UPI Energy Watch

OPEC announces losses in revenues

Member countries of the Organization of Petroleum Exporting Countries said that since oil prices began falling several months ago, they have lost about $700 billion in revenues.

Oil prices peaked in July at about $147 per barrel and then, on economic concern and falling demand, prices dropped by about 60 percent and are now hovering at about $52 per barrel.

OPEC President Chakib Khelil told BBC News and other media outlets that OPEC members are losing money on low oil prices.

In October OPEC cut its oil production by about 1.5 million barrels per day, and the flat oil prices likely will prompt more cuts that could come next month.

The cartel controls about 40 percent of the world's oil supply, and most of its members are in the process of implementing the first round of production cuts.

Khelil said the cartel will wait until all the cuts are in place and also will look at oil price trend analysis before implementing additional cuts.

China projects lower oil prices

At a recent meeting of officials from national oil companies, Fu Chengyu, chief executive of China National Offshore Oil Corp., suggested that oil prices may fall to about $40 per barrel.

Prices that low, he said, will force national oil companies to cancel most of their planned projects and investments, the Financial Times reported.

A sense of panic is setting in for many national oil companies, Fu said.

He is not the only one who is predicting lower oil prices. The Paris-based International Energy Agency also warned that national oil firms are on track to under-invest in oil infrastructure capacity, which will lead to capacity issues later.

The Organization of Petroleum Exporting Countries also said low oil prices will jeopardize new projects, and Nigeria's oil minister said the nation's deepwater projects, in particular, are being threatened.

The United Arab Emirates' national oil company has said its oil capacity expansion will be put on hold, and Saudi Arabia has delayed two of its projects as well.

In Canada, oil sands projects and mergers are being delayed, too.

"If the oil price remained around $50 or $55, that would mean cutting at least 60 percent of budgeted projects for the next one or two years from the national oil companies," Fu said.

China-Myanmar pipeline planned despite oil prices

In spite of low oil prices, some projects are continuing to move forward, including the construction of a pipeline between China's Yunnan province and Myanmar, the country formerly known as Burma.

Construction is scheduled to start at the beginning of 2009, China Daily reported. The project is the first of three in a series for Yunnan province, said Mi Gongsheng, director of the Yunnan Provincial Development and Reform Commission.

The large-scale energy and infrastructure projects will get $10.5 billion in investment in the next year, Mi said.

The China-Myanmar pipeline is expected to cost nearly $3 billion, and China National Petroleum Corp. will hold a 50.9-percent stake. The pipeline will help China provide enough oil and gas to meet demand.

The country imports on average 200 million tons of oil per year and will need to extend its pipelines by about 60 percent in the coming years, China Daily reported.

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Closing oil prices, Nov. 19, 3 p.m., London

Brent Crude oil: $50.67

West Texas Intermediate crude oil: $55.71

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(e-mail: energy@upi.com)