If you would like to know more about OPEC and its publications, or have any

questions, please contact:

Public Relations and Information Department
OPEC Secretariat
Obere Donaustrasse 93
A1020 Vienna, Austria
Tel: +43 1 211 12-279
prid@opec.org
www.opec.org

March 2009

Organization of the Petroleum Exporting Countries

Frequently
Asked
Questions

Iraq
Algeria

IR Iran
Kuwait
Qatar
UAE

SP Libyan AJ
Saudi Arabia

Venezuela
Nigeria

Ecuador
Angola

Indonesia

Table of contents

What is OPEC?

When was OPEC founded?

What are the terms of Membership?

How does OPEC function?

What is the OPEC Conference?

Who are the Heads of Delegation?

What is the Board of Governors?

What is the Economic Commission Board?

What is the Ministerial Monitoring Sub-Committee?

What is the OPEC Secretariat?

Does OPEC control the oil market?

11

Why does OPEC set oil production quotas?

12

How does OPEC influence the world economy?

14

How does OPEC help other countries?

14

What is OPECs attitude towards fuel-efficiency?

15

Does OPEC support environmental policies?

16

Why is OPEC concerned about high oil taxes?

18

Can OPEC guarantee security of oil supply?

19

Is there any need for security of oil demand?

21

What is OPEC?
The Organization of the Petroleum Exporting Countries (OPEC)
is a permanent intergovernmental organization of 12 oil-exporting
developing nations that coordinates and unifies the petroleum policies
of its Member Countries. OPEC seeks to ensure the stabilisation
of oil prices in international oil markets, with a view to eliminating
harmful and unnecessary fluctuations, due regard being given at all
times to the interests of oil-producing nations and to the necessity of
securing a steady income for them. Equally important is OPECs role
in overseeing an efficient, economic and regular supply of petroleum
to consuming nations, and a fair return on capital to those investing in
the petroleum industry.

Algeria

Angola

Ecuador

IR Iran

Iraq

Kuwait

SP Libyan AJ

Nigeria

Qatar

Saudi Arabia

UAE

Venezuela

When was OPEC founded?

OPEC was founded at a meeting held on 1014 September 1960 in
Baghdad, Iraq, by five oil-producing developing countries: Iran, Iraq,
Kuwait, Saudi Arabia and Venezuela. These countries are referred to as
the Founder Members. OPEC was registered with the United Nations
Secretariat on 6 November 1962 (UN Resolution No. 6363).
OPEC Member Countries
Founder Members

Year of accession

Location

IR Iran

1960

Middle East

Iraq

1960

Middle East

Kuwait

1960

Middle East

Saudi Arabia

1960

Middle East

Venezuela

1960

South America

Algeria

1969

Africa

Angola

2007

Africa

Ecuador

1973*

South America

SP Libyan AJ

1962

Africa

Nigeria

1971

Africa

Qatar

1961

Middle East

United Arab Emirates

1967

Middle East

Full Members

*Ecuador suspended its Membership in December 1992 and reactivated it in December 2007.
Gabon, which became a Full Member in 1975, terminated its Membership with effect from 1 January
1995.
Indonesia, which became a Full Member in 1962, suspended its Membership in December 2008.

What are the terms of Membership?

The OPEC Statute stipulates that any country with a substantial
net export of crude petroleum, which has fundamentally similar
interests to those of Member Countries, may become a Full Member
of the Organization, if accepted by a majority of three-fourths of Full
Members, including the concurring votes of all Founder Members.
The Statute further distinguishes between three categories of
Membership: Founder Member, Full Member and Associate Member.
Founder Members of the Organization are those countries that were
represented at OPECs first Conference, held on 1014 September 1960
OPEC Member Countries and the Secretariat

OPEC Secretariat
Vienna

Iraq
Algeria

IR Iran
Kuwait
Qatar
UAE

SP Libyan AJ
Saudi Arabia

Venezuela
Nigeria

Ecuador
Angola

in Baghdad, Iraq, and that signed the original agreement establishing

OPEC.
Full Members are the Founder Members, plus those countries whose
applications for Membership have been accepted by the Conference.
An Associate Member is a country that does not qualify for Full
Membership, but that is, nevertheless, admitted under such special
conditions as may be prescribed by the Conference. There are currently
12 OPEC Member Countries.

How does OPEC function?

Member Country Delegations meet at the OPEC Conference to
coordinate and unify their national petroleum policies, in order to
promote stability and harmony in the international oil market. They
are supported by the OPEC Secretariat, which is directed by the Board
of Governors and run by the Secretary General, and there is assistance
from other bodies, such as the Ministerial Monitoring Sub-Committee
and the Economic Commission Board.
Member Countries consider the current oil market situation and
forecasts of market fundamentals, such as economic growth rates and

petroleum demand and supply scenarios. They then consider what

changes, if any, should be made to existing production agreements, to
promote stable prices and steady supplies to consumers in the short,
medium and long terms.

What is the OPEC Conference?

The Conference is the supreme authority of the Organization. It
consists of a Ministerial-level Delegation from each Member Country.
The Conference meets twice a year in March and September and,
in addition, holds Extraordinary Meetings when required. It operates

151st (Extraordinary) Meeting of the OPEC Conference, Oran, Algeria, December 2008.

on the principle of unanimity. It is responsible for the formulation of

the general policy of the Organization and the determination of the
ways and means of its implementation.
The Conference also decides on applications for Membership of
the Organization, and reviews the reports and recommendations
submitted by the Board of Governors on the affairs of the Organization.
It approves the appointment of Governors from each Member Country
and elects the Chairman of the Board.
Moreover, the Conference directs the Board to submit reports or make
recommendations on any matter of interest to the Organization, and
considers and decides upon the Organizations budget, as submitted
by the Board.

Who are the Heads of Delegation?

The Heads of Delegation are the official representatives of each Member
Country to the OPEC Conference. They are normally Ministers of Oil, Energy
or equivalent portfolio.

What is the Board of Governors?

The Board of Governors can be compared with the board of directors
of a commercial company. The Board is composed of Governors
nominated by Member Countries and confirmed by the Conference.
The Board directs the management of the Secretariat, implements
resolutions of the Conference, draws up the Secretariats annual
budget and submits it to the Conference for approval. It also decides
upon reports submitted by the Secretary General, and submits
reports and recommendations to the Conference on the affairs of the
Organization.

The Board of Governors at a meeting in Vienna, Austria.

What is the Economic Commission Board?

The Economic Commission Board (ECB) is a specialised researchoriented body operating within the framework of the Secretariat that
assists the Organization in promoting stability in the international oil
market. The ECB is composed of National Representatives from Member
Countries, the Secretary General and a Commission Coordinator (who
is ex officio the Director of the Research Division).

The Economic Commission Board at a meeting in Vienna, Austria.

What is the Ministerial Monitoring Sub-Committee?

The Ministerial Monitoring Sub-Committee (MMSC) was established
in February 1993 at the 10th Meeting of the Ministerial Monitoring
Committee (MMC) and given the mandate to monitor oil production
and exports by Member Countries. The MMSC comprises three Heads
of Delegation and the Secretary General.
The roots of the MMC go back to March 1982, when, comprising four
Ministers, it was set up to monitor the market situation and advise the
Conference on possible OPEC measures. Its mandate was expanded in
July 1990 and its size grew to include all Heads of Delegation.

What is the OPEC Secretariat?

The OPEC Secretariat functions as the headquarters of OPEC. It is
responsible for carrying out the executive functions of the Organization,
in accordance with the provisions of the Statute, under the direction of
the Board of Governors.

The Secretary General is the Chief Executive of the Secretariat, as

well as the legally authorised representative of the Organization.
In carrying-out his duties, he is assisted directly by an Office of the
Secretary General, a Legal Office and an Internal Auditor.

The OPEC Headquarters in Vienna, Austria.

Beyond this, the Secretariat consists of: a Research Division, with

Departments of Data Services, Energy Studies, Multilateral Relations
and Petroleum Studies; and a Support Services Division, with

10

Departments of Administration and Information Technology, Finance

and Human Resources, and PR and Information.
The Secretariat was originally established in Geneva, Switzerland,
in 1961, and was moved to Vienna, Austria, in 1965. The 8th
(Extraordinary) Meeting of the OPEC Conference approved the Host
Agreement with the Austrian Government in April 1965, before the
opening of the Secretariat in Vienna on 1 September 1965.

Does OPEC control the oil market?

No, OPEC does not control the oil market. OPEC Member Countries
produce about 40 per cent of the worlds crude oil and 15 per cent
of its natural gas. However, OPECs oil exports represent about
55 per cent of the oil traded internationally. Therefore, OPEC can have
a strong influence on the oil market sometimes, depending upon the
overall conditions.
OPEC seeks stability in the oil market and aims to deliver steady supplies
of oil to consumers at fair and reasonable prices. The Organization has

11

achieved this in a number of ways by voluntarily producing more or

less oil in response to demand and supply dynamics, for example.

Why does OPEC set oil production quotas?

The OPEC Statute requires OPEC to pursue stability and harmony in the
petroleum market for the benefit of both oil producers and consumers.
To this end, OPEC Member Countries respond to market fundamentals
and forecast developments by coordinating their petroleum policies.
Production quotas are one possible response. If demand grows, or
some producers supply less oil, OPEC can increase its oil production
to prevent a sudden rise in prices or shortfall in supply. OPEC might
also reduce its oil production in response to market conditions, as a
means of countering falling prices or a glut on the market.
It does this by setting a new group production ceiling or adjusting an
existing one. This ceiling is divided into individual Member Country
quotas, as agreed by the Conference.
However, when OPEC makes its production agreements, it does so
with the expectation that non-OPEC producers will actively support

12

World crude oil production, 19602008

m/bd
100

80

90

70

80

60

70

50

60

Non-OPEC production

50

40

40

30

30

20

20

10

OPEC-12 production

10
0

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

1972

1970

1968

1966

1964

1962

1960

the Organizations measures, since this will ensure OPECs decisions

are more effective and benefit everyone.
The impact of OPEC output decisions on crude oil prices must be
considered separately from the issue of changes in the prices of oil
products, such as gasoline or heating oil. There are many factors
that influence the prices paid by end-consumers for oil products. In
some countries, taxes comprise 70 per cent of the final price paid by
consumers, so even a major change in the price of crude might have
only a minor impact on consumer prices.

13

How does OPEC influence the world economy?

OPEC plays an important role in promoting and sustaining world economic
growth by ensuring steady supplies of oil at reasonable prices.
However, OPEC has long been aware of the need for improvements in
world trade. In 1975, the Organization backed calls for the creation
of a new international economic order based on justice, mutual
understanding and a genuine concern for the well-being of all the
worlds people.

How does OPEC help other countries?

In 1975, OPEC also called on industrialised and developing countries
to come together to solve the problems facing poor countries and to
look for ways of establishing a better economic system by allowing
increased trade and exchange of knowledge.
OPEC established the OPEC Fund for International Development (OFID)
in January 1976 (originally called the OPEC Special Fund) to promote
cooperation between OPEC Member Countries and other developing
states. In particular, OFID aims to help poorer, low-income non-OPEC

14

countries in their pursuit of social and economic advancement. OFID

is active in many regions, including Africa, Asia, Europe and Latin
America. It has supported a wide range of projects, from providing
clean water and energy to remote communities, to building schools,
hospitals and roads and developing industry, farming and trade
opportunities. Since its establishment, it has made commitments
totalling nearly US $10.1 billion, two-thirds of which have already
been disbursed.
The Third Summit of OPEC Heads of State and Government in 2007
reaffirmed OPECs commitment to energy for sustainable development.
The concluding Riyadh Declaration stated that energy was essential for
poverty eradication, sustainable development and the achievement of
the Millennium Development Goals. It associated Member Countries
with all global efforts aimed at bridging the development gap and
making energy accessible to the worlds poor.

What is OPECs attitude towards fuel-efficiency?

OPEC fully supports technological improvements that make
transportation cleaner, safer and more efficient. The Organization

15

would like more people to enjoy the benefits of personal mobility in

an environmentally sustainable manner.
OPEC has always recognised that crude oil is a finite resource. By
managing its production, the Organization aims to enable many
generations to benefit from its use. During the 20th century, oil
dramatically transformed the world for industrialised countries.
Increasingly, it is doing the same for developing countries. Technologies
that enhance fuel efficiency are, therefore, welcome.

Does OPEC support environmental policies?

OPEC is concerned about the environment and wants to ensure that it
is clean and healthy for future generations. In fact, all OPEC Member
Countries have ratified the Kyoto Protocol to the United Nations
Framework Convention on Climate Change. OPEC considers that
the development of technology is important for limiting or reducing
greenhouse gas emissions. In this regard, the Secretariat is exploring
options to participate in international collaborative efforts in research
and development programmes geared at improving carbon capture
and storage technology. OPEC Member Countries are also investing
heavily to improve the environmental credentials of oil by tackling

16

gas-flaring and promoting safer and cleaner drilling, transportation

and refining processes. In addition, OPEC participates in many
international meetings to remind governments and others debating
environmental policies that they must consider the needs of developing
countries, especially those that rely on oil for their income.

OPEC has held two joint roundtables

on carbon capture and storage with the
European Union, in 2006 and 2008.

To demonstrate its commitment, at the 2007 Third Summit of Heads

of State and Government of OPEC Member Countries in Riyadh, Saudi

17

Arabia, a number of OPEC Member Countries pledged a total of $750

million to help fund research and development into the environmental
challenges facing the energy industry.

Why is OPEC concerned about high oil taxes?

Many countries have introduced heavy taxes on oil products. In some
countries, the price that motorists pay for gasoline is three or four
times higher than the price of the original crude oil. Taxes can account
for as much as 70 per cent or more of the final price of oil products. As a
result of these oil taxes, some governments in oil-consuming countries
(especially in Europe, where taxation levels are highest) receive much
more income from oil than OPEC Member Countries.
OPEC is concerned that many of the so-called green taxes that are
currently levied on oil do not specifically help the environment.
Instead, they are simply added to government budgets and spent on
other items.
Several industrialised countries are developing policies to limit the
use of fossil fuels as a way of reducing their emissions of carbon

18

dioxide (CO2). Many are already imposing heavy taxes, particularly on

oil products, while subsidising alternative fuels whose sustainability
and environmental impact remains unknown. Yet, studies have shown
that the industrialised nations of the Organization for Economic
Cooperation and Development could cut their CO2 emissions by
12 per cent by 2010 and still maintain their tax revenues without
concentrating taxes on oil alone. This could be achieved by adopting
a pro rata tax system that levies tax on all forms of energy, according
to differing carbon contents.
OPEC is concerned that some countries may introduce environmental
and taxation policies that are harmful to those who rely on fossil fuels
for a substantial part of their income. Also, some countries with high
oil taxes actually subsidize domestic coal production, despite the fact
that coal produces more CO2 than oil.

Can OPEC guarantee security of oil supply?

OPEC will be called upon increasingly to supply the incremental barrel.
The Organization has both the capability and the will to do this. More
than three-quarters of the worlds proven crude oil reserves are located

19

in OPEC Member Countries. Moreover, these reserves are more accessible

and cheaper to exploit than those in non-OPEC areas. In 2030, the OPEC
Secretariat reference case sees the Organization meeting almost half the
worlds oil demand with supplies of 53.4 million barrels per day, including
natural gas liquids.
Only OPEC nations have significant spare oil production capacity,
which is why they are able to increase output at relatively short
notice. OPECs actions at critical times such as during the Gulf War
in 199091, the invasion of Iraq in 2003 and Hurricanes Katrina and
Rita in 2005 demonstrated the Organizations ability to keep the oil
market well-supplied in the face of natural disasters and geopolitical
crises. Expanding capacity requires substantial investment and long
lead-times. For this reason, oil producers and investors are concerned
about security of demand, just as consumers are worried about
security of supply.
OPEC recognizes the need for massive investment in exploration,
production and the construction of pipelines and other oil-related
infrastructure. Its Member Countries are constantly investing to
ensure a continuous supply of oil to help fuel world economic growth.
Consistency, transparency and certainty within the international oil

20

community as well as a broad-based, equitable approach are

needed to plan for the future and meet the requirements of the global
economy. The industry is much better off if there is an underlying
consensus on how to handle major issues, such as price stability,
security of supply and demand, investment, environmental issues and
sustainable development. This is why OPEC welcomes and encourages
the big advances in producer-consumer dialogue and cooperation that
have occurred in recent years.

Is there any need for security of oil demand?

Yes. Just as oil consumers need steady supplies of oil, oil producers
rely on steady demand. Sudden changes in demand can have a major
financial impact on oil producers, their economies and, by extension,
the well-being of their people.
Oil production is a long-term affair. The oil industry works 24 hours
a day, 365 days a year (except when disruptions occur, due, for
example, to maintenance or bad weather). Oil facilities require huge
investments and investors seek to earn a reasonable return on their
capital. A downturn in oil demand could force oil production to slow

21

down or stop. This could physically damage oil fields, reducing the
amount of oil that can be recovered in the future.
Such a downturn could also negatively impact oil installations. Some
facilities, such as those operating in the oceans, are very difficult and
expensive to shut down. When production declines, oil producers might
be forced to lay off staff. Downstream operators, such as gasoline retailers,
refiners and transport companies, would also suffer accordingly.
If oil producers receive lower incomes, they spend less money and
import fewer goods from oil consumers. If investors are unsure
about the risks and the likely returns from petroleum investments,
they may not invest. If producers do not invest enough money, or do
not do so early enough, the world could face a future shortage of oil
supplies.
However, if oil producers continue to see reasonable prices and stable
demand, they will maintain their production and invest on time to
meet demand. Thus, security of oil supply relies upon security of oil
demand. Oil producers and oil consumers need to work together to
preserve both.

OPEC publications
All publications are in the English language

Available from the OPEC Secretariat

The following publications may be obtained from: PR & Information Department,
Organization of the Petroleum Exporting Countries, Obere Donaustrasse 93, 1020
Vienna, Austria (tel +43 1 211 12; fax +43 1 214 98 27; website www.opec.org;
e-mail prid@opec.org).
Annual Report
General Information
OPEC Statute
Frequently Asked Questions
Who Gets What from Imported Oil?
OPEC Bulletin (latest edition)
OPEC Monthly Oil Market Report
Annual Statistical Bulletin (available in book and CD (WindowsTM application)
World Oil Outlook
A PDF version of all the above publications can be downloaded
free of charge from our website: www.opec.org

Available from Blackwell Publishing

The following is available from Blackwell Publishing, 9600 Garsington Road,
Oxford OX4 2DQ, England (tel +44 1865 776868; fax +44 1865 714591).
OPEC Energy Review (quarterly)
annual subscription rates, 2009:
Europe:
individual 150 institutional
UK:
individual 100 institutional
The Americas: individual $167 institutional
Rest of world: individual 100 institutional

482
380
$638
$744

Available from the OPEC Fund

Publications relating to our sister organization, the OPEC Fund for International
Development, can be obtained directly from its Headquarters at PO Box 995, 1011
Vienna, Austria (tel + 43 1 515 64 0; fax +43 1 513 92 38; website www.ofid.org;
e-mail info@ofid.org).

OPEC

prid@opec.org
www.opec.org