North Sea steps up security procedures at installations and airports

Sep 16, 2001 02:00 AM

Fears of US military retaliation for September 11's suicide attacks on New York and Washington have led to increased security precautions in the North Sea and a state of uncertainty in oil markets worldwide. David Odling, director of policy at the UK Offshore Operators Association, representing oil and gas exploration and production companies on the UK continental shelf, said: "It is business as usual in the North Sea but security procedures at installations and airports have been stepped up. There is a significant degree of regulations at all times but you can't be too careful." Oil workers abroad in the Middle East are also being instructed to return to the UK. BP is one of many exploration companies in Pakistan that told their expatriate staff to leave as soon as possible. "I can confirm that BP has sent all its expatriate staff from Pakistan," a spokesman said.

Aberdeen University's Professor Alec Kemp, a specialist in petroleum economics, said oil prices will remain volatile as suspicion ofUS attacks increases. "In 1990, when Saddam [Hussein] entered Kuwait, prices went up. If it transpires that Osama bin Laden is responsible, and not Iraq or Libya, then the oil prices would stabilise," he said. "There could be increases in petrol costs but OPEC have said they won't allow shortages to develop."
The fear of imminent supply disruption has led the US military to seek oil tankers to move diesel and jet fuel to secure locations. Prices remained high. The European benchmark Brent Blend crude closed at $ 29.43 a barrel after an earlier high of $ 29.82.
Aberdeen-based Lawrence Ross, director of oil and gas at venture capital company 3i, believes events in the next few weeks will not impact on the North Sea but warns that OPEC needs to take control. "Projects have already started in the North Sea and it takes a long time to plan increased production. There will be no quick change, everyone should try and stay calm and wait for issues to settle down. The whole system operates best when its steady."

Saudi Arabia, OPEC's most prominent producer, has already said it is willing, in co-operation with its OPEC partners, to cover any shortfall in oil supply. "OPEC should manage prices and give their willingness to keep supplies at a liberal $ 25 a barrel target range. If they allow prices to get out of hand, then they could be crystallising the onslaught of a recession," Ross said.
OPEC secretary-general Ali Rodriguez said military reprisals could lift oil prices in the very short term, but the damage done by the attacks to US consumer confidence would hit global demand growth in the medium term.
"If there are military strikes on a country that has helped in these attacks, it could increase oil demand for a while," he said. "But on the other hand, if investor confidence falls, then there could be a real recession."
Oil stocks BP and Shell, which could benefit from disruption in the Middle East, suffered with the stock market falls. They lost earlier gains to fall 14 pence to 535 pence, and 7 pence to 496 pence respectively.

Analysts say it is too early to tell what the market situation will be in coming weeks. Some say if supply is hit, non-OPEC producers will be left with higher production and capital expenditure levels. OPEC, after considering the changing markets, will decide on September 26 what action to take.
In Scotland, the oil industry remains buoyant. A Scottish Executive spokesman said: "Fuel supplies are normal at present and not a cause for concern but it is more difficult to forecast the medium- to long-term impact. We are maintaining contact with the industry and monitoring the situation very closely."

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