BEHIND THE STORY
Why is Opec important?
Opec is set to meet tomorrow at its headquarters in Vienna to consider curbing production following a 30 per cent slide in the price of Brent in a month. We take a look at what the organisation is, who its members are and why it came into being.
What is Opec?
Opec stands for the Organisation of Petroleum Exporting Countries, created in 1960 by the top sovereign oil producers at that time – Iran, Iraq, Kuwait, Saudi Arabia and Venezuela at a conference in Baghdad.
Why did it come into existence?
Opec evolved as an institutional bulwark to the “Seven Sisters”, the seven international oil and gas companies that dominated the global energy scene, controlling up to 85 per cent of the world’s crude reserves before the 1973 oil crisis. The companies, which later evolved or merged to become BP, Chevron, Shell and ExxonMobil, exercised significant economic and political clout in the Middle East, where they pushed for greater exploitation of resources. The decolonisation movement, as well as efforts towards the nationalisation of companies, led to the need for an organisation that would represent sovereign producers’ interests.
Who are its members?
In addition to the five founding members, Libya, the UAE, Algeria, Nigeria, Ecuador, Gabon, Angola, Equatorial Guinea and Congo are members today. Indonesia and Qatar were also part of the group but Jakarta left in 2016, while Doha announced it is leaving as of January 1.
Why did Indonesia and Qatar decide to leave?
Indonesia left Opec in 2016, when the exporters’ group agreed to slash production by 1.2 million barrels per day from the beginning of the following year. Indonesia, with its dwindling production, left as it did not wish to comply. Qatar claims it will leave Opec to focus on its plans to raise liquefied natural gas production capacity.
Are there Middle Eastern producers who are not part of Opec?
Bahrain, the first GCC country to strike oil, is not part of Opec as its reserves matured quickly and production remains low. Oman, which also has one of the region’s highest break-even points for oil production, is also not a member. However, the sultanate has been compliant with the Opec and non-Opec deal to reduce production as well as the turnaround in May to boost output.