Consumers can expect that as oil supplies look set to dwindle, oil prices are likely to remain high, says energy industry investor James Kinnear.

Mr. Kinnear, the chairman and chief executive of Pengrowth Corporation, was in Bermuda last week with his executive team to attend the 17th Fall Investment Conference of Pengrowth Energy Trust at the Fairmont Southampton.

"At worst, oil and gas prices will stay above their long term average for some time to come," Mr. Kinnear

Mr. Kinnear, whose Calgary-based energy trust invests in the Canadian oil and gas industries and has a market capitalisation of almost CD$4 billion, said in the short term oil prices have declined and have fallen from $70 or $80 a barrel to close to $60 a barrel but it was difficult to determine the future direction of oil prices.

"Even if oil production is beginning to level off, the amount of capital required for new investment in the industry going forward is very substantial," he said.

"We have seen a significant rise in the increase in oil prices since the year 2000 from the $20 to $25 a barrel level to recent levels of $60 to $70.

"One of the speakers at the conference, Henry Groppe of Groppe Long and Litell in Houston, Texas, was recently quoted in Canada's Globe & Mail that they foresee future oil prices in the range of $55 to $65 with prices low as $40 and high as $100.

"Perhaps there will be more volatility in the oil market. Its very challenging to predict the direction of oil prices."

Mr. Kinnear said that development costs are rising and finding and developing new reserves is required because there is an ongoing depletion in the oil and gas industry of three or four percent a year.

"We are consuming globally 85 million barrels of crude oil and a depletion rate of three or four percent means we must find 2 to 3 million barrels per day of new reserves just to offset depletion," he said.

"The challenge to the industry is to offset declines and grow, if possible, reserves. There have been very few discoveries of oil reserves in the last ten to 15 years and some in the industry indicate oil production world wide may indeed be peaking or may peak in the next few years."

Mr. Kinnear said if this is true there will be additional pressure on prices should consumption continue to grow.

"We are seeing increases in consumption in areas such as India, China, and the US is a major energy consumer. If production is levelling off, there could be an issue with respect to future prices for oil."

Mr. Kinnear said some of the world's major oil producing fields such as Ghawar in Saudi Arabia (the largest conventional oil field in the world, accounting for more than half of the cumulative oil production of Saudi Arabia) production is starting to level off and may be declining.

"What you require is to develop new reserves in that region but these are the challenges the oil industry faces worldwide. More than half of the world's oil production and reserves are held by host governments."

"Some of the countries don't encourage new investment by international companies and there are fewer places in the world where companies want to invest."