Restrained oil investment seen in biofuel push

Bob Tippee

When the head of the Organization of Petroleum Exporting Countries warns that a global rush toward biofuels might push oil prices "through the roof," is he issuing a calculated threat or a serious warning?

According to a June 5 report in the Financial Times of London, OPEC Sec. Gen. Abdalla El-Badri said OPEC members might trim their investment plans in response to efforts by industrial countries to raise production of biofuels.

OPEC's most important exporters face huge investment requirements as rising global consumption and limits on production elsewhere raise demand for their crude.

Their problem is determining how much to invest now in order to meet demand years from now, which requires knowing what demand will be, which is impossible.

The difficulty is of course complicated when governments of the largest consuming countries orient policy to using less OPEC oil and more of costly alternatives.

Claude Mandil, head of the International Energy Agency, was quick to point out that the biofuels contribution to total energy supply will remain small and that requirements for OPEC oil will continue to grow.

He should know. But he doesn't have to risk the hundreds of billions of dollars that the world needs OPEC members to invest in production capacity if energy needs are to be met a decade or two from now.

A seemingly unrelated but similar threat—or warning, as the case may be—cannot have raised the confidence of OPEC's investors.

The statement came June 7 from Charlie Drevna, executive vice-president of the National Petrochemical & Refiners Association, at a US House subcommittee hearing on alternative fuels.

"The domestic refining industry is likely to look upon rapidly rising ethanol and other biofuels requirements in the coming years as adding significantly more risk to investments in capacity expansions," he said. In the past year, he noted, projections of US refining-capacity additions during 2006-10 have fallen to "well below 1 million b/d" from 1.5 million b/d.

OPEC members know from painful experience that US refiners don't buy crude they can't process.

Manipulative threats or serious warnings? Check this space 25 years from now.

(Online June 8, 2007; author's e-mail:

Related Articles

LNG Ltd. unit appoints top executives

04/07/2014 Liquefied Natural Gas Ltd. has named John G. Baguley as chief operating officer and Rick R. Cape as chief commercial officer for the company’s whol...

Ultra Petroleum selects senior vice-president

04/01/2014 Ultra Petroleum Corp., Houston, has appointed Brad Johnson to succeed William Picquet, who will retire from the company at the end of the month, as...

Columbia Pipeline names chief executive officer

04/01/2014 Columbia Pipeline Group (CPG), a unit of NiSource Inc., has named Glen L. Kettering as its executive vice-president and group chief executive offic...

New Gulf Resources appoints chief executive officer

04/01/2014 New Gulf Resources LLC, Tulsa, has appointed Ralph A. Hill as chief executive officer and chairman of its board. He previously served as chief exec...

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected