Oil prices lower than $75 a barrel discourage producers from investing in the large-scale projects that ensure an adequate future supply, said OPEC members and industry executives attending a Paris conference this week. Conference participants told news sources large-scale investments in oil and gas projects are likely to be downsized or delayed as long as shrinking consumer demand pushes down oil prices.
Nobuo Tanaka, executive director of the Paris-based International Energy Agency, told news sources that demand is expected to slide by another 1.5 percent this year.
OPEC Secretary-General Abdallah El-Badri said OPEC members prefer the $75 dollar-per-barrel price that they say supports project investment and that they cannot afford to invest at the roughly $50-per-barrel current price. Earlier this year El-Badri said that OPEC members have already delayed 35 energy projects. At the conference, he told reporters that an oil shortage looms when energy demand does turn around.
Christophe de Margerie, chief executive of French oil company Total SA, said at the conference that his company would probably delay some portion of the approximately $18 billion planned for project investment in 2009, according to news reports.
Analysts with Barclays Capital estimated in December that global oil and gas exploration and production spending will fall to $400 billion in 2009, a 12 percent decrease from 2008. U.S. and Canadian investment is expected to fall $79 billion and $22 billion, respectively. Sharp declines are also expected in Russia, Venezuela and Saudi Arabia, while some regions, including Mexico and North Africa, could see increases in investment spending.