WASHINGTON, Jan. 5 (UPI) -- Saudi Oil Minister Ali Al Nuaimi said that Saudi Arabia has enforced its promise to fellow OPEC members to cut its daily production by 500,000 barrels a day. The country is now producing around nine million barrels per day, as of Monday. Al Nuaimi said, "We took off the 500, we're around nine." In December, OPEC oil producers month agreed to cut 1 million barrels per day of excess supply starting Jan. 1 in an effort to sustain sagging prices caused by consuming nations building in out-of-season stocks during the northern winter. Top group producer Saudi Arabia pledged to shoulder half the total cut production, or 500,000 barrels per day. Oil prices have fallen nearly $14, a 25 percent decline from record highs in late Oct. 2004. Some OPEC ministers have commented that the cartel may need to cut further production quotas when it meets on Jan. 30 to discuss how to halt the decline in prices. Al Nuaimi declined to comment on this, saying only, "We'll have to look at the data." In 2003 oil prices rose 34 percent, driven largely by rising consumption. In 2005 demand growth is expected to slow, but Al Nuaimi declined to speculate on whether oil prices would continue to fall.
Asian oil importers may try to persuade their core Middle East crude suppliers to bring down sky-high prices when they meet later this week. Since Sept. 2004, refiners in Japan, South Korea, India and China have paid less for Saudi and other Middle East crude oil than the United States or Europe. The estimated $1-$1.50 a barrel "Asian premium" has cost importers an extra $5-$10 billion every year. In 2004 massive price shifts between light, low-sulfur crude oils, favored for their ability to make gasoline and heating fuels, and heavier high-sulfur grades mostly produced by Middle East countries has essentially obliterated the "Asian premium." A South Korean energy official speaking off the record said, "I think it's going to be a bit difficult for us to talk about the Asia premium this time, given oil prices in Europe and America are higher now." In 2004 Europe's sweet benchmark Brent crude soared to a premium of $12 over Asia's sour Dubai marker, due to Western demand for the premium grades. While the price difference has since halved, analysts observe that it will take years to build the heavy-crude refining capacity needed to fully restore the balance. Asia contains only 4 percent of the world's reserves but has almost a third of global demand; subsequently, it has little choice but relying on the Middle East.
The first nuclear-reactor generating unit of Ukraine's Zaporozhye NPP nuclear power plant was decoupled from the Ukrainian power grid on Jan. 4 at the request of the plant's maintenance engineers. Zaporozhye's VVER-1000 unit was shut down for repairs to its electricity generator after a hydrogen leak from the cooling system was discovered. The repairs are estimated to continue until Jan. 8. Currently, Zaporozhye NPP is operating four of its reactors, generating an aggregate total of 3,940 megawatts. According to the Energoatom company, 13 out of 15 power generating units are currently in operation at Ukraine's four nuclear power plants.
China's largest oil producer, China National Petroleum Corp. (CPNC) has formed an offshore oil-engineering subsidiary. China's third-largest oil producer China's National Offshore Oil Corp (CNOOC) has traditionally dominated Chinese offshore oil production. CPNC's new subsidiary, the China National Petroleum Offshore Engineering Co. Ltd. (CNPOEC), was established by amalgamating the drilling, construction, engineering assets and design institutions of two subsidiaries, the Liaohe Oil Exploration Bureau and Dagang Petroleum Group. CNPOEC will do mainly offshore well-drilling, engineering, design and maintenance of offshore oil production platform. CNPC currently produces about 1 million tons of oil in shallow waters in Bohai Bay, less than 1 percent of its total production. CNPC to quadruple its production of crude in Chinese waters by the year 2010. CNPOEC chairman Liu Haisheng said, "The setup of CNPOEC is a strategic step for CNPC to speed up offshore oil exploration."
After Russia suspended natural gas supplies from Jan. 1, two Azerbaijani power plants partially switched to fuel oil, according to the Azenergo joint stock company. Following the Russian cutoff, 40 Azeri districts, mostly in the north and south, were left without gas, while gas supply to Baku, its suburbs and a number of large industrial centers was down by 20 percent. The measure did not affect the output of power generated by the Azerbaijanskaya and Ali-Bairamlinskaya plants. Azenergo president Etibar Pirverdiyev said, "Our power plants have enough reserves of fuel oil for operation in such a mode, so electricity production remains at the planned level." Azerbaijan produces an average of 50-60 million kilowatt-hours of electricity every day. According to the republic's state-owned GNKAR Co., which purchases Russian gas, Gazexport, a Gazprom subsidiary, suspended the supplies for due to maintenance work on a stretch of the Mozdok-Kazi Magomed trunk pipeline in the northern Caucasus.
Managing Director of Iranian Gas Export Co. Rokneddin Javadi has announced that IEGC and a South Korean gas company are continuing talks about annual exports of 1.5-2 million tons of liquefied natural gas from Iran to South Korea. Javadi said that IGEC has been one of the top three companies participating in South Korea's tender on LNG and is quite likely to win the bid. The deadline for mutual talks on the issue is Jan. 10. Javadi emphasized that although the winner of the tender has not yet been declared, according to the officials of Total Gas Co, the "Yaman LNG" proposal has a better chance to win than the "Pars LNG."
Closing oil prices, January 5, 3 p.m. London
Brent crude oil: $40.73
West Texas intermediate crude oil: $43.53