Oil producers risk wasting investment due to volatility: OPEC

08:34, April 01, 2010      

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The world's oil producing nations are at risk of wasting investment if oil prices are too low or too volatile, Abdullah Al-Badri, the secretary general of the Organization of Petroleum Exporting Countries (OPEC) told the International Energy Forum (IEF) on Wednesday.

"There is a very real risk of wasting financial resources on unneeded capacity," Al-Badri, a Libyan citizen, said during his presentation to the IEF, in Mexican resort city Cancun. "Current fears sourcing the pace of the global economic recovery translate into an uncertainty gap for OPEC member countries."

During 2008 oil prices saw swoops to record highs close to 150 U.S. dollar a barrel, but ended the year close to 30 dollars a barrel, because U.S. financial sector crisis spread into the rest of the economy and to the rest of the world. Oil producers canceled projects and continue to have more than 6 million barrels a day of space capacity even now, Al-Badri said.

"Moreover, non-crude oil supply is going to play a major role in satisfying future increases in demand," Al-Badri said. "The key is not related to availability but to deliverability and sustainability."

Brazil, which has become an oil producer but not joined OPEC, has been using ethanol made from sugar cane in transport for nearly 30 years. This decade, the use of fuel ethanol from a variety of sources has spread to the United States, Germany and India, reducing demand for fossil fuels.

"Our member nations are continuing to work hard to increase the efficiency and environmental credentials of petroleum," Al-Badri said. "In this respect, carbon capture and storage has enormous potential and offers a real win-win solution. It needs to be commercialized quickly and developed countries should take the lead given their historical responsibility and their technological and financial capabilities," he added.

He also expressed support for the Joint Oil Data Initiative, which the IEF formally launched on Monday, a database of monthly oil statistics which includes the 30 largest oil producers and oil purchasers among its 100 contributors.

"In a short time it has evolved into an internationally respected initiative that enhances the transparency, scope, quality and timeliness of data," he said, adding that this should help stabilize oil prices. "We need to lessen the magnitude of the swings and I feel there is now a common understanding that a price that is neither too high nor too low is favorable to all."

The 12th IEF has attracted representatives of 64 nations and 16 international organizations to Cancun for the two-day meeting.



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