Joint Oil Data Initiative

The joint initiative on Improving Oil Data Transparency arose from concerns by both producer and consumer countries that the high volatility in oil prices was due partly to the lack of transparent oil statistics. The message that clearly emerged from the 7^th International Energy Forum in Riyadh (17-19 November 2000) was that there is a need for more reliable and timely oil data.

Just a few days before the International Energy Forum, the IEA had organised a meeting with five other key International Organisations (APEC, EUROSTAT, OLADE, OPEC and UN) to discuss harmonisation of statistical systems. The need for strengthening international co-operation and for involving Member Countries in the harmonisation process was emphasised.

A follow-up workshop on Oil Data Transparency was organized in Bangkok on 2-3 April 2001, with the objective of investigating ways in which oil data transparency might be improved. This meeting was attended by representatives of each international organization, and by 3-4 of their Member Countries. An agreement was reached to launch a six-month Joint Oil Data Exercise, which purpose is to quantify and qualify availability and timeliness of monthly oil data. A further conclusion resulting from the meeting was the necessity to associate the oil industry with the initiative.

The Joint Oil Data Exercise was officially launched in June 2001, provisionally for a six-month period. The Joint Oil Data Exercise consists of a small questionnaire requesting countries to complete, on a monthly basis, some essential oil statistics such as production, trade, refinery flows and demand. At the Bangkok meeting it was agreed that after six months, the results would be reviewed and evaluated; Saudi Arabia offered to host this follow-up meeting in November 2001.

Some preliminary results of the Riyadh Meeting (10-11 November) can be highlighted. Firstly, the participation of Member Countries was surprisingly high. Some 55 countries (including almost all OECD, China, Russia, Brazil, Saudi Arabia, etc.) participated, and International Organisations are making substantial efforts to increase even further this rate of participation. Some key players have yet to be brought on board: Indonesia, Malaysia, Singapore, Venezuela and some other OPEC members, as well as some Caribbean countries. Secondly, as regards the quality, timeliness and completeness of data available, although major progress has been made, there still remains quite a lot of work to be done in these areas.

The meeting in Riyadh intended to bring together not only participants from the International Organisations and their Member Countries, but also participants from the oil industry. Unfortunately the events of 11 September had led to travel restrictions for many industry people, and although many companies expressed their interest in the initiative, only three oil companies were actually present at the Riyadh meeting.

The oil industry is a major provider of oil data, as well as a main data user. Industry is in a position to speed up the information flow and bring expertise to technical issues. Additionally, a critical view by industry participants may be needed to assess some of the data.

For these reasons it is now of prime importance that in the next round, industry should not only become fully aware of the issues, but also become closely associated with the initiative of improving oil data transparency. The involvement of industry is a key condition towards the success of the exercise and towards improved transparency.

Oil companies have to make many strategic decisions regarding crude production, imports, refinery production and optimization of refineries, which markets to supply, which products to supply, etc. Any oil company obviously has sufficient information concerning its own operations and transactions, however it is important for companies to know what is happening overall in each country in which they operate. Not only do they usually want to work out their own market share and its development, but also they have a need to anticipate future developments in the oil business for their own strategic planning and forecasting divisions.

Additionally, as many companies operate internationally they have a need for information on developments in other markets. This allows them, for example, to calculate better their business risks when taking decisions to launch new businesses or to enter new markets.

Industry also wants up-to-date information in order to be able to react or respond to the market promptly. This is necessary not only for the benefit of the company, but also critically important for supplying the market and the consumers. Cold weather, for example, can have the effect of depleting heating oil stocks more rapidly than expected, therefore necessitating a quick action by oil companies to either import additional heating oil or produce more from their own refineries. A fast adaptation is necessary for a balanced market, and this can take place only when adequate information is available.

Up-to-date and adequate information on the oil market is therefore essential for the oil companies to take not only short term, but also long term decisions on their future strategies to supply the market adequately with the oil products consumers require.

The numerous requests that IEA and other organizations receive from companies for more timely and extended coverage of data is a concrete illustration of their need for more up-to-date information.

Not only is industry the main user of oil market information, it is also the main data provider.

Almost all oil information originates from data provided by the oil industry. Whether it is information on crude oil and NGL production, crude oil imports and exports, refinery intake and production, product trade, inventory levels or deliveries/sales, the majority of data comes indeed from the oil industry.

The Member Country administrations have either a formal reporting process through questionnaires or a less formal agreement or understanding that the oil companies supply data. In the majority of the OECD member countries, a formal reporting system is in place, usually backed by statute, to collect and process information on oil. This includes information on production, trade, stock levels and changes, refinery throughputs and production of oil products, as well as deliveries or sales from the oil companies operating in their country. The information is collected not only from major integrated oil companies but also from some of the smaller “independent” operators, who usually specialise in one aspect (i.e. transportation, distribution, marketing or storage) of the downstream system.

An exception could be the trade data, which in many countries may only be provided indirectly by the oil industry. Many countries indeed rely on their customs offices to provide information on imported and exported goods, and this information is gathered from importers and exporters but with the customs office as an intermediary data collector.

Additionally, in many countries, a complete survey is not carried out for “short term” data. Short term has a meaning, which differs, among the countries. In the US, for example, weekly data are collected, while in many other countries monthly data are referred to as short term. In the case that oil data are not completely covered by a survey, the remainder is estimated using various means. Usually coverage of approximately 90 percent of the total is sought for – therefore only 10 percent needs to be estimated or imputed.

In countries where there is no formal reporting system – usually in countries where there is only a state oil company, it is usually the state oil company which provides the administration with required data. This process can be variable with the results sometimes depending on the goodwill of the company providing the information.

The role of industry is therefore extremely important in any country’s system of oil statistics.

4. Why should industry be interested and involved ?

From the above it is clear that, on the one hand, industry is potentially very interested in obtaining good quality oil information. On the other hand, oil companies are the primary providers of this information. That is why it is absolutely indispensable that they become closely associated with the initiative for improving Oil Data Transparency.

At the end of the day, industry along with administrations, consultants, banks, etc will be the main users of the data emanating from this exercise. It is therefore important that industry from the beginning provide administrations and organizations with their input on their expectations from a global database. Oil companies always look for the best information available for monitoring their operations; a successful database produced from the Joint Oil Data Exercise will therefore undoubtedly bring them more global and timely information.

When industry understand more fully the benefits the exercise might bring, they may be more willing to actively participate by co-operating more closely with administrations and by speeding up the collection and release of requested data. The transparency initiative is not an initiative against industry, but with and for the industry.

It is clear that the more industry participates, the better the data quality will be and the more timely and reliable the final database will be.

5. What can Industry do ?

The oil industry could back the initiative by increasing the effectiveness of the data reporting within the countries, this through supplying oil information more readily and more timely to national administrations. In many countries, there is a lack of co-operation between administration and the oil industry, which slows down the transmission of information and prevents a complete and up-to-date picture of the situation within a country. Although production, stocks and refinery data are know on a daily basis by the industry, it sometimes takes months for administrations to receive some of this information.

The oil industry can provide technical assistance, in terms of knowledge on specific issues (such as e.g. refinery gains, pipelines etc.) concerning the oil market. National administrations and international organizations collect information, but do not necessarily have the knowledge and expertise in technical areas such as refineries, pipelines, etc. Therefore the role of industry is essential when discussing technical issues which could have a major impact on oil balances.

Companies have access to information, which is not easily accessible by international organizations, because they have an extended business network. For example, many oil companies are operating in countries from which international organizations do not receive oil data submissions. Often they have a fair idea what is happening in these markets, or they have access to facts and figures, which are outside the reach of others. Oil companies can therefore help by providing information not received by international organizations.

Last but not least, major oil companies operate in many regions of the world and they have a fair assessment of the global market, it is therefore important that they share their judgement on the data from time to time, especially concerning the widening gap between supply and demand.

6. How to draw the attention of industry, how to obtain interest and involvement ?

To obtain interest from industry, priority should be given to bringing the benefit of the Joint Oil Data Exercise exercise and its objectives to their attention: more transparency through a world-wide database open to all market players. It is only when the mutual interest of all parties is completely understood that full co-operation can be expected.

When the benefits to industry of participation in this exercise are highlighted and well understood, it should be easier for industry to decide to contribute.

7.1 On a national level, encourage Member Countries’ administrations to improve the co-operation with industry in respect of oil data collection. To involve industry a dialogue between national administrations and industry representatives is required. This dialogue can take place in different forms, examples are below:

7.2 On a regional level, working groups could be set up, to give guidance and expertise on technical issues. These meetings could be “expert group meetings” with a focus on technical issues such as e.g. refinery gains.

The participation of oil industry in the effort towards transparency is a key to the overall success of the joint initiative. Indeed, transparency will only exist if all market players fully co-operate. All players, starting with industry should benefit from more transparency, and from a world-wide database open to all.

The meeting in Mexico (23-25 May 2002) should constitute an excellent opportunity to closely associate industry to the work of the organizations and administration.

However, preparatory work should be done ahead of the meeting, we hope that some of the measures described in this paper could already have been implemented in order to make the Mexico meeting a more constructive and productive step towards transparency.