Governments should lower trade barriers and cut taxes for the oil and gas industry to boost production and help stabilize global oil prices, the chief of oil giant BP PLC said yesterday.
Tony Hayward, chief executive of Europe’s second-largest oil producer, said the world is not short of oil and gas resources but that high operating costs, rising taxes and lack of access are hampering investment in new production capacity.
The inadequate supply to meet rising demand has led global oil prices to reach records, he said.
PHOTO: AP
“The problem is not below ground; the problem is above ground,” Hayward told a two-day oil and gas conference in Kuala Lumpur.
“The taxes that governments take from the oil and gas industry have continued to increase across the world. I believe this is unsustainable and counterproductive. All it means is that we have less money to invest in new production,” he said.
“Governments must also cooperate to lower trade barriers and tariffs,” he said.
“These are unproductive and run counter to the essential truth that a free and open energy market is just about the best possible guarantee to energy security,” he said.
He criticized government use of subsidies to shield consumers from rising oil prices, saying it was unsustainable as it strained public finances and discouraged sensible fuel efficiency measures.
Crude futures made their biggest single-day leap ever on Friday, soaring nearly US$11 for the day to US$138.54 a barrel but retreated below US$138 in Asian trading yesterday.
Some analysts have predicted that prices could keep climbing amid strong demand in Asia and tight supplies in the Western Hemisphere.
Hayward said there were still 42 years of proven oil reserves and 60 years of natural gas left and vast quantities of other unproven resources and unconventional hydrocarbons such as heavy oil and oil sands.
“We need to invest in new technology, to invest in capability and in alternative energy ... the key to new investment is to make the market work by getting the conditions right,” he said.
The International Energy Agency estimates that investments of US$22 trillion are needed between now and 2030 to meet future energy demand, Hayward said.
BP has raised its capital spending this year to US$22 billion, up nearly 15 percent from last year, to boost production, upgrade its refineries and investing in alternative forms of energy, he said.
Hayward called for increase partnership between private oil companies and national oil firms, which hold 80 percent of world resources.
Hassan Marican, chief executive of Malaysian national oil company Petronas, also urged governments to gradually remove fuel subsidies.
He said the subsidies had caused “unmitigated consumption and market distortions that are unmanageable in the long run.”
Malaysia and India last week became the two latest Asian nations to cut fuel subsidies, sparking protests nationwide as pump prices of gasoline and diesel rose sharply and inflation set to soar.
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