New Delhi recently hosted the eighth edition of Petrotech against the backdrop of falling oil prices that brought relief to consumers but no cheer and concerns to the producers. The year-long volatile prices, finally dipped to mana-geable levels for developing countries, despite efforts by OPEC to halt production and push up prices. Analysts predict a steep fall ultimately to $30 a barrel in a few months.

At the Petrotech conference, a biennial event hosted by Indian oil companies, representatives from all oil producing nations, including the OPEC cartel, descend to discuss issues such as prices, availability, energy security, supplies, future trends on production and technologies to extract oil from remote and inaccessible areas. Though 4000 participants turned up, they were mostly from India. Overseas visitors shrunk from an estimated 800 to about 400; fears riding the crest of the Mumbai 26/11 terror attacks and the worldwide recession kept many visitors away. More than 1050 ministers and delegates from about 50 countries and various organisations attended the five-day conference which saw a special session attended by petroleum and energy ministers in the Ministerial delegations from 11 countries namely Angola, Alberta (Canada), Mozambique, Nepal, Nigeria, Qatar, Saudi Arabia, Sri Lanka, Sudan, Syria and Yemen.

Just a year ago, oil prices shot to an astronomical high of $147 per barrel. Oil producers, oil traders and investors hedging their bets on commodities like oil all made a fortune and lined their pockets. But their prosperity was short-lived. Prices have begun a to decline and they are likely to stay that way for quite some time due to lack of demand, consumer resistance and Europe and US searching for alternative fuels.

The new US President Barack Obama has pledged $150 billion for research to foster alternative sources of energy – solar, wind and tidal. Europe, led by French President Sarkozy and UK Prime Minister Gordon Brown, are initiating a common strategy for EU countries to develop and commercially exploit alternative sources of energy and are committing over $170 billion for this purpose.

Lower production in February

At the conference, Saudi Arabia announced that it will produce less than its agreed quota of oil in February as it leads exporters in trying to halt a six-month slide in oil prices. “We are working hard to bring the market in balance,” said Saudi’s oil minister Ali al-Naimi.

The oil sheikdom, the world’s largest exporter and OPEC’s unnamed leader, had cut its target 5.1 per cent to 8.051 million barrels a day and produced 8.4 million barrels a day of oil last month. It is not clear what the production cutback would amount to in terms of exports. OPEC agreed at its 17 December meeting in Oran, Algeria, to reduce production targets for its 11 members with quotas, excluding Iraq, to 24.85 million barrels a day.

Crude oil for February delivery fell as much as $1.49, or 4 per cent to $36.10 a barrel in electronic trading on the New York Mercantile Exchange. The contract, down 25 per cent in six days, traded for $36.92 a barrel. Futures, down 61 per cent from a year ago, declined $3.24 to $37.59 a barrel, the lowest since 24 December. Oil for February delivery is now at a 35 per cent discount to the December future.

Newer sources of oil

The conference saw countries discussing how newer sources of oil through newer technologies could be harnessed. India particularly saw ONGC Chairman R.S. Sharma saying his company had approved a proposal to take up pilot production of shale gas in the country. He was careful in giving a prospective date for first gas from the proposed project, but other companies indicated production of shale gas could take place within the next one-and-a-half years.

ONGC said it would be joining hands with international oil-field services provider Schlumberger for exploring shale gas potential in the country. Shale is fine-grained sedimentary rock from which hydrocarbons can be extracted. At present, there is no data available on shale gas reserves in the country.

Oman’s Minister of Oil and Gas Mohammed Bin Hamad Al Rumhy said: “the consumers of energy want security of supply, whereas producers want security of demand. Price would hover around $45 a barrel for the next two months and stabilise after that. We are not planning any production cut; rather we are increasing our production.”

Apart from CEOs of corporations, special interactive groups discussed issues pertaining to strategies for international cooperation.

Security concerns

Minister for External Affairs, Government of India, Pranab Mukherjee told the conference the main challenge before the world today was to ensure availability of safe, clean and accessible energy at competitive prices. He highlighted security concerns for oil installations in India in the wake of the 26/11 Mumbai terrorist attacks.

“Protecting these assets would not simply be a law and order problem for an individual country, whether an energy exporter or consumer. Stability of energy supplies, security of energy transportation and creation of new energy infrastructure and its protection has to be a common goal requiring coordination and cooperation of all countries,” the minister said. India’s Petroleum Minister Murli Deora dealt with the theme, Energy Independence with Global Cooperation: Challenges and Solutions, and said “energy independence means accessibility, affordability and acceptability of energy sources which meet the needs of the present. This is to be done without compromising the ability of future generations to meet their needs.” He called for global efforts to address the ongoing price volatility that continues to affect oil markets and often delays investment decisions.

Deora disputed claims that there was no oil left to fuel a growing global economy in the coming decades. “Plenty of petroleum resources are left to be explored and produced. However, we need technological advances to extract the same and deliver it to consumers,” he said.

R.S. Pandey, Secretary, Ministry of Petroleum and Natural Gas, pointed out that the conference provided an insight into the issues concerning suppliers and consumers. The timing of the conference was very opportune as the world saw highly volatile oil prices, which he hoped would not be seen again. He suggested that some regulation on this account to check speculation should be instituted.

Dr. Anil Kakodkar, Chairman, Atomic Energy Commission of India, elaborated upon the importance of hydrocarbons among the primary sources of energy and pointed to the emerging role of nuclear energy in the years to come. He said that the linkage between hydrocarbon and nuclear energy would increase as efforts are on to promote use of hydrogen as a transportation fuel.

The conference saw an MoU signed between IndianOil and Eden Energy, Australia, for conversion of methane to hydrogen and carbon fibers/nano carbon tubes. Seven companies including EIL, L&T, Punj Lloyd, Technip KTI, Udhe India, Linde Engineering and Toyo Engineering, signed MoUs with IndianOil on lump-sum turnkey (LSTK) terms and conditions.

The next edition of Petrotech will be organised in 2011 with ONGC playing host. The scenario is likely to be much different with Europe and US leading the initiative on alternate sources of energy. We will have to see the progress made, and how OPEC deals with the oil prices then.