Lukman says oil prices "worrying" for consumers, producers

Lukman says oil prices "worrying" for consumers, producers

London (Platts)--21Jun2005


A former OPEC president and secretary general Tuesday said the current spike
in crude oil prices was not due to a shortage of crude but a decline of
production capacity caused by a long period of under-investment. "It is very
important over the next few years to invest in exploration and production
development to create new capacity," Rilawnu Lukman told delegates at a
CWC-organized African oil and gas conference. 

The 1998 and 1999 price collapse or "stagnant prices" threw the industry into
a deep recession and reduced the incentive to invest in capacity. Lukman, who
now heads the newly-launched African minnow Afren, said prices close to
$60/bbl were both "extremely worrying" for both producers and consumers. While
global economies appeared to be bearing the brunt of the spike, he said it was
still "important to make efforts to moderate" prices. Surging demand from
China and India where economies are rapidly expanding had contributed to price
hikes, he said.

"The strain is quite high," despite global production of 84-mil b/d, which he
said was "a hell of a lot of oil." US prices shrugged off OPEC's decision to
increase output limits and rose above $59/bbl this week on concern producers
may struggle to meet rising fuel demand in the second half of the year. OPEC
agreed to raise formal production quotas by 500,000 b/d at its June 15 meeting
to 28-mil b/d. The group's Kuwaiti president Sheikh Ahmad al-Fahd al-Sabah
said consultations on a further 500,000 b/d increase would start on Friday
increase should prices stay high. 

While the Gulf of Guinea is unlikely to replace the Middle East as a source of
oil to the US, the region is still "set to become a huge area of activity,"
Lukman said. Increasing instability in the Middle East have led Washington to
show greater interest in the region, a continent it has largely dismissed as
being of no strategic importance. About 15% of US imports come from West
Africa and that figure is projected to rise to 25% in the next 10 years.

This story was originally published in Platts Global Alert 
http://globalalert.platts.com

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