The Irish Independent reports that Taoiseach Brian Cowen's two most senior ministers were at odds last night over the Government's budgetary strategy.

Tanaiste Mary Coughlan told the Dail many parts of the key McCarthy report -- which identifies €4bn of spending cuts -- "don't make sense."

But her claims were immediately dismissed by Finance Minister Brian Lenihan, who insisted the Bord Snip report was a key part of the Coalition's Budget preparations.

The difference of opinion sparked major questions as to whether the Government has the political will to implement some of the most hard-hitting proposals in economist Colm McCarthy's report.

The Tanaiste, in charge of the country while Mr Cowen was in New York, is the most senior Cabinet member to challenge the Bord Snip report.

But Mr Lenihan casually dismissed her criticism, saying the report was "key to the budgetary process."

It was the second time in two days that the Finance Minister was forced to clean up a mess caused by the increasingly gaffe-prone Tanaiste. Just a day before, Mr Lenihan had to act to heal a threatened rift with the Opposition parties after Ms Coughlan appeared to question their efforts in campaigning for a 'Yes' vote in the Lisbon referendum

Ms Coughlan's remarks also undermined the Government's plans to prepare the public for the €4bn worth of spending cuts to come in December's Budget.

In just the space of a blunder-laden hour yesterday, she bizarrely managed to:

• Criticise the Bord Snip report.

• Wrongly state that the Cabinet didn't meet this week.

• Announce the Government was going to set a date for an election.

• Drag Mr Lenihan into the FAS controversy.

The Coalition was last night accused of being "all over the place" after Ms Coughlan's performance in the Dail.

Government sources put her comments down to the Tanaiste's "foot in mouth" and doubted whether it was part of a deliberate strategy.

Publication of background papers in recent weeks has revealed that many of the Bord Snip recommendations in fact originated in the Department of Finance itself.

Mr Lenihan denied Ms Coughlan's intervention would harm his Budget preparations.

"There are always rifts between the Department of Finance and other government departments," he said. "It doesn't make much difference because all of the departments have been consulted. They have all made their views known on the proposals made by Colm McCarthy and I'll be studying the departments' views."

Yesterday, Ms Coughlan became embroiled in a rolling controversy after she attacked the Bord Snip report.

"There are many recommendations in the McCarthy report which don't make sense. Many. Many," she said.

"It will be a matter for the Government to make a decision on how to find the appropriate savings to deal with the country's economic and financial difficulties. I am sure Opposition members will be constructive in their proposals as to where we will find savings of €4bn." Speaking later in Cork, the Tanaiste refused to be drawn on which aspects of the report were likely to be dropped from the cutbacks programme.

Before Ms Coughlan, Tourism Minister Martin Cullen and Community Affairs Minister Eamon O Cuiv had also criticised the report.

Mr Cowen was not available for comment as he was returning from a UN climate change conference in New York.

Fine Gael leader Enda Kenny said it was clear the Bord Snip report was now "being dumped in the same way as the Commission on Taxation".

"I assume she is speaking on behalf of the Taoiseach as deputy head of government. We waited months for the production of the McCarthy report. This is a list of recommendations, as McCarthy himself said, for the political process to decide what they want to do."

The Irish Independent also reports that Ireland's lenders face a "second wave" of multi-billion-euro losses from bad loans left on their books after the National Asset Management Agency as businesses and households continue to struggle.

Goodbody Stockbrokers estimate Allied Irish Banks will end up writing off €6.3bn of its remaining loan book within the next three years.

This is in addition to the €6.8bn discount it expects AIB will have to accept on risky property loans that it is transferring to the State's 'bad bank'.

Bank of Ireland will weather a €3.8bn discount on its NAMA-bound portfolio, according to Goodbody. But loan losses on its legacy loan book could clock up to €6.4bn, according to Anna Lalor, banking analyst with the brokerage.

Goodbody's forecasts are among the most pessimistic in the analysts' community.

All told, Goodbody estimates AIB and Bank of Ireland will end up writing down more than €25bn of loans over the course of four years, from 2008.

More than €14.58bn of AIB's and BoI's losses will be absorbed by the banks' forecast combined trading profits over the period.

This leads to an almost €10.4bn hit against the banks' bad loan provisions and capital reserves.

AIB plans to raise €2bn within the next 18 months to bolster its reserves. It hopes to avoid majority State ownership by either selling shares to existing stockholders, flogging a stake to a strategic investor or putting assets on the market.

Analysts largely believe BoI needs to raise between €1bn and €1.5bn to leave it with an equity Tier 1 capital ratio -- a key measure of a lender's financial stability -- of more than 5pc.

The Irish Times reports that the board of Fás should not be sacked “as part of a deal to rescue the Coalition,” a number of Fás directors have told the newspaper.

The directors said the board understood that up to recently it had the support of the Tánaiste and Minister for Enterprise, Trade and Employment, Mary Coughlan, but that this had changed for reasons to do with the Green Party.

“In our view we had the support of the Minister but then it disappeared after Gormley went to see the Taoiseach,” one director said.

A number of directors spoke to The Irish Times about the pressure there has been on the board since the controversy began last year about spending controls at the employment authority, on condition that they would not be identified. Their views are understood to be representative of the board generally.

Referring to the need for the Green Party to get the support of its membership if its TDs are to approve the National Asset Management Agency Bill, a director said: “I don’t think this board should be sacked as part of a deal to rescue the Greens and Nama.”

The directors said that at the time of the publication of a report on Fás by the Dáil Public Accounts Committee this year, Ms Coughlan told a delegation from the Fás board that they should “carry on”.

They said the board has been working intensively on responding to the weaknesses that were identified in certain areas of Fás, and that it wants to remain in place to see this work completed.

The work includes 22 audit reports on expenditure and controls in the corporate affairs and procurement areas. The reports are nearing completion. “We want to see the 22 reports to finality,” a director said. “We are concerned that a new board might want to forget about all this and move on.”

The expenditure issues were discovered by the authority’s internal audit section after anonymous allegations was sent in 2004 to the then minister for enterprise, trade and employment, Mary Harney, who forwarded it to her husband and then Fás chairman, Brian Geoghegan.

The directors also claimed that: the board was told by former director general Rody Molloy that Micheál Martin wanted Fás to hold an Opportunities jobs fair in Cork as well as Dublin; the board was told about income from the Independent News Media group arising from its sponsorship of the annual Opportunities jobs fairs, but was not told about the extensive expenditure by Fás on advertisements in Independent titles. One director said the Independent may have made a net profit from its relationship with Fás; the board has become aware that payments being made by Fás officials were split so that they would not reach the threshold that would require board approval.

Fás board members

Chairman: Peter McLoone;

Minister for Enterprise, Trade Employment representatives: Caroline Casey and Dermot Mulligan;

Representative for Minister for Education and Science: Anne Forde;

Representative for Minister for Social and Family Affairs: Deirdre Shanley (Appointed March 1st, 2009);

Representative for Minister for Finance: Dermot Nolan;

Trade union representatives: Des Geraghty, Alice Prendergast, Owen Wills, Sally Anne Kinahan;

Youth representative: James O’Leary;

Employer representatives: Jenny Hayes, Brian Keogh, Niall Saul;

Employee representatives: Margaret Mernagh, Frank Walsh.

The Irish Times also reports that Permanent TSB has said that it has no immediate plans to raise interest rates again on standard variable rate mortgages but it would be “irresponsible and disingenuous” to say it was ruling out future rate increases.

David Guinane, chief executive of the bank, told the Joint Oireachtas Committee on Finance and the Public Service that Permanent TSB, the banking division of Irish Life Permanent (ILP), that its interest rates were under review on a daily or weekly basis.

The bank raised its standard variable rate by 0.5 of a percentage point last July due to rising bad loans and higher funding costs, a move that attracted considerable public and political criticism.

Mr Guinane said that if loan impairments continued at the same rate and funding costs remained high, interest rate increases needed to be considered.

He said there had been “no serious discussions” with the Minister for Finance on the bank’s involvement in a merger with the country’s two building societies, EBS and Irish Nationwide, in the so-called “third force” in banking to compete against the two main banks, Bank of Ireland and AIB.

There had been some preliminary discussions of a speculative nature with Department of Finance officials, he said, and he hoped Permanent TSB would be “a leading player in a third force”.

The future of the banking industry would be dictated by Nama (National Asset Management Agency), said Mr Guinane, as smaller lenders sell large parts of their balance sheets. The bank is not participating in Nama as it avoided development lending.

Permanent TSB needed no capital from the Government, said Mr Guinane, but EBS and Irish Nationwide will require “significant support” once a combined €9 billion in loans are transferred to Nama.

Mr Guinane said that this capital would need to be injected into the two building societies “prior to any engagement with ourselves”.

He said that securing funding from sources other than the European Central Bank (ECB) was “incredibly challenging”. Some 27 per cent of ILP’s funding was sourced from the ECB, finance director David McCarthy told the committee. This stands at about €10.9 billion at present, he said.

Mr McCarthy said that the group could access another €2 billion to €3 billion from the ECB but had no plans to draw on this.

Some 72,000 mortgages of Permanent TSB’s 190,000 mortgages – 38 per cent of its customers – were affected by the half-point increase on its standard variable rate, Mr Guinane said, and this led to an average increase of €14.75 on their monthly repayments.

The average interest rate on Irish mortgages of 3.19 per cent compared with 4.2 per cent in the UK, he said, and it was hard to see how Irish mortgage rates can remain lower for much longer.

Permanent TSB sold 100 per cent mortgages to 8,000 customers, the committee was told.

Mr Guinane said that 6,000 customers or 3.3 per cent of the bank’s customer base were in arrears of three months or more.

Permanent TSB was approving 60 per cent of mortgage applications, but just 20 per cent were being drawn down, he said.

The Irish Examiner reports that over 100,000 public servants providing frontline services in healthcare, security and emergency response will resist Government attempts to impose the cutbacks proposed in the McCarthy report.

The new umbrella group, the Frontline Service Alliance, which brings together nurses, gardaí, firefighters and defences forces’ unions and representatives associations, had its first meeting in Dublin yesterday.

Irish Nurses’ Organisation general secretary Liam Doran condemned commentators who want to slash and burn but "fail to identify what essential services they actually want to cut, or acknowledge that such services are essential to any civilised society".

He was flanked by the new group’s chairman Des Kavanagh of the Psychiatric Nurses’ Association, and spokespeople from the Garda Representative Association, the Association of Garda Sergeants and Inspectors, PDFORRA, the Prison Officers’ Association and SIPTU’s nursing branch.

Announcing a series of regional meetings, the alliance outlined its opposition to the proposed cuts in public service provision and pay detailed in Colm McCarthy’s Bord Snip Nua report.

Drawing attention to TDs’ allowances and the failure to prosecute bankers for their behaviour, Mr Doran contrasted this with frontline public servants "who do more than their patriotic duty every day." There was a call for private sector workers not to be hoodwinked into a false conflict with the public sector by politicians.

Association of Garda Sergeant and Inspectors general secretary Joe Dirwan said there was growing anger and demoralisation in the force.

He said: "Gardaí are now also paying more than their fair share of tax — the combination of the levies, taxation and PRSI has resulted in income being reduced by more than 12%.

"The closure of more Garda stations will accelerate the separation of the gardaí from the communities they serve and drive a wedge between communities and their Garda service."

PDFORRA general secretary Gerry Rooney said the imposition of pension, income and health levies had already resulted in "deductions of approximately €4,000 per annum for a typical soldier."

This had already seen people leaving the defence forces. Any further pay cuts would lead in some cases to mortgage difficulties resulting in "homes being lost."

With members of the gardaí and the defences forces legally barred from striking, Mr Rooney said PDFORRA would be resolute in opposing any cutbacks but would not do anything which broke the law.

Garda Representative Association general secretary PJ Stone said he was also mindful of the legal restriction on industrial action by his members.

The group’s leadership said the nature of their protest campaign had yet to be decided and would be defined by the Government’s actions.

Mr Doran said they hoped to be able to rely on "the weight of the alliance’s collective, moral persuasion on the body politic." However, he would not rule out possible strike action in the health sector.

Frontline staff: How they are hit

Moiria Wynn, staff nurse, Dublin:

"My wages are down between €250 to €300 a month, some of my colleagues are down €600 a month. I keep hearing about the cost of living going down but certainly I have not seen that. I’m tried of public servants being villainised, we provide a service everyday of the year looking after the most vulnerable in society and people need to remember it is not a businesses we are talking about, it’s people and society."

Jim Mitchell, prison officer, Dublin, 20 years’ service:

"Last night I worked the nightshift. During the night a prisoner was beaten up and I had to be taken over to the hospital. When I was there what do you see but nurses up to their eyeballs and guards bringing people in right, left and centre — this is where this alliance is coming from because we know the difficulty of the jobs people are doing. This is why the denigrating we see of the public service we take quite personally."

Brendan Quinn, paramedic, 20 years’ experience:

"The amount of disposable income I have is down considerably, about €60-€70 on a given week, besides... that there is the threat of further cuts. I just don’t know how much of a further cut I’m going to be expected to take. I think we need a bit of equity and fairness in the system where everyone will be seen to shoulder their fair portion of the debts that obviously need to be paid. I haven’t seen any decrease in my bills, if anything they are going up. I have a teenage daughter in school and I’ve spent over €1,000 on books alone."

Garda Damien McCarthy, Dublin city centre:

"We don’t have the right to strike or ballot our members, so gardaí are demanding some sort of respect from the Government. I have been in the force since 2002. Many, many of my colleagues are stuck in negative equity after committing to mortgages of a 20 to 40-year life span. We simply will not be able to sustain another cut. Terms and conditions have been changed dramatically. This is simply about survival now. There is anger and major fear in the force, people talk about market collapse, our market has not collapsed, it’s getting busier and more dangerous than ever for gardaí. If the McCarthy report is implemented it simply will not be sustainable. If we default on a loan we are subject to disciplinary proceeding — that is adding to the fear."

The Financial Times reports that a sweeping overhaul of financial supervision across Europe moved closer on Wednesday when the European Commission unveiled new rules it hoped would prevent a repeat of the worst financial crisis in decades.

“We have had a crisis – and we have to learn from this crisis ... This proposal is a first,” said Joaquín Almunia, economic and monetary affairs commissioner. But the publication of the draft legislation, which would create three pan-European Union authorities to develop and enforce common rules on banking, insurance and securities markets, raised fears that the powers of national supervisors could be eroded.

Some Brussels diplomats voiced concern that the wording of the draft legislation could give the three authorities a say over the use of taxpayers’ money. But Commission officials said the proposed laws clearly prohibited the authorities from decisions that could impinge on individual countries’ “fiscal responsibilities.”

As an additional safeguard, any country that believed this principle had been breached could appeal to EU ministers.

“Our goal in the negotiations in the months ahead will be to ensure that the final proposals align with the council’s [member states’] instructions in June,” said Lord Myners, UK Treasury minister.

EU regulation timeline

October 2008: European Commission asks former French central banker Jacques de Larosière to advise on overhaul of financial supervision in Europe.

February 2009: De Larosière report recommends improvements including a new “systemic risk” board at the macro-level, and new European supervisory agencies for banking, insurance and securities markets at the micro-level.

March 2009: De Larosière gets broad endorsement but some countries, including the UK, express reservations. Worries about possible split of fiscal responsibility from supervisory responsibility surface.

May 2009: European Commission details plans for implementing the proposals. Says it wants new system in place in 2010.

June 2009:EU finance ministers give outline approval but with caveats on fiscal responsibility and binding mediation. EU leaders follow suit.

September 2009:European Commission unveils draft legislation to implement the changes.

 

The board will have no direct powers, but will meet regularly and report to EU finance ministers and leaders.

Charlie McCreevy, EU internal market commissioner, admitted that the proposals, which need support from both member states and the European Parliament, would be fiercely debated. “I anticipate further heavy discussion about this,” he said.

The proposed overhaul is regarded in some member states as a first step towards closer integration of financial services supervision.

“A lesson from the financial crisis is that national super­visory structures are no longer sufficient to supervise inter­nationally active banks . . . [In] that respect the present suggestions are an important step,” said Manfred Weber, managing director of BdB, the association of Germany’s private banks.

He added: “It should not stop there. A next step is that powers to regulate cross-border banks should be brought together at a European level to ensure effective oversight.”

The legislation will create a new European Systemic Risk Board, which will warn of threats to financial stability. The board’s main members will be the 27 central bank governors in the EU bloc, as well as the president and vice-president of the European Central Bank. 

There will be a European System of Financial Supervisors to oversee individual banks and financial firms. Day-to-day supervision will remain with national supervisors. But three existing pan-EU co-ordinating committees will become authorities and be given more staff and responsibilities for the banking, insurance and securities sectors.

These will develop harmonised rules and common approaches to supervision. They will also ensure “consistent application” of those rules and be able to co-ordinate and take some decisions in emergencies.

The FT says that in a curious echo of his promise to change the way Washington does business, Barack Obama pleaded with United Nations on Wednesday to change its “old habits and arguments”. The UN, he said, should become a venue for “forging common ground” rather than “sowing discord.”

Time will tell whether Mr Obama’s words – and actions – have a more positive impact on the UN than they have had on Washington. But the real test of Mr Obama’s ambitions lies 316 miles east of New York in Pittsburgh, where the president will on Thursday host the third summit of Group of 20 leaders – and the first in which the world no longer fears it is staring down the barrel at a new Great Depression.

The atmosphere is very different to the one that greeted Mr Obama in London last April, which produced a “trillion dollar” communiqué in what was a kind of global coming- out party for the popular new president. In addition to being fêted, Mr Obama became an instant mediator – for example pulling Hu Jintao and Nicolas Sarkozy aside to broker a compromise on offshore tax havens.

Then Mr Obama reaped the benefits of not being George W. Bush, whose approach was dubbed by one Washington insider as “G1 rather than G20”. Today and tomorrow, Mr Obama will need all his charisma to bring coherence to a group that is no longer unified in its panic.

With the possible exception of Mr Sarkozy, who has developed a habit of threatening to walk out of summits if he does not get his way, the world’s leaders are a far politer bunch than Mr Obama’s opponents in Washington. There is nevertheless frustration over the increasingly visible limits on Mr Obama’s ability to get his way in Washington.

That is particularly true of climate change, which has gone from being an afterthought in April to a central element of Thursday’s agenda in Pittsburgh. Given the slow progress of cap and trade legislation in the Senate, Europeans are beginning to understand why the UN might be an easier forum for Mr Obama than Capitol Hill.

In this, Mr Obama is accused of not trying hard enough, rather than trying to do the wrong things. “Europeans no longer see President Obama as merely an innocent victim of what they regard as rightwing nuttiness in the American political wars,” says Strobe Talbott, president of the Brookings Institution. “They are beginning to worry that the president has contributed to the paralysis of the system by playing too much defence.”

Protectionism is also squarely on the G20 menu. Since April, when leaders pledged to desist from taking further protectionist steps, member countries have taken several hundred measures defined as protectionist by the World Trade Organisation. Mr Obama will have an equally hard time preaching on this given his recent decision to impose a 35 per cent duty on Chinese tyre imports.

Although legal, it was seen as another sign of Mr Obama’s defensiveness in the face of domestic opposition to globalisation. “President Obama has made it far more difficult for the US to lead on this than before, which is a pity,” says Fred Bergsten, head of the Peterson Institute of International Economics

From Mr Obama’s point of view, the two biggest goals of Pittsburgh are to achieve a global economic rebalancing by persuading China, Germany and others to switch away from an export-based model, and to ensure there is not a “race to the bottom” on global re-regulation. Again, there is frustration with the slow passage of financial reform on Capitol Hill.

But the biggest danger is that Europe and the US advance incompatible reforms, which would open the door for banks to play the game of regulatory arbitrage. US officials are confident that Tim Geithner, the US Treasury secretary, made enough progress at the recent G20 finance meetings to bridge that divide, as well as the dispute on how to reform bankers’ pay.

However, they strongly play down expectations Pittsburgh will produce a breakthrough comparable to London. When times were tougher, it was relatively easy to persuade the G20 and Capitol Hill to follow Mr Obama’s lead. Now the panic has receded, the UN looks like much the nicer talking shop.

The New York Times reports that in a step toward overhauling the nation’s financial regulation, a senior Democrat on Wednesday announced a plan that preserved the core of the White House’s proposal for a new consumer financial protection agency, while jettisoning a smaller though symbolically significant provision that had posed political obstacles.

The announcement by Representative Barney Frank, of Massachusetts, comes after weeks of consultations with other members of the fractious financial services committee that he heads.

By slightly modifying the administration’s plan, Mr. Frank appears to have found a middle ground to support the creation of a robust new consumer financial protection agency over the vigorous objections of the banking industry. The agency’s core mission would be to protect consumers from deceptive or abusive credit cards, mortgages and other loans.

Mr. Frank also announced an ambitious schedule to complete the House’s work on the legislation over the next two months. Recognizing that the revisions increased the odds of the bill’s passage, the Obama administration quickly embraced the changes.

“Media reports that it is dead for the year are inaccurate,” Mr. Frank said. “This will be a very busy schedule.”

Consumer groups offered a measured response to the changes, expressing some relief that a stand-alone consumer-protection agency had not been scrapped altogether. “I don’t think anything here is intended to weaken or eviscerate this in any way,” said Ed Mierzwinski, consumer program director at the United States Public Interest Research Group. “The agency will still have a primary role of protecting consumers, and it will still have authorities.”

The legislation still faces major hurdles in Congress, where bankers hold considerable political sway. President Obama has asked lawmakers to approve a comprehensive bill this year, mindful that if the economy continues to mend, the political impetus could evaporate.

Senator Christopher J. Dodd, Democrat of Connecticut and head of the Senate banking committee, is soon expected to file his own version of a comprehensive bill.

That legislation is likely to include a measure introduced this week by Senator Jack Reed, Democrat of Rhode Island, to impose tighter regulations on derivatives dealers. Mr. Reed’s measure would require that credit-default swaps — a form of insurance against bond defaults — be traded through clearinghouses. Top officials at the Securities and Exchange Commission and the Commodity Futures Trading Commission have called for tougher regulation of the derivatives market than the White House has.

An Obama proposal that Mr. Frank rejected would have required banks and other financial services companies to offer so-called plain vanilla products, like 30-year fixed mortgages and low-interest, low-fee credit cards.

That proposal set off criticism by Democrats and Republicans, some with close ties to the banking industry, that it was the first step toward having government bureaucrats approve and disapprove an array of products.

At a hearing on Wednesday before the financial services committee, Treasury Secretary Timothy F. Geithner said: “There has been a lot of concern that if you invest the government with the ability to decide what’s appropriate here and there, that will lead to less competition and choice. The chairman’s proposals, which I’ve had a chance to read quickly, provide a better balance of choice and protection.”

Mr. Frank said his measure would exempt various businesses — like merchants, retailers and providers of retirement plans — from oversight by the consumer financial protection agency.

Both Mr. Frank and Mr. Geithner emphasized that the legislation would be intended to limit the “too big to fail” policy of bailing out the nation’s largest institutions. That policy, which has provoked widespread voter anger, was central to the bailouts of Bear Stearns and the American International Group and led to big loans to the largest banks in the nation.

“We will be putting a package of legislation together that will substantially diminish that problem,” Mr. Frank said. “We will be providing for mechanisms for putting financial institutions out of their misery. There will be death panels enacted by this Congress, but they will be for large institutions that are seen as too big to die. We are talking here about dissolution, not resolution. We are talking about making it unpleasant for these institutions to die.”

Mr. Geithner saidthose institutions whose problems could shake the financial system would face far greater regulatory scrutiny and higher capital standards. But under questioning from Representative Spencer Bachus of Alabama, the ranking Republican on the committee, he refused to rule out the possibility of more bailouts of big companies.

“You can’t have a system, how shall I say it, where you abolish the fire station, or lock the doors to the fire station,” Mr. Geithner said. “That’s not a system that works.”

The NYT also reports that the oil industry has been on a hot streak this year, thanks to a series of major discoveries that have rekindled a sense of excitement across the petroleum sector, despite falling prices and a tough economy.

These discoveries, spanning five continents, are the result of hefty investments that began earlier in the decade when oil prices rose, and of new technologies that allow explorers to drill at greater depths and break tougher rocks.

“That’s the wonderful thing about price signals in a free market — it puts people in a better position to take more exploration risk,” said James T. Hackett, chairman and chief executive of Anadarko Petroleum.

More than 200 discoveries have been reported so far this year in dozens of countries, including northern Iraq’s Kurdish region, Australia, Israel, Iran, Brazil, Norway, Ghana and Russia. They have been made by international giants, like Exxon Mobil, but also by industry minnows, like Tullow Oil.

Just this month, BP said that it found a giant deepwater field that might turn out to be the biggest oil discovery ever in the Gulf of Mexico, while Anadarko announced a large find in an “exciting and highly prospective” region off Sierra Leone.

It is normal for companies to discover billions of barrels of new oil every year, but this year’s pace is unusually brisk. New oil discoveries have totaled about 10 billion barrels in the first half of the year, according to IHS Cambridge Energy Research Associates. If discoveries continue at that pace through year-end, they are likely to reach the highest level since 2000.

While recent years have featured speculation about a coming peak and subsequent decline in oil production, people in the industry say there is still plenty of oil in the ground, especially beneath the ocean floor, even if finding and extracting it is becoming harder. They say that prices and the pace of technological improvement remain the principal factors governing oil production capacity.

While the industry is celebrating the recent discoveries, many executives are anxious about the immediate future, fearing that lower prices might jeopardize their exploration drive. The world economy is weak, oil prices have tumbled from last year’s records, corporate profits have shrunk, and global demand for oil remains low. After falling to $34 in December, oil prices have doubled, stabilizing near $70 a barrel. But if the world economy does not pick up, some analysts believe the price could fall again.

Oil companies contend that is not a prospect they can afford. Despite reaping record profits in recent years, many executives have warned that they need prices above $60 a barrel to develop the world’s more challenging reserves. In fact, some exploration activity has already slowed this year, as producers seek better terms from service companies and contractors.

It is not just oil that is benefiting from the exploration boom. Repsol, Spain’s biggest oil company, said this month that it had discovered what could turn out to be Venezuela’s biggest natural gas field. In recent years, companies have found substantial natural gas reserves in the United States, from shale rocks once believed to be impossible to drill.

“The No. 1 question that exploration teams have right now is, Where do we go next?” said Robert Fryklund, who ran the operations of ConocoPhillips in Libya and Brazil, and is a vice president in Houston at Cambridge Energy Research Associates.

Exploration spending swelled in recent years, partly to offset a doubling of costs throughout the industry — from steel prices to the cost of renting deepwater drilling rigs. A big issue confronting the industry now is how to drive down costs while maintaining a high level of exploration. On average, costs have fallen by 15 to 20 percent from their peak, according to petroleum executives.

Exploration remains a risky, and costly, business, where some deepwater wells can cost up to $100 million. From 30 to 50 percent of exploration wells find oil.

Some executives are also worried the world might face a shortfall in supplies in coming years if another decline in oil prices causes exploration to falter.

The chief executive of the French oil giant Total, Christophe de Margerie, has warned that such a supply crunch is possible by the middle of the next decade. “There could be a shortage of capacity,” he said.

His concerns echoed those of Abdullah al-Badri, the secretary general of the Organization of the Petroleum Exporting Countries, who said that lower oil prices also threatened investments by OPEC nations.

Saudi Arabia is also unlikely to expand its production in coming years because of the uncertainty clouding future oil demand, Ali al-Naimi, the kingdom’s oil minister, signaled earlier this month. Saudi Arabia is just completing a $100 billion program to increase its capacity to 12.5 million barrels a day, from around 9 million barrels a day just a few years ago.

Although they are substantial, the new finds do not match the giant fields discovered in the 1970s, like Alaska’s Prudhoe Bay, Ekofisk in the North Sea, or Cantarell in Mexico. They are also dwarfed by the last enormous discovery, the Kashagan field in the Caspian Sea, discovered in 2000 and estimated to hold over 20 billion barrels of oil.

“We have not seen another Kashagan, but still these finds are very material,” said Alan Murray, the exploration service manager at Wood Mackenzie, a consulting firm in Edinburgh.

Since the early 1980s, discoveries have failed to keep up with the global rate of oil consumption, which last year reached 31 billion barrels of oil. Instead, companies have managed to expand production by finding new ways of getting more oil out of existing fields, or producing oil through unconventional sources, like Canada’s tar sands or heavy oil in Venezuela.

Reserve estimates typically rise over the life of a field, which can often be productive for decades, as companies find new ways of getting more oil out of the ground.

The industry’s record has improved in recent years, thanks to high prices. According to Cambridge Energy Research Associates, oil companies have found more oil than they produced for the last two years through a combination of exploration and field expansions.

“The appetite for opening new frontiers when prices were low in the 1990s was very small,” said Paolo Scaroni, the chief executive of Italy’s oil giant Eni. “Today, the biggest discovery of all is technology.”

One of the largest finds this year was made by a small producer, Heritage Oil, at the Miran West One field in the Kurdistan region of northern Iraq. It found nearly two billion barrels of oil and plans to drill a second well before the end of the year. While the central government of Iraq has had a hard time attracting investors to develop its huge fields, local authorities in Kurdistan have been successfully wooing foreign producers.

Meanwhile, in the Gulf of Mexico, BP’s discovery proves that the area remains one of the most promising oil regions in the United States. BP has estimated that the Tiber field holds four billion to six billion barrels of oil and gas, which would be enough, in theory, to meet domestic consumption for more than a year.

“In 30 years I’ve been in the business, the Gulf of Mexico has been called the Dead Sea countless times,” said Bobby Ryan, the vice president of global exploration at Chevron. “And yet it continues to revitalize itself.”