Postwar Iraq commands center stage on the agenda of the Organization of Petroleum Exporting Countries, but the issue remains surrounded by questions.
That was made evident by comments from some of the key figures in OPEC attending the 4th Oil Summit last month in Paris.
"After this war nothing will be the same," was the opening remark of Mustapha K. Faïd, one of the organizers of the summit. "A war is taking place in Iraq, a founding member of (OPEC). "Deep regional and international consequences are expected," he said, "especially on the geopolitical and economic fronts, but also as far as the organization of the oil market is concerned."
With OPEC Pres. Abdullah bin Hamad AL-Attiyah, OPEC Sec. Gen. Álvaro Silva Calderón, and Algeria's Energy and Mines Minister Chakib Khelil attending the summit, it was scarcely surprising that Iraq was at the center of discussions and questions. The most pressing question at the summit was how OPEC would cope with the reintegration of Iraq into the group—either under its pre-1991 quota (before sanctions were imposed) of around 3 million b/d or with a higher quota when its production reaches more significant quantities.
However, summit speakers offered no answers other than to admit that OPEC has developed no scenarios to cover this eventuality.
Iraqi uncertainty
"There is a legal problem to be settled first," said Algeria's Khelil at a panel discussion on OPEC and postwar Iraq. "Who will represent Iraq in matters of production, on whether to start producing or not?
"Much water will flow beneath Bagdad's bridges before decisions are taken in this respect," he said. "Nobody knows yet how decisions will be taken in Iraq, and who will take these decisions."
Meanwhile, Al-Attiyah's view was "to wait and see." In any case, he added, if Iraq produces 3 million b/d, then is later able to produce 6 million b/d and prices fall to $15/bbl, it would not be in the interest of Iraq to disregard market essentials.
"At the end of the day," he added, "you need value, and what is the value of producing 6 million b/d?"
Nordine Aït-Laoussine, panel session chairman and head of the Narcona consulting group, reminded the summit "that OPEC has lived 10 years with the Iraqi uncertainty. And the Americans admit that a long time will be needed before Iraq can really come back strongly onto the market."
OPEC's role touted
All representatives of OPEC present at the summit pointed repeatedly to the role the organization has played in such troubled times to keep the market as stable as possible.
"If OPEC did not exist, it would have to be created," said Al-Attiyah. He pointed out that if prices had remained high even though OPEC had increased production by 2.5 million b/d from Feb. 1 onward, this had been due to "speculation and worry about supplies after a war."
"It is important," Al-Attiyah said, "for consumers to know that OPEC members will do their utmost to cooperate in meeting their needs in difficult times."
This was a theme the OPEC delegates took great pains to emphasize. Silva Calderón insisted on "the commitment of the OPEC member countries to work together to ensure the security of the oil market by maintaining stability of supply and price stability.
"I believe this commitment has played—and will continue to play—a pivotal role in the oil market, now and in the future," he said.
Supporting prices
The oil price target band identified by OPEC 3 years ago of $22-28/bbl (for an OPEC basket of crudes) as "being fair and reasonable for both consumers and producers," would be retained, Silva Calderón promised.
But he added that OPEC members should not be expected "to shoulder this burden alone." Like other OPEC representatives at the summit, Silva Calderón called for cooperation from non-OPEC producers as well.
"For its part, OPEC is committed to broadening relations with non-OPEC producers. One example of this effort is the recent inauguration of an informal breakfast meeting of ministers from OPEC and non-OPEC countries, to be held on the morning of every OPEC meeting," he said.
This high level of dialogue was confirmed by International Energy Agency Executive Director Claude Mandil, who noted that the the consumer-producer dialogue also is very much high on OPEC's agenda. Mandil told OGJ that all through the recent crises, he had called or been called by OPEC representatives several times a day for consultations.