by Bob Tippee, Editor
As the eminent force in the Organization of Exporting Countries, Saudi Arabia in recent years has managed supply at the margin of the oil market virtually alone.
The role befalls any exporter with the ability to produce more than 12 million b/d of crude oil and possessing more than 11 times the spare capacity of the next-ranking OPEC member in that category.
OPEC's function has been to create a semblance of consensus around what Saudi Arabia thought necessary. The group mostly has set quotas that masqueraded as targets but that really functioned as validations of production behavior—led by Saudi Arabia—already in place.
At its June 8 ministerial meeting in Vienna, an unusually fractious OPEC didn't calibrate quota to production as usual. Questions now abound about the group's relevance.
The better question relates to configuration.
In the 3 years since OPEC's last membership change, Saudi Arabia has added 1.04 million b/d of production capacity while capacities of most other members have fallen or increased negligibly. Capacities of important but politically knotted Iran and Venezuela, both of which in Vienna prevailed with resistance to higher quotas, have slumped and won't soon recover.
Besides Saudi Arabia, the only other member with more than a minor gain in production capacity in 3 years has been Iraq, with 250,000 b/d.
More there is under development. Analysts at the Energy Policy Research Foundation Inc., Washington, DC, say Iraq could be producing 9 million b/d by 2017 (OGJ, May 2, 2011, p. 24). Tariq Shafiq, a founder of Iraq National Oil Co. now with Petrolog Associates, thinks Iraq ultimately will produce 10-12 million b/d (OGJ, June 6, 2011, p. 46).
If so, Saudi Arabia won't always manage global oil supply solo.
For now, however, the kingdom seems comfortable enough. The day after the Vienna fiasco, Saudi newspapers reported decisions by Saudi oil officials to raise production to 10 million b/d, reminding the market of what, concerning OPEC, really matters.
More Oil & Gas Journal Current Issue Articles
More Oil & Gas Journal Archives Issue Articles
View Oil and Gas Articles on PennEnergy.com
