Tuesday, June 7, 2011

A Strong Reason Why Government Should Think Twice Before Increasing Petrol Price

Petronas: Oil prices should remain in US$75-US$85 range

KUALA LUMPUR: Petroliam Nasional Bhd believes crude oil prices should remain within the range of US$75 to US$80 per barrel given the current state of market fundamentals and cost environment.

President and chief executive Datuk Shamsul Azhar Abbas said prices played a pivotal role in resource allocation decisions of both consumers and producers, but were influenced by the actions of central bankers and financial speculators.

“How have we reached these price levels this early in the economic cycle given the absence of any real evidence of shortages in the physical market?” he asked in his keynote address at the 16th Asia Oil and Gas Conference here yesterday.

He pointed out that key crude price benchmarks were in their triple digits, having risen by more than US$25 per barrel in a matter of months, amid the fear of supply disruption in the Middle East and North Africa and a weakening US dollar pushing up the price.

He said the Organisation of the Petroleum Exporting Countries (Opec) spare capacity has fallen below four million barrels per day, while inventory levels of crude oil and petroleum products have come off their highs.

“Global natural gas demand rebounded strongly by 4.9% and LNG demand, an astounding 21%. The buffers in supply that exist today might indeed absorb these demand increase quite comfortably,” he added. Bernama

Shamsul Azhar said Asia would have consumed more than 250 billion barrels of oil by 2030, more than six times its current proved reserves of about 40 billion barrels.

He said geology-based assessments have suggested that the region's mean undiscovered oil resources is in the order of about 50 billion barrels.

“At a recovery factor of 30%, these undiscovered resources would translate into a resource base, one-and-a-half times the combined proved reserves of Indonesia, Vietnam and Malaysia,” he said.

Meanwhile, Pemandu chief executive officer Datuk Seri Idris Jala said the oil and gas industry needs to undergo a structural revamp to keep fuel prices low for its benefit and that of consumers.

“Players in the industry need to have more collaboration on a level playing field as well as compete at the same time,” he said.

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