OPEC Current Affairs - 2019

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Ecuador to withdraw from OPEC in January 2020

Ecuador will withdraw from 14-nation Organization of the Petroleum Exporting Countries (OPEC) from 1 January 2020. The country stated its internal fiscal problems as the reason for the withdrawal from the group.

Key Highlights

The Andean nation (i.e. a group of nations in South America connected by Andes mountain range) is attempting to increase its production of crude oil in a bid to raise more income. On multiple occasions Ecuador has not compiled with the output quota fixed by OPEC.

This measure is also in line with national government’s plan to reduce public spending and generate new income. Despite leaving OPEC, the country will however continue to support efforts to stabilize the world oil market.

Background

Ecuador joined OPEC in 1973 had earlier withdrawn from the bloc in 1992. However, it rejoined the organization in 2007. It is also not the first country to do so, as earlier other small former OPEC members have also left the organisation for fiscal reasons such as Indonesia suspended membership in 2016 as the country sought to increase oil exports.

Currently, Ecuador produces about 545,000 barrels per day (bpd) of crude, but is struggling with tight liquidity because of a wide fiscal deficit and huge foreign debt. In February 2019, Ecuador reached a $4.2 billion deal with IMF (International Monetary Fund) which allowed it to receive an immediate disbursement of $652 million and opened the door for an additional $6 billion in loans.

Qatar to leave OPEC from January 2019

Qatar has announced its withdrawal from Organization of Petroleum Exporting Countries (OPEC) from January 2019 and focus more on the production of natural gas. It makes Qatar first Gulf country to leave OPEC bloc of oil-producing countries led by Saudi Arabia.

Qatar has been member of OPEC since 1961 and its decision to pull out after more than five decades comes at turbulent time in Gulf politics. It is under boycott from its neighbouring gulf allies including Saudi Arabia for 18 months (since August 2017).

Key Facts

Qatar is the world’s largest exporter of liquified natural gas (LPG) and 17th largest producer of crude oil (around 600,000 barrels per day). It also only holds around 2% of the world’s global oil reserves. The withdrawal decision reflects Qatar’s desire to focus its efforts on plans to develop and increase its natural gas production from 77 million tonnes per year to 110 million tonnes in the coming years. Being part of OPEC its oil production was steady with limited prospects for increases. Since 2013,  amount of oil Qatar produced has steadily declined from about 728,000 barrels per day (2013) to about 607,000 barrels per day (2017), or just under 2% of OPEC’s total output.

Organization of Petroleum Exporting Countries (OPEC)

OPEC is an intergovernmental organization (or cartel) of 15 oil-exporting developing nations that coordinates and unifies the petroleum policies of its member countries. It was established in 1960 in Baghdad, Iraq by the first five members. Its headquarters are in Vienna, Austria.

Its mission is to coordinate and unify petroleum policies of its member countries and ensure stabilization of oil markets, in order to secure an efficient, economic and regular supply of petroleum to consumers,  steady income to producers and fair return on capital for those investing in petroleum industry.

OPEC member countries accounted for an estimated 43% of global oil production and 73% of the “proven” world’s oil reserves. Two-thirds of OPEC’s oil production and reserves are in its six Middle Eastern (west Asian) countries that surround the oil-rich Persian Gulf.

OPEC Members

  • Asia and Middle East: Iran, Iraq, Saudi Arabia (de facto leader of OPEC), Kuwait, United Arab Emirates and Qatar (to withdraw from January 2019)
  • Africa: Algeria, Angola, Libya, Congo Nigeria, Equatorial Guinea and Gabon
  • South/Latin America: Ecuador and Venezuela