INTERVIEW-OPEC can't cover twin Iraq, Kuwait outage-Nigeria

www.forbes.com Reuters, 03.12.03, 10:14 AM ET By Jonathan Leff VIENNA, March 12 (Reuters) - The Organisation of the Petroleum Exporting Countries does not have enough spare capacity to cover a twin supply disruption from Iraq and Kuwait in the event of war, the head of Nigeria's OPEC delegation said on Wednesday. OPEC has at least two million barrels per day of available output, excluding Venezuela, where the effects of a strike have reduced output, Presidential Advisor on Energy Rilwanu Lukman told Reuters in an interview. Asked if OPEC could cover an outage of Iraqi oil, he said: "Yes, but then it would be stretching it a bit tight." If Kuwait or another Middle East producer were affected he said: "Then nobody can do anything; the SPR will come in and bring the prices down while people are putting their houses in order. This is what they did last time around. We expect them to do the same thing again if producers can't make it up." Washington has said it will use its SPR, Strategic Petroleum Reserve, as a last resort if OPEC cannot cope, under the umbrella of the 26-nation International Energy Agency. The IEA last released emergency reserves during the 1990-1991 Gulf crisis. OPEC agreed on Tuesday to leave formal output limit of 24.5 million bpd in place despite fears that a potential U.S.-led attack on Iraq could cut off its 1.7 million bpd of exports. Kuwait has said it may need to shut up to 700,000 bpd of production from fields near its northern border with Iraq, where U.S. troops are poised to invade. OPEC heavyweight Saudi Arabia has said it would pump to the extent of its capacity if needed to prevent any shortage, but even Lukman is worried that may not be enough. "Saudi has at least one million, the rest of the OPEC nine is at least another million and you have Venezuela still to go back to normal," he said. In case of war, Lukman said the cartel stood ready to "drop everything" and hold a meeting, but could also agree to raise production via telephone if required. OPEC's next scheduled meeting is June 11 in Doha, Qatar. One of several members pushing to raise its share of overall cartel output, could sustain 2.5 million bpd in the space of a few weeks, from about 2.1 million now, Lukman added. "We have the potential to increase to 2.8-2.9 million bpd, but this is not immediate," he said, adding that it could take three to six months to reach this level. The West African producer was planning 3.0 million bpd capacity by year's end, he said. The sensitive task of redistributing output quotas among members began last year and members are now debating what formula to use, although Lukman said there was no timetable for the new divisions. "The sooner the better," he said.