RIYADH, 6 March 2003 — Leading OPEC member Saudi Arabia and the International Energy Agency agreed yesterday the group should tap its spare output capacity in case of an Iraq war, before consumer countries dip into emergency petroleum reserves.
“The IEA agrees with the point of view that some OPEC countries have put forth which says it is best to use the surplus capacity before using the strategic reserves of consumer countries,” Oil Minister Ali Al-Naimi told the Saudi Press Agency (SPA) after meeting IEA Chief Claude Mandil in Riyadh.
“OPEC, and the Kingdom in particular, are concerned with compensating for any shortage in oil supplies in case there is a production or export halt from one or some of the members for any reason.”
If the Organization of the Petroleum Exporting Countries has insufficient spare, consumer countries represented by the Paris-based IEA have said they will release emergency stockpiles for the first time since the 1991 Gulf War.
The agency says it will take a decision swiftly if war breaks out on Iraq, the world’s eighth biggest oil exporter.
With only Saudi Arabia holding substantial spare volume, Riyadh will have a key role in determining how many extra barrels are released into world markets.
The Kingdom is already pumping about nine million bpd and has said it stands ready to pump to its 10.5 million bpd capacity.
OPEC is hoping to convince the IEA, which controls the reserves of 26 industrialized consumer nations, that a repeat of its 1991 Gulf War emergency drawdown can be avoided.
The group fears an oil price collapse after any war if the energy watchdog orders a release of vast reserves from its members that include the United States, Germany and Japan. But the cartel’s worst fears might yet be realized.
Two production hikes already this year have left members with barely enough spare capacity to cover a potential outage of Iraqi exports which are running at around two million bpd.
And Kuwait has said that war on Iraq will force it to close its northern oil fields which are pumping 400,000 bpd. It also said the 300,000 bpd western Manakish oil field might be closed.
The planned Kuwait shutdowns will make it more difficult for OPEC to fill a shortage in the event of war and make an emergency release of reserves more likely.
OPEC officials have said they are prepared to pump at maximum volume to prevent a supply shortfall if war erupts.
The 11-member producer group is likely at its March 11 meeting to consider a Saudi-backed plan to suspend production quotas once hostilities start.
