Copy of Article from 10/30/08 Posting

Source: The Korea Herald

Retrieved From: Lexis Nexis

Date: October 30, 2008

Title: Saudi Aramco to Raise Output, Remain in Korean Market

Byline: Kim Yoon-Mi

Length: 410 Words

Link to relevant WorldOilNews blog posting here.

Saudi Aramco, the world's largest oil production company, is committed to increasing oil production, even though the Organization of the Petroleum Exporting Countries recently said it would cut output due to falling oil prices, the company's executives said.

The 11-member OPEC's announcement on Oct. 20 to cut oil production contradicts Saudi Aramco CEO Abdullah Jumah's recent statement that the state-owned oil company of Saudi Arabia will bolster output capacity from the current 9.4 million barrels per day to 12 million per day by the end of next year.

"How do they reconcile? We take long-term views, not short-term, trying to ensure market stability through reliability of supply during the crisis," Omar Saleh Bazuhair, chief engineer of Engineering Services at Saudi Aramco, said in an interview with The Korea Herald in Seoul.

"Our program to go to 12 million barrels per day will continue," he said.

Saudi Arabia's overall oil production quantity is determined not by Saudi Aramco but by the government, he added.

Bazuhair and Aramco's public relations department manager Emad M. Al-Dughaither are in Seoul for the company's Asia Business and Culture program.

It is aimed at helping the company's prospective executives expand their understanding of Korean business practices and cultural backgrounds.

Bazuhair said the Korean market is very important for his company because it accounts for about 10 percent of the company's total exports. The Asian market takes about two thirds of Saudi Aramco's exports.

The company became the largest shareholder of local oil refiner S-Oil in 1991 after it purchased a 35 percent stake through its subsidiary Aramco Overseas Company BV.

There have been media reports that global firms operating in Korea as strategic investors might leave the country or reduce their investments in Korean firms, because of the gloomy outlook of the local economy.

Al-Dughaither dismissed any such possibility, saying that Saudi Aramco is strongly committed to the Korean market, as it was during the Asian 1997 financial crisis.

The biggest threat for Saudi Aramco is the decelerating global demand. However, the company is well prepared for the economic downturn, thanks to its extensive experience in the energy sector, Al-Dughaither said.

"We see long-term growth potential. After 75 years of experience in delivering energy, we know that the cycles exist and we know how we weather the cycles," he said.

Copy of Article from 10/29/08 Posting II

Source: Platts Oilgram Price Report

Retrieved From: Lexis Nexis

Date: October 29, 2008

Title: OPEC Warns Oil Price Fall To Hit Projects

Byline: Margaret McQuaile and Jacinta Moran

Length: 828 Words

Link to relevant WorldOilNews blog posting here.

OPEC and oil officials warned October 28 that the recent sharp fall in world oil prices and the ongoing global financial crisis were likely to deter investment in new oil projects, leading to future supply shortages.

"With this low price I guarantee you we will not be able to invest and there will be a shortage of supply in the future," OPEC Secretary General Abdalla el-Badri told the Oil & Money conference in London. He said that if crude prices were to continue around current levels for some time "alternative energies will be out of the market, Canadian oil sands will be out of the market."

Qatari Oil Minister Abdullah al-Attiyah, speaking at the same conference, said he also thought the economic turmoil would result in expensive projects aimed at adding new production capacity being delayed.

"I am seeing that a lot of projects will be postponed. A lot of projects will not exist because the finance is not there," he said, adding this included new refining projects as well as upstream developments. However, it would not apply to Qatar and its planned LNG projects, he said, which are all under construction.

Attiyah's counterpart from the UAE, Mohammed bin Dhaen al-Hamli, agreed, saying it was "now extremely, extremely difficult to finance these expensive projects."

"We need...a reasonable oil price that will stimulate investment," Hamli said. "Costs are rising; it isn't cheap to continue to invest."

Shokri Ghanem, head of Libya's National Oil Corporation and head of the country's OPEC delegation, said OPEC national oil corporations need to obtain $2.4 trillion to expand OPEC production capacity to meet future demand. "The point is, can the NOCs get this money? And if they can't get the money, where is it going to come from?" he asked. "The problem with NOCs is that they are government companies. They are constrained by the budgets allocated to them" by their governments.

The OPEC officials were speaking on the same conference panel as Nobuo Tanaka, executive director of the Paris-based International Energy Agency, who said failure to invest in new capacity could lead to a new supply crunch.

"We have enough below-ground reserves," Tanaka said. But he warned that because of constraints above ground, "supply may not catch up with demand after this recession. We need...investment now...or a supply crunch may come again but in a much more acute way," Tanaka said.

Paolo Scaroni, CEO of Italian energy group Eni, noted that the oil price, which had been around $70/barrel in September 2007, had "more than doubled in nine months and then promptly halved again. These dramatic swings up and down are bad news for everyone."

He added: "Spiking and plunging oil prices certainly make life complicated for oil companies, whether they be international or national, as they try to plan something in the region of $1 trillion of investments over the next five years and provide adequate returns to shareholders," he said.

"When oil prices are lower than expected, planned investments need to be delayed. And when prices rise too high, the surplus cash tends to cause asset price bubbles, which are then pricked when oil prices come down again," he said.

Furthermore, Scaroni said, "oil price spikes and falls have important geopolitical impacts, periodically shifting power between countries which have oil and countries which use oil."

Oil prices have plunged by some $87/b from peaks of more than $147/b in early July, with North Sea Brent trading as low as $59.02/b earlier this week. OPEC agreed at emergency talks in Vienna last week to cut crude production by 1.5 million b/d from the beginning of November.

Eni's Scaroni, meanwhile, called for a new contractual framework for the global oil industry that would recognize the need of producers for stable demand for their resources.

He said the "exact shape and nature" of such a framework would need to be discussed carefully, but suggested the industry could look to natural gas market take-or-pay structures for ideas.

"The time is ripe for the oil industry as a whole, producers and consumers, to move beyond short-term power shifts and work together in the interest of mutually beneficial stability," he said.

"One idea would be to work towards a new contractual framework which ensures producers can count on stable demand for their oil and stable revenues, perhaps taking a leaf out of the take-or-pay structures which are common in the gas market," he said.

"This would give producers rational incentives to invest in exploration and production capacity, to the benefit of consumers, without the fear of being caught out by the downturn and seeing their returns on investment collapse."

It was in everyone's interest "to forsake their short-term interests and work towards a compromise," he said.

"Just as consumers need supply stability, producers need demand stability. And the whole world needs to ensure oil is used rationally and efficiently," he said.

Copy of Article from 10/29/08 Posting

Source: Platts Oilgram News

Retrieved From: Lexis Nexis

Date: October 29. 2008

Title: OPEC Says Oil Markets Need Time To Adjust To Output Cuts

Byline: Daniel Booth, Margaret McQualie, Jacinta Moran.

Length: 533 Words.

Link to relevant WorldOilNews blog posting.

World oil markets need time to react to OPEC's decision last week to cut supply by 1.5 million b/d from November, the cartel's Secretary General Abdalla el-Badri said October 28, adding he was not overly worried by the fact that oil prices had declined further after the deal was announced.

"We just have to give some time to the market to react. This is an abnormal situation," Badri said, referring to the fact that OPEC was trying to restore equilibrium to world oil markets against a background of global financial turmoil.

International crude benchmarks have fallen by some $87/barrel since peaking above $147/b in early July. Earlier this week, North Sea Brent crude futures traded at $59.02/b, its lowest level in 19 months.

Badri, speaking on the sidelines of the annual Oil & Money conference in London, added that if circumstances warranted new action by OPEC, the group would meet again.

Qatari Oil Minister Abdullah al-Attiyah, also particating in the conference, said he thought OPEC was unlikely to call another emergency meeting before its next scheduled conference on December 17 in Oran, Algeria. "I don't think we will meet" before December, he said.

Badri, meanwhile, said OPEC did not like dramatic price movements up and down, and that this kind of volatility was good neither for producers, consumers or investment. "If we have a price decline, then most of our projects will be either delayed or canceled," Badri warned.

Qatar's Attiyah said many companies were requesting delays to their planned cargo lifting dates as the global financial crisis continued to deepen. "We are seeing a lot of lifters ask to start delaying lifting," he said. "Today is the first time we are seeing a global financial crisis...Today we are seeing a lot of oil and no one will buy it."

Paolo Scaroni, CEO of Italian oil and gas major Eni, said the oil industry expected prices to continue to fall. "Everyone in this room is agreed that the oil price will continue to collapse and stay there," he said, adding this could lead to a new price spike three or four years from now.

OPEC's decision to cut production last week drew criticism from consumers, including the UK, whose energy minister Mike O'Brien described the move as "disappointing."

But Badri said the world should not look to OPEC to help find a way out of the current financial crisis. "What surprises me is that everybody is looking to OPEC to bail out this crisis," he said. "Please don't look at us to bail you out."

Meanwhile, the UAE's Abu Dhabi National Oil Company said October 28 it will cut crude allocated to term customers loading in November and December as part of its commitment to OPEC's 1.5 million b/d oil output reduction starting in November.

ADNOC will cut 5% of its Upper Zakum grade loading in November to buyers with long-term agreements, an ADNOC official said. In addition, the producer will cut by between 5% and 15% four grades of crude, including Upper Zakum, allocated to term customers in December.

ADNOC will cut 5% of Upper Zakum term liftings in December, along with a 15% cut in Murban, a 10% cut in Lower Zakum and a 5% reduction in Umm Shaif.

Margaret McQuaile, Jacinta Moran, with Daniel Booth in Singapore

Copy of Article from 10/28/08 Posting

Source: Platts Oilgram Price Report

Retrieved From: Lexis Nexis

Date: October 28, 2008

Title: Despite Cut, OPEC Remains Concerned: Badri

Byline: Kate Dourian

Length: 1095 Words

Link to relevant WorldOilNews blog posting here.

OPEC Secretary General Abdalla el-Badri said October 27 that OPEC was concerned by the continued fall in oil prices even after the group agreed to cut supply by 1.5 million b/d and he did not rule out the possibility of a further emergency OPEC meeting before a planned December 17 gathering in Algeria, Kuwait's official news agency KUNA reported.

It quoted Badri as saying in an interview that the fall in oil prices below $70/barrel would jeopardize all future energy projects and he called on non-OPEC producers Russia, Mexico and Norway to cut oil supply and help OPEC balance markets.

KUNA quoted Badri as saying the October 24 agreement by OPEC in Vienna to slash supply by 1.5 million b/d from next month was "a wise decision at this time."

It said Badri explained that the decision was taken after studying supply and demand data which showed that supply next year would be higher than demand because of the economic crisis "and therefore a decision was taken to try to prevent a further deterioration in oil prices and to stabilize the market."

Badri said he hoped the agreement would help to achieve both these goals but that the producers' club would watch closely market developments in the next few weeks "to determine if there is a need for further action."

He noted that oil prices had fallen by more than 50% since July, when front-month WTI crude oil futures traded at an all-time high of $147.27/b, and said OPEC expected a further weakening in energy demand as a result of the financial crisis.

The group wanted to see "reasonable and fair" oil prices, at a level that serves both producers and consumers.

Badri, who visited Moscow before the OPEC meeting, said he had discussed with Russian leaders the need for cooperation among all producers to stabilize the market at a time of falling demand.

Pointing out that OPEC accounts for just 40% of global supply, Badri said non-OPEC producers Russia, Norway and Mexico "should contribute by cutting production because a fall in oil prices below $70/barrel will affect all energy projects worldwide in the future."

The biggest cut will come from OPEC kingpin Saudi Arabia, which will trim output by 466,000 b/d. The kingdom, which raised supply unilaterally by around 500,000 b/d between June and August this year to meet what it said was higher demand from its customers, already has implemented some cutbacks as demand subsided.

Saudi Arabian oil minister Ali Naimi told the Saudi-owned newspaper al-Hayat on October 25 that Saudi output would fall to 8.6 million b/d in November following the latest OPEC decision.

Naimi explained that the producers' club decided to reduce its collective output target to 27.3 million b/d from 28.8 million b/d to correct a "big imbalance" between supply and demand.

"Through our observation of the market from the supply and demand side, it became clear to us that supply is far higher than demand and we also noticed that global inventories were rising and that if we did not take this action, there would have been a big imbalance in the market and this has nothing to do with price," Naimi said.

He said that one of the reasons for the volatility in oil prices was the surplus in inventories "and this is what we are trying to avoid." Oil prices were being affected by other factors, Naimi added, including speculation, geopolitical tensions and weather-related incidents.

The kingdom had increased production in the summer partly because prices had risen to unreasonable levels and because of higher demand from lifters of Saudi crude, Naimi said, adding that it produced nearly 9.7 million b/d in August.

He did not give any figures for Saudi supply in September. But a Platts survey of OPEC production showed Saudi output fell to 9.5 million b/d last month.

Naimi told al-Hayat that "starting in November, Saudi production will be around 8.6 million b/d," but he gave no indication of volumes produced in October.

"What we have noticed with our customers is that as a result of the global economic slowdown and the bankruptcies of several banks, that they are unable to buy crude because there is no liquidity and this reduces demand for oil," he said. "So when a producer sees lower demand for its crude sales, there is no need to produce volumes that are not wanted and which will only go into storage."

Asked if the global economic slowdown might lead to a further cut in OPEC's production, Naimi replied: "Anything is possible and the problem with predicting this is that it will depend on the state of the world. So if the recession continues and demand for crude oil falls further, there is no doubt that this will require further measures."

But the Saudi minister said he hoped economic conditions would improve and the global economy would grow next year, which would translate into higher demand for crude.

Naimi said the current surplus showed those both in and outside OPEC were producing volumes of oil for which there were no customers. He added: "This is why we took this decision and called on other producers, such as Russia and others, to cooperate with us to prevent a further deterioration in prices...we want all producers to be aware that if prices continue to fall, investment in upstream activity will fall and this could lead to a shock and lower demand in the future when demand growth returns to normal."

Meanwhile, OPEC's number two producer Iran said October 26 the cartel may cut output again if the latest agreement fails to stabilize the oil market.

"Be assured that if the recent decision is not effective on the market, OPEC will take steps to consolidate the market and stabilize prices at its next meeting which will be held in [Algeria] in December," Iran's OPEC governor, Mohammad Ali Khatibi, said.

"Currently some members produce more than their quotas. If these countries observe the quotas, about 500,000 barrels will be cut from the current OPEC production volume," he said as quoted by Iran's Mehr news agency, monitored by the BBC.

The 1.5 million b/d cut agreed in Vienna will be divided among 11 members and made from a baseline of 28.808 million b/d, which is derived by subtracting Indonesia's allocation from the 29.673 million b/d 12-member ceiling set in September 2007. Indonesia will leave OPEC at the end of the year and was not part of last week's agreement. Iraq does not participate in OPEC output pacts.

The decision has so far failed to halt the sharp decline in oil prices. North Sea Brent crude traded as low as $59.02/b on October 27, its lowest level since February 22, 2007.

Copy of Article from 10/27/08 Posting

Source: Oil and Gas Journal

Retrieved From: Lexis Nexis

Date: October 27, 2008

Title: Will Russia Join OPEC

Byline: Eric Watkins

Length: 476 Words

Link to relevant WorldOilNews blog posting.

Much has been said over recent months about the possibility of Russia joining the Organization of Petroleum Exporting Countries. In the coming months, we'll probably hear more, too.

A week or so ago, Qatar's Oil Minister Abdullah bin Hamad Al-Attiyah expressed the hope of seeing Russia one day become a full member of OPEC as it would "add value" to the organization.

"I wish one day to see Russia as a full member of OPEC," Al-Attiyah said in an interview. "Russia as the second (largest) oil exporting country (after Saudi Arabia) has a strong role in the oil market, so if Russia were to join OPEC, it would add value," he said.

But even Al-Attiyah had to acknowledge that his wish has little chance of being fulfilled--at least for the moment. "So far the Russians support cooperation, but they don't talk about full membership," he said.

Rising speculation

Speculation about Russian membership arose after Russia sent its most senior delegation in a decade to OPEC's Sept. 9 ministerial meeting in Vienna. At the meeting, Russian Vice-Premier Igor Sechin proposed extensive cooperation between Russia and OPEC to meet global energy needs.

Sechin said at the time that "a draft memorandum of understanding will be submitted" on the matter to OPEC's leaders. But even Sechin didn't suggest that Russia would consider becoming an OPEC member.

Sechin said that Russia and OPEC aimed to increase the predictability and transparency of "all factors that affect the market conditions." He said it was "impossible to imagine" how global energy security could be strengthened "without a dialogue between Russia and OPEC."

Cooperation could include joint projects between Russian and OPEC national oil and gas companies, joint investments and the sharing of technology, as well as environmental issues, Sechin said. But again, he said nothing about becoming a member of OPEC.

Russians say 'nyet'

With all due respect to our friend Al-Attiyah and other esteemed OPEC ministers, there is no reason to think that Sechin or any other Russian official ever would want to join the organization.

After all, what is OPEC about except creating and maintaining production quotas on its members to ensure that none of them deliberately--or even accidentally--destabilizes prices by adding too much or too little oil to the market.

Frankly, it's a little hard to imagine Vladimir Putin or any of his minions accepting the idea of limits to production imposed by anyone. And that, of course, is exactly what OPEC would want to do with a Russia that already can seriously undermine international markets.

Between Russia and OPEC there is no great love lost. Each side recognizes that it can undermine the other and both sides want the other to know that. At best, we'll see an uneasy cooperation between OPEC and Russia. On the question of joining OPEC, Russia's answer will remain "Nyet."

Copy of Article from 10/22/08 Posting

Source: Platts Oilgram News

Retrieved From: Lexis Nexis, link here.

Date: October 22, 2008

Title: OPEC Secretary General Sees 'Huge Oil' Excess in 2009

Byline: Anna Shiryaevskaya

Section: MARKETS & DATA; Pg. 10 Vol. 86 No. 209

Length: 627 words

Link to relevant WorldOilNews blog posting here.

Moscow

OPEC Secretary General Abdalla el-Badri said October 21 there would be a "huge" overhang of oil in 2009 if action was not taken to bring oil markets into balance, and that while OPEC would try to balance the market, it might not be able to do so on its own.

Speaking to reporters in Moscow, Badri would not be drawn on the likely outcome of the oil producer group's emergency talks later this week in Vienna. Asked whether OPEC would agree to cut production and how any cut might be distributed among members, he said: "It has not been decided yet."

He said OPEC would try to balance the market but might not be able to do so without the help of non-OPEC producers.

"From the numbers we have there will be excess supply at the end of 2008" and the first and second quarters of 2009, Badri said.

"If things keep as they are now, there will be a huge oil excess in 2009," he said. "OPEC will try to balance the market, but OPEC alone may not be able to do it."

OPEC's Algerian President Chakib Khelil October 20 called on major independent producers Russia, Norway and Mexico to help share the pain of any output reduction.

Asked whether OPEC would ask Russia to cut exports in line with any OPEC decision to cut output, Badri said: "No. I am sure that they have information and that they will decide themselves."

Badri said OPEC had not been asked officially by any consumer country not to reduce output. "We have not received any official requests from any country," he said.

He rejected any suggestion that the group should refrain from taking action to prevent oil prices from falling further for fear of harming the fragile global economy. "We cannot bail [out] the financial crisis created by Mr. Gordon Brown and others in the United]States," he said, referring to UK Prime Minister Gordon Brown, who last week said it was "absolutely scandalous" that OPEC was considering cutting output (ON 10/20).

"If Mr. Brown is really concerned about his citizens he should really look into the taxes he imposes. He should really try to reduce the tax," he said, referring to the high taxes levied on refined products by Britain and other European governments.

Badri continued: "I have no doubt that the financial crisis created in the [United] States and then spread to the EU and other countries will affect everybody. Some of them will be very affected, some of them will be touched. But everybody will see the heat one way or the other."

The Chinese, Badri said, would be least affected by the financial crisis. But, he said, "they are not immune."

Badri declined to indicate what price level or range OPEC would defend, saying only that the group wanted neither a very high nor a very low price.

OPEC had insisted during the runup to July's records that oil prices were being driven by a number of non-fundamental factors, including speculation on futures markets. During his Moscow news briefing, Badri called for speculation to be controlled.

"We have been seeing at the end of 2007 and in 2008 abnormal speculation in the market, and people should really control it," he said.

Badri arrived in Moscow October 21 for talks with senior Russian officials and to participate in a conference and workshop. His agenda will include discussion of a Russian proposal for cooperation between Moscow and OPEC.

"Russia is a very important oil producer," he said. "We are interested in what Russia is doing and Russia is interested in what we are doing."

There were a lot of challenges in the oil and financial markets as well as technology and the environment, and OPEC and Russia would examine how they might cooperate to tackle these challenges, Badri said.

Russia will not attend OPEC's October 24 meeting, Badri said, noting that no observers would be present.