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Oil companies: underinvesting can spark price jump

Gulf ministers, European executives meet to map out future of oil industry

  • Thursday April 2, 2009, 6:27 am EDT

PARIS (AP) — The global economic crisis is leading international oil and gas companies to under-invest in new capacity, which threatens to spark renewed sharp increases in oil prices once the crisis ends, executives from two of Europe’s leading oil companies warned Thursday.

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“Definitely this crisis will leave strong traces in the long term and we will probably not see the same world anymore,” Total SA Chief Executive Christophe de Margerie said at an oil industry conference.

The event gathered industry executives and ministers of Gulf states to debate the industry’s future amid a gloomy economic outlook for the world’s biggest energy consumers.

The head of France’s largest company warned that Total may not achieve its target of investing euro18 billion ($23.84 billion) this year, as some projects are likely to be “slightly delayed.”

Royal Dutch Shell Chief Executive Jeroen van der Veer said the crisis was causing the whole industry to under-invest in new oil and gas projects. Van der Veer said his “gut feeling” is that the overall investment in the industry was down by more than the 12 percent recently estimated by analysts at investment bank Barclays.

“The oil industry faces one of the sharpest downturns in its history,” said Algeria’s former energy minister and the conference chairman, Nordine Ait-Laoussine.

Ait-Laoussine said the current recession “is likely to be much deeper and protracted than most experts forecast only a few months ago.”

He said oil industry leaders were looking for an upbeat note from Thursday’s Group of 20 summit, held across the Channel in London.

“Needless to say we are all looking forward to a positive outcome of the crucial G-20 meeting,” Ait-Laoussine said.

Others present at the conference included OPEC Secretary General Abdalla el-Badri and Gulf ministers Abdulla bin Hamad al-Attiyah of Qatar and Mohammed Bin Dhaen al-Hamli of the United Arab Emirates.

Nobuo Tanaka, executive director of the Paris-based International Energy Agency, was also scheduled to speak at the annual meeting, now in its tenth year.

Oil crept above $49 a barrel Thursday as glimmers of hope that the U.S. economy may be stabilizing were weighed against concerns that global demand remains weak.

Oil prices have pulled back from three-month highs of above $54 a barrel last month as investor hopes that the global recession may be bottoming out waned.

Americans are collectively driving billions of miles less each month, helping push U.S. oil inventories to 16-year highs. Meanwhile, data from Europe, Japan and China suggests their economies have yet to see any benefit from the fiscal stimulus packages announced by their governments.

OPEC members have been hit hard by the fall in oil prices. On Monday, Qatari oil minister al-Attiyah said his nation was “OK” with crude oil at $50 a barrel this year

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