OPEC Notified Of Capacity Shortage

Yesterday IMF warned oil ministers that their expansion in capacity was failing to keep up with surging demand, leading to instability in the market.

Mr Lipsky said the spare capacity held by Opec, the oil producers' cartel, was about half of its 1996-2007 average, or one quarter of its 2002 level, and was expected to remain limited for some time.

Supply projections had been revised downwards, particularly for producers outside the 13 Opec nations, including Mexico, Russia, and the UK, he said. That, said analysts, left the biggest producers, such as Saudi Arabia, with a greater role in increasing capacity.

However, Abdullah al-Badri, Opec's secretary-general, revealed that rising costs could delay some of the cartel's expansion plans for a year or two.

Saudi Aramco, Saudi Arabia's national oil company, has seen its project deadlines slip because of the equipment bottlenecks that have plagued the industry. Its Khursaniyah field was due to be completed in the last quarter of 2007 but will only be ready to pump 300,000 barrels a day within a month, Saudi Aramco said.

But Opec ministers said the delays were temporary and they would meet their long-term goals.

Saudi Arabia has been one of the most aggressive investors in its energy sector, boosting capacity to a target of 12.5m b/d, which it is expected to meet by 2009. Ali Naimi, the oil minister, said the kingdom was pumping $90bn into its energy industry but argued that demand forecasts did not warrant a further boost to 15m b/d. That view is disputed by big consumers who say the world will rely more on Saudi Arabia as other producers falter.