The president of Opec, Chakib Khelil, said Tuesday the oil cartel was concerned that future demand for oil might not be strong enough to justify investment to boost oil production. "The concern we have is about the security of demand," Khelil, who is also Algeria''s energy minister, told delegates at industry event the World Petroleum Congress in Madrid.
He said there were "big uncertainties" about making huge investments in infrastructure to increase output from Opec member countries, which pump about 40 percent of world oil. "I don''t think anyone questions that we have enough resources, the issue is if we are able to supply it to the market," he said.
Benchmark oil prices hit record high levels above 143 dollars a barrel on Tuesday amid growing public anger at the rising cost of fuel world-wide and concern about the impact on inflation and economic growth.
Consumer countries are clamouring for higher output from Opec and keen to see investments in future capacity to deflate the market, but the remarks from Khelil underline the resistance in many oil producing countries.
The uncertainty about future demand arises from increased investment in alternative sources of energy, the impact of energy conservation, falling economic growth and the stepped-up search for non-Opec oil reserves. Each of these factors could reduce future demand for oil from Organisation of Petroleum Exporting Countries and the cartel needs to see "a credibility of future demand," Khelil said.
He stressed that financial market turmoil, which has led to projections of lower global growth and a possible recession in the United States, had already had an impact on investment in oil production and refining. "We see the looming financial crisis having an effect on investment upstream and downstream," he told delegates during a debate entitled "Deliverability Challenges: Security of Supply and Demand Perspectives."
The president of French oil major Total said meanwhile that the development of new oil fields in frontier regions or in offshore projects require crude prices of at least 80 dollars a barrel just for oil firms to break even.
"Projects are getting more and more complex. We have to tackle at the same time the access to energy, the environmental issues, the security. All together this involves billions of dollars," said Christophe de Margerie.
"Now yopu understand while oil prices are high," he added. Khelil said Opec, whose member states contribute 40 percent of global oil output, currently have 120 development projects in the works and plan to increase capacity by four billion barrels per day from current levels by 2012. A generally hard-line member of the organisation, he has led members within the organisation in blaming speculators and the fall in the dollar for record prices.
Nevertheless, most economists and the International Energy Agency, the industrialised world''s energy watchdog, expect oil demand to continue to grow strongly driven by economic development in Asia and the Middle East. There are signs of weakening oil demand in developed markets, but China, India and other fast-developing countries are expected to more than compensate.