By Chua Baizhen
CEO of Saudi oil giant says fall in prices could hurt large investments required in industry.
Oil supplies are "more than comfortable" given a global economic environment which is hitting demand, but low prices threaten investment to secure longer-term supplies, Saudi Aramco's chief executive was quoted as saying.
"Considering the present financial and economic turmoil in the markets and especially the falling growth in petroleum demand, the supply situation is more than comfortable," Abdallah Jumah said, according to a newsletter published for the 5th National Oil Company Forum in Beijing.
"A further fall in oil prices could hurt large investments required to offset the natural decline in oilfields, beside the need to expand capacity to meet the long term growth in demand," he added.
Jumah also complained the world made unfair demands on national oil companies (NOCs), expecting them to guarantee a steady flow of oil during boom times, but leaving them with a collection of unprofitable projects when consumption fell off.
The world's biggest state-owned oil companies are weathering the global financial crisis and the dive in crude prices for now, many of the top executives at the conference said on Friday, but they issued similar warnings about the potential threat to investments from a slide in oil prices to $60 a barrel.
Oil majors and public energy firms that have ventured into higher-cost frontiers to grow their production are already beginning to pull back on projects as credit grows scarce and oil's steep retreat in recent months threatens their profits.
"When the world economics are booming the NOCs are expected to meet the upside of petroleum demand irrespective of the potential for downside," Jumah said.
"However when the downside occurs, the NOCs are left holding the bag with massive investments unable to generate adequate returns," he added. (Reuters)For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
I fully agree. The industrial countries whinged and moaned about high oil prices in the early 80's but nobody bothered to bail us out when they dropped in 86-87. Same thing in 97-98. Here we go again. It's just a matter of time before the operators and service companies start laying people off by the thousands. Then they'll wonder why we won't come back to work when the next boom starts.