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The Times: Norwegian lifeboat failures push up price of crude oil

October 14, 2006
By Carl Mortished, International Business Editor
 
THE discovery by safety regulators of faulty lifeboats on two Norwegian oil production platforms pushed the price of crude oil above $59 per barrel yesterday.

Statoil is closing the Snorre A platform for between seven and ten days and Shell said that it would close its Draugen facility for up to two weeks for repairs. Together, the two oilfields produced about 280,000 barrels per day, representing 13 per cent of Norway’s total output of 2.2 million barrels per day.
 
The price of Brent crude gained $1 yesterday on the London futures market to $59.73, buoyed by an imminent Norwegian production cut and further indications that Opec would implement a one million barrel per day reduction in output.

The action by safety regulators was a reminder of the Norway’s importance to world oil markets; it is the third-largest crude exporter after Saudi Arabia and Russia. It also highlighted concerns that safety issues may have an increasing impact on oil output, as ageing installations are taken offline to conduct maintenance and repairs.

Yesterday Norwegian officials rejected appeals by Shell and Statoil for a dispensation from lifeboat rules and ordered an immediate shutdown of the platforms. “On Friday morning we contacted the companies and made it clear that the consequence of our decision is immediate closure of Snorre A and Draugen,” the Petroleum Safety Authority said.

The Norwegian offshore shutdowns come after that of BP’s operations in the giant Prudhoe Bay oil complex in Alaska in August after serious corrosion was found in transit pipelines.

Speculation was growing yesterday that Opec ministers will meet in Qatar to reinforce their commitment to reduce output by one million barrels per day. The sharp fall in the oil price since last summer has caused alarm within Opec. A consensus has emerged that an overall production cut of a million barrels per day is necessary to prevent further decline in the cost of oil, which has lost a quarter of its value since July.

Countries that are pumping above quotas, such as Saudi Arabia, are keen to restrict the cut to actual supply levels whereas underproducers would prefer to see quotas reduced.
 
http://www.timesonline.co.uk/article/0,,5-2403233.html

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