UPI Energy Watch

Oil prices could reach record highs by 2012

A report from the International Energy Agency suggests that if low prices continue to prevent investments in new oil and gas infrastructure, the industry may experience a capacity shortage in the near future.

Prices reached record highs, near $150 per barrel, in the first half of 2008 and since have fallen to less than $40 per barrel, causing a significant decrease in new project investment, Middle East Business Intelligence reports.

"If we see a continuation of (project) delays and cancellations, a recovery of demand in 2010 or 2011 and strong demand growth, then we may see higher prices than we saw last year," Fatih Birol, an IEA economist, said.

An IEA study of infrastructure spending by national and international oil companies for the year so far suggests a 25 percent decrease in investing from the same time in 2008.

The release of the IEA's report comes not long after an announcement from the secretary-general of the Organization of Petroleum Exporting Countries, Abdalla Salem El-Badri. He said about 35 out of 130 projects in OPEC member nations have been delayed or canceled because of low oil prices.

Despite projections of falling oil demand in the next year, demand is eventually expected to increase again, and a lot of new capacity will be needed to meet it.

Demand is expected to reach about 100 million barrels per day by 2030, according to IEA estimates, making it necessary to add an additional 60 million bpd of new capacity.

The IEA expects demand to start recovering in 2010 or 2011 and, depending on how fast the recovery is, prices could reach $200 per barrel.

Russia, Bolivia talk energy cooperation

During Bolivian President Evo Morales' trip to Moscow, Russian leaders offered to help Bolivia further develop its natural gas industry.

Following the signing of a memorandum of understanding on Feb. 5, the Bolivian government is setting up an implementation plan to industrialize its oil and natural gas industries, ITAR-TASS reports.

Russia's Gazprom and Bolivia's state-owned oil and gas company YPFB will draft the plan for the development of the Bolivian gas industry through 2029 including a working timetable.

Aid also will be given to Bolivia to establish a natural gas research institution.

On the renewable side, Russia's Tekhnopromexport may build several hydropower stations in Bolivia.

Prime ministers seek capital for North Sea oil and gas

The ministers of West Aberdeenshire and Kincardine will meet with Britain's energy and climate-change secretary to try to secure capital for North Sea offshore oil and gas developers.

Sir Robert Smith and Malcolm Bruce want Ed Miliband to make funds available to allow companies to continue exploring new oil and gas finds and to fully develop existing fields, The Press and Journal reports.

There is some possibility of funding through a proposed financial rescue package recently announced by Chancellor Alistair Darling.

The two ministers decided to take action after a report from industry group Oil and Gas U.K. suggested that up to 50,000 jobs in the North Sea oil and gas sector could be at risk because of the bad economy.

Across northeastern Britain the study shows 147,000 jobs that are directly or indirectly related to the North Sea oil and gas industry.

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Closing oil prices, Feb. 16, 3 p.m., London

Brent Crude oil: $44.75

West Texas Intermediate crude oil: $37.47

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(e-mail: energy@upi.com)