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Energy insight: Organization of the Petroleum Exporting Countries (OPEC) and the Republic of the Congo

The newest member of OPEC is The Republic of the Congo  which joined on 22 June 2018 – so why have they joined, how did they qualify for membership, and what sort of organization are they joining? 

(Note: There are two Congos: Democratic Republic of the Congo – capital Kinshasa; and Republic of the Congo – capital Brazzaville.  The new OPEC member is the latter)

Why did OPEC come about?

In the 1950’s and 60’s the international oil industry of the western world was dominated by the “Seven Sisters”.  The oil industry of the Soviet Union and other CPEs was separate.  The Severn Sisters’ companies operated in many of the oil producing countries and profited by their operations, arguably more than the countries in which the oil was found. 
 
In September 1960, representatives of the governments of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, five major oil exporting countries, met at a conference held in Baghdad, Iraq. The outcome was the formation of OPEC.  Qatar, who had attended the conference, joined with the 5 founding members in January 1961.

The petroleum resources of all those six countries were, in effect, at the time controlled by the major international oil companies.

In 1951 Iran had voted to nationalize the Anglo Iranian Oil Company (later to become BP).  Through turbulent Iranian times, the AIOC struggled to maintain its control, but eventually had to settle for 40% shares in what had become an international consortium named the National Iranian Oil Company

In 1968, OPEC adopted a “Declaratory Statement of Petroleum Policy in Member Countries” which “emphasised the inalienable right of all countries to exercise permanent sovereignty over their natural resources in the interest of their national development.”

By the end of 1969 four more countries had joined: Indonesia, Libya, UAE and Algeria. (Indonesia left in 2008, briefly rejoined in 2016, then left again).

The oil crises of the 1970’s pulled in three more members: Nigeria, Ecuador and Gabon (Ecuador left in 1992 but rejoined in 2007, Gabon left in 1996 but rejoined in 2016).

Angola joined in 2007; Equatorial Guinea in 2017 and Congo in 2018.

Qatar resigned from membership at the end of 2018 (see our Energy Insight: Qatar and OPEC)

In July 2019 there remain 14 member countries.

How does a country become a member of OPEC?

The five founding members have to concur with a new country joining, and then three quarters of all OPEC members have also to agree.

OPEC meetings
The member states meet in Vienna, where their Secretariat is based, to agree on new members, quotas and other policy issues.  This neutral location has allowed OPEC to continue to function even while individual members have been at war with one another, such as during the Iraq-Iran war of 1980-1988  and  Iraq’s invasion of Kuwait in 1990.

These meetings are generally open to journalists

What qualifies a country to be an OPEC member?

Exporters

Members have to be net exporters of Crude petroleum
 

Petroleum policies

OPEC countries agree to align their petroleum policies with those of the other member countries -
 
OPEC attempts to coordinate and unify the petroleum policies of its member countries.  Their stated aim is to “ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry”.

What else do OPEC members have in common?

Oil producers

As well as net exporters, they are of course all major oil producers.

From OPEC Annual Statistical Bulletin 2019


The Republic of the Congo has the stated aim to become sub Saharan Africa’s third-largest oil producer (after Nigeria and Angola) with a target of 350,000 b/d by the end of 2018 

Also in common:

None of the OPEC countries are members of the OECD, and therefore cannot belong to the IEA either.

How does OPEC influence oil markets?

OPEC has attempted to influence the price of crude oil on international markets by controlling its supply.  The member countries, at their meetings, agree on the amount of oil each country is allowed to produce.   These quotas are not always complied with.  In July 2018 S&P Global Platts reported that individual OPEC’s country’s compliance with their quotas will not be reported, but rather OPEC’s compliance with a collective production ceiling

 Note - There was no allocation for Iran, Libya or Venezuela
[There is a note that no production level was allocated for Libya and Nigeria]

Relationships with other oil exporting countries

By 2015 and 2016 oil prices were in freefall from the highs of 2012.  For the first time in their history, OPEC coordinated with 11 non-OPEC oil producing countries in an attempt to stabilize the global oil market. On 2 December 2016, the African Petroleum Producers' Association (APPA) (of which The Republic of the Congo is a member ) pledged it’s full support to the efforts of OPEC to reverse the fall in oil prices. (Prices did indeed start to recover after 2016, but have never reached the heights of those in 2012, and in 2019 there has been a decline.  For updated monthly OPEC prices see our Energy Insight: Prices: OPEC crude prices

[In 2016 the APPA comprised 18 Member Countries, including five OPEC Member States - Algeria, Angola, Gabon, Libya and Nigeria. The others are: Benin, Cameroon, Chad, Democratic Republic of Congo, Congo, Côte d'Ivoire, Egypt, Ghana, Equatorial Guinea, Mauritania, Niger, South Africa and Sudan. – nearly all the African oil producers]

Source: OPEC bulletin


On 10 December 2016 A Declaration of Cooperation  was issued stating that: “Azerbaijan, the Kingdom of Bahrain, Brunei Darussalam, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, the Sultanate of Oman, the Russian Federation, the Republic of Sudan, and the Republic of South Sudan committed to adjust their respective oil production, voluntarily or through managed decline, in accordance with an accelerated schedule. The combined reduction adjustment was agreed at 558,000 barrels a day for the aforementioned producers.” 

In November 2017 they all agreed to amend the declaration to continue through all of 2018
 
And In June 2018, Chad, Egypt, Uganda, South Africa, as well as the APPA  joined in.

Further reading and sources of information

What drives crude oil prices?: Supply OPEC  Energy Information Adminstration (EIA)  2018


OPEC publications

OPEC Annual Statistical bulletin detailed statistics from each OPEC country, and also statistics from the rest of the world’s oil industry

World oil outlook (annual)-  OPEC’s take on the state of the oil industry and what lies ahead

OPEC bulletin (about 8 issues a year) -  gives news of member countries and a Brief market overview

OPEC monthly oil market report  - detailed analysis of events affecting the oil markets, plus prices of OPEC crudes and other major crudes on the global oil market.

Other relevent EI Energy Insights

Energy Insight: Prices: OPEC crude prices - current (2008-2017)

Energy Insight: Historical crude oil prices 1861 - 2016


For an overview of more of OPEC's history, written in 2010, see Energy Insight: OPEC general information (DSI03)


Contact details

OPEC headquarters 
Organization of the Petroleum Exporting Countries
Helferstorferstrasse 17
A-1010
Vienna, Austria

Energy Insight details


Subjects: Oil and gas

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