West depends on O.P.E.C.

Press, 8 May 1982, Page 21

West depends on O.P.E.C.

NZPA-Reuter Orlando Florida Western oil companies will be dependent on the Organisation of Petroleum Exporting Countries until the end of the century, the president of Mobil (Mr William Tavoulareas) told the annual meeting in Orlando yesterday. ■ The oil companies will need to buy about 16 million barrels per day in the second quarter to meet a shortfall of oil supplies from other sources. Other sources could supply about 23 million of the 43 million barrels per day needed by non-communist nations in the quarter, with another four million b.p.d. coming from the Soviet Union and from stocks. Mr Tavoulareas defended Mobil’s unprofitable agreement to buy oil from Saudi Arabia rather than take cheaper crude from the spot market, although this was penalising the company by “many millions of dollars, perhaps hundreds of millions.” Mobil is one of four American oil giants that are

partners in the ArabianAmerican Oil Company (Aramco). They have had to buy Saudi oil at the O.P.E.C. bench-mark price of SUS 34 per barrel although the freemarket price of Saudi light crude has been pushed several dollars lower by the world glut. It is now about $33 in Rotterdam. Mr Tavoulareas told the annual meeting of shareholders: “We do not believe it is wise to assume we can meet our enormous crude needs without long-term and stable supply arrangements. “A temporary glut should not make us forget oil is a dwindling resource and the companies with access to it are the ones that will be more able to supply their customers and maintain their earnings growth." The relatively short-term penalty Mobil would pay because Saudi oil at present costs more than non-O.P.E.C. spot crude, was “a price we must pay for aft long-term arrangement with a country which owns a "quarter of the free, world’s oil reserves and has proven itself over the

years to be a reliable supplier at moderate prices,” Mr Tavoulareas said. Mobil. America’s second largest industrial company, last week reported earnings ' in the first quarter of this year at $326M — a 49 per cent drop from 1981. Mr Tavoulareas's estimate of continued world dependence on the O.P.E.C. nations for 16 million b.p.d. until the end of the century suggests the oil exporters’ group is unlikely to see world demand increase much from present levels, The O.P.E.C. nations’ output has been cut one-third by the glut and last month was estimated at 15.85 million b.p.d.. the lowest for 20 years. The chairman of Mobil (Mr Rawleigh Warner), reviewing last year’s unsuccessful bids for the Conoco and Marathon oil companies, said: “We are still, after all the litigation, left in uncertainty as to whether a company of our size may buy another oil company with refining and marketing assets.” After long battles, Conoco went to Dupont and Marathon to U.S. Steel.