The global economic crisis is causing international oil and gas companies to under-invest in new production, which threatens to spark a new spike in crude prices once the downturn ends, oil companies and Gulf state ministers warned Thursday. “If prices stay low for a long time future supply growth will be impossible, leading to another price runup in the future,” Qatar Energy Minister Abdulla bin Hamad Al-Attiyah told an oil industry conference in Paris. Al-Attiyah said crude prices “must rise to a level that supports investment,” and said that in his opinion, $50 a barrel “is the pragmatic price.” The conference gathered industry executives of Europe's two largest oil companies and ministers of Gulf states to debate the industry's future amid a gloomy economic outlook for the world's biggest energy consumers. Oil prices crept above $49 a barrel Thursday, but have pulled back from three-month highs of $54 a barrel last month, as investors weighed hopes of recovery in the global economy against expectations that demand will remain weak for a long time. Last summer - before the worst of the financial crisis erupted - oil was as high as $147 a barrel before tumbling. “Definitely this crisis will leave strong traces in the long term and we will probably not see the same world anymore,” Total SA Chief Executive Christophe de Margerie said at an oil industry conference. The head of France's largest company warned that Total may not achieve its target of investing 18 billion euros ($23.84 billion) this year, as some projects are likely to be “slightly delayed.” De Margerie said there was no list of projects that were delayed, and that his goal was to have no delays. But speaking to reporters on the sidelines of the conference, De Margerie said he doubted whether talks between the company and Iran over plans to develop the massive South Pars gas fields would ever succeed. While denying that talks had completely ended with Iran, De Margerie said, “As the situation is probably economically and globally not very satisfactory, I think that we'll probably never successfully complete renegotiations over South Pars.” Earlier this month Iran said a new partner would take over work on the current phase of its massive South Pars gas fields, accusing Total of bowing to US pressure and “procrastinating” in a project key to the country's development plans. Other conference participants stressed the threat to the oil industry of the current global economic crisis. Royal Dutch Shell CEO Jeroen van der Veer said his “gut feeling” is that the overall investment in the industry was down by more than the 12 percent recently estimated by analysts at investment bank Barclays. Algeria's former energy minister and the conference chairman, Nordine Ait-Laoussine said the current recession “is likely to be much deeper and protracted than most experts forecast only a few months ago.” “The oil industry faces one of the sharpest downturns in its history,” he said.Ait-Laoussine said the industry was looking for an upbeat note from Thursday's Group of 20 summit, held across the Channel in London. “Needless to say we are all looking forward to a positive outcome of the crucial G-20 meeting,” Ait-Laoussine said. United Arab Emirates' Energy Minister Mohammed Bin Dhaen al-Hamli was likewise gloomy about the trend in investments, warning that “many conventional and non-conventional oil projects have already been shelved or scrapped because of the deteriorating economics.” “Oil prices need to be at levels that help sustain economic growth by supporting long-term energy investments,” Al-Hamli said. “A failure by investors to invest will result in a supply crunch in the near future.” Oil prices vaulted nine percent in New York Thursday, in tandem with a powerful stocks rally, as investors cheered G20 agreements to combat the global downturn and an easing of US accounting rules. New York's main contract, light sweet crude for May delivery settled at $52.64 a barrel, up $4.25 from its Wednesday close. In London, Brent North Sea crude for delivery in May rocketed $4.31 to close at $52.75 a barrel.“Today the G20 was viewed positively, but also the change in (US) accounting rules and the surge of stock markets,” said Mike Fitzpatrick at MF Global. Investors welcomed decisions by the leaders of the Group of 20 top industrialized and developing countries at a one-day London summit to work together to fight the global recession and improve financial regulation. Markets soared on the back of revived optimism that an economic recovery could be in sight, lifting oil prices higher on the prospects of a rebound in energy demand. Crude futures were further underpinned by the European Central Bank's decision to slash eurozone interest rates to record low levels - a move that could help to lift demand for energy. “The market thinks the worse is behind us and that we're heading toward recovery at the end of the year, early next year,” Fitzpatrick said. Spreading worldwide recession has ravaged energy demand and slashed oil prices from their record peaks of above $147 last July. OPEC said Thursday that it could accept crude oil prices of between $40 and $50 a barrel in light of the severity of the current economic downturn. OPEC Secretary General Abdalla Salem El-Badri said “with this $40-50 price, maybe we can live with for 2009 because of the present circumstances.”
