WEC: Algeria's Khelil reopens debate on OPEC's role as world's oil 'crisis manager'

At the World Energy Congress in Sydney, Algerian Minister for Energy and Mines Chakib Khelil paved to way for the reopening of an old debate when he questioned the fairness of the world's continuing reliance on the Organization of Petroleum Exporting Countries as a "crisis manager" during times of high oil demand.

Sept. 9, 2004

3 min read

Rick Wilkinson
OGJ Correspondent

SYDNEY, Sept. 9 -- At the World Energy Congress in Sydney, Algerian Minister for Energy and Mines Chakib Khelil paved to way for the reopening of an old debate when he questioned the fairness of the world's continuing reliance on the Organization of Petroleum Exporting Countries as a "crisis manager" during times of high oil demand.

Khelil said that the world relied on OPEC's spare production capacity to fill the gap in oil supply when economic growth is strong or in times of trouble when oil supplies are short.

During periods of low demand OPEC is expected to drop down to levels of production at or below its quota. In other words the organization is treated as a producer of last resort.

Khelil said that non-OPEC producers have no qualms about producing to maximum capacity at all times. All producers, he said, should play by the same rules. They should all share the pain as well as the gain.

Khelil said it was a question he would like to see raised at next week's meetings in Vienna between OPEC, non-OPEC producers, and consumers to be held after the main OPEC gathering to determine internal strategies.

Algeria's activity
Touching on Algerian activity, Khelil told WEC delegates that the country is currently producing 1.3 million b/d of oil, but is moving toward production of 1.5 million b/d by yearend 2005.

He said Algeria has implemented a number of reforms to its energy sector since 2000 to widen its base and encourage renewed exploration and development of the country's resources. In 2001 a new mining law was introduced to promote competition and provide a transparent legal framework for operations.

In 2002 another law was introduced dealing specifically with natural gas and electric power. There have also been new rules for selection of investors in the country and 20 contracts have been written under this new regime during the last 3 years. They have involved companies from five countries.

Khelil said Algeria was underexplored and the country has set production goals of 2 million b/d of oil and 85 cu m/day of gas by the end of this decade.

Recent work has seen the construction of a second subsea gas pipeline to Spain and a second line to Sardinia and Italy. In both cases electric power cables have been laid in the same corridors to export power to Europe from gas-fired generation in Algeria.

LNG progress
The country also is stepping up its LNG marketing to target prospective buyers in the US and significant new investments are being made on the production side.

George Anderson, deputy minister of energy in Canada, told the Congress that Canada also is in the market for LNG. He said that during the late 1990s "dash for gas" to use in electric power generation there was a realization that there would be a shortfall of gas within Canada to meet future demand.

Hence the country has begun to focus on LNG and there are now 4-5 proposals under consideration to build LNG reception terminals on the country's east coast and another three on the west coast.

Anderson recognized that there is resistance to LNG terminals in Canada, particularly in British Columbia. However he believes that at least one or two of the proposals will come to fruition in the medium term.