OPEC freezes oil-drilling projects as oil prices crash

11 February 2009

With oil prices tumbling in the past seven months, OPEC members have collectively frozen 35 of the 150 planned oil-drilling projects, as the current global economic turmoil has weakened global demand for oil resulting in oil prices crashing and is threatening the long-term investments in the industry.

OPEC Secretary General, Abdalla Salem El-Badri speaking at the London's Royal Institute for International Affairs said that out of the 135 projects due to come on stream in the next few years, OPEC members have put 35 projects on hold to after 2013 as the "Current prices threaten the very sustainability of planned investment."

"These projects are on hold…and will continue to be until the (oil) price recovers and the start-up dates of many other projects are still expected to slip," said El-Badri, adding that the price of oil has crashed to $40 a barrel from a record of $147 a barrel in July due to which, OPEC has lost approx $356 billion and the income will be less by 50 per cent this year.

He did not say as to how much the 35 projects that have been postponed would have added to the production but analysts believed that one the major factor was that the demand would be low even after the world economy recovers and OPEC's production capacity anyway has increased since the past eight years.

But Mohammed bin Dha'en al Hamli, the energy minister of UAE said in a speech at Chatham House, a London-based think-tank, that if the current oil prices continued to remain low in the near future, ''large supply shortages will develop when the present economic woes are over.''

According to him that with OPEC delaying investments in oil projects would make the producers and consumers suffer in the long run.