TPT September 2008

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September 2008 160 ›
Oil & Gas News
The Middle East is projected to play an
increasingly important role in the
world oil market
According to a new report from a prominent energy consulting firm,
the Middle East is an emergent new export force. As reported by
Marilyn Radler, senior editor-economics of Oil & Gas News, the July
energy brief of FACTS Global Energy says that, in the Middle East,
bumper oil revenues, strong domestic demand growth, an influx
of foreign investment, and the launch of a Middle East sour crude
futures contract have the oil market evolving rapidly.
Ms Radler wrote, “The region plays a role as a major crude supplier
with spare capacity and is exporting increasing volumes of oil
products as its refining capacity grows. As a result, product-trade
patterns in the Middle East will see significant changes, according
to the report.” (‘Middle East Trade Transformation Underway,’
15 July).
Among the company’s findings:
The Middle East is projected to add 3.45 million barrels per day
(bpd) of crude oil production capacity from 2007 through 2012.
With actual production expected to increase 2.8 million bpd over
the period, FACTS estimates that spare production capacity in the
Middle East will rise to 3.2 million bpd by 2012, up from 2.5 million
bpd in 2007.
Meanwhile, production of natural gas liquids (NGL) and condensates
in the region will rise by about 2 million bpd in the same time frame.
Demand for oil products in the Middle East will grow 7.5 per cent
over the period 2006-2010, and 4.3 per cent per year over 2010-
2920.
Some key trends driving petroleum-product demand in the region
include growing petrochemical activity, strong transportation fuel
demand, and rising fuel-oil consumption for power generation.
Middle East oil demand is forecast to grow 2.9 million bpd over
2007-2015.
Meanwhile, Middle East refining capacity is projected to grow by 3.3
million bpd in 2008-2015, with major projects taking place in Saudi
Arabia, Iran, and Qatar. More than 70 per cent of these capacity
additions will be export-oriented.
In total, exports of petroleum products from the Middle East will
increase to nearly 4.4 million bpd by 2015, up from 2.8 million bpd
in 2007.
Exxon Mobil chief ‘surprised by how rapidly and
how high the price of oil ran’
A week in which Rex W Tillerson, the chief executive of Exxon
Mobil Corp (Irving, Texas), sat for an interview with the New York
Times was marked by two events. On July 17, shares of Exxon
Mobil fell to a 52-week low of $79.85. And, on July 19, oil prices had
their biggest-ever drop, falling by more than $16 a barrel over the
previous four days. Still, oil remained at stratospheric levels, settling
at $128.88 a barrel on Friday. The Times’s Jad Mouawad asked
Mr Tillerson to share his views on an increasingly volatile – not to
say erratic – global oil industry. Some excerpts (lightly edited):
Q: Globally, the picture for oil supplies looks pretty bleak. Where are
new supplies going to come from in the next five years?
A: There is an access issue in the US and in many countries
around the world. The problem with supply is one of accessing the
resources in the ground so they can be explored and developed.
That’s a political question. This is something where the United
States has to look in the mirror first.
Q: Aren’t we paying the price for more than a decade of
underinvestment in new oil supplies when prices were low in the
1990’s?
A: This is still an enormously risky business. We don’t advertise our
$100 million dry holes. The costs of our failures are borne by our
ability to be successful in other areas. In the 1990’s there was a big
surplus. You could also say the industry paid a big price for having
overinvested in the 1970’s and 1980’s.
Q: You were an early critic of biofuels, and you once referred to
ethanol as “moonshine”. What role do you see for alternative fuels,
including ethanol?
A: There is no question that we will develop a replacement fuel for
conventional motor gasoline. But we will also develop other ways to
use fossil fuels for transportation that are more efficient and more
environmentally friendly.
Q: Oil prices dropped by $16 in four days. Is the bubble bursting?
A: It is difficult for me to explain or rationalize the high level of oil
prices we’ve seen in the last four to six months. We’ve seen that
kind of volatility in the upside. But it is too early to generalize without
looking at the longer-term trends.
Q: Many energy experts were caught flatfooted by the rapid rise in
prices in recent years. How do you explain it?
A: I was surprised by how rapidly the price ran and how high it ran. It
clearly is a demand-driven price run-up that we’ve seen, especially
in emerging economies because of price controls and subsidies.
We are not seeing the normal market signals responding normally.
That’s one of the causes behind the rapid run-up.
Q: Where do you see your company in 20 years? Will oil and gas
still be your dominant business?
A: Yes. In 2030, oil and gas will represent 60 per cent of the world’s
energy needs. My view is we are going to keep doing what we do
now – finding, developing, and delivering oil and gas to the world.
We will still be doing it in 20 years because people will still be
needing it.
Elsewhere in oil and gas . . .
■ The head of the Organization of the Petroleum Exporting
Countries has warned that any military conflict involving Iran
would bring about an “unlimited” increase in oil prices, as other
OPEC members would be unable to make up the consequent
shortfall in production. Iran, the second-largest producing