They should know. They already have to pump massive amounts of water and gas in their fields to maintain the flow…
By Giulia Segreti and agencies in Rome
Published: May 25 2009 18:59 | Last updated: May 25 2009 18:59
Saudi Arabia warned oil prices could spike to beyond the near $150 record high of 2008 within three years as it joined other energy leaders on Monday to call for more investment to boost production over the long term.
Energy ministers and officials at the Group of Eight energy summit wrapped up the two-day meeting by urging the industry to pump money into projects to expand capacity despite the credit crisis, which has put the brakes on investment.
Saudi Arabian Oil Minister Ali Naimi said the world was heading for a fresh spike after the current phase of faltering demand and lower prices, which he said reflected the economic downturn rather than being an indicator of things to come.
”We are maintaining our long-term focus rather than being swayed by the volatility of short-term conditions,” he said in prepared remarks at the summit.
”However, if others do not begin to invest similarly in new capacity expansion projects, we could see within two-to-three years another price spike similar to or worse than what we witnessed in 2008.
Mr Naimi painted a bleak picture of the investment scenario, saying low prices, weak demand, high costs, tight credit markets and energy policies focused on alternative fuel sources had all combined to hurt spending on new projects. He has been warning about the drop in investment in oil over the last few months.
The meeting came as oil prices have recovered from a low of $30 a barrell to a six-month high of over $60, but producers fret that it remains below the $75 level needed to spur investment while consumer nations fear further rise in prices could hurt global economic prospects.
The recent rally in prices is expected to have eased OPEC concerns about high inventories and weak demand, and Opec officials have suggested an output cut is unlikely at a Thursday meeting, though Libya says that possibility still exists.
“Opec will not want to take decisions which will harm the first signals of economic recovery”, said Chakib Khelil, president of Opec.
The International Energy Agency also expressed some concern regarding the impact the financial and economic crisis might have on global energy investment.
“Supply and demand side investments are being affected in the face of a tougher financing environment. Global upstream oil and gas investment budgets for 2009 have been estimated to be cut by around 21 per cent compared with 2008”, said Nobuo Tanaka, executive director of the IEA.
The capital intensive renewable sector could suffer from a drop in investments “by as much as 38 per cent although stimulus provided by government fiscal packages can probably offset a small proportion of this decline”, the IEA said.
Both Fulvio Conti, CEO of Enel, and Roberto Poli, President of Eni, denied this, reassuring that investments are still being made. “Enel, present in 22 countries, is investing more than €6bn in new projects”, said Mr. Conti during a press conference.
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For the state of Saudi’s (and the world’s) largest oil field, see here.