Al-Falih: Oil output cuts may need to continue
Al-Falih: Oil output cuts may need to continue
The comments come as the price per barrel stand above $50 and increases in US shale oil production threaten to keep them low.
“There is an initial agreement but it has not been communicated to all the countries yet that we might be forced to extend in order to reach our goal,” Al-Falih said in a speech at an oil conference in Abu Dhabi.
OPEC agreed in late November to cut its production by 1.2 million barrels a day for six months, its first cut since 2008. Nearly a dozen other countries including Russia pledged in December to cut an additional 558,000 barrels a day.
OPEC is keen that non-member producers play their promised part in supporting the group’s efforts to lift prices, which have recovered to $53 a barrel from lows last year below $30.
OPEC and non-OPEC meet on May 25 to discuss extending the curbs that total 1.8 million barrels daily, two-thirds of that from OPEC.
OPEC sources said an internal assessment was that if they failed to extend the agreement, oil could slide back to $30-$40 a barrel.
Significant wild cards remain, however. President Donald Trump has pledged to free up more oil drilling in the US. The global economy remains weak as well. Meanwhile, shale oil production has started growing again in the US while Iran rushes to produce as much as it can to make up for years of economic sanctions it suffered over its contested nuclear program.
Talking about shale, UAE Energy Minister Suhail Al-Mazroui said producers involved in the cut made the decision “because we care about the balance in the market.”
He said: “This sacrifice cannot be taken as a sacrifice where someone else can benefit 100 percent.”
Kuwait’s Oil Minister Essam Al-Marzouq said he expected the output cut agreement to be extended. “Russia is on board preliminarily ... Compliance from Russia is very good,” Al-Marzouq said.
OPEC Secretary-General Mohammed Barkindo, noting that Al-Marzouq chairs a committee that measures compliance with the cuts, said: “It is significant that the Kuwaiti minister has come out in public and said this.”
Inventories still high
Al-Falih said his main concern was to reduce global oil inventories, calling that “the main indicator for the success of the initiative.”
While inventories held at sea and in producer countries have dropped, they remain stubbornly high in consumer regions, particularly in Asia and the US.
Oil prices were largely flat on Thursday. Brent futures were at $52.93 barrel at 1345 GMT, unchanged from their last close. US crude futures were down 9 cents at $50.50 a barrel.
Both benchmarks had traded more than 50 cents higher earlier in the day, but gains eased at the start of US trading hours.
“The US market perhaps does not believe in the oil market balance that OPEC would have us believe,” said Hans van Cleef, senior energy economist with ABN AMRO.
The International Energy Agency said last week that inventories in industrialized countries were still 10 percent above the five-year average, a key gauge for OPEC.
OPEC seems to be encouraged by the contribution of non-OPEC producers to the output cuts.
Al-Marzouq said there was a “noticeable increase in compliance from non-OPEC.” Joint compliance among OPEC and non-OPEC in March was above 90 percent, he said.
Russia has not yet publicly committed to prolonging its curbs, although Energy Minister Alexander Novak said this month that Moscow would start consultations with producing companies about the possibility of doing so.
Al-Marzouq said another African nation, which he did not identify, had expressed interest in joining the 24-country effort.
One hold-out for an extended deal may be Iraq. Baghdad might seek to be exempt and ask to boost its own output, said the leader of the nation’s ruling coalition, Ammar Al-Hakim.
Speaking in Cairo, Al-Hakim cautioned that Baghdad could ask to be exempted from taking part in the supply curbs as the OPEC member country needed its oil income to fight Daesh.
“Given these sensitive circumstances, it is the right of Iraq to hope for an exemption by the other OPEC member states and have an opportunity to increase its production,” Al-Hakim, an influential cleric, said in an interview this week.
“But we are with the principle of reducing the overall OPEC supply to lift prices.”
Iran does not look likely to become an obstacle. The current deal granted Tehran permission to lift output, hit by Western sanctions that ended just over a year ago.
“Iran is not an issue. We know they cannot raise their production much more,” an OPEC source said.
Mozambique’s gas-fueled future threatened by militants
- An unprecedented wave of militant attacks in northern Mozambique has raised fears the country will fail to fully cash in on a gas bonanza
- Since October, more than 30 people have been killed in brazen assaults on unarmed villagers
MAPUTO: An unprecedented wave of militant attacks in northern Mozambique has raised fears the country will fail to fully cash in on a gas bonanza.
After 180 trillion cubic feet (5.1 trillion cubic meters) of natural gas were discovered off the country’s northeastern shore, Mozambique entertained dreams of following Qatar down the path toward wealth. The government even predicted that by 2035, the country’s GDP per head could increase sevenfold.
But the southeast African country’s golden vision has been thrown into doubt by an explosion of bloodthirsty assaults by a shadowy militant group in the region where the industry plans to base its hub.
Since October, more than 30 people have been killed in brazen assaults on unarmed villagers.
Security forces have rushed reinforcements to be area yet seem powerless to stem the attacks. Terrorized, many civilians have fled their homes and a cloud hangs over the great expansion plans.
US oil and gas giant Anadarko, the largest exploration company in the region, has invested $4 billion (3.4 billion euros) so far — it plans to put in $20 billion over the lifetime of the gasfields.
But following a US embassy alert on June 8 that warned of an imminent attack on the regional gas hub Palma, Anadarko temporary suspended some activities and moved affected workers and contractors to a secure site.
Canada’s Wentworth Resources has already suffered delays to its projects as a result of the insecurity, forcing it to seek a year-long extension for its initial exploration.
In its successful application to the authorities, Wentworth said the attacks had “prevented safe access to the area for Wentworth staff and contractors.”
There have been more than 10 attacks on villages since October, featuring beheadings and arson. None has targeted gas operations.
“Due to the attacks, we took additional measures to protect not only the oil and gas companies operating in that area, but also to protect the communities,” said Joaquim Sive, the police commander in Cabo Delgado.
Eric Morier-Genoud, a researcher at Queen’s University Belfast, said any attack against the gas “majors” would be an “escalation from which the militants would come out the losers.”
“At this point... based on the information we have, we classify the attacks as an insignificant risk to the economy,” Rogerio Zandamela, the governor of Mozambique’s central bank, told AFP.
In contrast to this, the central bank did consider a spate of attacks carried out by a militia loyal to the main opposition Renamo party in the country’s center in 2015 and 2016 as an economic risk.
“There was much more clarity about the conflict in central Mozambique... We cannot equate the north with the south,” Zandamela said. “The information available on the conflict in Cabo Delgado is very limited.”
Police have stepped up security around gas projects — particularly those close to areas that have come under attack, national police spokesman Inacio Dina told AFP.
An official at Anadarko, who declined to be named, said “There have been no threats specific to our project. However, it is a cause for concern, and therefore, as operations continue, we have undertaken appropriate measures.”
The company has a gas operations camp in a forest on the Afungi Peninsula.
Police and army units have established a command post in the forest following the attacks.
But a source at Anadarko told AFP that the firm has also stepped up its own security efforts, increasing its private protection force by two-thirds — a move that will have an impact on costs.
Despite such problems, foreign investors for now still have a big appetite for a share of Mozambique’s gas treasures.
Japan’s Tokyo Gas and Britain’s Centrica inked supply deals with Anadarko on June 15 — just a day after a machete attack on the village of Ibu.
Even so, experts say the instability in the northeast could still prove costly. It could cut into the dividend that Mozambique expects from the huge find.
“(The gas projects) are at risk in their early stages, as attacks can adversely affect logistics. Materials must reach Palma by land,” said Maputo-based political science researcher Joao Pereira.
“The insurgency is most likely to delay rather than derail development of the sector,” said Ed Hobey-Hamsher, an analyst at global risk consultancy Verisk Maplecroft.
“Attacks will certainly make the investment more expensive because of security needs reducing revenues for the state.”