U.A.E. Concerned That Oil Glut May Curb Exploration, OutputAnthony DiPaola and Mahmoud Habboush
The collapse in oil prices may deter investment in exploration and production projects predicated on $100 crude, according to Suhail Al Mazrouei, energy minister of the United Arab Emirates.
“What worries us is that some investors will not continue to invest,” Al Mazrouei told reporters in Abu Dhabi. “Not us, others, are not going to continue to invest. And in a few years, we’re going to face difficulties finding enough investments in the market.”
Oil has fallen into a bear market this year on increased output of U.S. shale and other supplies. The Organization of Petroleum Exporting Countries, including the U.A.E., will meet Nov. 27 to assess the market and production. Saudi Arabia and Kuwait have resisted calls for the group to cut production, while Libya, Venezuela and Ecuador have asked for action to keep prices from falling lower. Brent crude has tumbled 29 percent since June 19.
“This isn’t the first time that we see a drop in the market,” Al Mazrouei said yesterday. “If this is a phenomenon that’s going to last, it will affect some future investment, especially in the more expensive oil developments. If this is a short fluctuation, we’re not going to be panicking. And we never panic.”
Brent lost 54 cents to $81.13 a barrel on the London-based ICE Futures Europe exchange at 12:21 p.m. Singapore time. The contract, which expires tomorrow, closed at $81.67 yesterday, the lowest price since October 2010. West Texas Intermediate declined 51 cents to $77.43 a barrel.
The oil industry is over-committed to capital expenditure and will probably need to reduce spending on exploration and production next year, Wintershall AG Chairman Rainer Seele said yesterday at a conference in Abu Dhabi. Oil at $80 a barrel won’t stop BP Plc or Total SA from exploring for and developing crude, BP Chief Executive Officer Robert Dudley and Arnaud Breuillac, Total’s president of exploration and production, said Nov. 10 at the same conference.
Many companies made investment decisions over the past three or four years on the premise that crude would sell at $100 a barrel, Al Mazrouei said.
“There is a concern, but the long-term investors will continue investing in those large projects,” he said. “Some who are producing at a higher oil-price assumption, they will suffer.”
The oversupply of oil “didn’t come from us,” Al Mazrouei said of the U.A.E. and OPEC, which provides about 40 percent of the world’s oil. “We kept the market balanced. So we need to wait to see. Now OPEC members are meeting to discuss.”
The group exceeded its official target of 30 million barrels a day by 974,000 barrels a day in October, according to data compiled by Bloomberg.
“No single country can give you an indication of the result” of OPEC’s decision before it meets this month in Vienna. “We’ve been wise in much more difficult times than this. Let’s wait for that meeting,” Al Mazrouei said.