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March 1, 2011

Diversifying Power Resources and National Economy

 

By Suleiman Al-Herbish, Director General, OFID

With oil set to be the main energy resource for the foreseeable future, another aspect of the next 50 years for OPEC- and one to which people do pay too little attention- is the increase in the consumption in Member Countries. The President and CEO of Saudi Aramco, Khalid A Al-Falih, said in Boston recently that domestic energy demand was expected to rise by nearly 250 percent by 2028- from about 3.4 million barrels a day of oil equivalent in 2009 to around 8.3 mboe/d- and that this would greatly reduce the amount of oil left for exports. Look at Iraq too. If Iraq is going to start producing around four million barrels a day, then you have to imagine how much they are going to consume, because they are building the country and they are relying entirely on oil.

Next, there is the issue of the "resource curse" and the need for diversification. If you look at OPEC's very first resolution, this states: "The Members must rely on petroleum income to a large degree, in order to balance their annual national budgets." If I were to write this now, I would put the opposite. I would say that Member Countries "should NOT rely on..." In other words, they should diversify. This clause has been a constraint on our Member Countries from day one. And it is still a constraint. Allied to diversification, of course, is the need to develop human resources.

Nevertheless, in my opinion, this calls for a stronger Organization, and there is a case for the strengthening of the framework through which OPEC pursues it policies, together with the budgetary support. This is not a new issue. The First Solemn Declaration of 1975 stated: "The Sovereigns and Heads of State attach great importance to the strengthening of OPEC." More recently, the Long-Term Strategy of 2005 called for strengthening the Secretariat, and I am sure the forthcoming updated Strategy will recognize this as a continuous process.

Diversifying power resources goes hand in hand with diversifying national economies. 

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