x Abu Dhabi, UAESaturday 22 July 2017

Algeria says current oil prices are ‘reasonable’

But crude prices are likely to rise in the long-term as production costs escalate, according to Peter Voser, the chief executive of Royal Dutch Shell.

Dr Thani Al Zeyoudi, director of energy and climate change at the Ministry of Foreign Affairs, speaks during the World Energy Congress in South Korea. SeongJoon Cho / Bloomberg News
Dr Thani Al Zeyoudi, director of energy and climate change at the Ministry of Foreign Affairs, speaks during the World Energy Congress in South Korea. SeongJoon Cho / Bloomberg News

Algeria’s energy minister said yesterday that current oil prices were “reasonable” and it was too soon to predict whether Opec might change its output target at its meeting in December.

Opec, which pumps more than a third of the world’s oil, meets on December 4 in Vienna to decide whether to adjust its output target.

“We will see when we meet early December. We will study the market and we will decide,” Youcef Yousfi said on the sidelines of the World Energy Congress, when asked about next year’s Opec production.

Brent crude prices have traded in a range of between US$107 and $112 a barrel in the past four weeks after spiking above $117 in August on disruption of Libyan supply and the prospect of western military action against Syria.

Africa’s biggest gas producer was producing around 3 trillion cubic feet per year of gas and 1.2 million barrels per day of oil, the minister said, adding production was “stable”.

Algeria would launch bidding for onshore blocks in a few months, he added, declining to give details on the blocks that would be offered.

The North African country expects to double its gas production in the next seven to 10 years after making a number of significant oil and gas finds in maturing and new fields, the minister said earlier this month.

The Opec member is a major supplier of gas to Europe, although strict licensing terms have seen major investments freeze up in recent years.

An attack on a gas plant in the Sahara desert in January also triggered an exodus of expatriate workers and forced energy companies to strengthen security.

“We have taken very tough measures in order to secure all of the infrastructure in the southern part of the country … We don’t have any big concern about that, because, for example, the military have taken charge of security problems on our borders,” Mr Yousfi said during an address at the conference in Daegu in South Korea.

Meanwhile, oil prices are likely to rise in the long-term as production costs escalate and a “good value” for oil is at around $100 a barrel, according to Peter Voser, the chief executive of Royal Dutch Shell.

“If you look long term, the oil price in our opinion will rise because it will be technically speaking more complex to develop the resources,” Mr Voser said at the conference, adding that non-technical costs of engaging with communities and governments will also increase.

He said the cost of producing oil and gas in countries outside the Middle East is particularly high, and the long-term oil price needs to be a $100 per barrel or even more in some countries.

“Non-Opec gas will have to flow as well and for that you need a certain price,” he said.

Mr Voser echoed the opinions of oil producers who have previously said that crude-oil prices need to be above $100 a barrel to sustain jobs and industries, even in key producers like Saudi Arabia that need the revenue to boost rapid urbanisation.

Angola has 13 billion barrels of proven oil reserves, the country’s vice minister for petroleum, Anibal Silva, said yesterday, almost 4 million barrels more than the estimates made by Opec.

“Right now our crude production is about 1.7 million barrels per day (bpd) and our reserves are almost 13 billion barrels,” Mr Silva said in Daegu.

Opec said in its annual statistical bulletin that Angola had 9.06 billion barrels of oil reserves at the end of last year.

Mr Silva said the country will increase its oil production to 2 million bpd by 2015 from the current 1.7 million bpd.

Angola, which initially intended to increase its oil production to 2 million bpd this year, expects its production to average 1.75 million bpd by the end of 2013, he added.

Brent crude slid for a third day yesterday as investors weighed the likelihood that international talks with Iran on the country’s nuclear programme may help to ease sanctions that have curbed its oil exports.

Futures fell as much as 0.3 per cent in London while West Texas Intermediate crude dropped for the second time in three days in New York. Diplomats from western nations were set to meet their Iranian counterparts in Geneva yesterday for two days of talks, the first round of negotiations over the programme since Hassan Rouhani was elected president. Brent may slip below $100 a barrel for the first time since June, should discussions lead to an easing of the sanctions.

“There’s still a long way to go with Iran,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. Investors will be watching for “any news or concrete discussions that increase the likelihood” of the removal of sanctions, he said.

* Reuters and Bloomberg News