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Page added on March 1, 2009

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Crisis may force Opec members to cut barriers

Even as the financial crisis may force some Opec members to lay down barriers for entry of international oil companies (IOCs), the Middle East-based national oil companies (NOCs) with stronger balance sheets will not do the same, an energy analysis firm said in a recent update.

Washington based energy analysis firm PFC Energy said countries such as Venezuela, Ecuador and Algeria that are under “financial stress” could ease oil sector entry terms this year. It attributed its conclusions to a study made by its Petroleum Risk Manager service. Countries with weak government finances, declining production or immediate technical needs could make concessions to attract investments. International oil companies (IOCs) may, therefore, find greater negotiating leverage in these countries.

According to Organisation of Petroleum Opec data, 100 capacity projects worth $120 bn (Dh441bn) are planned by Opec members in 2009.

“Over the past few years, rising oil prices and dwindling investment opportunities for oil companies gave greater leverage to resource holders, and many countries responded by tightening their contract terms. Those conditions have changed, and many oil producing countries will find their relative power has diminished,” PFC Energy said.

“Sustained low oil prices will add to the financial strain on state budgets, forcing a policy response. Countries that introduced windfall profits taxes will see declining participation in new bid rounds, and IOCs will push for more favourable terms in bilateral negotiations,” it added.

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