OPEC plans to increase its production
Wed, April 23, 2008
ROME -- OPEC plans to boost its oil production target capacity by five million barrels a day by 2012, the organization's secretary-general said yesterday.
Abdalla Salem el-Badri said on the sidelines of an energy forum that members of the Organization of Petroleum Exporting Countries are planning to spend US$160 billion during the next four years to boost production capacity.
OPEC crude oil production is expected to average 32.3 million barrels a day during the first quarter of this year, according to the most recent forecast from the U.S. Energy Information Administration.
El-Badri also said supply and demand issues were being discussed at the forum, but that he didn't expect any agreement on whether prices are too high or too low.
Oil prices rose to all-time highs above US$118 a barrel yesterday on concerns over supplies from some key producers.
A U.S. energy official appeared to indicate that OPEC should consider increasing production.
"Oil prices are clearly too high," Acting Deputy Secretary of Energy Jeffrey Kupfer told reporters at the forum.
Asked if OPEC should boost production, Kupfer replied that the group "should take a look at ensuring sufficient supply in the market. Market fundamentals are tight and we do think it's important to keep the market well-supplied."
Producing countries "should take a look at how prices have reacted. The fundamentals are driving the price," Kupfer added.
El-Badri, however, blamed a weak dollar and speculators for soaring oil prices, which are taking a heavy toll on economies worldwide. He said OPEC members were investing to increase both production and refining capacity.
"Right now, we have 120 projects worth $160 billion just to increase capacity by five million to 2012," he said, referring to production.
El-Badri also said OPEC members plan to invest about US$50 billion to boost refining capacity by about three million barrels a day.
Oil prices are clearly too high.
IF (and that's still a big IF) Ghawar is in fact on plateau or starting a decline, no amount of money Aramco throws at remedial/tertiary production or bringing other insignificant fields online is going to get Saudi Arabia producing any more oil than it is now. What about the other OPEC members? I guess we'll see.