GLENEAGLES, Scotland, 9 July 2005 — G-8 leaders said yesterday they saw no end to the demand that has driven oil prices sky-high and called for more investment in refining as well as greater access for foreign investors to oil-rich states. “Significant investments will be needed in the short-, medium-, and long-terms, in exploration, production, and energy infrastructure to meet the needs of a growing global economy,” they said in a statement at a summit in Scotland.
Oil prices hit a record $62.10 a barrel on Thursday and are now about three times as high as their 2001 low point, raising fears of inflation and reduced economic growth in both the rich G-8 countries and in many other largely oil-importing regions.
Surging demand from booming China is a major factor in fueling demand. “We encourage oil-producing countries to take all the necessary steps to foster a favorable investment climate sufficient to support strong global economic growth,” the G-8 statement said. “In particular, oil-producing countries should ensure open markets with transparent business practices and stable regulatory frameworks for investment in the oil sector, including increased opportunity for foreign investment.
The G-8 comprises the United States, Japan, Germany, Italy, Britain, France, Russia and Canada.
Despite their economic weight, some analysts believe the oil-rich states will want to invest themselves rather than open up to the big oil companies. “High oil prices mean oil producers are more likely to do it alone because they can self-finance most of the projects,” said Valerie Marcel, an energy expert at the Royal Institute of International Affairs. “The (G-8) communique just adds to the ongoing discussion between consumers and producers whereby consumers are trying to impress on producers that they need to increase capacity.” The G-8 leaders also said they would take steps to promote more investment in refining, something the big oil companies are not rushing into, but they did not say what they might do. “We agree to consider measures to encourage the expansion of refinery capacity,” their communique said. No new refinery has been built in the United States in the last 30 years.
The G-8 appeal to oil-rich states to open up more to foreign investment marked a more strident tone than declarations that the group had initially considered issuing.
Meanwhile, Russian President Vladimir Putin promised yesterday that his country will increase its oil exports and said energy policy would be a key theme of the Russia’s G-8 presidency in 2006. “Russia is constantly increasing the supply to world markets,” he told reporters after the conclusion of the Gleneagles summit of G-8 leaders. “We will increase our supply of crude and work to develop nuclear energy,” he said.
Russia currently produces about 470 million metric tons a year, of which 230 million metric tons are exported. Putin said this figure would rise to between 250 million and 270 million metric tons. A metric ton is the equivalent of about 6.9 barrels of oil.
Putin gave no timeline for the increase, but described a series of projects under way to augment Russia’s energy transport capacity — its perpetual Achilles heel. Russia’s capacity to export its abundant oil and natural gas supplies has been hobbled by its limited and obsolete pipeline system. To boost that capacity, it will have to invest in infrastructure upgrades, in particular in the area of liquefied gas transport and completion of oil pipelines to terminals where large tankers could be accommodated.
Putin said he had promised his fellow G-8 leaders that Moscow would do its utmost to provide enough transportation infrastructure to supply energy to its partners, both pipelines and railways.
Putin described the plans for constructing a pipeline to Far East Russia, which would reach both China and the Pacific Coast for shipment onward to Japan, and from Siberia to the White Sea to supply a sufficient amount of Russian crude to the North American market.
He said China would be supplied with about 20 million metric tons of oil a year, and Japan — which would be supplied by rail for part of the stretch — with about 10 million metric tons.
