UPI Energy Watch

Oil demand is expected to continue to drop

The International Energy Agency suggests in its most recent report that oil demand in 2009 will fall at the highest rate since 1982.

The latest projection for the coming year is 87.4 million barrels per day, down 1 million bpd from 2008 demand and 570,000 bpd from the IEA's January projections, the Financial Times reports.

The IEA points to the global economic recession as the reason for the decrease in demand.

In addition to the steepest decline in recent history, 2009 also will make the last two years the first two-year decrease in demand since 1982 and 1983.

Demand is falling not just in the United States but also in countries that recently were growing rapidly, like China. In China, demand growth is expected to slow drastically this year.

The IEA also commented on the production cuts by the Organization of Petroleum Exporting Countries, saying that unless demand falls further than projected, there likely will be a supply shortage by the end of 2009.

OPEC cut its production levels by 4.2 million bpd during the last six months of 2008 and has said it would likely discuss additional production cuts at its March 15 meeting.

Non-OPEC oil production could decrease too, because of rising costs of production and the low cost of oil.

Polar Star Canadian Oil and Gas to buy Calgary's Tusk Energy

Another merger as a result of the economic slowdown, Calgary oil and gas junior Tusk Energy announced it has agreed to a $257 million offer from Polar Star Canadian Oil and Gas Inc.

Tusk, like many other small oil and gas firms, has been struggling with the rising prices of oil and natural gas production and the low price of selling oil and gas, the Calgary Herald reports.

Polar Star is owned by the Teachers Insurance and Annuity Association of America. The U.S. insurance firm is the largest provider of retirement plans to educational institutions in the country.

Polar Star will pay $194 million in cash and inherit $63 million in debt, according to the deal Tusk released.

The agreement comes shortly after French company Total made a hostile bid for Canada's UTS Energy Corp., Canadian newspaper The Globe and Mail reports.

"This is probably just the tip of the iceberg," said Jim Davidson, chairman and chief executive officer of Calgary's FirstEnergy Capital Corp. "There are a lot of other purchasers and sellers that are waiting."

Libyan National Oil Co. will recover stake from Total

The Libyan National Oil Co. announced it has signed a memorandum of understanding with French company Total to increase Libya's stake in Total's ventures in Libya.

Libya will now have a greater stake in Total's work developing the Mabrouk perimeter in the Syrte basin and the marine plateau perimeter in northern Tripoli, Afriquejet.com reports.

Under the agreement, the two will work more on developing offshore resources and Libya will have more control over its resources than it did under the previous agreement with Total.

The memorandum was signed in Tripoli by Choukri Ghanem, secretary of the Libyan National Oil Co. steering committee, and Christophe de Margerie, managing director of oil exploration and production for Total.

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Closing oil prices, Feb.11, 3 p.m., London

Brent Crude oil: $45.15

West Texas Intermediate crude oil: $38.14

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(e-mail: energy@upi.com)