21 January 2014, News Wires – Eni chief executive Claudio Descalzi has urged Opec to act to restore stability to oil prices to avert a future price spike from a collapse in investment that could see Brent rocket to $200 per barrel in years to come.
Speaking on the sidelines of the World Economic Forum in Davos, Descalzi told Reuters Television he expected prices to stay low for 12 to 18 months but then start a gradual recovery as US shale oil production began falling.
Oil prices have sunk by almost 60% from highs of $115 in the summer to below $50 a barrel due to a large supply glut in a price slide that accelerated after Opec decided in November to maintain current production levels rather than cut output to revive prices.
Descalzi said the oil industry is already planning to cut capital spending by 10% to 13% this year as a result of the oil price collapse.
However, he said the world should avoid a further massive drop in investment in oil exploration and production as it would create oil shortages in the future, leading to price spikes.
“A lot of our projects are long term to have production in five or six years. And that is a problem. If you are cutting capex drastically now – we can have a lack of production in four or five years creating a new increased oil price at $200 maybe,” Descalzi said.
“What we need is stability… Opec is like the central bank for oil which must give stability to the oil prices to be able to invest in a regular way,” he said.
The International Energy Agency is predicting a 15% decline in upstream oil and gas investments this year as a result of slumping prices.
Speaking at the Davos forum, the chief economist of the Paris-based inter-governmental energy advisory organisation Fatih Birol forecast a $100 billion slide in upstream investments in 2015, warning that this could have strong implications for markets and prices in the longer term.
Earlier on Wednesday, Total chief executive Patrick Pouyanne said the French oil major is chopping its capital expenditure by 10% with the exploration budget to take an even bigger hit, while stressing there would be no layoffs.