range of quarterly oil demand estimations (year(year--onon--year change, year change, mb/dmb/d) )

14

Regional oil demand growth Regional oil demand growth (year(year--onon--year change, year change, mb/dmb/d))

0.96

0.95

0.76

0.94

0.90

0.98

0.70

-1.2

-0.6

0.0

0.6

1.2

1.8

2.4

3.0

94 95 96 97 98 99 00 01 02 03 04 05-1.2

-0.6

0.0

0.6

1.2

1.8

2.4

3.0

Others Asia Total

15

Growth in global oil demand and non-OPEC supply in 2005mb/d

-1

0

1

2

3

Demand Non-OPEC Supply Demand - Non-OPECSupply

-1

0

1

2

3Range of forecasts

Mean (exc. OPEC)

OPEC

16

World oil demand & supply balance (adjusted)(mb/d)

2003 1Q04 2Q04 3Q04 4Q04 2004 04/03 2005 05/04

Demand (a) 78.8 81.0 79.0 80.6 82.9 80.9 2.1 82.6 1.7

Supply 79.3 81.7 81.9Non-OPEC (b) 48.7 49.7 49.6 49.9 50.9 50.0 1.4 51.2 1.2OPEC NGL (c) 3.7 3.9 3.9 3.8 3.8 3.9 0.2 4.0 0.1OPEC Crude oil 27.0 28.1 28.4

a-(b+c) 26.4 27.4 25.5 26.9 28.2 27.0 0.6 27.4

Balance 0.5 0.7 2.9

Seasonal stock chg

(1999-2003) -0.5 1.0 0.3 -0.6

17

OPEC production versus capacitymb/d

24

26

28

30

32

34

1998 1999 2000 2001 2002 2003 2004* 2005*

Capacity

Production

*/ 2004 production reflects the 1st half '04, while the ranges for '04 & '05 are based on required OPEC crude production for the balance from the survey of forecasts.

18

Real oil price assumption, $(2003)/b

0

10

20

30

40

50

60

70

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

19

Oil Outlook to 2025Underlying assumptions:

Prices:initial years see the OPEC basket price at $ 25/b,long-term real oil price $20/b (2003 prices).

GDP growth rates:average world economic growth of 3.6% pa over the period 2003-2025,uncertainties over OECD productivity growth and the Chinese economy.

Imply fundamental perceptions:sufficient oil resourcessustainable price level (does not generate boom-bust supply cycles)sufficient to mobilise necessary resourceswould be supportive of the prospects for robust economic growth (both for producers & consumers)

20

Average annual real GDP growth rates (PPP), % pa

Average growth in the OECD economies of 2.5% pa over the period 2003–2025For developing countries, with low capital stock bases and considerable technological catch-up potential, GDP growth rates are expected to be higher, but large uncertaintiesexistChina is a significant uncertainty but expected to remain fastest growing regionDeveloping countries expand at an average 5% pa Economies in transition have considerable scope for productivity “catch-up”Thus, economic growth in the reference case is relatively optimistic regarding the long-term health of the world economy

Reference 2003-05 2006-10 2011-15 2016-20 2021-25 2003-25OECD 2.6 2.6 2.5 2.4 2.3 2.5DCs 5.6 5.3 5.1 4.9 4.5 5.0

China 8.0 6.8 6.4 6.0 5.5 6.4FSU 5.2 3.8 3.4 3.2 3.0 3.6World 3.9 3.8 3.7 3.6 3.4 3.6

21

World oil demand outlook in the reference casemillion barrels a day

2002 2010 2020 2025 OECD 47.7 51.2 54.5 55.8 DCs 24.7 32.3 45.3 52.5 Transition economies 4.5 5.3 6.0 6.3 World 77.0 88.7 105.8 114.6

22

Growth in oil demand – 2002-25million barrels a day

0 5 10 15 20 25 30

Transition economies

OECD

DCs incl. China

23

Annual global growth in oil demand by sectormillion barrels of oil equivalent a day

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

0.8

1

Transport

HH/Comm

Industry

Elec. Gen.

1971-1980 1980-1990 1990-2000 2010-20252000-2010

24

World oil production outlook in the reference casemillion barrels a day

2002 2010 2020 2025 Non-OPEC 47.8 54.6 56.9 56.3 OPEC (incl. NGLs) 29.2 34.1 48.9 58.3 World 77.0 88.7 105.8 114.6 OPEC market share % 37.9 38.4 46.2 50.9

25

OPEC and non-OPEC oil productionmillion barrels a day

0

10

20

30

40

50

60

70

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

mb/

d

non-OPEC

OPEC

OECD

non-OECD

History Projection

26

More investment in production capacity needed:

to meet forecast rise in demandto replace exhausted reserves

to cover sudden, unexpected shortages

27

Uncertainties over future economic growth,government policies and technological progress

raise questions over scale of investment

28

Cumulative OPEC investment requirements:how much is needed to provide market stability?

0

50

100

150

200

250

300

350

400

450

2000 2005 2010 2015 2020 2025

$(20

03) b

illio

n Reference

Low economic growth

$122-173 billion

$258-382 billion

$70-95 billion

If OPEC balances the market, the uncertain volume requirements translate into huge ranges of anticipated capital outlay needs

Already by 2010 an estimated gap of $25 billion exists between the reference case and the low economic growth case

This a central concern: where lies the onus of maintaining sufficient spare capacity?

29

Estimated annual upstream investment requirements 2000-2025, $bn (2003)

0102030405060708090

100

OPEC non-OPEC World

2005-2010 2010-2015 2015-2020 2020-2025

30

Starting-point for sound investment strategyis market order and stability today,with reasonable, predictable prices

31

Collective responsibility

OPEC’s agreement are necessary for healthy market— present and future

Non-OPEC must actively support OPEC’s measures

All parties benefit from cooperation

32

World’s oil resource base sufficient to meet forecast rise in demand

in early 21st century

Increasing reliance upon OPEC oil

OPEC committed to meeting demand in orderly manner

stable markets reasonable prices steady revenues

secure supply fair returns for investors

33

34

BACK UP SLIDES

35

Commercial oil stock levels in the USA week-ending, mb

250

280

310

340

370

J F M A M J J S O N D

Avg. 99-03

2003

2004

Min-Max range: '94-'03

Crude Oil Products

560

620

680

740

800

J F M A M J J S O N D

Avg. 99-03

2003

2004

Min-Max range: '94-'03

36

Comparisons of world oil balance:supply – demand, (mb/d)

-2

-1

0

1

2

3

4

1q04 2q04 3q04 4q04-2

-1

0

1

2

3

4

Min-Max range Mean (exc. OPEC) OPEC

uncertainty range