May 1996


Rogue OPEC member Venezuela not only continues to break quota by the largest margin, but it now proposes a “new world oil map” in which it would discontinue marketing to Asia and concentrate almost exclusively on marketing to the Americas. (Yeah, let’s narrow the exporters’ markets and see what that does to prices!)  A former Shell environmental troubleshooter turned whistleblower heaps more hot coals on Royal Dutch/Shell over the operator’s purported widespread pollution in Nigeria. At long last, an agreement is reached between Iraq and the United Nations for the exchange of oil for humanitarian relief. Republican presidential candidate Bob Dole claims that this is tantamount to extending Saddam Hussein’s dictatorship. After finally getting President Clinton to sign off on it, the Department of Energy is having trouble selling sour crude from the Strategic Petroleum Reserve.

Light sweet crude oil—$21.14 per bbl
Natural gas—$2.29 per MMBTU
U.S. active rig count—757

May 2001

The International Maritime Organization approves a global timetable that would phase out all singlehull tankers by the year 2017. (That just leaves a little over 10 years for those Liberian titanics to terrorize the oil shipping lanes.) Brazil’s federal environmental agency reportedly fines Petrobras $10 million for oil spills from two platforms in the Campos Basin, one of which was the oft-publicized, 32°-listing P-36 semisubmersible (that almost became fully submersible) platform. U.S. refiners continue to bemoan the refining transportation infrastructure problems that prevent them from being able to keep up with the plethora of “boutique” fuels in various regions, as mandated by federal air quality rules. (Soon, selecting your automotive fuel will be like selecting your morning gourmet coffee. “Yes, I will have some of your 93 octane, 20% corn-fed ethanol blend with a dash of MTBE.”)

Light sweet crude oil—$28.40 per bbl
Natural gas—$4.57 per MMBTU
U.S. active rig count—1,217

The Rest of the Yarn

Continuing with our look back at the history of the world’s most powerful oil cartel, OPEC, this month we examine the fallout of a second oil price reduction, led by Exxon Corp., that transformed the entire atmosphere of the Middle East. In response to this price reduction, Iraq convened a meeting in Baghdad of the five countries that were responsible for 80% of the world’s oil exports, namely, Saudi Arabia, Iran, Iraq, Kuwait and Venezuela. The meeting was dominated by Abdullah Tariki from Saudi Arabia and Perez Alfonso from Venezuela.

The delegates to this meeting decided on the creation of the Organization of Petroleum Exporting Countries, or OPEC. Their first resolution made it clear that their chief enemy was the oil companies. It demanded that oil companies maintain their prices steady and free from all unnecessary fluctuations. The delegates agreed that members of this fledgling organization would try by all means available to restore oil prices to the levels prevailing before these unilateral reductions occurred.

The oil exporters all depended on oil to finance their countries’ development and balance their budgets. Oil price fluctuations hurt their economies, and they decided it was time to exercise whatever control they could to stabilize these prices.

At the meeting, Tariki accused the oil companies of rigging their profits to deprive the producing countries of more than $2 billion during the previous 7 years. The oil companies denied the accusation but would not reveal the true figures; the extent of their Middle East profits thus remained buried in the complex accounting practices of that day.

The growing indignation of the producing countries, coupled with the lack of full accounting disclosure by the oil companies, gave a strong impetus to the charter of OPEC. Even though its influence has been somewhat overridden by other market factors, OPEC remains a source of solidarity, be it ever so fragile at times, for the major oil exporting countries.

Readers are encouraged to submit brief, ostensibly true stories about notable personalities from our industry’s storied past. Submissions should be e-mailed to contest@houston.spe.org.

History Quiz

Name the two operators that partnered to install the world’s first offshore oil and gas production spar.

If you would like to participate in this month’s quiz, e-mail your answer to contest@houston.spe.org by noon, May 15. The winner, who will be chosen randomly from all correct answers, will receive a gift certificate to a nice restaurant.

Answer to April’s Quiz

The El Dorado field, discovered in 1921, was the first oil field discovered in Arkansas.

Answer to March’s Quiz

In the early days of refining, a “sweaterman” operated a device that extracted or “sweated” solidphase waxes out of lube oil stocks.

Congratulations to March’s winner:

Judy Guy-Caffey with Tetra Technologies Inc.