ALL ABOUT OPEC



Organization of the Petroleum Exporting Countries (OPEC)a permanent, international organization headquartered in Vienna, Austria, was established in Baghdad, Iraq on 10–14 September 1960.[2] Its mandate is to "coordinate and unify the petroleum policies" of its members and 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 In 2014 OPEC comprised twelve members: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.[2] According to the United States Energy Information Administration (EIA), OPEC crude oil production is an important factor affecting global oil prices. OPEC sets production targets for its member nations and generally, when OPEC production targets are reduced, oil prices increase.[7] Projections of changes in Saudi production result in changes in the price of benchmark crude oils.[7]
Brief History of Organization
The Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental Organization, created at the Baghdad Conference on September 10–14, 1960. OPEC had its headquarters in Geneva, Switzerland, in the first five years of its existence. This was moved to Vienna, Austria, on September 1, 1965. In accordance with its Statute, the mission of the Organization of the Petroleum Exporting Countries (OPEC) is to coordinate and unify the petroleum policies of its Member Countries and 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.

Member States (most powerful in bold)
Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, Qatar, Indonesia (suspended its membership from January 2009), Libya, United Arab Emirates, Algeria, Nigeria, Ecuador (suspended its membership from December 1992-October 2007), Angola, and Gabon.


Objectives of Organization
OPEC was created to co-ordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.





Structure of Organization
The OPEC Secretariat is the executive organ of OPEC. Located in Vienna, it also functions as the Headquarters of the Organization. The Secretary General is the legally authorized representative of the Organization and Chief Executive of the Secretariat. In this capacity, he administers the affairs of the Organization in accordance with the directions of the Board of Governors. The Office of the Secretary General is an executive office that provides full support to the Secretary General, enabling him to fulfill his duties. The Legal Office has the responsibility of providing legal advice to the Secretary General and supervising the Secretariat’s legal and contractual affairs. The Research Division is responsible for a continuous program of research, and the Support Services Division has the responsibility of providing the required infrastructure and services to the entire Secretariat in support of its programs.


Advantages and Disadvantages of Membership in Organization
One of the main advantages of OPEC is that they control the price of oil. They do this by talking to the Middle East and other countries where most of the oil is imported from and have helped influence the oil prices since 1973. However, this is currently also a disadvantage as OPEC’s short term plans has caused a continuous stream of fluctuations in oil rates and often dramatic rises in these prices.


How the Organization Challenges and Preserves Local Diversity
OPEC challenges local diversity by having members in all different areas of the world. Currently, six are in the Middle East, four are in Africa, and two are in South America. OPEC does not have any one identity of people within its membership.

According to its statute, the principal goal is the determination of the best means for safeguarding their interests, individually and collectively; devising ways and means of ensuring the stabilization of prices in international oil markets with a view to eliminating harmful and unnecessary fluctuations; giving due regard at all times to the interests of the producing nations and to the necessity of securing a steady income to the producing countries; an efficient, economic and regular supply of petroleum to consuming nations, and a fair return on their capital to those investing in the petroleum industry

Decision making
The OPEC Conference is the supreme authority of the Organization, and consists of delegations normally headed by the Ministers of Oil, Mines and Energy of member Countries. The Conference usually meets twice a year (in March and September) and in extraordinary sessions whenever required. It operates on the principle of unanimity, and one member, one vote. [10]

 MAJOR ORGANS OF OPEC
By virtue of Section 9 of OPEC STATUTE there are 3 major organs of OPEC namely;
  1. The conference
  2. The board of Governors
  3. The Secretariat
                     
                                    THE CONFERENCE
The conference is the supreme authority of the Organisation.[1][4] It consists of delegations representing the member countries.
 A delegation may consists of one or more delegates, as well as advisers and observers. When a delegation consists of more than one person the appointing country shall nominate one person to head the delegation[2][5].
Each member country should be represented at all conferences; however, a quorum of three-quarters (31/4) of Member Countries shall be necessary for holding a Conference[3][6].
Each Full Member Country shall have one vote and all decisions of the Conference, other than on procedural matters, shall require the unanimous agreement of all Full Members. The Conference Resolutions shall become effective after 30 days from the conclusion of the Meeting, or after such period as the Conference may decide unless, within the said period, the Secretariat receives notification from Member Countries to the contrary. In the case of a Full Member being absent from the Meeting of the Conference, the Resolutions of the Conference shall become effective unless the Secretariat receives a notification to the contrary from the said Member, at least ten days before the date fixed for publication of the Resolutions[4][7].
 A non-Member country may be invited to attend a Conference as Observer, if the Conference so decides.
                  
MEETINGS OF THE CONFERENCE[5][8]
The Conference shall hold two Ordinary Meetings a year. However, an Extraordinary Meeting of the Conference may be convened at the request of a Member Country by the Secretary General, after consultation with the President and approval by a simple majority of the Member Countries. In the absence of unanimity among Member Countries approving the convening of such a Meeting, as to the date and venue of the Meeting, they shall be fixed by the Secretary General in consultation with the President.
 VENUE OF THE CONFERENCE MEETING
The Conference meeting shall normally be held at the Headquarters of the Organization, but it may meet in any of the Member Countries, or elsewhere as may be advisable.
 PRESIDENT OR ALTERNATE PRESIDENT OF THE CONFERENCE
 The Conference shall elect a President and an Alternate President at its first Preliminary Meeting. The Alternate President shall exercise the responsibilities of the President during his absence, or when he is unable to carry out his responsibilities[6][11].
 The President shall hold office for the duration of the Meeting of the Conference, and shall retain the title until the next Meeting[7][12]. The Secretary General shall be the Secretary of the Conference[8][13].
                
 FUNCTIONS OF THE CONFERENCE
The Conference shall:
1.      Formulate the general policy of the Organization and determine the appropriate ways and means of its implementation.
2.      Decide upon any application for membership of the Organization.
3.      Confirm the appointment of Members of the Board of Governors.
4.      Direct the Board of Governors to submit reports or make recommendations on any matters of interest to the Organization.
5.      Consider, or decide upon, the reports and recommendations submitted by the Board of Governors on the affairs of the Organization.
6.      Consider and decide upon the Budget of the Organization, as submitted by the Board of Governors.
7.      Consider and decide upon the Statement of Accounts and the Auditor’s Report, as submitted by the Board of Governors.
8.      Call a Consultative Meeting for such Member Countries, for such purposes, and in such places, as the Conference deems fit.
9.      Approve any amendments to this Statute;
10.  Appoint the Chairman of the Board of Governors and an Alternate Chairman.
11.  Appoint the Secretary General; and
12.  Appoint the Auditor of the Organization for a  duration of one year.
All matters that are not expressly assigned to other organs of the Organization shall fall within the competence of the Conference[9][15].


II.               THE BOARD OF GOVERNORS[10][16]
The Board of Governors shall be composed of Governors nominated by the Member Countries and confirmed by the Conference[11][17].
B. Each Member of the Organization should be represented at all Meetings of the Board of Governors, however, a quorum of two thirds (2/3) shall be necessary for the holding of a Meeting[12][18].
When, for any reason, a Governor is prevented from attending a Meeting of the Board of Governors, a substitute ad hoc Governor shall be nominated by the corresponding Member Country. Such nomination shall not require confirmation by the Conference. At the Meetings which he attends, the ad hoc Governor shall have the same status as the other Governors, except as regards qualifications for Chairmanship of the Board of Governors[13][19].
Each Governor shall have one vote. A simple majority vote of attending Governors shall be required for decisions of the Board of Governors[14][20]. The term of office of each Governor shall be two years[15][21].
 MEETINGS OF THE BOARD OF GOVERNORS:
The Board of Governors shall meet no less than twice each year, at suitable intervals to be determined by the Chairman of the Board, after consultation with the Secretary General[16][23].
 An Extraordinary Meeting of the Board of Governors may be convened at the request of the Chairman of the Board, the Secretary General, or two-thirds of the Governors[17][24].
The Meetings of the Board of Governors shall normally be held at the Headquarters of the Organization, but they may also be held in any of the Member Countries, or elsewhere as may be advisable
 FUNCTIONS OF THE BOARD OF GOVERNORS
The Board of Governors shall:
1.      Direct the management of the affairs of the Organization and the implementation of the decisions of the Conference.
2.      Consider and decide upon any reports submitted by the Secretary General.
3.      Submit reports and make recommendations to the Conference on the affairs of the Organization.
4.      Draw up the Budget of the Organization for each calendar year and submit it to the Conference for approval.
5.      Nominate the Auditor of the Organization for duration of one year.
6.      Consider the Statement of Accounts and the Auditor’s Report and submit them to the Conference for approval.
7.      Approve the appointment of Directors of Divisions and Heads of Departments, upon nomination by Member Countries, due consideration being given to the recommendations of the Secretary General.
8.      Convene an Extraordinary Meeting of the Conference; and
9.      Prepare the Agenda for the Conference.

 CHAIRMAN AND ALTERNATE CHAIRMAN OF THE BOARD OF GOVERNORS
The Chairman of the Board of Governors and the Alternate Chairman, who shall assume all the responsibilities of the Chairman whenever the Chairman is absent or unable to exercise his responsibilities, shall be appointed by the Conference from among the Governors for a period of one year, in accordance with the principle of alphabetical rotation. The date of membership in the Organization, however, shall take precedence over the principle of alphabetical rotation.
 FUNCTIONS OF THE CHAIRMAN OF THE BOARD OF GOVERNORS
The Chairman of the Board of Governors shall:
1.      Preside over the Meetings of the Board of Governors.
2.      Attend the Headquarters of the Organization in preparation for each Meeting of the Board of Governors; and
3.      Represent the Board of Governors at Conferences and Consultative Meetings.
Should a majority of two-thirds of Governors decide that the continuance of Membership of any Governor is detrimental to the interests of the Organization, the Chairman of the Board of Governors shall immediately communicate this decision to the Member Country affected, who in turn shall nominate a substitute for the said Governor before the next Meeting of the Board of Governors. The nomination of such substitute as a Governor shall be subject to confirmation by the following Conference[18][28].
Should a Governor, for any reason, be precluded from continuing in the performance of his functions on the Board of Governors, the corresponding Member Country shall nominate a replacement. The nominated Governor shall assume his functions upon nomination subject to confirmation by the following Conference.






    IV.            THE SECRETARIAT
The Secretariat shall carry out the executive functions of the Organization in accordance with the provisions of this Statute under the direction of the Board of Governors.
The Secretariat of the Organization shall consist of the Secretary General and such Staff as may be required. It shall function at the Headquarters of the Organization[19][29].
 The Secretary General shall be the legally-authorised representative of the Organization and the chief officer of the Secretariat, and, in that capacity, shall have the authority to direct the affairs of the Organization in accordance with directions of the Board of Governors[20][30].
         A    PPOINTMENT OF THE SECRETARY GENERAL
 The Conference shall appoint the Secretary General for a period of three years, which term of office may be renewed once for the same period of time. This appointment shall take place upon nomination by Member Countries and after a comparative study of the nominees’ qualifications.
The minimum personal requirements for the position of the Secretary
General shall be as follows:
a)      35 years of age
b)      a degree from a recognised university in Law, Economics, Science, Engineering or Business Administration;
c)      15 years’ experience of which at least 10 years should have been spent in positions directly related to the oil industry, and five years in highly responsible executive or managerial positions. Experience in Government-Company relations and in the international aspects of the oil industry is desirable. Should, in any case, a unanimous decision not be obtained, the Secretary General, in that case, shall be appointed on a rotational basis for a term of two years without prejudice to the required qualifications.

The Secretary General shall be a national of one of the Member Countries of the Organization[21][32].  The Secretary General shall reside at the Headquarters of the Organization[22][33].
 The Secretary General shall be responsible to the Board of Governors for all activities of the Secretariat. The functions of the different departments shall be carried out on his behalf and under his authority and direction.
The Secretary General shall attend all Meetings of the Board of Governors. Should the Secretary General be unable to attend any Meeting of the Board of Governors, the Officer in Charge of the Secretariat shall attend such Meeting, representing the Secretary General.
FUNCTIONS OF THE SECRETARY GENERAL
The Secretary General shall:
1.      Organize and administer the work of the Organization.
2.      Ensure that the functions and duties assigned to the different departments of the Secretariat are carried out.
3.      prepare reports for submission to each Meeting of the Board of Governors concerning matters which call for consideration and decision.
4.      Inform the Chairman and other Members of the Board of Governors of all activities of the Secretariat, of all studies undertaken and of the progress of the implementation of the Resolutions of the Conference; and
5.      Ensure the due performance of the duties which may be assigned to the Secretariat by the Conference or the Board of Governors.
The staff of the Secretariat are international employees with an exclusively international character. In the performance of their duties, they shall neither seek nor accept instructions from any government, or from any other authority outside the Organization. They shall refrain from any action which might reflect on their position as international employees and they shall undertake to carry out their duties with the sole object of bearing the interests of the Organization in mind[23][35].
The Secretary General shall be assisted in the discharge of his duties by a Division of Research, an Administration and Human Resources Department, a Public Relations and Information Department, his own Office, and any division or department the Conference may see fit to create.
The first OPEC Secretary-General was appointed in 1961 and since then till now two of them have been Nigerians i.e  Chief  Feyide and Dr. Lukman. The full list is as follows:
NAME                                                                                                             COUNTRY
Dr. Fuad Rouhani  (1961-1964)                                                                        Iran
Abdul Rahman Al- Bazzazi (1964-1965)                                                         Iraq
Ashraf Lutf  (1965-1966)                                                                                  Kuwait
Mohammad Saleh Joukhdar(1967)                                                                   Saudi Arabia
Francisco R. Parra (1968)                                                                                 Venezuela
Dr . Elrich Sanger (1969)                                                                                 Indonesia
Omar El Badri (1970)                                                                                       SP Libyan AJ
Dr . Nadim Pachchi (1971-1972)                                                                     UAE
Dr.Abderrahma Khene(1973-1974)                                                                 Algeria
Chief M. O. Feyide(1975)                                                                                Nigeria
Ali M. Jaidah(1977-1978)                                                                                Qatar
Rene G. Oritz(1979-1981)                                                                                Ecuador
Dr. Marc Saturnin Nan Nguema(1981-1983)                                                  Gabon
Dr. Fadhil J. Al-Chalabi(1983-1988)                                                               Iraq
Dr. Subroto (`1988-1994)                                                                                Indonesia
Abdalla Salem El Badri(1994)                                                                         SP Libyan AJ
Dr. Rilwanu Lukman (1995-2000)                                                                   Nigeria
The current Secretary General of OPEC is Abdalla Salem EL- Badri            SP Libyan

OPEC’S ACHIEVEMENT OF HER AIMS AND OBJECTIVE: A CRITICAL ANALYSIS
In line with the aims and objectives of OPEC stated above, the organisation set out means and moved towards the realisation of this objectives. This chapter analysis the various achievements of OPEC and the means it adopted towards the achievements of its objectives.
One of the major aims of the Organisation was to devise ways and means of ensuring the stabilization of oil prices in the international oil markets and to eliminate harmful and unnecessary fluctuations. The instability of the price of crude oil has made the stabilization of crude oil a very important objective of OPEC. Towards achieving this objective, the OPEC Economic Commission was established in 1964. One of the functions of the commission is to examine petroleum prices on a continuous basis. According to Dr Subroto[24][36] :
Stability can only prevail, of course if it reflects long term market fundamentals. Far less apparent however, is the fact that stability must also be along equitable line … As our statute puts it, there must be ‘‘a fair return on their capital to those investing in the petroleum industry’’.
Since its formation, it took OPEC many years of painstaking efforts, protracted and difficult negotiation, first to win concessions from the multinational oil companies that controlled the oil industry in OPEC countries. In 1973, it wrestled power from the international oil companies thereby assumed full control over its oil resources, thus establishing once and for all member countries sovereign right to manage their oil resources in the interest of the producers and not purely those of the consumers. An example of this can be seen in Nigeria where between 1971 and 1973 Nigeria acquired a 35% participation interest in the concessions of the major international oil companies in Nigeria such as Elf, Shell-BP, Mobil and Gulf[25][37] .
OPEC unilaterally resolved to quadruple the posted price of crude oil in the market without negotiating with the international oil companies. The increase in the price of crude oil gave rise to the uproar in the industrialised countries and the various accusations against OPEC of seeking to disrupt the world economy[26][38]. Determination, vision and solidarity were of vital importance to OPEC in those early formative years and member countries displayed them faithfully and consistently.
OPEC’s first decade was characterised by a protracted campaign to gain recognition and credibility. It was only through laborious negotiations and self-restraint that OPEC was able to get the oil ‘‘Majors’’ to accept the principle of consultation with the host governments on matters affecting those countries’s oil. At the same time, OPEC was also able to insist on the principle that taxes and royalties should be calculated on the basis of posted, rather than realised prices in every OPEC country.
Furthermore, OPEC was able to introduce a formidable Declaratory statement of Petroleum policy in member counties. Particularly in June 1,1968, a Declaratory Statement of Petroleum Policy in Member Countries was adopted by the OPEC Conference which:
Referred to the inalienable right, as expressed by the United Nations, of all countries to exercise permanent sovereignty over their natural resources in the interests of their national development.
Accordingly, it claimed that the exploitation of OPEC’s indigenous, exhaustible resources should be aimed at securing the greatest possible benefit for its Member Countries. This could best be achieved if these countries themselves directly undertook the exploitation of these resources. It also added that operators should be required to conduct their operations in accordance with the best conservation practices, bearing in mind the long-term interests of the country.
This historic statement laid the foundation for the leadership role which the producing countries grouped within OPEC were to play in the direct exploitation of their resources.
In addition, OPEC through its associated agencies has contributed immensely to global economy. The organization set up agencies such as; OPEC Fund for International Development; OPEC Project Loan ; OPEC Programme Loan; OPEC Special Fund and OPEC Financial Assistance Project in order to aid its developmental objectives.
The First Solemn Declaration, adopted by the First Conference of Sovereigns and Heads of State of OPEC Member Countries in March 1975, in Algiers, added new policy guidelines in the light of the changing pattern of the relationship between producer and consumer nations. It indicated that OPEC should:
 seek, in consultation and co-operation with the other countries of the world, the establishment of a new international economic order based on justice, mutual understanding and a genuine concern for the well-being of all peoples
A direct consequence of this was the establishment of the OPEC Fund for International Development, which since its formation in 1976, has made substantial financial commitments to other developing countries.
The OPEC Fund for International Development (OFID)
The fundamental objective of OFID is to promote solidarity through financial co-orporation between OPEC members and other developing countries. The Fund’s headquarters are also located in Vienna. It is however a separate institution from OPEC with its own management and organisational structure. The resources of the fund consists of voluntary contributions by the member countries and accumulated income derived from the Funds Investment and loans. Aid from Fund is unique in that it is ‘‘aid without strings’. In other words, unlike aid from practically every other aid institution in the world, it is not tied to procurement from the donors.
All developing countries  with the exception of OPEC member countries are eligible for loans from the Fund. However, priority is given to the least developed countries. Over the years the Funds has given loans to 105 countries of which 48 are in Africa, 31 in Latin America and the Caribbean and 3 in Europe.
The Fund has so far implemented twelve lending programmes. The thirtieth lending programme is for a 2year period from January 1, 1998 to December 1999[27][39]. By the end of December 1998 US $ 3.982.7 million had been committed in the form of 778 loans. Also 478 grants, totalling US $ 240.9 million had been made. This later amount includes the  contributions of 35 least- developed countries to the common Fund for commodities (CFC); a voluntary contribution to the Second Account of the CFC and a special contribution of US $20 million to the International Fund for Agricultural commitments as at the end of December 1998, were US $5.195.5 million.

From the outset, OFID has directed its resources to where they have the greatest impact on the lives of the poor, such as primary healthcare, basic education, water supply and sanitation, transport and agriculture, and rural development, while allowing the key decisions to be made by the beneficiary governments and the people themselves. It constantly strives to work ever more closely with its recipient countries, fellow development agencies and other partners, to ensure that its assistance continues to be well targeted, effective and timely.
Its methods of funding include: public sector loans for development projects and programmes; balance of payments support and debt relief under the Heavily Indebted Poor Countries Initiative; trade financing; support to private enterprises; grants for technical assistance, food aid, research and humanitarian relief work; and contributing to the resources of other development organizations, such as the International Monetary Fund for its Poverty Reduction Strategy Trust Fund, the International Fund for Agricultural Development and the Common Fund for Commodities, whose activities benefit developing countries. By the end of January 2010, over 120 countries from the developing world — Africa, Asia, Latin America, the Caribbean, the Middle East and Europe — had benefited from OFID’s assistance, with the level of cumulative development assistance extended by OFID standing at $12.2billion[28][40]. Moreover, OFID is just one of many multilateral and bilateral institutions that are supported by OPEC Member Countries as a means of providing aid to developing countries. It is all part of OPEC’s continuing commitment to help meet the pressing needs of other developing countries. In fact, relative to their per capita income, OPEC Member Countries have done a lot more to alleviate poverty in poorer developing countries than the richer nations of the world. For example, Saudi Arabia has consistently earmarked a near four per cent of its annual budget for the purpose of aid, which it makes through bilateral and multilateral channels. OPEC, OFID and their Member Countries continue to advocate a coordinated, balanced and holistic approach sustainable development through its three mutually supportive pillars, as defined by the United Nations: economic development, social progress and environmental protection[29][41]

     OPEC AND THE ENVIRONMENT
The oil industry, through human ingenuity and technological development, has a long history of successfully improving the environmental credentials of oil, in both production and use. And OPEC Member Countries both individually and collectively have themselves been at the forefront of many important environmental-focused developments. This includes investing billions of dollars over the past decades in flared-gas recovery projects. This represents a significant contribution to the reduction by more than half since the early 1970s of the amount of gas that has been flared per barrel of oil produced. OPEC has also held and participated in a number of workshops on this issue, and is an active participant in the Global Gas Flaring Reduction Partnership sponsored by the World Bank.
In the Gulf region, where many OPEC Member Countries are located, the very busy sea lanes are highly vulnerable to pollution, with the unregulated dumping of waste materials a common problem. However, the countries in the region have been exceptionally proactive in rising to these challenges, in line with international and regional conventions and agreements.
The Organization also recognizes the realities of global climate change and supports comprehensive, fair and realistic efforts to reduce the environmental impacts of global energy use. OPEC and its Member Countries have been active participants in the longstanding UN-sponsored negotiations on climate change, since they began formally in 1992.
OPEC has also participated in countless other conferences and seminars on this subject, as well as organizing some of its own, and undertaken extensive studies on  climate change and the energy sector. The issue is an important feature of the energy dialogues OPEC established with the European Union (EU), China and Russia, as well as in its involvement with other groups in the industry, such as through the International Energy Agency’s Greenhouse Gas Research and Development Programme. The Third OPEC Summit, held in Riyadh, Saudi Arabia, in November 2007, had as one of its three core themes: energy and environment. It highlighted the importance of promoting collaboration in research and development in the petroleum field among OPEC science and technology centres, as well as collaboration with other international centres and the industry. This was underscored by several Member Countries announcing at the Summit the creation of a special $750 million fund to invest in clean technology ventures.
In the years ahead, with the world requiring its energy to be even cleaner, safer and environmentally benign, and with fossil fuels continuing to be the leading energy source, OPEC recognizes the importance of continuing to promote the development and deployment of cleaner fossil fuel technologies. In this regard, OPEC supports the existing technology of carbon capture and storage (CCS), which has the potential to contribute up to 40 per cent of emission reductions by the middle of the century. One CCS project in an OPEC Member Country already exists: In Salah in Algeria. Industrialized countries, however, having the financial and technological capabilities, should take the lead in developing and deploying these types of technology. In looking at the environmental conundrum, it should be remembered that, for developing countries, poverty alleviation, economic development and social progress are the overriding priorities, and it is clear that people in such nations will need more energy, not less, to meet their needs. Climate change is, in fact, providing these countries with yet more challenges and additional vulnerabilities, although they have contributed little to the current situation. It means that the UN-defined principle of “common, but differentiated responsibilities and respective capabilities” and of “equity” needs to be to the fore[30][42].        

                           PROBLEMS OF OPEC
Although OPEC has managed to stay together as one for over 50 years now it is still faced with some problems which call for examination in view of the moves by some of its members to pull out of the organisation. There is the constant disagreements among member countries as per the fixing of prices and production quotas. In addition the emergence of the north sea oil producers (non- OPEC) of the United Kingdom and Norway which have increased petroleum supply in the international market and which forces the oil price to fall. To date, OPEC has still not been able to stabilize the prices of crude oil. Some of the reasons for the unstable crude oil prices include;
1.      Over Production: Over production of crude oil has been one of the major problems of OPEC which negatively affects the price of crude oil. OPEC member countries have production ceilings given by the organisation. This is officially called quotas. For example as at 1998, the allocated production quota stands thus; Qatar 0.430 million barrels per day; Algeria 0.909, Iraq 0.261; Iran 3.78; Nigeria 1.958; Saudi Arabia 8. 633; Venezuela 2.425; UAE 2.406; Libya 1.502; Indonesia 1.396 and Kuwait 2.191[31][43] by. The problem is that the official ceiling is not strictly adhered to by member countries of OPEC. These OPEC quota cheats flood the oil market with crude oil, thus making supply to be more than demand. For example, OPEC pumped 28.7 million barrels per day into the market in February 1998. This is 1.2 million above its official ceiling[32][44]. Also in April 1998, the market was over supplied by 1.5 to 2.0 million barrels and to 2.7 million barrels per day[33][45] production. To arrest this glut in the oil market the OPEC Market Monitoring Committee was set up. It is currently made up of oil Ministers from Iran, Nigeria and Kuwait. However, this committee has not been able to stop this greed of over production  among OPEC States. According to Dr. Subroto[34][46] ‘‘ the quota issue has remained a stumbling block to our organisation’s cohesiveness and this has undermined our ability to stabilize the oil market…[35][47]
1.      Non OPEC oil producers:  The existence of another parallel 10-nation organization called OAPEC(Organization of Arab Petroleum Exporting Countries)[36][48].  Formed by Kuwait, Libya and Saudi Arabia on January 9, 1968, the Organisation has seven more members: Algeria (1970), Bahrain (1970), Qatar (1970), United Arab Emirates (1970), Iraq (1972), Syria (1972), and Egypt (1973).  Tunisia joined in 1982 but pulled out in 1986.  So eight of the eleven members of OPEC are also members of OAPEC, and one wonders whether the agenda of the Vienna/Austria-based OPEC is actually set or not in the Safat/Kuwait-based OAPEC. This OAPEC  has consistently been a source of worry to OPEC states. They always flood the market, oblivious of OPEC policies. Even some countries such as United Kingdom have publicly declared their opposition to any form of co-orperation among producers in order to stabilize the oil market[37][49] . At the moment, non –OPEC producers produce about 2 million barrels per day of crude oil, and chances are that these figures would increase steadily[38][50].
2.      Decline in demand for oil:  For some years now there has been a steady decline in the demand for crude oil in the international oil market. In some situations, it is indication that structural changes in the economies of oil importing countries have led to  decline in the use of crude oil. Also, the price of crude oil led consuming countries to seek alternative sources of energy supply or indeed to reduce energy demand itself by embarking upon series of well publicised conservation measures. The net outcome was excess supply and tumbling oil prices[39][51]
3.      Instability of dollar: Crude oil in the international market is tied to the value of dollar. Whenever the value of dollar increases it affects positively the value of crude oil. While continuous erosion of purchasing power of the dollar causes severe market down turn.
4.      Internal problems of OPEC member nations : Most member countries have unstable political and economic environment. This militates against fulfilling the concerted policies reached by OPEC. Their various economies are suffering terribly. For example Nigeria’s oil sector is in disarray. Some of its refineries are shut down and there is persistent fuel scarcity. This makes the government to be tempted to flout OPEC’s policies to remedy its economy. Most member states are also unstable politically.
5.      Multilateral Agreement on Investment: It has been said that this is one of the most contemporary threats to the success of OPEC. The multilateral Agreement on Investment aims to curb the power of governments to affect the operations of multinationals. If the accord which has been secretly negotiated since 1995 is finalised, it will have the most profound economic impact on the world of any international agreement this century. The accord undermines the right of national and state governments to regulate the activities of foreign investors and places the authority and freedom of capital above those of the states. The most devastating effect of the above agreement will be on the third world nations. One of the purposes of forming OPEC was to wrestle power and control from the multinational companies[40][52]  then the Multinational Agreement on Investment threatens to revert the situation to the pre-OPEC days when multinationals in the oil sector had unopposed and unfettered hold on the oil business.
6.      Persistent low price: The present income of OPEC member countries is simply not supporting the growth and development rate of their economies as envisaged. In addition to this is the burden of inflation. The major concern is how can the necessary finance be raised to meet the needs of investment in exploration, production capacities and downstream facilities.
7.      Development of alternative energy sources: for example coal and hydro-electricity by the developed world which could drastically de-emphasise the present predominant utility of petroleum



                                OPEC’S OIL PRODUCTION
Total OPEC crude oil production averaged 29.20m barrel/d in July, up by 120,000 b/d from the previous month, according to secondary sources. Output saw a considerable increase from Nigeria and Saudi Arabia, while production fell in Angola. According to secondary sources, OPEC crude production, not including Iraq, stood at 26.86m b/d in July, an increase of 140,000 b/d over the previous month. Output of OPEC NGLs and non-conventional oils in 2010 was expected to increase by 490,000 b/d over the previous year to average 4.84m b/d. In 2011, production of OPEC NGLs and non-conventional oils was forecast to grow by 530,000 b/d to average 5.36m b/d[41][53]



OPEC AND NIGERIA: AN INTRODUCTION
In the 1970s OPEC rose to international prominence during this decade, as its Member Countries took control of their domestic petroleum industries and acquired a major say in the pricing of crude oil on world markets. On two occasions, oil prices rose steeply in a volatile market, triggered by the Arab oil embargo in 1973 and the outbreak of the Iranian Islamic Revolution in 1979. OPEC broadened its mandate with the First Summit of Heads of State and Government in Algiers in 1975, which addressed the plight of the poorer nations and called for a new era of cooperation in international relations, in the interests of world economic development and stability. This led to the establishment of the OPEC Fund for International Development in 1976. Member Countries embarked on ambitious socio-economic development schemes. Membership grew to 13 by 1975.
It was during this decade that Nigeria in 1971 joined OPEC during the Gowon military regime in compliance with Article 7(c) of OPEC statute which provides with effect that any country with a substantial net export of crude petroleum which has fundamentally similar interests to those of member countries of OPEC may become a full member of the organisation, if accepted by a ¾ majority of full members, including the concurrent vote of all founder members.
The OPEC Statute did not define the qualities that a country must possess in order to be considered as a net exporter and so one can conclude that this matter is entirely at the discretion of the Conference. As to having fundamentally similar interests, opinions have been expressed as to what these might be. One of OPEC’s founding fathers, Perez Alfonso[42][54] of Venezuela stated that one common interest amongst members was the necessity of protecting themselves from the ‘powerful’ international industry which was then in control of the resource. Dr. Rouhani, the first OPEC Secretary-General has deduced what the common interest might be by reviewing the common interests of the five founding members, and conditions common to them when OPEC was created. According to him the common interest can be summarised as follows;
        i.            The founder members were developing countries
       ii.            They were exporters of oil
       iii.            They were dependent on their oil revenues for the financing of their budgets.
      iv.            They needed the assistance of foreigners for the exploitation of their oil resources and therefore their oil industry was in the hands of the major oil companies.
       v.            The agreements governing the operation of their oil industries were similar and for this reason, the disputes that arose between the host countries and the operating companies were often identical.
On a similar note according to Dr. Mana Saeed Al-Olaiba the common interest is;
 the common feeling of bitterness inherited by the people of these countries and which had grown in consequence of the injustices inflicted by the inequitable oil concessions granted to the Companies. There was therefore a common interest in casing the consequences of injustice and remedying the situation.
Thus, the primary and proximate cause of the formation of OPEC was to forestall the downward trend in crude oil prices and the vulnerability of OPEC members’ economies to diminishing oil revenue. It is obvious that this interest was also common to Nigeria. It was therefor for the reason stated above amongst others that influenced Nigeria to join the Organisation in July 1971.

NIGERIA AND OPEC: A BRIEF HISTORY
In 1960 when OPEC was formed, the daily crude oil production rates for Venezuela, Kuwait, Saudi Arabia, Iran and Iraq were 2.85, 1.69, 1.31, 1.07, and 0.97 million barrels per day respectively, with Nigeria’s production (at that time non-OPEC) being 0.02 million barrels per day[43][55]; At that time, the present 11 OPEC countries produced 41.4% of the daily world crude oil production of 21 million barrels per day.  In 1971 when Nigeria joined, those daily production numbers were 3.55, 3.20, 4.77, 4.54, 1.69 and 1.53 million barrels per day for Venezuela, Kuwait, Saudi Arabia, Iran, Iraq and Nigeria respectively, with OPEC countries producing 52% of the world’s production of about 48.52 million barrels per day. Today, those daily production numbers are 2.43, 1.75, 7.09, 3.25, 2.13 and 1.80 million barrels per day for each of the countries respectively, with OPEC currently supplying about 15% of the world’s natural gas, about 41% of world’s oil output (back to its percentage in 1960), and 55% of the oil traded internationally, and possessing 78% of the world's oil total proven crude oil reserves.  In general, nine of its members feature in the top 12 of net crude oil exporters

 NIGERIA’S MEMBERSHIP OF OPEC FAIR OR NOT
As Nigeria celebrates her forty-one year as a member of OPEC, having joined the organisation in July 1971, one question which begs for answers periodically is whether or not Nigeria will gain or lose from the dramatic move of leaving OPEC[44][62]. Nigeria being both a major mono-cultural producer nation of oil as well as a member of OPEC makes the situation fairly complex. Nigeria being a major mono-cultural producer nation of oil is characterised by heavy reliance on petroleum. Despite government’s commitment to reduce this heavy reliance on oil, Nigeria’s annual budget is always dominated in the foreign currency of dollars rather than in the local currency of naira with oil as the major ‘‘financier’’. This has reflected an increasing dependence on oil.[45][63]
In view of the problems of OPEC and in spite of its achievement so far, there has been a lot of debate as to whether Nigeria should retain its membership or pull out of OPEC. It is unarguable that Nigeria has benefitted a lot from her membership in OPEC since it joined the organisation in 1971. The various benefits derived by Nigeria as a member of OPEC can be analysed as follows:
1.      Nigeria enjoyed thorough OPEC the benefit of participating in existing oil concession, increases in oil royalties and petroleum tax rates, increased oil exploration and more efficient conservation measures and the use of production and service contracts for operating oil industry instead of the traditional concessionary system. This helped Nigeria in those early years to assume full control over the pricing of her crude oil.
2.      Nigeria benefitted from OPEC price administration of crude oil. The sales price of the country’s crude oil rose from $8.36 per barrel in 1973 to $36.52 per barrel in September, 2000. These are reflected in increased oil revenue which rose from ₦1.02 billion in 1973 to over ₦20 billion in year 2000.
3.      OPEC membership has increased Nigeria political status in the comity of nations. The oil power has afforded Nigeria the opportunity of playing leading roles in African politics as demonstrated in the role played in the struggle for Angolan, Zimbabwean, South Africa independence and especially recently in West Africa sub-region.
4.      Nigeria has also benefitted immensely from OPEC membership by her contribution through OPEC to world development and to the philosophy of independence of nations.
   In the light the above, the case for the continued membership of Nigeria in OPEC is undoubtedly overwhelming.
However despite this benefits and advantages which Nigeria has derived from being a member of OPEC some political and economic analyst are really advocating that Nigeria should pull out of OPEC. They gave strong reasons why Nigeria should pull out of the Organisation and stated that Nigeria will be better off economically if it pulled out of OPEC.
According to Professor West Professor David West[46][64],one of the advocates for anti-OPEC; OPEC is its own enemy and by extension part of the problems of the socio-economic development of member states, the reasons being that OPEC is a dishonest, undisciplined and cheating organisation.


Some of the reasons given by these advocates of anti- OPEC can be analysed as follow:
1.      That Nigeria can fix her crude oil price to reflect market conditions and can produce as much hydrocarbon as possible as long as the market can permit without being constrained by the OPEC quota system.
2.      That there will be no need to contribute to OPEC Fund which gives out loans to other  developing countries some of whom are even more developed than Nigeria. It is argued that substantial savings would be made from this and other financial contributions which Nigeria made to OPEC.
3.      That Nigeria has more population than most of the OPEC member countries but most of them for example Saudi Arabia, is granted more quota than Nigeria. This is seen as being inequitable because  while Saudi Arabia generates a lot of dollars to develop her own country, Nigeria has to make do with lower quota and much smaller export earning to meet her development yearning. Today, the total quota for all the 11 OPEC countries is 24.5 million barrels per day, meaning that all things being equal, this should be 2.23 million barrels per day per OPEC country.  So except for historical and deep political reasons, why Saudi Arabia with a population  22 million (about 4% of OPEC total population) has a quota of 7.093 million barrels per day (almost 30% of the total crude oil quota),  while Nigeria with a population of 133 million (25% of OPEC total, that is according to OPEC data!) has a quota of 2.018 million barrels (8.2% of total quota) per day remains to be explained.  Even UAE with a population of just over 3 million people (0.5% of OPEC total population) has a higher quota (2.138 million or 8.7% of total quota) than Nigeria! 
Saudi Arabia is thus in a strong political position to use its commanding oil presence to create a glut and/or scarcity all by itself and as it pleases.  It has used changes in its production or threat to get much of its way within OPEC.   For example, its daily production has been as high as between 8 – 10 million barrels per day in the time frames 1974 – 1981 and 1991–2001, and as “low” as for example a sudden “drop” to 7 million barrels per day in 1975, or in the range 3.4 – 6.5 million barrels per day in 1982-1990. Certainly, a more EQUITABLE re-distribution (while keeping the total output quota fixed) based on some rational metrics can be done among the nations without dis-equilibrating the international oil market.  The new quotas would be subject to the ability of countries to produce their assigned amounts.  If they cannot, then they can assign their own QUOTAS to other OPEC (and even non-OPEC) nations as they see fit until they can redeem those quotas[47][65].
Assuming that we keep to a total quota of 24.5 million barrels per day, then based on population alone, Nigeria should have a quota of 6.2 barrels per day (three times its current quota) and Saudi Arabia 1.02 barrels per day (one-seventh its current quota).    Based on proven reserves, Nigeria should have 910,000 barrels per day (under half of its current quota) and Saudi Arabia should have 7.6 barrels per day (just a little over its current quota). Similar calculations can be done for each of the other nine countries.
4.      It was further argued that OPEC is a cartel. And any cartel situation leads to inefficient production and consumption conditions. OPEC therefore is a stumbling block to smooth international development and world economic development.
Also that none of the OPEC member countries could be regarded as having truly crossed the line of underdevelopment despite all the petrodollars they have amassed over the decades. A few of them have only succeeded in creating or complicating the poverty and crime situation in their member nation, what then  is the essence of an organisation that has not been able to positively impact on the lives of the citizens of her member countries?
They further argued that Nigeria remaining in OPEC has more to do with politics than economic development. Therefore there is an urgent need to re-evaluate her position.

However, it is pertinent to state here that the above reasons and arguments that Nigeria should leave OPEC ignored all other benefits gained from the Organisation, for example, it ignores the international stature of OPEC and the pride derived from its membership which will also be lost.
 It also ignores the fact that Nigeria outside OPEC would be vulnerable to the machination of the industrialised countries and the International oil companies whose major objective are to have lower crude oil prices and to break up OPEC
Further, it ignores the fact that Nigeria would lose the protection against the multinational oil companies afforded by OPEC membership. Thus her present ability to compare notes with other oil producing states would be seriously impaired if she were to opt –out and this would seriously affect her bargaining strength
In addition it must also be noted that OPEC has been in the forefront to ensure that its members maximize proceeds from their resources, for instance, when oil price goes up, it allows its members to exceed production quotas and tightens the noose when price begins to fall beyond tolerable levels.
 More importantly, it ignores the fact that Nigeria’s membership of OPEC will be very vital especially if the present administration would be able to implement to the hilt the reform agenda in the oil and gas sector which it has enumerated; especially the enactment of the Petroleum Industry Bill, implementation of the Gas Master Plan, increasing in-country refining capacity through building of new refineries and proper rehabilitation of existing ones and other initiatives geared toward optimizing  the hydrocarbon resources.
The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke had mentioned several efforts of the government and planned collaboration with foreign companies to achieve the set goals[48][66].
 In view of the above we are suggesting that it would be unwise and regrettable for Nigeria to pull out of OPEC. It would amount to setting the clock of progress many hours behind. The answer to Nigerias’ economic problems is not in opting out of OPEC but in effective management of the oil resources.


                                               CONCLUSION
Without a successful policy of adding value to our crude oil, and rapid weaning away from our monoculture, Nigeria will continue to face the paradox of “oil everywhere but occasionally no single drop of petrol to put in our gas tanks!”
Despite competing substitute for oil and increasing supply from non-OPEC sources, OPEC’s oil is still an important factor in the  total world energy supply. It is estimated that Nigeria’s oil reserve, proven plus provable and speculative are more than 115 billion barrels and the proven reserve alone can last Nigeria more than 25 years from now at a daily production of about 2 million barrels.
 It is also suggested that Nigeria should explore other markets and other uses and diversify her markets for oil. The present over-dependence on one market (United States) is most unhealthy.
Indeed, while the major oil consuming countries are searching for alternative, substitutes. Oil producing exporting countries should also be developing alternative uses for oil. In addition to developing alternative uses and market for oil, Nigeria and other OPEC countries should expand their domestic consumption and refining capacities. Nigeria should embark on a deliberate policy of building up reserves so as to be able to withstand future shocks arising from fluctuations in the international oil market.
 


  





                   



















































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