[A-List] World oil industry: annual congress report

["Keaney Michael" <Michael.Keaney@xxxxxx>]

Oil producers ready for battle
By Mario Osava
Asia Times, September 7 2002

RIO DE JANEIRO - The looming threat of war in Iraq and the less perilous
pressures from the environmental movement did not stand in the way of
optimism on Thursday, the final day of the 17th World Petroleum Congress
in Brazil.

Demand for petroleum will grow an average of 1.9 percent annually until
2020, when this fuel will still make up 40 percent of the global energy
matrix, said Jean-Paul Vettier, chief of oil refining and marketing for
the French consortium TotalFinalElf, citing projections made by the
International Energy Agency (IEA).

World consumption would thus rise from the current 76 million barrels of
petroleum daily to nearly 120 million in 2020, calculates Ali Rodriguez,
president of Petroleos de Venezuela SA, one of the largest companies in
Latin America.

These forecasts have been strengthened by the World Summit on
Sustainable Development, which ended Wednesday in the South African city
of Johannesburg. After 10 days of negotiations, few concrete initiatives
were agreed by the 190 countries in attendance.

At the Johannesburg summit, failure was the fate of Brazil's proposal to
set a target of 10 percent renewable sources for all energy consumed
worldwide by 2010. The rejection of the Brazilian initiative marked a
clear victory for the petroleum industry and for oil-producing
countries, which actively opposed the measure, alongside the United
States. This outcome suggests that changes in energy production to
"cleaner" renewable sources will be slower than what the
environmentalists had hoped for.

Activists and some Latin American and European governments left
Johannesburg frustrated that no concrete targets were set that would
help curb the greenhouse effect caused by the accumulation in the
atmosphere of carbon dioxide and other gases emitted when fossil fuels
are burned.

Nevertheless, the demand for petroleum is increasing at a slower pace
than in the previous period, from the oil crisis of 1973 to 2000, when
annual growth reached 2.2 percent, according to the IEA.

Meanwhile, renewable energy sources - wind, solar, ocean waves - should
see a more accelerated increase, of 4 percent annually, followed by
natural gas, with 2.7 percent. The problem, say environmentalists, is
that even with rapid expansion of clean energy production, it does
little to combat climate change because they represent just 2.2 percent
of the world's energy consumption today.

The question weighing heavily on the 17th World Petroleum Congress,
which took place in Rio de Janeiro Sunday through Thursday, was the
possibility of a US-led attack against Iraq. International oil prices
have been fluctuating a great deal in recent days, depending on whether
the news indicates imminent military moves against the oil-producing
Arab nation.

On Wednesday, for example, a hardline speech by US President George W
Bush caused a two-percent price increase, with the benchmark North Sea
Brent crude reaching $27.10 per barrel in London.

Former Saudi Oil Minister Sheikh Zaki Yamani predicted worse to come if
the US invaded Iraq, with the price of oil rocketing to $100 per barrel
if Saddam is able to shut down Gulf oil fields. "In my opinion,
attacking Iraq could be like playing with fire," Yamani said. "One of
the scenarios, and I don't know if it is a valid scenario or not, is
that the man has some biological weapons and chemical weapons and this
is what the British and others are trying to assure us. If worse comes
to worse, what prevents him from firing these weapons at neighboring
countries down in the south, Kuwait and Saudi Arabia? Hundreds of
thousands of people will die and oil operations will stop for some
time."

Rilwanu Luckman, the Nigerian-born president of OPEC (Organization of
Petroleum Exporting Countries), said, however, that a conflict in Iraq
would not cause an explosion of oil prices. Iraq's crude exports would
quickly be replaced, he assured.

The OPEC members - Algeria, Indonesia, Iran, Iraq, Kuwait, Libya,
Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela -
maintain a daily output of 21.7 million barrels of crude. The 11-member
cartel could expand its output by seven million barrels daily, with a
million from his country alone, said Luckman.

The president of Saudi Aramco, Abdallah Jum'ah, meanwhile promised that
his company could step up production from seven to 10 million barrels a
day. Venezuela would add 1.5 million barrels to its current daily output
of 2.5 million, said Rafael Ramirez, energy minister for the only Latin
American member of OPEC. The intention expressed by these industry
leaders is to prevent a dramatic price rise and not take advantage of
the potential US-Iraq conflict to boost profits or use petroleum as a
political weapon. The ideal price is an average of $25 a barrel, says
the president of OPEC, whose members hold three-quarters of the world's
known petroleum reserves and 40 percent of all production.

Meanwhile, environmental and social problems have become a new concern
of the petroleum industry. A seminar on social responsibility that took
place parallel to the World Petroleum Congress drew oil executives,
environmentalists and other experts. The oil companies were doomed and
must "face their death with dignity", stated Brazilian singer-songwriter
Gilberto Gil, speaking as head of the Fundacao Onda Azul (Blue Wave), a
non-governmental organization active in defending the environment.

Petroleum "is not a clean energy source, nor is it sustainable, and the
next World Petroleum Congress must focus its debate on renewable sources
and the transition to a new energy panorama," stated Benedict
Southworth, coordinator of the climate campaign for Greenpeace
International.

"The transition has already begun," responded Irani Varella, director of
services at the Brazilian state-run oil giant, Petrobras, pointing out
that his company was no longer dedicated exclusively to crude, but had
become an energy enterprise, with investments in renewable sources such
as wind and biomass. Petrobras was willing to work with environmental
groups in the search for solutions to the contamination caused by fossil
fuels, but, said Varella, doing so "requires mutual respect".