Kuala Lumpur, 9 June 2010

The International Energy Agency ( IEA) may cut its oil output estimates for the Gulf of Mexico by up to 300,000 barrels a day for 2015 on potentially tighter U.S. laws on deepwater drilling after the  BP oil spill. "Our tentative estimates are that we will have to revise our forecasts for Gulf production for 2015 downwards. Our preliminary estimate is that we will have to cut by 100,000 to 300,000 barrels per day," Richard Jones, IEA deputy executive director, told Reuters in an interview on Tuesday.

Crude output from the Gulf of Mexico was pegged at 1.5-1.6 million barrels per day (bpd) in 2009, with this level seen edging up to 1.6-1.7 million bpd this year, data from the IEA's Oil Market Report published in May showed.

The Obama administration has put on hold new deepwater exploratory drilling in the U.S. for six months, pending the findings and recommendations of a presidential commission investigating the causes of the explosion in April that sank Transocean's Deepwater Horizon rig leased by BP Plc .

The review could lead to new legislation by the U.S. Congress. The U.S. Interior Department, which regulates exploration from oil to minerals, may also issue new safety and environmental requirements for shallow-water offshore drilling as soon as Tuesday.

"There will be a cost attached to any regulation, and that cost will inevitably affect the future development of the industry in U.S. waters, which will have an impact internationally as well," Jones said on the sidelines of the Asia Oil and Gas Conference in the Malaysian capital.

"I wouldn't be surprised if the tighter legislation would have some extra-territorial provisions. Costs will go up, and investments will be affected, as some projects will no longer make the cut," he added.

"This would slow (exploration and production) development, but whether it would slow appreciably is an unknown question."

Hungary a "Concern"

Jones said current crude prices around $71 a barrel would not have a negative impact on oil producers. Levels would keep within the $60-80 range in the medium term due to ample supplies in OECD nations and spare OPEC capacity, barring a double-dip recession, he added.

"Obviously, the lower the price the better, as far as the recovery is concerned, but we have not heard too many complaints about the negative impact at this price level. Let the market determine the price."

This could also prompt the Organization of the Petroleum Exporting Countries to keep its output targets steady when it next meets in October.

"We have not seen anything to suggest that they are looking at a change in production guidelines in October," he said.

OPEC members could do more to abide by production quotas, Jones said, echoing remarks made on Monday by Iraqi oil minister Hussain al-Shahristani.

Al-Shahristani said fairer crude oil prices could be reached if OPEC members adhered better to production quotas, and that he was unhappy about compliance levels over the past few months.

"OPEC has been more successful in the recent past than they are right now in terms of compliance," Jones said. He also said the pace of the global economic recovery will be the key driver for the industry. "The real uncertainty is the nature of (oil) demand and the nature of the economic recovery."

Jones said the Paris-based IEA, which advises industrialised nations on energy policy, is keeping an eye on Hungary's debt problems. But he does not think its impact would be as serious as the 2008 financial crisis or Greece's sovereign debt woes.

"We are concerned about Hungary. But we do not think the ripples will be quite as big as the first financial crisis. Hungary is a new addition to the economic system, and we do not think that it has as extensive ties as Greece," he said.

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