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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Linkdog who wrote (44875)	5/17/1999 2:48:00 PM
From: Think4Yourself	Respond to of 95453

Warning of oil supply crunch as majors cut costs Monday May 17, 2:18 pm Eastern Time LONDON, May 17 (Reuters) - Cut-throat competition in a world oil business concentrated in the hands of supermajors could quickly cause a shortage in world oil supplies, an industry report warned on Monday. Stampeded by last year's oil price slump into joining forces and slashing costs, the big multinational companies now were in danger of letting supplies lag the growth in world oil demand, said Richard Shepherd of Aberdeen consultancy Petrodata in a new monthly research report. ''International oil companies are tending to drop their production growth targets now in favour of defending their net income and return on capital employed against the predatory acquisition ambitions of their competitors,'' said Shepherd. A spate of mergers was concentrating industry power in the hands of three supermajors -- Exxon-Mobil (NYSE:XON - news) (NYSE:MOB - news), still to be approved, BP Amoco (quote from Yahoo! UK & Ireland: BPA.L) and Royal Dutch/Shell (quote from Yahoo! UK & Ireland: SHEL.L) and other companies may be forced to follow suit. The oil companies were seeking their growth from mergers and acquisitions rather than from expanding production of oil and gas, the report said. To compete, others would need to adopt similar business strategies to keep the investment community content. ''In other words, oil companies will sacrifice production growth for short term financial performance. If they do not, they risk being swallowed up by those who keep their eyes on the stock price and not on the drilling programmes,'' it said. Petrodata, which monitors the status of every new offshore oil project, said development work had fallen behind schedule in most parts of the world. Of 161 projects scheduled in 1999 and 2000 only 40 percent had reached the stage where they were actually under contract for development. ''In practical terms much of the contracting work required to deliver net growth in non-OPEC oil production is simply not happening at the moment,'' it said. ''The forecast for total non-OPEC supply includes as much as 750,000 bpd due in the market in 2000 which is not yet contracted.'' Oil demand growth, though still slow after the Asian financial crisis, is expected to add 900,000 barrels a day (bpd) to world oil consumption next year to 74.8 million bpd, the International Energy Agency estimates. Analysts expect a further 1-1.5 million bpd of demand growth in 2000. While new projects are at risk, falling investment among oil majors also would accelerate the rate of decline of mature oilfields, said Petrodata's Shepherd. Winners as a result of industry competition could be members of the Organisation of the Petroleum Exporting Countries. OPEC's emergency response to the lowest oil prices in a generation has seen nearly four million bpd removed from the market in little more than a year -- leaving the cartel with about six million bpd of spare capacity. OPEC says it wants to revive $18 a barrel oil after suffering prices at $10 earlier this year but to avoid prices rising too high for fear of sparking another boom-bust cycle on the market. (Richard Mably, London newsroom +44 171 542 6280 email london.energy.desk@reuters.com))