Political turmoil in the homelands of some oil exporters is threatening the group's ability to respond to a global return to demand as the tough economic conditions ease. And analysts say prices are about to become more sensitive to supply disruptions. Tamsin Carlisle reports More than half of OPEC's members are facing severe political problems, posing a threat to the group's ability to respond to resurgent oil demand as the global economy recovers.
At any other time, such a situation would already have pushed oil prices sky high. The bull run that ended in July 2008 with crude hitting US$147 a barrel was preceded by "a simultaneous collapse" in output from Iran, Iraq, Nigeria and Venezuela, Prince Turki Al Faisal, the former Saudi ambassador to Washington, has pointed out. OPEC has between 5 million and 6 million barrels per day (bpd) of spare production capacity, after cutting output last year in response to falling oil demand.
But analysts say most of the excess capacity could be absorbed as early as next year, leaving oil prices more sensitive to supply disruptions. The perennial political problems of Iran and Iraq, the respective holders of the world's second and third-largest oil reserves, are well known. Last June, Iran's domestic strife intensified after the re-election of the president, Mahmoud Ahmadinejad, amid opposition allegations of electoral fraud.
The country's worst internal crisis in 30 years has so far not spilt over into its oil sector, but that could soon change if the Iranian oil workers join the ranks of the disaffected. Iraq is still far from putting to rest its years of war and civil unrest. Its people's determination to do that will be tested to the utmost in national elections scheduled for March 7. The outcome of that contest could either put the battered Gulf oil producer more steadily on the road to recovery or plunge it into a renewed spiral of worsening violence.
At this point, few political analysts are bold enough to make a firm call, but the outcome could mean the difference between Iraq becoming an oil-producing superstar and retreating to the lower rungs of the OPEC league. Kuwait is also in the throes of a long-running constitutional crisis, which is interfering with government plans to raise oil production capacity and pursue industrial development. There are few signs of a resolution of the stand-off between the emirate's ruling family and its elected parliament that is dominated by tribal influences.
The governments of several OPEC producers outside the Gulf face acute threats to their stability. It may be these countries' fast-evolving internal situations that put the world's oil supply most imminently at risk. Algeria The country's energy sector is reeling from the sacking this month of the national oil company's top manager, while two of his deputies are in prison. Mohammed Meziane, the chief executive of Sonatrach, and Chawki Rahal, the company's head of marketing, are under "judicial control" while they are investigated over corruption allegations. Abdelhafid Feghouli, a Sonatrach vice president, has been named the interim chief executive.
Two other vice presidents, Belkacem Boumedienne and Benamar Zenasni, as well as two of Mr Meziane's children, have been jailed in the affair, the Al Watan newspaper reported. There have been allegations of breaches in Algeria's public procurement regulations, the paper said. Mr Meziane and the two jailed vice presidents are considered to be proteges of Chakib Khelil, the reformist Algerian energy minister.
Mr Meziane's replacement is an experienced and capable executive, "but Sonatrach will be hard hit by the removal of so many of its key personnel, should the suspensions hold", the Middle East Economic Survey commented. Abdelmajid Attar, a former chief executive of the company, said the investigation was a "real earthquake" that could threaten Sonatrach's reputation. The arrests follow a series of setbacks to Algeria's oil and gas sector.
Several flagship developments are delayed, including the Gassi Touil integrated production and gas liquefaction project; the Medgaz and Galsi gas pipelines, respectively to Spain and Italy; the 300,000 bpd Tiaret oil refinery project; and southern gas developments. Last month, seven of 10 licences offered in Algeria's latest oil and gas auction failed to attract bids from foreign oil firms. The December 20 auction was only slightly more successful than the previous bidding round a year earlier, when just four of 16 licences were awarded.
Executives of international oil companies operating in Algeria complain of tough contract terms and bureaucratic red tape. Other sectors of Algeria's economy have recently shown signs of strain, with workers striking at steel and lorry-making plants. In the past few months, the government has launched a rush of anti-corruption cases involving high-ranking civil servants. Mr Meziane is the most senior official to have been linked to the investigation.
Angola Cabinda, the enclave that pumps more than half of Angola's crude oil, grabbed international headlines this month when separatist rebels mounted a deadly attack on the bus carrying Togo's football team to the African Nations Cup. The decades-old dispute between the rebels and Angola's government is about oil revenues, not sport. Cabinda, a forested region to the north-west of the Congo River that is cut off from the rest of Angola by a narrow strip of the Democratic Republic of Congo, has some of Angola's poorest living standards.
"We don't have running water. Sometimes there are power cuts that last three or four days," Modesto, a rebel who would not give his full name, told Reuters. This is a familiar story in West Africa's most prolific oil-producing provinces, but under a recent agreement, the Angolan government is supposed to invest 10 per cent of the country's oil profits in Cabinda. That does not satisfy the province's main secessionist group, the Forces for the Liberation of the State of Cabinda (FLEC).
"We are at war and it's no holds barred," Rodrigues Mingas, the general secretary of one of FLEC's factions, said after the bus was ambushed. Cabinda's oil production is mostly offshore, which reduces the chances of rebels disrupting output. Nevertheless, Nigerian militants have harassed offshore oil platforms, sometimes forcing their evacuation. Nigeria Royal Dutch Shell no longer expects the biggest African OPEC producer to drive its oil production growth, the company's chief executive said this month in comments posted on Shell's website.
"Nigeria is still a heartland for Shell but we no longer depend on it for our growth aspirations," said Peter Voser. Instead, Europe's biggest oil company may divert resources to oil and gas projects in more politically stable parts of the world, such as its gas liquefaction and gas-to-liquids joint ventures in Qatar and its oil sands operations in Canada. Shell may be seeking buyers for between US$4 billion (Dh14.69bn) and $5bn of Nigerian oil-producing assets, The Wall Street Journal reported last month.
In the latest violent incident in the Niger Delta region of southern Nigeria, where secessionist rebels and criminal gangs have disrupted oil production since 2006, gunmen abducted three Britons and a Colombian after shooting dead their police escort. They have demanded 300 million naira (Dh7.2m) for the captives' release. In October, the region's main rebel group, the Movement for the Emancipation of the Niger Delta (MEND), declared an open-ended ceasefire to give peace talks with Nigerian authorities a chance. But two weeks ago, the group said it was reviewing that decision.
The absence from the country of the Nigerian president, Umaru Yar'Adua, for nearly two months has jeopardised the peace process, MEND said. Mr Yar'Adua, a Muslim in frail health, failed to transfer executive power to Nigeria's Christian vice president, Jonathan Goodluck, when he left the country for medical treatment in Saudi Arabia. A fragile political balance exists between Nigeria's Muslim north and Christian south, and there have been allegations of attempts to exploit the current situation to destabilise the country.
Chevron this month suspended 20,000 bpd of crude output because of pipeline sabotage. Mr Voser said Shell's Nigerian oil production had fallen to 120,000 bpd from 300,000 bpd before the violence started. Venezuela A drought-induced electricity shortage is threatening to cripple the economy of the biggest South American oil exporter, and the country's electricity minister has been fired for allegedly mishandling the crisis.
The populist Venezuelan president Hugo Chavez this month announced plans for nationwide rolling power cuts, but quickly exempted the capital, Caracas. Mr Chavez dismissed Angel Rodriguez, his electricity minister, just two months after appointing him, for "technical errors" in implementing the electricity rationing. Venezuela's worst drought in 50 years could shut down the nation's biggest hydroelectric plant, Guri, which usually supplies nearly three quarters of the country's power.
The president's political opponents have criticised him for allowing Venezuela to depend so heavily on a single electricity source. Last month, Mr Chavez halted production at the country's state-run aluminium and steel refineries, which normally consume 18 per cent of Guri's output. He also instructed Venezuelans to take three-minute showers, cut working hours for government offices, shopping malls and bingo halls, and rescheduled evening football matches to take place during afternoons.
Rafael Ramirez, the Venezuelan oil minister and the head of the country's national oil company, has said electricity rationing is not hurting oil production because most drilling sites and refineries generate their own power. But the country's oil sector has a history of labour disruptions related to political turmoil. "This is a ticking time bomb," said Luis Vicente Leon, the director of the polling company Datanalisis.
Mr Chavez "suspended the rationing plan in Caracas, but he can't suspend the nationwide energy crisis", he said. Further stoking popular discontent is the recent devaluation of Venezuela's currency by 50 per cent. The government has temporarily closed hundreds of shops that reacted to the move this month by raising prices by as much as 80 per cent. @Email:email@example.com