OPEC relaxed about cost-sensitive shale oil

Updated 02 October 2013
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OPEC relaxed about cost-sensitive shale oil

LONDON: A rise in output of North American tight oil will not trouble OPEC, the group's secretary general said on Tuesday, maintaining his view that the new supply source will not significantly impact the group's market share.
Abdullah Al-Badri, attending the annual Oil and Money conference in London, referred to forecasts of rising production of tight oil, also known as shale, but said that would not be a problem for the 12-member OPEC.
"I do not think that with this quantity OPEC is in trouble," Badri said.
The Organization of the Petroleum Exporting Countries, sceptical of information available, has been looking more closely at shale oil this year. It decided in May to carry out its own investigation on shale's potential.
Already, the US shale boom has altered the landscape of oil trade. For example, OPEC members Nigeria and Algeria have seen demand for their crude fall in the US, the world's top consumer, because of growing domestic supply.
But this need not alarm core OPEC members such as Saudi Arabia in the longer run, according to a senior International Energy Agency (IEA) official also at the conference.
"In the next few years we will continue to see growth in US shale oil, which is very good news for the US and the rest of the world," IEA Chief Economist Fatih Birol told Reuters.
"But I don't think that this has either the resource base or the economics to replace Middle East oil," he added. The IEA advises industrialized countries on energy policy.
Tight oil output would be in decline by 2018 and the cost of such developments means that a sharp drop in oil prices would restrain supplies, Badri said.
"This tight oil is hanging on the cost. If the (price) were to drop to $60 to $70, then it would be out of the market completely."
Current prices, of $108 a barrel for Brent crude, are at an acceptable level for producers and consumers, he said.


Jordanian cabinet approves new IMF-guided tax law to boost finances

Updated 2 min ago
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Jordanian cabinet approves new IMF-guided tax law to boost finances

AMMAN: Jordan’s cabinet on Monday approved major IMF-guided proposals that aim to double the income tax base, as a key part of reforms to boost the finances of a debt-burdened economy hit by regional conflict.
“When only 4 percent of Jordanians pay (personal) income tax, this may not be the right thing,” Finance Minister Omar Malhas said in remarks after the cabinet meeting, adding the goal was to push that to eight percent. The draft legislation was submitted to parliament.
The IMF’s three-year Extended Fund Facility program aims to generate more state revenue to gradually bring down public debt to 77 percent of GDP in 2021, from a record 95 percent.
A few months ago Jordan raised levies on hundreds of food and consumer items by unifying general sales tax (GST) to 16 percent — removing exemptions on many basic goods.
In January subsidies on bread were ended, doubling some prices in a country with rising unemployment and poverty among its eight million people.
The income tax move and the GST reforms will bring an estimated 840 million dinars ($1.2 billion) in extra annual tax revenue that will help reduce chronic budget shortfalls normally covered by foreign aid, officials say.
Corporate income tax on banks, financial institutions and insurance companies will be pushed to 40 percent from 30 percent. Taxes on Jordan’s phosphate and potash mining industry will be raised to 30 percent from 24.
The government argues the reforms will reduce social disparities by progressively taxing high earners while leaving low-paid public sector employees largely untouched.
“This is a fair tax law not an unfair one,” said Malhas, who shrugged off criticism the law is lenient on many businesses connected to politicians whose transactions are not subject to tax scrutiny.
Husam Abu Ali, the head of the Income and Sales Tax Department, said a proposed IMF-recommended Financial Crime Investigations Unit will stiffen penalties for tax evaders. Critics say it will not tackle pervasive corruption in state institutions.
Abu Ali said the government could be losing hundreds of millions of dollars through tax evasion, which is as high as 80 percent in some companies.
The amendments lower the income tax threshold and raise tax rates. Unions said the government was caving in to IMF demands and squeezing more from the same taxpayers.
“It is penalizing a group that has long paid what it owes the state,” the unions syndicate said in a statement.
“It imposes injustice on employees whose salaries have barely coped with price hikes rising madly in recent years.”