SUMMARY OF OPEC-IEA WORKSHOP - THE OUTLOOK FOR

UNCLAS SECTION 01 OF 03 KUWAIT 002169

SIPDIS

STATE FOR FDOWDY EB/ESC/IEC/EPC AND JSTEELE EB/ESC/IEC/ENR
STATE PLEASE PASS TO DEPARTMENT OF ENERGY

E.O. 12958: N/A
TAGS: ENRG EPET KU
SUBJECT: SUMMARY OF OPEC-IEA WORKSHOP - THE OUTLOOK FOR
ENERGY IN MENA

REF: KUWAIT 00936


1. (U) Summary and Comment: The 3rd Joint OPEC-IEA Workshop,
held in Kuwait on May 15, 2005, focused on the future of oil
and gas supplies from MENA OPEC member countries and the
anticipated worldwide demand for hydrocarbon products.
Hosted by Kuwait's Ministry of Energy, the conference gave
MENA OPEC members and industry experts the chance to discuss
the future of the regional supply of oil and gas and to
address how these supplies would meet the worldwide market
demand. Select countries were also given the opportunity to
present country-specific expansion plans for their oil and
gas reserves, including the investment needed to reach
production and export goals. During the day-long workshop, a
common theme emerged from all of the MENA OPEC presentations,
one that emphasized that the majority of the world's known
oil reserves lie beneath MENA countries and that these
countries are planning to expand their oil and gas output to
meet the expected increase in future demand. End Summary and
Comment.

Opening remarks
--------------


2. (U) Sheikh Ahmad Fahad Al-Ahmad Al-Sabah, Kuwait's
Minister of Energy, opened the May 15 day-long workshop,
followed by a welcoming speech from Mr. Claude Mandil,
Executive Director of the International Energy Agency (IEA).
Both speeches focused on the increasing domestic energy needs
in Middle East and North Africa (MENA) countries due to their
quickly growing populations, and the impact this internal
consumption will have on their export capacities. Mr. Mandil
pointed out that the unique hot and arid climate of much of
the MENA region also requires large quantities of energy to
power the desalination plants and year-round air-conditioning
needed in these countries to make life bearable. Because
many of the MENA governments subsidize oil and gas products,
he continued, this region is also facing a drain on its
resources since energy conservation is not practiced in much
of the region.


3. (U) The other common theme in both speeches was the
volatility of demand and the need to balance investment in
the energy sector against the anticipated worldwide demand
for oil and gas products. (Note: The theme for the next
joint OPEC-IEA workshop will be "Demand". The IEA has
proposed hosting it in Paris next year. End note). Sheikh
Ahmad also pointed out that, "the petroleum reserves in the
(MENA) region have not received the attention they deserve
from planners, industry observers and international
agencies." He went on to say that the MENA region will, with
the appropriate investment, be able to meet the increasing
internal and external demands for oil and gas products in the
upcoming years.


Keeping up with demand
--------------


4. (U) The workshop opened with Dr. Adnan Shihab-Eldin,
Director, Research Division at the OPEC Secretariat,
discussing the current state of MENA oil reserves and
production capabilities. According to Dr. Shihab-Eldin, OPEC
has been able to keep up with the growth in demand over the
past few years and anticipates that it will be able to
continue to meet the increasing demand with appropriate
levels of investment in the upstream market. He said that
the oil prices of 2004 are not sustainable and fears a
"backlash" in response to the recent high prices that will
drive future prices lower than normal. OPEC, he said, is
currently estimating demand will reach 104 million barrel per
day by 2020, with rapid growth in demand from China.


5. (U) Dr. Fatih Birol, Chief Economist, IEA, also gave a
general overview of the expected supply and demand of oil and
gas products, focusing on the MENA region through 2030. In
his presentation, Dr. Birol said that, by 2030, the IEA
expects the highest demand will be for oil, driven by the
transportation sector, followed by demand for natural gas.
Coal will be the lowest in demand, he said, and used mostly
by Asian countries. The supply of oil and gas is expected to
increasingly come from the MENA region. Dr. Birol announced
that the IEA's World Energy Outlook for 2005 will focus on
domestic energy demand and supply trends for the MENA region,
with individual country reports prepared on Saudi Arabia,
Iraq, Iran, Kuwait, the United Arab Emirates, Qatar, Libya,
Algeria and Egypt. This report will also include oil and gas
export projections through 2030. The report is expected to
be released in November 2005.


Investment
--------------


6. (U) Mr. Ali Aissaoui of APICORP gave a short presentation
that focused on the amount of investment that will be
required over the next 20-30 years in MENA OPEC countries to
increase their production levels to meet the anticipated
higher demand levels for oil and gas. According to APICORP's
annual survey, USD210 billion will need to be invested in the
oil and gas industry in the MENA region over the next 5
years, a 17% increase over APICORP's estimate from last
year's survey. The largest portion of this investment, $35
billion, is expected to go to Saudi Arabia, with Iraq,
Algeria and Libya the next highest recipients of investment.
Dr. Aissaoui pointed out that much of the investment by these
countries will be financed with the profits from higher than
expected oil revenue, rather than debt.


The Future of Oil and Gas - By Country
--------------


7. (U) The second half of the workshop was given over to
individual presentations by some MENA countries. These
presentations focused on the specific future plans that each
country had for its oil and/or gas sector. While the country
presentations were unique, they all had the common themes of
increasing investment in their energy sector and increasing
export levels to meet anticipated higher future demand.


8. (U) ALGERIA: Mr. Mustapha Hanifi, OPEC National
Representative for Algeria, focused on the gas reserves and
future investment projects that Algeria will be working on
over the next 5 years. According to Mr. Hanifi, Algeria has
increased its estimate of gas reserves by 120% since 1980,
bringing the 2003 estimate to 4,580 billion cubic meters
(Bcm). Thirty percent of this increase is attributed to new
discoveries, while 70 percent is from reevaluations of
existing gas fields. In order to keep up with the expected
demand for its gas - mostly exported to Europe via pipeline -
Algeria anticipates investing USD24.2 billion in its gas
sector over the next 5 years. Algeria also expects to become
a new transit country for exported pipeline gas coming from
sub-Saharan Africa.


9. (U) IRAN: The presentation by Mr. Javad Yarjani, General
Manager, OPEC & Energy Affairs Department, Ministry of
Petroleum of Iran, was a sweeping overview of Iran's 4th
5-year development plan that is now being implemented.
According to Mr. Yarjani, Iran has the second largest
hydrocarbon reserves in the world, an estimated 132.46
billion barrels (Bbbls) or 11.54% of the world total, per a
March 21, 2005 estimate. New reserves are being explored in
the Caspian Sea, Central Iran and the Zagross area. He
estimates an additional 32.85 Bbbls may be found in these
areas. According to Mr. Yarjani, Iran exported 2.483 million
barrels/day (Mb/d) in 2004. By developing and revamping 7
mature oil fields and opening up three new fields in the
Bangestan region, Iran hopes to increase its exports to 2.825
Mb/d by 2009.


10. (U) Mr. Yarjani also said that Iran also has the second
largest gas reserve in the world, estimated at 27.50 trillion
cubic meters (Tcm),as of March 21, 2005. A new sweet gas
field was recently discovered, he added, although he did not
provide an estimate of its size. Mr. Yarjani said that
Iran's natural gas exports in 2003 reached 3.4 Bcm. Iran is
planning to increase exports over the next 5 years, he said,
looking to India and Pakistan as potential new markets.
China was also mentioned as a possible market for Iran's
energy supply. Mr. Yarjani added that Iran does not
currently produce liquefied nature gas (LNG),liquefied
propane gas (LPG) or ethanol, but plans to enter these
markets by 2010.


11. (U) KUWAIT: Mr. Mohammad Al-Shatti, Manager, Market
Research Department, Kuwait Petroleum Corporation, gave a
presentation on Kuwait's expanding oil sector. According to
Mr. Al-Shatti, global demand for oil is expected to increase
to 107 million b/d, or a 30% increase, by 2025. Much of the
increase in demand is expected to come from Asia, led by
China. Oil supplies from non-OPEC countries will decrease,
he said, placing a larger demand on MENA OPEC resources to
fill the gap. Kuwait, with about 10% of the world's
estimated oil reserves, is anticipating this increase in
demand by investing in its current oil reserves and tapping
into new oil fields, the largest being the much talked about
Kuwait Project, which will open up Kuwait's northern oil
fields to foreign investment (see reftel). Kuwait plans to
continue to expand its oil production capacity over the next
20 years to 4 million b/d by 2025. Mr. Al-Shatti also said
that plans have been finalized for building a fourth oil
refinery that will be used to supply fuel to the power
generation industry in Kuwait. To reach these goals, Kuwait
anticipates investing an estimated 16.2 billion Kuwait dinar
(USD56.7 billion) in its oil market over the next 20 years.


12. (U) QATAR: Dr. Salman Saif Khan Ghouri, Senior Economist,
Business Environment Section, Qatar Petroleum, gave a
presentation entitled, "Regional Natural Gas." Qatar, while
not having the large oil reserves of its neighbors, has an
abundance of natural gas and is the largest LNG producer in
the region. Dr. Ghouri anticipates a 38% annual growth in
the spot market for LNG, with the largest demand coming from
Asia. Qatar is also the leading supplier of natural gas to
the Gulf region and is currently in negotiations with Kuwait
to build a pipeline from Qatar to Kuwait. Under the Dolphin
Project, Qatar is also planning to export natural gas to the
UAE and Oman.

13. (U) LIBYA: Dr. Bashir El-Ashahab, Manager, Production and
Reservoir Engineer, NOC, Libya, focused on the potential for
increasing production and exportation of oil from Libya. Dr.
El-Ashahab said that Libya currently has excess pipeline
capacity and is looking to export other countries, oil
through Libya's pipelines. Libya currently has 9 ports (7
onshore and 2 offshore) that are used to load oil tankers.
Libyan oil production is currently at a low-to-moderate rate
due to OPEC restrictions and market need, according to Dr.
El-Ashahab. However, the Libyan government has instituted a
10-year plan that will increase its production. Much of the
increase is anticipated to come from the opening of new areas
to oil exploration, around 70% of Libya's territory. Dr.
El-Ashahab estimates that 76 billion barrels of oil may be
discovered in Libya once full exploration commences.


14. (U) UNITED ARAB EMIRATES (UAE): Mr. Mohammad
Al-Yabhouni, OPEC National Representative of UAE, Ministry of
Petroleum and Mineral Resources, discussed both oil and gas
markets. According to Mr. Al-Yabhouni, the UAE holds about
10% of the world's known oil reserves. Currently, the UAE
exports 2.45 Mb/d and anticipates increasing its exports to
3Mb/d by 2008. The UAE is currently exploring expansion
projects in Abu Dhabi's onshore and offshore oil fields. The
UAE is also working on three natural gas development plans in
Abu Dhabi. The UAE intends to use its natural gas for
internal consumption, exportation of LNG, and re-injection
into its oil fields to boost oil production. By 2007, the
UAE expects to export around 10.6 million tons of butane and
propane, up from its current exports of 6.4 million tons.
Mr. Al-Yabhouni also discussed the Dolphin Project, mentioned
by Dr. Salman Saif Khan Ghouri from Qatar. The Dolphin
Project is expected to be completed by 2006.
LEBARON