No E&P Investment Growth Despite High Oil Prices

Norway's Minister of Petroleum and Energy, Thorhild Widvey, said Thursday that there was no evidence oil companies were expanding their exploration plans despite the incentive of high oil prices.

Speaking at an OPEC international seminar here, Widvey questioned why companies weren't capitalizing on surging demand that has been "grossly underestimated."

"Oil companies have had every incentive to increase their exploration and development activities but there is no strong evidence that this has happened," she said.

Widvey said oil company investment behavior implied it will take substantially higher oil prices than seen in the 1990s to release their investment resources.

Crude prices averaged $18 a barrel in the 1990s and have averaged $25 a barrel this decade.

"Oil companies were quick to cut budgets when prices fell in 1998. However, they seem to have been slow to react to the higher price levels we've seen for the past four or five years," she said.

Widvey pointed to International Energy Agency data that said the world needed a 20 million-25 million barrels a day increase in crude output by 2020, some 30% above current levels.

"Huge investment in new capacity is needed," she said, and all of that is going to have come from OPEC.

"The challenge for those countries is to make attractive investment opportunities for companies," she added.

The IEA and OPEC are already participating with other multilateral institutions in the Joint Oil Data Initiative to improve the quality of market data.

While the initiative has opened an office in Saudi Arabia and touted the merits of transparency in the abstract, there has been little tangible progress.

Widvey said she hoped the initiative will lead to less volatility and better forecasting, as "demand has been grossly underestimated, leading to OPEC setting production too low."

Norway, she added, is likely to maintain its 3.3 million barrels a day output "for a few years before we see a decline."