UPI Energy Watch

WASHINGTON, Feb. 22 (UPI) -- Saudi Aramco President and Chief Executive Officer, Abdallah S. Jum'ah, has announced that there is a need for a greater global cooperation to increase upstream investments and expanding and upgrading refining capacity to ensure the world's energy future. Speaking before the Summit of the Cambridge Energy Research Association's Annual Conference in Houston on Feb. 15, Jum'ah said oil producing countries will most likely increase construction of refineries due to difficulties oil companies have when constructing new plants in consuming countries. Attended by more than 15,000 top energy officials, the conference was held on Feb. 14-18. Jum'ah also said there is a need for a global cooperation to improve environmental technologies, and improve investment in petroleum-related infrastructure, such as pipelines and terminals, including managing the safe movement of oil through strategic shipping channels and sea-lanes. Jum'ah said: "Until now, refineries have been built primarily in consuming nations, but I believe we will see a portion of this new refining capacity being located in producing countries. We also look forward to strengthening our relationships with the Chinese and Indian petroleum sectors, and to helping them meet the rapidly expanding energy needs of their home markets."

While more than 100 of the world's oldest and most dangerous oil tankers are expected to be put out of commission in 2005, the international community does not have enough demolition capacity to do so legally. Under International Maritime Organization (IMO) law, it is illegal to demolish old tankers containing toxic waste such as waste oil, asbestos and PCBs in traditional ship breaking nations. The IMO, UN's Basel Convention representatives and the International Labor Organization are currently looking to find a legal way to establish a phase-out program. One option experts are considering is by making ship owners pay a fee to equip European yards to clean ships ready for dismantling elsewhere. Until last October, ship owners had avoided rules established by the Basel Convention because they argued that the hulks expected to be broken up were ships to be recycled, not scrapped. Joined by Norway, Turkey and Iceland, the European Union has agreed in October that this method was no longer legal and that ships must be cleaned before export or be dismantled in Europe. Basel Action Network Spokesman Jim Puckett told The Guardian: "The sudden need to scrap all these tankers has concentrated minds on an issue that everyone has been trying to ignore for a long time. There are yards in Europe which would love to have the business, but what is needed is a funding mechanism. We think the ship owners should pay a levy."

Cambridge Energy Research Associates (CERA) projects global oil production capacity to increase by almost 20 percent to 101.5 million barrels per day by 2010. At the 25th annual meeting Houston, CERA officials stated that it projects an increase in oil supplies with increased production split between non-OPEC and OPEC producers. Non-OPEC production is expected to increase some 7.6 million bpd; OPEC production is expected to increase 8.9 million bpd. CERA predicts that an immense portion of new oil is expected to come from deepwater projects such as those from offshore Brazil, Nigeria, Angola, and the Gulf of Mexico. According to CERA Senior Director Julian West, there is a risk that prices may decrease due an increase in supply. ChevronTexaco Executive Vice President George Kirkland said during the Upstream Oil Session of the conference, that the industry will also need more than $2 trillion for oil infrastructure investments in order to extract new oil and move it to markets. ChevronTexaco Chairman and CEO David O'Reilly said because the oil industry is entering a third cycle characterized by globalization and trade, coupled with declining oil production from OECD countries, "The era of cheap energy is ending. The era of easy access is also over."

Russia and Hungary intend to increase bilateral trade by more than 30 percent annually. Following talks with Hungarian Prime Minister Ferenc Gyurcsany, Russian Prime Minister Mikhail Fradkov said: "Our trade amounts to $4 billion annually, and we are not going to stop at that level. Russian companies plan to take part in the construction of a metro in Budapest, modernization of carriages and expansion of the Paks nuclear power station. The subject was discussed and we confirmed that Russia will carry out earlier commitments on oil delivery."

An Iranian contractor has awarded Van Leeuwen Buizen of the Netherlands a $21 million contract to supply valves for the Salman offshore oil and gas field project (EPC-2) in Iran. Partners involved in the EPC-2 project are looking produce 50,000 barrels crude oil daily and 20 million cubic yards of gas daily. The project will also reconstruct five platform jackets and seven platform topsides as well as related bridges. Completion of the project is scheduled for mid 2005. Within the past several years, Van Leeuwen Buizen has acquired a reputation as a reliable supplier for piping material in the Middle East.

China began construction of a refinery with a capacity to process 10 million tons of crude oil annually and a 1.2 million ton ethylene plant on Feb. 8 in Xinjiang, located in northwestern China. The Dushanzi Petrochemical Company will invest $3.2 billion in the two projects, which are scheduled to come online in 2008. The projects are part of the China-Kazakh energy strategic cooperation.

Closing oil prices, Feb. 22, 3 p.m. London

Brent crude oil: $47.21

West Texas intermediate crude oil: $49.15