LONDON (Dow Jones Newswires), Feb. 9, 2009
OPEC nations have collectively postponed 35 oil drilling projects that had been in various stages of development, OPEC Secretary General Abdalla Salem el-Badri said Monday.
The delayed projects, shelved for an indefinite period, are a sign that members of the Organization of Petroleum Exporting Countries are starting to feel the pain of low crude prices.
"These projects are on hold ... and will continue to be until the (oil) price recovers," El-Badri told journalists here.
Until now, nearly all of the industry's oil drilling projects canceled or delayed in past months have been in non-OPEC nations, like the U.S. and Canada, where high-cost developments such as heavy tar sands were put on the back burner as economic incentives and financing dried up.
But with crude prices trading below $50 a barrel in recent months, even the world's cheapest-to-produce hydrocarbons are taking a hit.
A big factor in the project postponements is that OPEC spare production capacity has swelled to around an eight-year high. Officials in the Organization of Petroleum Exporting Countries also have expressed growing concern that future energy demand will be tepid even when the global economy starts to recover.
El-Badri said it wasn't clear exactly how much production capacity the 35 projects had been expected to add, but he said the distribution of the postponements was across OPEC member countries. The delayed projects are from among a total of 150 that OPEC states have planned to deliver over the next decade.
As a result of the project delays, OPEC will not increase production capacity by all of the 5 million barrels a day by 2012 that was previously expected, said El-Badri, without elaborating.
OPEC nations pump about 40% of the roughly 86 million barrels of oil consumed globally every day.
El-Badri's comments came after United Arab Emirates oil minister Mohammad Al-Hamli warned earlier Monday in a speech at Chatham House, a London-based think tank, that weak oil prices and economic recession are threatening longer term spending on Middle East oil projects.
Hamli later told reporters that all oil and natural gas projects in the United Arab Emirates, an OPEC nation, currently are going forward, but said member states could shift investment priorities away from energy projects to more domestic economic development needs if current oil-price trends continue.
"We shall all suffer the consequences in the long run" if current trends continue, Hamli said.
OPEC nations have seen oil revenues tank in recent months, with crude prices falling to around $40 a barrel Monday from $147 a barrel last July. Financial pressures are clearly building in the oil-producing states.
The International Monetary Fund at the weekend cut its 2009 economic growth forecast for the six Gulf Arab oil-exporting states to just 3.5%. The countries, which include Saudi Arabia, the world's biggest crude exporter, grew by a combined 6.8% in 2008.
El-Badri said OPEC states had so far achieved 80% compliance with the group's three production cuts totaling 4.2 million barrels a day. He said OPEC, scheduled to meet March 15 in Vienna, wouldn't announce more output reductions until 100% compliance with already agreed cuts is achieved. El-Badri reiterated that OPEC could cut more of its production if necessary, but only after it ensures full compliance with current quotas.
Copyright (c) 2009 Dow Jones & Company, Inc.
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