Cancun, Mexico (Platts)--31Mar2010/833 pm EDT/033 GMT

The world's top energy producing and consuming nations took a big leap forward Wednesday after two days of talks in Cancun, Mexico, with a decision to establish a charter to formalize two decades of dialogue and promote stable and transparent energy markets in the future.

The International Energy Forum said 66 producing and consuming countries would approve the charter at a meeting to be held in the Saudi capital Riyadh before March 2011.

The agreement "confirms the political and financial commitment of IEF countries to an enhanced energy dialogue and outlines the path for a stronger institution," the IEF said, though it stressed the need to maintain the informality of dialogue.

As a result, it said, "the IEF will become more capable of defining and commissioning insightful analyses, providing better information to governments to facilitate a more informed and fruitful dialogue. This will permit enhanced cooperation on improving the functioning of energy markets," it said.

Part of these efforts will include enhancing data collection from producers on oil reserves and production as well as consumption data from the consuming states through the Joint Oil Data Initiative (JODI). The forum also agreed to expand this data to include gas for the first time.

Saudi Arabian oil minister Ali Naimi, whose country hosts the IEF secretariat, said the charter "will aim at narrowing differences between producing and consuming countries."

Naimi described the Cancun meeting as "one of the most important meetings since I started 20 years ago" and "an important step in international energy cooperation."

The IEF provided a forum "where we try to listen to the other person's point of view" and take these views into account when deciding policies "in our own countries," he said.

'A DIFFERENT PARADIGM'

Saudi deputy oil minister Prince Abdulaziz bin Salman said that in deciding to establish a charter, the IEF was "taking transparency to a different paradigm."

"There was a kind of vacuum in 2008 and that vacuum needed to be filled," he told reporters, referring to the jump in crude prices to record highs of more than $147/barrel.

Prince Abdulaziz said the idea was to hold the meeting to approve the charter as close as possible to March next year, the 20th anniversary of the ministerial seminar in Paris that established the producer-consumer dialogue.

Among the countries which agreed to establish the charter are 30 of the world's leading oil producing and consuming countries, including the United States and China, he said.

Qatari oil minister Abdullah al-Attiyah said the Cancun talks had forged an unprecedented level of cooperation among producers and consumers.

"There is a good understanding that we are in the same boat," he said. "All the (IEF) members accept to work together."

UK minister of state for energy and climate change Lord Phillip Hunt said the charter would lead to a stable oil market and benefit the global economy.

"Oil price volatility has very negative consequences for the world as a whole. We need stable and efficient energy markets. We need them both in terms of ensuring future investment and development but also need them in helping the globe as a whole recover form the financial problems that we see in the last two years," Lord Hunt said. "We need a shared understanding of what triggered the volatility of 2008 and 2009.

We need the analysis to make sure we do not face the same energy price volatility again. Our international agreement today will set the IEF on a course to becoming a forum that will guide action and delivery for both producers and consumers," he said.

Oil prices, which have been relatively stable in a range of between $70 and $80/barrel so far this year, closed Wednesday in New York at their highest level since October 2008, settling at $83.76/barrel despite a large weekly build in US crude stocks. Analysts said it was another sign of a disconnect between fundamentals and price direction.

SOME TENSIONS

Despite the show of unity in Cancun, however, developments over the past two days indicated that tensions remain among the top producers and consumers over price objectives and, in particular, US policy aimed at reducing dependence on foreign oil imports.

The end of the meeting coincided with an announcement by US President Barack Obama to open up new areas for offshore exploration, part of declared US efforts to ease dependence on foreign oil.

Mexico, Saudi Arabia and Venezuela are among the US' top five oil suppliers, although Saudi volumes to the US, which have been slipping as the kingdom focuses increasingly on Asian markets, last year averaged less than 1 million b/d, a 22-year low.

Saudi Arabia's Naimi, while pledging continued investment in meeting future energy needs, said demand uncertainty was damaging to market stability. He said that achieving and maintaining spare capacity had already cost the kingdom billions of dollars and entailed further expenditure, "particularly in a time of demand uncertainty under the urge for the rollback of petroleum use, and a reduction of oil imports from some countries including Saudi Arabia."

Naimi and International Energy Agency Executive Director Nobuo Tanaka said on arrival in Cancun that a price range of $70-$80/barrel was enough to ensure continued investment in future capacity, both for renewable and non-renewable sources.

However, while Naimi referred to this price level as "perfect," Tanaka, representing the major consuming countries of the industrialized world, questioned whether this price band was sustainable for the global economy.

The US, the world's biggest energy consumer, insisted however that markets should be allowed to set prices, though they too signed up to the charter.

"The right price is the price set by demand and supply," said US Deputy Secretary of Energy Daniel Poneman Tuesday. If markets are allowed to operate fairly, "we will get the right price," one that provides adequate incentives for producers to invest and ensure a stability of supply, Poneman said. Indeed, ExxonMobil CEO Rex Tillerson said ExxonMobil doesn't view volatility and price uncertainty as a "big, daunting" issue. The major, he said, makes its development plans and then rides the market's swings as best it can.

"...We don't know what the price of oil is going to be when we invest in a deepwater oil resource today that'll produce in 2014," he said. "...For us, we're not as troubled by that."

"The truth of the matter is, we don't spend a lot of time agonizing over what the price is going to be," Tillerson added. "We test our investments against a range of possible pricing outcomes and we always want to make sure that the investment is resilient enough at the bottom of the price, the prices we think we might have to live with...So for us, it's really not a big, daunting issue. We focus on how do you be more efficient...those are the things that we can control. The price will just be what the price is."

--Staff reports, newsdesk@platts.com