NOPEC, or No Oil Producing and Exporting Cartels Act has been dormant for years as past presidents have signalled they would veto any move to pass the legislation. Anadarko photo.
NOPEC could open OPEC up to anti-trust laws
According to a report by Reuters, OPEC is urging its members to not mention oil prices when discussing policy as the cartel is hoping to avoid US legal action for manipulating the oil market.
NOPEC, or No Oil Producing and Exporting Cartels Act, is proposed US legislation which, if passed, could open up the group to anti-trust laws. The proposed legislation has been set aside for years as previous presidents have signalled that they would veto any moves to make it law.
But President Trump has been a vocal critic of OPEC and, despite placing sanctions on Iranian crude exports, he is blaming the cartel for high oil prices. Also, he has argued that OPEC should boost its supply to relieve pressure on the global oil market.
With Trump sitting in the oval office, OPEC’s kingpin Saudi Arabia has grown more concerned about NOPEC.
As such, OPEC members have been instructed to stop discussing a preferred oil price level. As well, Reuters reports that senior OPEC officials attended a workshop in Vienna with international law firm White & Case to discuss the NOPEC bill.
At that meeting, lawyers advised members to avoid discussing oil prices, and instead highlight oil market stability, according to two Reuters sources.
One of the sources said OPEC officials were also advised to build diplomatic lobbying channels in an effort to prevent NOPEC from becoming law. And in early August, the OPEC secretariat sent a letter to cartel ministers which made a similar recommendation.
“We solemnly believe that market stability, and not prices, is the common objective of our actions,” UAE Energy Minister Suhail al-Mazroui, 2018 OPEC president, wrote in the letter which was seen by Reuters.
“I would like to call upon OPEC Member Countries, as well as our participating Non-OPEC colleagues, to refrain from any reference to prices in their commentary about our collective efforts or oil market condition,” he added.
According to Reuters, White & Case did not respond to the news agency when asked for comment.
It is not believed that NOPEC will be passed this year, but OPEC members and other oil producers are concerned that it may be supported by Trump.
The NOPEC law may not be just about oil prices and policy. The recent murder of Saudi journalist Jamal Khashoggi has sparked renewed interest in NOPEC as lawmakers weigh possible actions against the kingdom in response to the killing of Khashoggi.
However, a Reuters source says that with US lawmakers out of town for the coming weeks, it is difficult to measure the appetite for NOPEC.
The threat of NOPEC may also be behind the shelving of the Saudi Aramco IPO. The IPO is a key part of Crown Prince Mohammed bin Salman’s reform program which is aimed at diversifying the kingdom’s oil-based economy.
Earlier this month, Prince Mohammed said the $100 billion float was postponed to 2021. A number of industry sources told Reuters that the delay is partly due to the litigation risks faced if Aramco was listed in New York, the crown prince’s preferred venue.
“There is a major fear NOPEC could turn into another JASTA,” one of the sources familiar with Aramco IPO preparations told Reuters. The Justice Against Sponsors of Terrorism Act allows victims of the Sept. 11, 2001, attacks to sue Riyadh.
Saudi Arabia has almost $1 trillion in investments in the US, some assets are owned by Aramco, meaning the kingdom has a lot at stake should NOPEC be passed into law. Oil producers, including OPEC members currently enjoy sovereign immunity from US legal action, which would be revoked should NOPEC be passed.
According to Reuters, Washington-based legal firm Gibson Dunn signed a contract with the Saudi embassy in August, according to US Department of Justice records. The contract specifies that the law firm will oppose NOPEC.
Be the first to comment