Expert Meeting on Economic Diversification

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Expert Meeting on Economic Diversification Mariti
m Hotel, Bonn, 16-17 May 2006 Ramiro Ramirez
Energy Studies Department OPEC Secretariat,
Vienna
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Why is OPEC here?

• Organization of developing countries with a
  commitment to bring stability to a historically
  very volatile commodity market
• Important because it seriously jeopardizes our
  economic and social structure
• Important to consumers as it affects their
  economies too
• Our countries provide a unique, non-renewable
  resource which is traded world-wide as if it were
  simply another commodity

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Why is OPEC here?

• Huge amounts of capital are required to simply
  maintain production and
• Huge amounts of capital are also required to
  expand production in order to meet demand
  forecasts
• Projects do not happen overnight (long lead
  times)
• Uncertainty regarding project investment is a
  critical issue to us
• Kyoto Protocol implementation will affect us
• Economic diversification is of great importance
  to us

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OPEC profile

• Average GDP per capita 2,500 (2005 estimate)
• But there is a very wide range (730 - gt50,000)
• 95 of the 544 million people in OPEC live in a
  country where GDP per capita is no higher than
  5000
• This compares with OECD average GDP per capita of
  close to 30,000
• Average life expectancy 61 years
• Socioeconomic development needs reflected, for
  example in the relatively low values of HDI
  (Human Development Index)

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Human Development Index, 2003

• HDI typically below 0.8
• Unemployment levels very high, often as much as
  25-30
• Particular problem with youth unemployment
• Fast rates of population growth

Slide 2
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OPEC dependency on petroleum
Share of oil exports in total exports 76
(17-98) Share of oil exports in GDP
38 (7-80) Oil reserves 897 billion
barrels (78 of world total) Crude oil
production ca. 30 mb/d (35 of world
total) Gas reserves 89 trillion standard
cubic metres (49) Gas production 464 billion
st cu. m. p.a. (17) OPEC study suggest that by
2010 of the 12 most dependent countries in terms
of net fossil fuel exports as a percentage of
GDP, 10 will be OPEC countries
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OPEC dependency on oil
Slide 2
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OPEC Real GDP, population and Real GDP per
capita, 1960100
Slide 2
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Real GDP per capita, 1960100
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Impact of Kyoto implementation

• Significant impact on OPEC MCs
• Why?
• High dependency on oil exports revenues
• High human development needs

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Impact of Kyoto implementation
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What should we be trying to achieve?

• Reduce global emissions on a level playing field
• (Article 3 of the Convention on Principles)
• Sustainable economic growth and development
  through
• Stable markets for commodities important to the
  developing world
• Encourage technology transfer (energy efficient,
  cleaner, more sustainable use of our energy
  resources)
• Encourage investment (win-win-win)
• Encourage trade (on a level playing field)

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The challengesAn OPEC perspective

• Encourage initiatives that would bring about
  economic diversification for OPEC MCs (developed
  countries commitments under Article 4.8 of the
  Convention and 2.3 of the Kyoto Protocol)
• Investment and transfer of technology
  (win-win-win)
• More access for exports into Annex B markets
• Encourage trade opportunities for oil exporting
  developing countries

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What does it all mean?

• Be realistic
• energy efficiency for all
• development and quick deployment of cleaner
  fossil fuel technologies for all
• Be fair
• elimination of distorting taxes
• Be cooperative
• lets look for win-win-win opportunities

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Possible areas for diversification
How could they contribute to stop deterioration
of our environment and yet assist them in
diversifying their economic dependence on
hydrocarbon exports? Manufacture of energy
intensive goods with CO2 sequestration? Further
development of natural gas projects? CDM gas
flaring reduction projects Depending upon natural
endowments and human resources, other sectors
such as agriculture, manufacturing, and services
including information technology could be
expanded Importance of policies to promote local
content development and technology
assimilation. Greater vertical integration of the
petroleum industry, as well as further expansion
of petrochemicals and other products
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Possible areas for diversification natural gas
Switching to natural gas use and export
contributes to diversification efforts, frees up
exports of oil Need to encourage the development
of LNG and pipeline infrastructure West African
Gas Pipeline initial talk of a CDM
project Trans-Saharan pipeline from Nigeria to
Algeria Gas sector offers considerable scope for
further exploration
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Expanded gas use and exports through reduced gas
flaringFlared gas as a percentage of gross
production
Huge success in reductions in flaring Still scope
for improvement (7 vs 2) Low population
densities prohibit expansion of domestic markets,
large distance to foreign markets, infrastructure
developments too expensive
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Carbon capture and storage
40 Gt CO2 lt2 of Emissions to 2050
920 Gt CO2 45 of Emissions to 2050
400-10,000 Gt CO2 20-500 of Emissions to 2050
Source IEA
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The Way Forward

• Bonn Agreement/Marrakech Accords give priority to
  "assisting developing country Parties which are
  highly dependent on the export and consumption of
  fossil fuels in diversifying their economies".
• Are there funding possibilities?
• GEF? (has, for example, a history of providing
  funding to investigate technical and economic
  issues associated with gas flaring)
• SCCF? (includes explicit mention of
  diversification)
• What about the Kyoto mechanisms?
• CDM? Efforts underway, how to expedite?
• Need for serious, extensive review of the options
  

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www.opec.org
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