OPEC Summit: Abdelaziz Bouteflika of Algeria

Official opening

H.E. Abdelaziz Bouteflika,
President of the People's Democratic Republic of Algeria

II Summit of Sovereigns, Heads of State an Government of OPEC Member Countries

Caracas, Venezuela. Wednesday September 27, 2000

Mr. President, In the name of God the Almighty and the Merciful, Mr. President, Your Majesty,

Excellencies, Ladies and Gentlemen:

Twenty-five years ago, The I Summit of the Organisation was held in Algiers. I need not remind you of the solid, prolonged action against the transnational companies that exploited our resources. The price of oil was adjusted to correspond to its true value and the producing countries sought to co-ordinate their actions to defend their positions. The Algiers Summit was necessary to deal with the common front presented by the developed countries that sought to ensure that all consumer countries would join forces with them. It was an upheaval, a change in the international scenario which some have described as an "oil shock." And we knew that we, the producing countries, had to co-ordinate our action. We knew that it was both urgent and necessary. The decisions taken at Algiers allowed as to a large extent to defend our interests without adversely affecting those of the consumers, to lend our support to underdeveloped countries, particularly those hard hit by this sudden readjustment in the price of fuel. Indeed, the producing countries have, in fact, contributed to world prosperity by ensuring a secure supply and relative equilibrium in the commercial transactions in the energy sector. Today, Algeria is passing on the torch to the Bolivarian Republic of Venezuela and is honoured to do so because we are sure that the destiny of the Organisation will be in good hands.

The welcome, Mr. President, that has been given to us and the quality of the preparations that were made for this meeting deserve our unqualified praise, and I would like to express my thanks to you on behalf of all the participants. The hospitality of the people of Venezuela, which is characterised by its spontaneity and generosity, is particularly touching and I would like to express our every wish for happiness, success and prosperity for this country which is so dear to us, and with which we share a common destiny in several aspects.

Mr. President, the world in which OPEC was born and took its first steps has changed radically. We are at a junction between two millenniums and the effects of the developments of the last few decades have profoundly changed international relations in so many aspects and dimensions. We are affected by the process of globalisation but the results are mainly affect the weakest countries which are most dependent on their natural resources. Apart from the fact that we are forced to make great sacrifices in the social sphere, this process makes access of our products to developed markets very difficult. Moreover, globalisation is taking place at a time when some fiscal measures which are excessive impose a great burden on the price of fuel in developed countries and new sales and environmental taxes are being levied. These are aimed at reducing our sales and hence our income and, paradoxically, this makes our countries look guilty to the other consuming countries which are the ones to blame for this. Oil, which is a non-renewable resource, considered by some as the foremost of all natural resources is, therefore, at the forefront of international economic relations. They seem to forget that the OPEC countries themselves are beset by development problems, when they are not constrained by serious economic and budgetary difficulties, which are generated by the international system. It would seem that the industrial performance and the profits and productivity and the progress made over all these decades by the developed countries could be achieved overnight by our countries. This progress is due to modern scientific and technological progress and to a large extent they have benefited from the low prices of our own raw materials. In order to develop, our countries cannot go through several stages because this would have serious social consequences.

We cannot overcome the very serious obstacles to underdevelopment without being able to maintain our purchasing power in international markets and without external capital and technological progress. After implementing the structural adjustment programmes for improving our economies, most of our countries are now engaged in policies and programmes that are destined to allow us to reach the stage of efficiency is required to achieve international competitiveness. However, this cannot be achieved overnight, because we must take into account the objective time periods necessary to overcome the handicap and to allow us to reach an acceptable level. We are very well aware that industrialised countries function at a different rhythm to us and have means and possibilities that we do not have.

The rules that govern economic financial relations impose that rhythm on us, but this rhythm is also imposed on the larger industrialised countries where current economic considerations are given more importance than matters of substance. Despite the efforts of globalisation, we have to note that the developed countries are often highly receptive to our legitimate concerns in the face of the problems of indebtedness, such as the setting of tariff barriers that penalise export of our raw materials as well as our manufactured products.

A number of factors combine to neutralise the efforts made by our countries to achieve an acceptable level of development. With respect to globalisation, the financial sphere is tending to dominate the economy at the expense of those countries which need strong and sustained growth. Similarly, fluctuations in exchange rates between the major currencies exacerbate the unpredictability and uncertainty of our economic actors. It would seem that the large industrial powers only seek to conserve their hegemonic positions and secure the globalisation of the economy to their own profit, even if to do so they take liberties in which they impose a free exchange system on the rest of the planet. Because of the impact on oil supply and demand, the energy policies implemented by the Western countries have seriously affected efforts by OPEC to stabilise prices. While the Organisation strives to control our petroleum resources, these policies, over several years, have brought about a certain number of constraints and challenges which we have to manage. The emergence of new producing countries outside OPEC, as well as results taken from technological innovations by the oil companies, for instance better yields from deposits, access to profitable oil deposits in difficult areas and improved performance in prospection, have all led OPEC to lose the share that it once had in the world market and this has happened since the beginning of the 80's. This process risks becoming more marked if we are not careful. These situations and these strategies are making OPEC a residual producer and, therefore non-essential. OPEC's production will therefore serve to offset shortages when world supply is unable to meet demand.

With respect to world petroleum production, OPEC will see its earnings fall and will not benefit from the reciprocity which will compensate the shortfalls. These fluctuations will greatly contribute to the profit of the speculators on the oil market and to the benefit of consumers and producers alike.

Finally, with respect to the regulation of demand, the new energy policies which are being advised by the International Energy Agency, among others, tend to favour the return of an overabundant supply on the market. OPEC is gradually being deprived of its traditional landmarks as far as quotations and reference prices are concerned. Arabian light crude has not grown as a reference in favour of North Sea Brent and Texas light crude, for example.

Despite the current developments and changes in exchange rates in the major western currencies, the monetary policies of those states that have soft currencies in which our transactions are quoted, contribute, to a large extent, to the degradation and weakening of our international purchasing power. To this we have to add the cutbacks in development aid as well as the inequalities of the international trade system, which practically excludes the production that would enable our countries to have a comparative advantage from being freely traded, practically forcing us to become exporters of a single product.

Mr. President, Excellencies, Ladies and Gentlemen, the problem for the future of world energy lies in satisfying the growing needs to limit available resources and ensure competitive prices, while protecting the environment. Despite the current relative abundance of petroleum, energy continues to be source of concern in the XXI century.
Indeed, the contrast in the situations of the oil market seems to fluctuate according to economic conditions, as well as the energy challenges which will have to be faced by the modern society over this next century.
It is quite true that the identified energy reserves have never been as high as they are today. However, we should bear in mind the limited duration of these proven resources. The essential question for these countries is to find out whether, in the long run, we will be able to discover new fossil fuels and what will be the production cost of these new fuels. This is a question which is quite valid, even though we know the reserves of our countries represent almost two-thirds of the world's reserves. This gives OPEC significant bargaining power since its production could have a significant bearing on world exports, even though its relative participation has shrunk over the last 15 years. But we must also remember that using those reserves calls for important capital input, while only 30% of the flow of petroleum investment world-wide is directed towards developing countries.

As a result of the significant amount of investments by our countries, our regions, because of their production cost, continue to be the main source of future production. However, the level of oil costs is and will continue to be one of the key variables in the world energy environment with all its geopolitical repercussions and changes.
Since the strength of a chain is measured by the strength of its links, it is the coherence and cohesion of all our internal energy policies that will ultimately strengthen OPEC. This sheds new light on the missions that are awaiting our Organisation and oblige us to adapt our national societies to align them with the level of operation of the open and competitive free market economies.

In order to maintain control of the costs of better competitiveness y and appeal to direct foreign investments. OPEC must face new problems which also bring with them new challenges. The time has come for the Organisation to think and keep with the spirit of the statutes to revise its methods of actions, straightening its credibility with the emergence of new and more competitive petroleum markets. We also have more pressing needs with respect to capitals in the face of the fundamental needs of our countries, that is, health, education, the repayment of public debt, just to mention a few.

Mr. President, Excellencies, Ladies and Gentleman, the contribution of our countries to the development of the world economy through the supply of petroleum needs not be demonstrated all over the last century. We have and continue to play a fundamental role to play in ensuring oil stability in the market. We have to ensure a stable supply at fair prices.

Without OPEC, the last forty years would have been characterised by even greater instability in the oil market. With erratic shocks which would be even greater than any we have ever experienced
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However, our experience on budgetary maters show us that we have paid a very high price for this instability and price volatility.

Our organisation should, therefore, try to develop the instruments for foresight and reflection in order to help and clarify our decisions. Studies of costs and appropriate operational skills allow us to ensure stable and remunerative prices.

We must give priority to methods which must be consistent with the international economic reality, so that we can take into account the increase needed as a result of the growth of the world's economy, while reconciling the legitimate interests of all of the market actors: the actors in this magic square, that is, members of the OPEC producers, non-OPEC producers, oil companies and buyers.

These types of formula will allow us to give a greater dynamism and co-operation for mutual benefit. The objective is also to allow our countries to be better prepared to confront the phenomenon of globalisation and to help them to put in place those development strategies which will help us to overcome the economic fluctuations and facilitate our integration into the world economy, in conditions which are far more compatible with the covering of our social needs and the need to ensure our national economic growth at a sustainable and lasting rate.

While we are faithful to the original status of the organisation, the time has come for us to think of new means and ways of guaranteeing its permanence and the cohesion of its members which are facing the inevitable challenges of globalisation and as well as the opportunities of this globalisation.

With respect to communication, we have to make a great effort to improve the image of organisation in international opinions, public opinions. It is also important for us to inform the consumers that the penalisation affecting them through the taxes imposed by the governments on the price of the fuel, is not the responsibility of OPEC.

The financial measures and aid programmes of OPEC for the most impoverished countries should also be better publicised. OPEC must organise itself and must do so to help its members to adapt to the moments of generalised deregulation that affect all the aspects of the energy sectors in the upstream and downstream sectors.

In the wake of the universal movements of liberalisation and generalisation of rules of the WTO, there are new modes of access to fuel which are used by the consuming countries which change their old relationship with the producing countries. In these relations with multilateral institutions, our organisation must also adapt the conditions to the new rules of the WTO, taking into account the principles of openness, transparency, competitiveness and fair prices. In Algeria, we are convinced of the need for major economic reforms to increase the capacity of production at competitive costs to attract necessary private investment and private capital which are so vital for our organisation and for our development.

The creation of transparent and attractive rules of investments would be extremely important for our organisation thanks to partnership and the respect for mutual interests. The major oil companies determine and set the options of investments between OPEC and non-OPEC countries, according to the degree of openness of upstream production of OPEC, demanding, naturally, equitable conditions which are flexible and attractive. This has to do with the internal decisions of another countries.

For its part our Organisation must contribute to the defence of the individual and selective protection of its members and to the implementation by our countries of effective measures to promote the attractiveness of the OPEC zone vis-à-vis investment and to confront the competition from non-OPEC countries.

It is to this end that we ensure more and better co- operation among our countries All of those problems linked to the protection of the environment will be of importance in the concern of the nations for our commitment for the twenty first century. The industrialised countries have not in the past shown a sufficient degree of rationality and responsibility. The present wastage of natural resources and the multiplication of pollution are unacceptable. The taxes on oil products are very high and are supposed to be to protect the environment. They have restricted our markets and limited our resources without really promoting efforts and programmes in favour of the environment.

A new sharing of the products on the markets could serve to remunerate producers fairly, without affecting the efforts in the struggle against pollution. It is quite clear that the protection of the environment is a concern that is common to all humanity, it must have its rightful place in the energy policies of the members of the international community.

We must not lose sight of the fact that fossil fuels are important in the world economy, In other words, liquid fuel and coal can only be diminished in the long term, in favour of renewed sources of cleaner sources of energy. We call attention to this point by our Organisation and should try to develop and strengthen co-operation with ecological organisations and movements in charge of saving the environment.

Mr. President, dear brothers, this second Summit will allow us to make an objective study of our Organisation and its evolution during the last 25 years, analyse the limits of our possibilities and define our new objectives so that we can honourably be integrated into the new international environment. With respect to the prospect of organisations, the following observations are very important; the objectives of our Organisation, as defined in our Statute 40 years ago, are still very current and are just as important now as they were then, just as the analysis and proposal of the first Summit of 1975 are just as current.

Furthermore, thanks to the massive production and supply of oil over the 20th century, the contribution of our countries to the prosperity of the world economy is patently clear to all. It is the same prosperity that has prepared globalisation and these are the challenges that we have to live up to today. It also affects opportunities which we also would like to benefit from, and the development of the respective countries. OPEC must rethink its methods of action, we must take into account the new international consideration and we must try to reinforce our credibility. I would like here to note a few methods that I have just given you informally for you to think about.

A quarter of a century has passed since our first Summit was held to strengthen our Organisation and improve its capacity for adapting to the profound and frequent changes in today's world. It is necessary to institutionalise our Summit, to hold them at more regular intervals. More frequent Summits would allow us to give the necessary distance to have access to the results of our decision and possibly to confront very rapidly changing events which could influence the objectives of the world organisation. In defining an effective system of consultation in order to favour a conciliation of our mutual interests and the interests of all the actors in the world oil market we have to contribute to world economic growth and at the same time ensure the stability of markets and the transparency of world supplies.

This dialogue should also contribute to preserving and strengthening the role of oil and gas and future developments of world energy demand. Nothing, indeed nothing opposes or stands in the way of a dialogue between the G8 and OPEC. The objective of this is to take into account all of the reflections, all of the thoughts that I have just been sharing with you. The will of OPEC to satisfy in good time and in sufficient quantities the oil demands of consuming countries, while at the same time ensuring price stability and guaranteeing of earnings, equitable earnings, should be based on of stable, competitive, remunerative prices with respect to other competing energy sources; secondly, on co-ordinating trading policies in consonance with production policies in order to ensure fair earnings for OPEC countries in world oil supplies.

Mr. President, our Organisation must have a greater say in decisions aimed at protecting of the environment. This is a problem of great concern to all humanity. It should become an active partner in discussions, negotiations and in the Framework Convention on Climate Change as well as the Kyoto Protocol. OPEC should have greater co-ordination of the positions of its members in international forums dealing with the universal problem of the preservation of the global environment. It would also draw attention to the extent of the losses suffered by the members in the implementation of the provisions on climate change.

Mr. President, there are other suggestions for your kind attention. These could be useful to consolidate our co-operation and strengthen our solidarity towards the least advantaged countries. We could have a world solidarity fund fed by the contributions of all the countries, I say developed and developing countries, whose exports at this time are very dynamic and which will enable us to finance programs and projects to fight poverty and provide support for growth at a time when international development resources are less accessible and less attractive. An OPEC Bank, why not, for the service of the energy policies of the member countries. could be useful to strengthen competiveness through co-operation projects and programs between the organisation's members.

And why not an OPEC university, aimed at the new economy at the service of development. It could help ensure our ongoing growth in the medium and long term within the framework of globalisation. Lastly, a research and development institute on new energy and renewable energy that would enable us to develop our technological competitiveness in these fields and prepare our member countries or to introduce and develop these energies under economic conditions in our energy matrix, as well as defending our legitimate interests. Our Organisation must continue to play its role in favour of justice and stability in international relations, in its relations with the consuming countries and we must strengthen their action towards the less developed countries, and must express our effective and fraternal solidarity by strengthen our involvement in OPEC.

Through a permanent consultation process and constant co-ordination of our policies we shall achieve these objectives and be able to contribute to the maintenance of world peace and stability Mr. President, esteemed brothers and friends, Excellencies, Ladies and Gentlemen, thank you for your kind attention.

ENDS

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