UPDATE 4-OPEC delays oil expansion as income, demand fall-Badri

LONDON, Feb 9 - OPEC members have delayed 35 oil projects to expand the group's supply, its secretary general said on Monday, as oil's record plunge reduces their revenues and the global financial crisis erodes demand.

To help revive prices, the Organization of the Petroleum Exporting Countries is willing to cut yet more oil output at a meeting in March, Abdullah al-Badri told reporters at a Chatham House energy conference.

Oil has fallen to $40 from a record near $150 in July as the global financial crisis erodes fuel demand. The decline "lost" OPEC $356 billion in income from the peak in prices to last month, he said.

"Current prices threaten the very sustainability of planned investment," he said in a speech. He told reporters earlier that of 150 projects due to come on line in the next few years, 35 had been set back to after 2013.

"This year our income will be cut by 50 percent," Badri said. The group that pumps a third of the world's oil earned close to $1 trillion dollars last year, according to the U.S. Energy Information Administration.

The comments are a further indication that OPEC is feeling the pressure from oil's collapse. So far, oil projects most at risk have been outside the 12-member group, where production costs are typically higher.

Declining demand worldwide has prompted OPEC to reduce output by 4.2 million barrels per day (bpd) since September to prop up prices, boosting its unused production capacity to about 8 million bpd, Badri said.

That leaves little incentive for many in OPEC to invest in supplies that are not currently needed at a time when world fuel demand is falling for the first time in a generation.

Even firm plans by OPEC to bring on 5 million bpd of new supply by 2012 could be dogged by some delays.

"The start up dates of many other projects are still expected to slip," added Badri.

PRICE TOO LOW

At $40, the price of crude now is about half that required to attract enough investment in new supply, the oil minister for the United Arab Emirates said in his speech at Chatham House.

"It is clear that if oil prices remain low for much longer, the negative investment trend will increase to such an extent that large supply shortages will develop when the present economic woes are over," said Mohammed al-Hamli.

The UAE oil minister expressed OPEC's worry that low prices could lead to lower future supplies, potentially causing prices to surge when demand recovers.

But Hamli said he saw no sign yet of an upturn.

"This crisis has rapidly gained global proportions and we do not yet see light at the end of the tunnel," he said.

Despite the gloom, OPEC has attempted to stay ahead of the slowdown in demand, by removing 4.2 million bpd of production from the market, about 5 percent of daily world demand.

The OPEC secretary general said early indications are that members have delivered on 80 percent of that pact, higher than some estimates. Another 900,000 bpd had to go to ensure perfect compliance, he added.

He reiterated comments first made to Reuters at the end of last month that OPEC stood ready to lower production further. OPEC holds its next meeting to set supply policy on March 15 in Vienna.

"If we think we still need more action, I'm sure the conference will take more action to stabilise the market," Badri said, and dismissed the possibility of a meeting before then.