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World oil output struggling, say Arab experts

Alex Lawler and Peg Mackey, Reuters
Leading figures from the Middle East oil industry added their voices on Tuesday to those warning that the world is struggling to sustain rising oil production.

“There is a real problem — that supply may not be possible to increase beyond a certain level, say around 100 million barrels,” Libya’s National Oil Corporation chairman Shokri Ghanem said at an industry conference.

“The reason is, in some countries production is going down and we are not discovering any more of those huge oil wells that we used to discover in the Sixties or the Fifties.”

Sadad al-Husseini was a key architect of Saudi Arabian energy production policy for more than a decade whilst a top official at state oil firm Saudi Aramco. He was even more pessimistic, saying world oil production had already plateaued.

“We are already three years into level production,” Husseini also told the annual Oil & Money conference, a gathering of top executives.
(30 October 2007)

Middle East can leave oily old cycle in the past

Gary Duncan, UK Times
A new power is taking its place in the world economy. After the disruptive emergence of China and India as key players with a decisive role in shaping global economic events, the Middle East is joining the race to challenge the dominance of the industrial West.

The region has long held sway over world economic developments, of course, by virtue of its control over more than 40 per cent of known oil reserves. But in the past, it has been as much a prisoner of the oil market’s fortunes as the West, its prosperity and progress swinging wildly from boom to bust with fluctuations in the price of crude.

Now, at last, this may be changing. Over the past half-decade, led by the six states of the Gulf Cooperation Council (GCC) – Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Oman and Bahrain – the Middle East has enjoyed its fastest prolonged expansion for almost 30 years.

This sustained boom appears to have transformed radically the region’s economic prospects, opening the way not just for it to enjoy a protracted period of rising prosperity but also for it to exert a more potent influence over global conditions. (29 October 2007)

Iran Adapts to Economic Pressure
Oil Market Could Help It Weather U.S. Sanctions

Steven Mufson and Robin Wright, Washington Post
Confronted by mounting U.S. and U.N. pressure, Iran has been steadily shifting its trade from West to East and, with the benefit of record high oil prices, is likely to be able to withstand the new U.S. sanctions, according to U.S., European and Iranian analysts.

China, a permanent member of the Security Council that can veto any U.N. resolution, is expected to overtake Germany as Iran’s biggest trading partner this year. Germany and other European countries had consistently been Iran’s largest trading partners for more than a decade, according to the Iran Investment Monthly.

…Oil traders said that Iran does an increasing portion of its petroleum sales in euros and yen, instead of U.S. dollars, and often through third parties, to help its customers circumvent U.S. financial sanctions.

“Given particularly the price and demand for oil, Iran clearly has leverage with countries that need Iran’s oil,” said Shaul Bakhash, a George Mason University historian and author of “The Reign of the Ayatollahs.” In addition, he said, “Iran has a huge cushion of foreign-exchange reserves.”

Iran’s oil revenue this year will far exceed the government’s budget forecasts, which had assumed an average oil price of $60 a barrel. On Friday, oil settled above $90. The extra revenue will make it easier for the government to maintain social-services payments designed to bolster its popularity amid economic problems.

Iran has also moved to protect what Leo Drollas, chief economist of the Center for Global Energy Studies in London, calls its Achilles’ heel — gasoline imports.
(29 October 2007)