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Sarbast - Dilshad - Evaluation Answer Sheet Template Petroleum Economics
Sarbast - Dilshad - Evaluation Answer Sheet Template Petroleum Economics
Sarbast - Dilshad - Evaluation Answer Sheet Template Petroleum Economics
10
Total
Out of
[ Section 1: To be filled by the student]
Department: Petroleum Engineering
Student Full Name: Sarbast Dilshad Omer
Stage/ Year: 3rd, 2020
Course Title: Economic
Examiner name:
Date:
Exam committee member name and signature:
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1- The course tutor/instructor to send the materials (this answer sheet template and the
evaluation topics/questions) to the student.
2- When the materials sent both the department head and the exam committee of the department
to be copied.
3- To make sure that the student has received the materials, the student has to reply (Received).
4- The student has to fill the information in the section 1 of this template.
5- For all kinds of evaluation, the answers should be on this template.
6- In case of the answers that need to be written by hand (i.e. cannot be typed electronically), the
student need to take pictures of his/her answer and insert them as images to this template.
7- The student has to return his/her answers in both word and PDF format of this template within
the allowed time based on the evaluation/assessment time tables.
8- When the answers received from the student the course tutor/ instructor will reply (received).
9- After marking the answers, the course tutor/ instructor will fill the marks in section 2 of the
word version of this template and sign them.
10- The answer sheets after marking and converted to PDF it will be sent to the exam committee.
11- The exam committee member of the department will print the answer sheet out and after
checking/ processing it will be signed as in the section 2 and it will be kept in the exam
committee office for their record.
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Summary:
Organization of the Petroleum Exporting Countries (OPEC), in 1960 was founded in Baghdad at
a conference by five-member states (Iraq, Iran, Kuwait, Saudi Arabia and Venezuela).Venezuela
made the essential development towards the making of OPEC in 1949 when it haggled with the
government of Iraq, Iran, Kuwait, and Saudi Arabia recommending the trading of perspectives
and simple correspondence among oil creating states (OPEC, n.d.). The organization (OPEC)
first shows its impact on world economy during the war among Egypt and Israel alongside when
Israel wrongfully occupied Palestinian territories in 1973 that lead to OPEC putting an oil
embargo on Israel with its supporters, for example, USA, South Africa, and Netherland. OPEC
work inside the edge work of liberal methodology which required the presence of political on-
screen characters in a particular situation of universal legislative issues without a world
government or any authority with an imposing business model on the genuine utilization of
power.
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Contents
Introduction:..............................................................................................................................................6
OPEC Objectives:......................................................................................................................................8
Member countries:....................................................................................................................................9
Non- OPEC countries..............................................................................................................................11
Importance of Countries(Member & Non Member)............................................................................11
OPEC Challenges....................................................................................................................................11
OPEC ROLES:........................................................................................................................................12
Functions of OPEC:................................................................................................................................14
Oil Economics:.........................................................................................................................................14
OPEC Basket:..........................................................................................................................................15
Conclusion:..............................................................................................................................................16
Reference..................................................................................................................................................17
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Introduction:
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Since OPEC was established in Baghdad in 1960, oil unrefined is still seen as a vital and basic
product for the world economy highlighted by the many territorial disputes over possession of
this essential commodity. However, the international petroleum industry has changed
substantially since 1960, with a bewildering array of alternative energy sources and a mix of
public and private players, along with an added element of environmental pressure groups that
was not prevalent in 1960. When OPEC came to life, production, marketing, and prices were
controlled unilaterally by the international oil companies (IOCs), and there was little or no
concern for the environmental and the social impacts of the industry such as global warming and
ozone depletion. Today things have fundamentally changed, and at their peril, neither OPEC nor
the IOCs can ignore these issues.
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OPEC Objectives:
1. Co-ordinate and unify the petroleum policies of the member countries and to determine
the best means for safeguarding their individual and collective interests,
2. Seek ways and means of ensuring the stabilization of prices in international oil markets,
with a view of eliminating harmful and unnecessary fluctuations, Provide an efficient
economic and regular supply of petroleum to consuming nations and a fair return on
capital to those investing in the petroleum industry.
According to current estimates, 79.4% of the world's proven oil reserves are located in OPEC Member Countries,
with the bulk of OPEC oil reserves in the Middle East, amounting to 64.5% of the OPEC total.
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OPEC Member Countries have made significant additions to their oil reserves in recent years, for example, by
adopting best practices in the industry, realizing intensive explorations and enhanced recoveries. As a result,
OPEC's proven oil reserves currently stand at 1,189.80 billion barrels.
Member countries:
As before mentioned The Organization of the Petroleum Exporting Countries (OPEC) was
founded in Baghdad, Iraq, with the signing of an agreement in September 1960 by five countries
namely Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. They were to
become the Founder Members of the Organization.
COUNTRIES YEAR
QATAR 1961
INDONESIA 1962
LIBYA 1962
UNITED ARAB EMIRATES 1967
ALGERIA 1969
NIGERIA 1971
ECUADOR 1973
GABON 1975
ANGOLA 2007
EQUATORIAL GUINEA 2017
CONGO 2018
Table 1:List of countries which later jointed to OPEC.
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Ecuador suspended its membership in December 1992, rejoined OPEC in October 2007,
but decided to withdraw its membership of OPEC effective 1 January 2020.
Indonesia suspended its membership in January 2009, reactivated it again in January
2016, but decided to suspend its membership once more at the 171st Meeting of the
OPEC Conference on 30 November 2016.
Gabon terminated its membership in January 1995. However, it rejoined the Organization
in July 2016.
Qatar terminated its membership on 1 January 2019.
The OPEC Statute recognizes the Founder Members and Full Members - those nations whose
applications for enrollment have been acknowledged by the Conference.
The Statute specifies that "any nation with a significant net fare of rough oil, which has in a
general sense comparative interests to those of Member Countries, may turn into a Full Member
of the Organization, whenever acknowledged by a lion's share of three-fourths of Full Members,
including the agreeing votes of every single Founder Member."
The Statute further accommodates Associate Members which are those nations that don't meet all
requirements for full enrollment, yet are by and by conceded under such unique conditions as
might be endorsed by the Conference.
OPEC. (n.d.)
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OPEC Challenges
Uncertainty in Global Demand Structural shift in demand from developed world to
developing world.
Non-OPEC oil-producing nations (Russia , Norway, Canada, Mexico etc.)often increase
production when OPEC cuts it.
Russia overtook Saudi Arabia as the world’s biggest crude supplier in 2009.
OPEC’s share of production has gone down from around 51% in the mid-1970s to just
over 40% now.
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Economist do refer to OPEC as a textbook example of a cartel that cooperates to reduce market
competition, OPEC is a model force which seeks to stabilize market and its members can easily
influence global oil prices through a collective action
Structure of OPEC
OPEC is structured based on 3 different part / categories which are as follows:
1. The conference
2. The board of governors
3. The secretariat
OPEC ROLES:
The major role of OPEC which is to stabilize price of oil in international market in order to avoid
huge movement of price, so as to secure an efficient, economic and steady supply of oil to its
consumers (Alvaro Silva-Calderón, n.d.).
OPEC decisions and policies has effect on other sectors, most especially manufacturing
and transportation sector, which has direct influence on finished product and house hold
commodities.
The increase in oil price also increases the cost of production which is passed on to the
final consumer.
OPEC influence world economy because increase of oil price can in turn lead to higher
inflation and even reduce economic growth.
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OPEC promote sustainable development among its member states and also other
developing countries.
The foundation of OFID (OPEC fund for international development in 1976 has helped in
expanding participation between OPEC part states and other creating nations. What's more, it has
bolstered wide scope of venture, for example, giving of vitality, clean water to remote networks,
working of framework for poor non-OPEC nations.
The job of OPEC has been diverse during its reality in some cases it has been extremely fruitful
in impacting the cost of oil and different occasions not all that effective however regardless it has
affected it. OPEC is and has been a ground-breaking association and has generally delivered
around 40% of world's oil and has about 80% of demonstrated oil saves. Its individuals
incorporate 11 of the best 20 world oil makers and it holds additionally the majority of the
world's overabundance limit, since non-OPEC oil makers will in general produce near their most
extreme yield. From this is straight forward the weight and intensity of OPEC individuals in oil
advertise.
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Functions of OPEC:
Functioning of OPEC As stated in the objectives the OPEC countries work together to ensure
supply of petroleum to the consuming nations and strives to maintain stable world oil prices by
regulating supply according to the market demand.
Representatives of the OPEC member countries meet at the OPEC Conference to co-ordinate and
unify their petroleum policies in order to promote stability and harmony in the oil market.
It is responsible for formulation and implementation of policies for the member countries.
OPEC’s influence on the market has been widely criticized, since it became effective in
determining production and prices.
Oil Economics:
Oil Economics OPEC is a swing producer and its decisions have had considerable influence on
international oil prices.
For instance, in the 1973 vitality emergency OPEC would not send oil to western nations that
had bolstered Israel in the Yom Kippur War or 6 Day War, which Israel had battled against
Egypt and Syria. This refusal caused a fourfold increment in the cost of oil, which endured five
months, beginning on October 17, 1973, and finishing on March 18, 1974. OPEC countries at
that point concurred, on January 7, 1975, to raise unrefined petroleum costs by 10%. Around
then, OPEC countries – including numerous whom had as of late nationalized their oil ventures –
joined the require another global financial request to be started by alliances of essential Producer.
Closing the First OPEC Summit in Algiers they called for steady and just product costs, a global
food and horticulture program, innovation move from North to South, and the democratization of
the monetary framework. By and large, the proof recommends that OPEC acted as a cartel, when
it embraced yield proportioning so as to look after cost.
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OPEC Basket:
is A weighted average of oil price gathered from different oil delivering nations. This normal is
resolved by the creation and fares of every nation and is utilized as a source of perspective point
by OPEC to screen overall oil economic situations.
The OPEC Reference Basket of Crudes (ORB) is comprised of the accompanying: Saharan
Blend (Algeria), Girassol (Angola), Djeno (Congo), Zafiro (Equatorial Guinea), Rabi Light
(Gabon), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es
Sider (Libya), Bonny Light (Nigeria), Arab Light (Saudi Arabia), Murban (UAE) and Merey
(Venezuela).
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Conclusion:
At the end we can say OPEC is a greatest overall cartel .Oil, other than being amazingly
Profitable to sell is one of the most significant vital asset, is looked for at all pieces of the world
and as the value rises an ever increasing number of fields become worth to exploit.
For whatever length of time that the demand for oil is consistent and costs are high their
economies are protected yet there a while later they may find their selves in an amazingly
troublesome circumstance Until governments and the open focuses only on oil valuing they
won't have the option to devote scholarly and budgetary assets to advance different pieces of
their industry, for example, the innovative work or the use of elective vitality sources. With
worries about an Earth-wide temperature boost and contamination purchasers are urged to
change their inclinations to new vitality assets. OPEC individuals' extraordinary dependence on
incomes created by oil leaves their economy powerless against changes and political clashes.
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Reference:
1. Andrew Moravesik (2008). The new liberalism. The oxford handbook of international
relations.
2. Thomas Oatley (2013). International Political Economy. International Edition 5th
Edition.
3. Duncan, R. C and Youngquist, W. (2001) The World Petroleum Life Cycle. In K. E. F.
Watt (ed.), Human Ecology: Civilization in the 21st Century, Vol. 1 (in press).
Transactions Publishers, Piscataway, NJ.
4. Kanovsky, E (1992). The Economic Consequences of the Persian Gulf War: Accelerating
OPEC’s Demise. Washington Institute for Near East Policy, Washington D.C.
5. OPEC Annual statistical bulletin, 2016. Organization of the petroleum exporting
countries.
6. World oil outlook 2040, (2017). organization of the petroleum exporting countries.
7. Alvaro Silva-Calderón, D. R. (n.d.). OPEC's role and the challenges we face in the
petroleum.
8. OPEC. (n.d.). Member Countries. Retrieved July 4, 2020, from
https://www.opec.org/opec_web/en/about_us/25.htm
9. OPEC. (n.d.). Brief History. Retrieved July 4, 2020, from
https://www.opec.org/opec_web/en/about_us/24.htm
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Q2/
A.
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Q2/
B. Profit indicates like
Payout period
Discount cash flow rate of return
Net present value(NPV) at 5%, 10% and 15%.
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