UPI Energy Watch

IEA says oil has not fallen far enough

The price of crude oil has fallen drastically since July when it edged near $150 per barrel, but according to a recent announcement from the Paris-based International Energy Agency, the world economy could be hit with a global recession if the price of oil stays above its recent $90 a barrel, The Telegraph reported.

Economic concerns pushed oil prices back up from below $90 per barrel to near $95 per barrel. Barclays Capital estimates the average price in the third quarter will be $97.50 a barrel.

IEA Executive Director Nobuo Tanaka said economic growth depends on how oil prices affect emerging economies. Until recently, there was little sign of a slowdown in nations like China and India.

In many Western countries, Europe and the United States, however, there is a slowdown. Oil consumption in the United States has fallen since oil hit record-high prices.

Many analysts have pointed to supply and demand as the main reason behind the price fluctuations. At their last meeting, the Organization of Petroleum Exporting Countries decided to cut output by 520,000 barrels per day.

Tanaka said he has asked OPEC not to cut any additional production when they meet in December.

According to the IEA, oil supplies are tight and some analysts believe oil could reach $200 per barrel on growing demand from developing countries.

India, China win gas block

A joint venture between India's Reliance Industries, China National Petroleum Corp. and Argentina's Pluspetrol announced that they won the rights to explore for natural gas in Peru's Block 155. The block is located in Puno, near the border shared by Bolivia, Top News India reported.

Reliance Exploration and Production DMCC, a fully owned subsidiary of Reliance Industries, is participating in the exploration as part of RIL's efforts and goals to expand their presence in Latin America.

Jindal Steel and Power Ltd. also joined a venture with Enigma Oil and Gas Exploration Ltd. to win onshore blocks 147, 159 and 153 in Peru's bidding round that auctioned 22 new oil and gas blocks; only 17 blocks were sold.

Reliance-CNPC-Pluspetrol will pay a 24.58-percent royalty to the Peruvian government, and Jinda-Enigma will pay between 30.02 percent and 32.03 percent in royalties.

ONGC to up investments in exploration

India's state-owned Oil and Natural Gas Corp., in the face of mass shortages throughout the country, announced it will invest $4.2 billion in oil and gas exploration this fiscal year. That is reportedly a 10-percent increase over the company's investment last year, the Press Trust of India reported.

"Improving the reserve replacement ratio by intensifying exploratory efforts is company's first priority," said ONGC Chairman R.S. Sharma. "Improving recovery factor, arresting decline in mature fields and expeditious development of discovered fields are the other priorities."

He also said ONGC will invest more than $5 billion in developing gas finds in eastern offshore Krishna-Godavari basin blocks and will increase its investments in solar and geothermal energy. ONGC is currently discussing the possibility of a new solar farm with four different U.S. firms.

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

Brent Crude oil: $95.05

West Texas Intermediate crude oil: $99.89

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(e-mail: energy@upi.com)