Oil-price war pressure up

Press, 26 February 1983, Page 1

Oil-price war pressure up

NZPA-Reuter Paris Ministers of four key oilproducing countries ended a series of meetings early yesterday as pressure built up for co-operation by the Organisation of Petroleum Exporting Countries and those producers outside the group to avoid a price war. Venezuela's Oil Minister. Dr Humberto Calderon Berti. Algeria’s Belkacem Nabi. Kuwait’s Sheikh Ali al-Khal-ifa al-Sabah. and Mr Francisco Labastida, of Mexico, spent an evening of talks at the Kuwaiti Embassy in Paris. Earlier, the Venezuelan and Algerian Ministers had held bilateral talks while the Mexican and Kuwaiti Ministers held separate discussions. Officials said they expected no formal statement from the four after their talks at the embassy. Earlier Dr Calderon had told reporters that the oil producing countries, hit by a continuing slump in world demand for oil. must start a dialogue with consumers in order to establish principles for future long-term relations. In London earlier yesterday another Venezuelan delegation held, talks with

Britain, the main North Sea producer, and intended to hold talks with Norway. The surprise Paris talks came a day after the Gulf States decided on a cut in their $34 a barrel price in response to price reductions by Britain, Norway and O.P.E.C. member Nigeria. Venezuelan officials see British co-operation, however tacit, as one of the key elements in averting a price war. British industry sources said in London that it was difficult to see how Britain could co-operate with O.P.E.C. on pricing and production without changing its whole market strategy. British policy is to produce at maximum capacity and sell its oil at prices dictated by the market. Asked whether Venezuelan officials had put forward specific proposals in talks with British officials, Dr Calderon said: “No, we are just starting our discussion.’’■After his meeting with the Kuwaiti Minister, Mr Labastida said. “We had a long conversation.lasting one-and-a-half hours which I would characterise as fruitful and cordial. “This exchange of views of oil producing countries must

help to stabilise the market. Instability is not in the interests of either the oil producers or the consumers.” he said. There was no indication from the Mexican delegation as to' whether they would go ahead with a price cut which was originally scheduled for today. The presence of Mexico at the Paris talks fuelled speculation that it might be considering joining the strifetorn O.P.E.C. But Mr Calderon said. “I do not believe that Mexico is going to join." The spotlight now is likely to be on Iran, Nigeria and Britain, A Tokyo report, on which Iranian officials had no immediate comment, said Iran planned to cut its oil prices to between SUS2 and SUS 3 below any reduction in the SUS 34 a barrel price of Saudi Arabia's Arab light, the current O.P.E.C. marker crude. Oil industry sources gave credence to the report by the Kyodo news agency on the grounds that Iran was already offering substantial discounts and would have- to cut prices further to maintain market share.

Nigeria meanwhile said it was willing to attend emergency O.P.E.C. talks on averting a price war as long as it had assurances of cooperation from Mexico and the North Sea producers. Industry sources said Britain might have to rework its entire oil marketing strategy if it was to respond to appeals from O.P.E.C. to co-operate on pricing and production. Britain now produces more than two million barrels of oil a day from its North Sea fields, some 5 per cent of non-Comtaunist world demand. A decline in the world market for oil forced the British National Oil Corporation to recommend a SUS 3 a barrel cut in its prices last week. 8.N.0.C. made the move reluctantly, under pressure from buyers and suppliers, after holding out in the hope that one of the 13 O.P.E.C. countries would take the first step in trimming official prices. Nigeria's decision to bring its oil price down to the new North Sea level prompted the present pricing crisis. The British Government did not see a coPlapse in the world oil price and the consequent loss of revenue. At the same time, it was committed to an independent policy of producing

North Sea oil at maximum capacity. British governments are virtually committed to not shutting down oil production, at least until oil companies recoup their huge capital investment in North Sea ■ fields. In accordance with the assurances, the Government was committed to allow maximum output until 1982 or for at least four years after the start of production in any particular field. The present Conservative Government last year extended the deadline and said it has no intention of cutting back production until 1985 at the earliest. Cutting back output in order to tighten the world market for oil would be one way for Britain to help 0.P.E.C.. which is bearing the brunt of the present world oil glut. But analysts say the main loser from a cutback would be the British Government, which pulls back a total of almost 90 per cent of North Sea takings in taxation. Britain’s policy of maximum production is linked to ■ the belief that there will be little movement in the real price of oil between now and the time North Sea fields start to run dry in the 19905. It is therefore considered sound economic sense to try and get the oil out of the ground as quickly as pos- i sible. ’ But the pressure from O.P.E.C. for Britain to cooperate is intensifying.