Oil conference opens as prices hit high

By: AP
By: AP

ROME (AP) -- The chief executive of Eni SpA said Sunday that the share of profits taken by governments of oil-rich countries is cutting international oil companies' profits, in some cases below their capital costs.

"The average government take is now moving to overcome the critical barrier of 90 percent, which means that oil companies' profitability is decreasing," Paolo Scaroni, the CEO of Italy's largest oil and gas company by revenue, said in a speech at the International Energy Forum.

Major Western oil companies have been forced to renegotiate contracts as hydrocarbon-rich countries aim for a bigger slice of profits on the back of surging crude prices.

International oil companies need to "profoundly rethink their business model in order to survive and prosper," Scaroni said.

Government ministers from oil-rich nations and international oil company executives were meeting in Rome for a three-day energy conference that ends Tuesday. While the energy ministers of most OPEC states will be present, the group was not expected to announce any policy shifts during the International Energy Forum, which being is held as crude oil prices have reached a new high of $117 a barrel.

Italy's outgoing Development Minister Pier Luigi Bersani told the conference in his opening remarks Sunday that the high price of oil will have an impact on inflation for all of 2008.

"The price of oil has had an impact on the inflation dynamic in many countries and it is reflected in part also on food stuffs in general," Bersani said. "This dynamic will persist for all of 2008."

On the sidelines of the conference, Eni signed a memorandum of understanding with Qatar Petroleum International to pursue key joint projects in Africa and the Mediterranean focusing on natural gas and crude oil. It also envisions cooperation in the petrochemical industry and power generation.

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