OPEC Posts Record 2006 Oil Revenue

OPEC Posts Record 06 Oil Revenue; Lags Western Cos by Half
by Spencer Swartz
Jul 31, 2007

The Organization of Petroleum Exporting Countries posted nominal record revenue of nearly $650 billion last year on high crude prices and increased oil production, although its sales were just half those of the top U.S. and European energy firms, the producer group said in a report released Tuesday.

But in an indication as to why it may be keeping a tight rope on future production capacity, the report showed OPEC's base of economically recoverable oil reserves last year was flat if new, higher estimates from troubled OPEC producer Venezuela are stripped out, the worst growth in this key metric in recent years.

The world's top five publicly traded oil companies, led by ExxonMobil Corp. (XOM) of the U.S., collectively raked in total revenue last year of $1.36 trillion, up 6% on the year, OPEC said in its annual statistical report released Tuesday.

The contrasting numbers underscore the financial muscle the top Western oil companies have relative to OPEC states even though those same states control nearly three-quarters of the world's proven oil reserves.

Such was the tailwind of higher oil prices that Saudi Arabia, OPEC's biggest producer and exporter, saw its oil revenue jump a fifth to $193.7 billion, even though it pumped and exported less oil last year compared with 2005, OPEC said.

Oil prices touched a record high of near-$79 a barrel last July.

The OPEC sales numbers, representing 22% revenue growth, may stoke anger by consumers shouldering high energy costs caused by tight gasoline supplies, unexpected production shutdowns in Nigeria, and OPEC production cuts the past year.

U.S. lawmakers have proposed a largely symbolic bill that would permit law suits against OPEC's 12 members under U.S. antitrust laws.

Companies such as ExxonMobil and Royal Dutch Shell PLC (RDSB.LN) typically have more business units and operate in more regions of the world compared with most OPEC states, although this has been changing the past decade, but they own just a small percentage of the world's proven oil reserves.

OPEC's annual report didn't disclose net profits, but OPEC states earn handsome returns on the oil they produce because of low production costs.

"There might be some who are critical of these numbers, but the money OPEC is earning allows these countries to invest in new energy projects, like refineries, and import more goods," said Manouchehr Takin, senior analyst at the Centre for Global Energy Studies in London. OPEC nations imported $447.3 billion worth of goods last year, up 13% on the year.

The report also didn't disclose how much OPEC states invested in new exploration programs last year, although OPEC Secretary General Abdalla Salem el-Badri told Dow Jones Newswires in June that members had earmarked $130 billion-worth of capacity expansions that would add a net 6.7 million barrels a day to current oil output by 2012.

Reserves Languish

Venezuela, where oil output has languished this decade because of underinvestment, has tightened its grip the past five years on foreign operators with new taxes and operating restrictions, and few energy analysts believe the country can tap its costly and difficult-to-exploit heavy oil reserves without foreign technology and know-how.

After relatively stable to modest increases the past decade, Venezuela's proven oil reserves jumped last year by nearly 9% to 87.04 billion barrels, according to OPEC's report. It didn't explain why.

But backing out much of that rise because of the state of Venezuela's energy sector, OPEC's total proven oil reserves rose by a mere 0.2% last year, the lowest rate of increase this decade.

Saudi Arabia's crude asset base changed little at about 264.3 billion barrels, although the kingdom is currently investing billions of dollars to boost its production capacity to 12.5 million barrels a day by 2009, up about 11% from current levels.

Including the big additions of heavy oil Venezuela added to its reserves last year, OPEC's proven oil reserves in 2006 rose 1% to 922.5 billion barrels, representing just over 77% of the world's total.

OPEC's daily production last year averaged 32.07 million barrels, up 3.2% on the year. Saudi Arabia's daily output averaged 9.208 million barrels, about 145,400 barrels fewer than in 2005, while Saudi exports averaged 7.029 million barrels, nearly 180,000 barrels less than last year.

© 2007 Dow Jones Newswires.