Brazil’s energy giant says oil prices will remain high

July 2nd, 2008 - 10:46 pm ICT by IANS  

Madrid, July 2 (IANS) The oil prices will remain high as long as the current conditions continue to prevail, Brazil’s energy giant Petrobas has said, Spain’s EFE reported Wednesday. Besides others, speculation is a “major factor” contributing to the current high crude oil prices, Petrobas’ chief operating officer (COO) Jose Sergio Gabrielli said at the 19th World Petroleum Congress being held here June 29 to July 3.

Currently, the crude oil price is more than $143 a barrel. A barrel is 159 litres.

“It’s very difficult to give a value. But if the conditions remain same - an increase in demand above the level of supply, low interest rates and expectations for a return on investment in futures markets - the oil prices would remain high in the coming years,” Gabrielli told EFE in an interview.

When asked about a proposal from Spanish Industry Minister Miguel Sebastian for tough regulations to crack down on speculations, Gabrielli said: “Control and regulations are not enough. It’s also necessary to consider the impact and the consequences of (low) interest rates.”

Regarding Petrobas’ recent deep-water discoveries off the Brazil’s Atlantic coast, Gabrielli said: “We have several wells in the pre-salt layer, in the waters of the Santos Basin. Each of them has reserves between five billion and eight billion barrels. But we still don’t know the exact volume,” he said.

“The cost of oil extraction in deep water is high, but our plans are viable and with costs that are perfectly assumable,” he said.

“We’re going to begin production in this area in the first quarter of 2009. At the end of 2010, we’ll begin a pilot project of extracting 100,000 barrels a day and we hope to increase production in 2013-2014 depending on how the pilot project develops.”

International aid groups such as Oxfam partly blamed the high global food prices due to the use of crops such as corn and sugar to produce alternative energy sources like ethanol.

However, Brazil’s President Luiz Inacio Lula da Silva believes bio-fuel production is no threat to the food supply.

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