UAE ‘to tap Mideast shale,’ says energy minister

Shale and conventional oil need to work as partners, according to the UAE’s energy minister. Above, pump jacks and wells in an oil field on the Monterey Shale formation. (AFP)
Updated 13 March 2019
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UAE ‘to tap Mideast shale,’ says energy minister

  • Speaking at the CERAWeek forum, UAE Energy Minister Suhail Al-Mazrouei said that the economics of the energy industry had changed following the boom in US shale production
  • Suhail Al-Mazrouei: First, we want to produce and consume the easier oil, which we have plenty of. There will be a time when we will tap into shale - we have looked at the potential

HOUSTON: The Middle East has great potential as a shale oil-producing area, according to the UAE Energy Minister Suhail Al-Mazrouei, who said the Emirates would inevitably produce shale at some stage.
Speaking at the CERAWeek by IHS Markit energy forum in Houston, Texas, Al-Mazrouei said that the economics of the energy industry had changed following the boom in US shale production, and the UAE was looking at how it might exploit its resources.
“We need to thank the shale oil producers for significantly dropping the cost. That has helped us look at shale with a different eye in the Middle East and in many parts of the world where it is a viable source,” he told delegates.
The UAE’s move into shale will not come immediately, he added. “First, I think we want to produce and consume the easier oil, which we have plenty of. There will be a time when we will tap into the shale oil, but definitely we have looked at the potential,” Al-Mazrouei said.
The technology-driven boom in US oil production has revolutionized the global energy industry, with the International Energy Agency forecasting that the US will overtake Russia as the second-biggest oil exporter, after Saudi Arabia, by 2024.
Al-Mazrouei, who was president of the Organization of the Petroleum Exporting Countries (OPEC) last year, said that this transformation had altered perceptions of the shale business. “The oil revolution is something that demonstrates how tech can help us look at the new frontiers, and whatever we see today as not commercial, one day can be commercial,” he said.
Countries in the Arabian Gulf, including Saudi Arabia and the UAE, have potentially significant reserves of shale oil, but because they also have the greatest concentration of conventional oil in the world, at geologically accessible locations, they have not considered it economically worthwhile to produce shale.
“In the beginning people were thinking it’s just a phenomenon, it’s not going to last for longer. Personally, I was thinking that shale oil is needed, and that we need to work with shale oil producers as partners. We need to complement each other,” Al-Mazrouei added.
For the past two years at CERAWeek, OPEC representatives met with executives from the US shale business to discuss areas of mutual interest.
“We started to have a technical dialogue, not a commercial dialogue, to see how can we complement each other in fulfilling the demands of the world and making sure that we have the right commodity at the right time for the right consumers,” Al-Mazrouei said.
He credited the alliance between OPEC, led by Saudi Arabia, and other major oil producers, led by Russia, for bringing about balance in the world oil market. “We managed to get a consortium together. Since then we began to gradually recover the market balance, and we achieved that balance last year in the summer,” he said.
However, for many reasons, including geopolitics, “we had to change the strategy again and adopt the new agreements that we adopted at the end of 2018. Now we’re seeing that strategy has been working, reducing inventories and trying to get to the five-year average (oil price), where we feel it’s the right environment for the balance and for the oil industry to thrive again,” he added.


Pakistani central bank lifts interest rate as inflation bites

Updated 20 May 2019
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Pakistani central bank lifts interest rate as inflation bites

ISLAMABAD: Pakistan’s central bank raised its key interest rate to 12.25% on Monday, warning that already soaring inflation risked further rises on the back of higher oil prices and reforms required for a bailout from the International Monetary Fund.
The 150 basis points increase follows a preliminary agreement last week with the IMF for a $6 billion loan that is expected to come with tough conditions, including raising more tax revenues and putting up gas and power prices. It was the eighth time the central bank has increased its main policy rate since the start of last year.
With economic growth set to slow to 2.9% this year from 5.2% last year, according to IMF forecasts, the rate rise adds to pressure on Prime Minister Imran Khan, who came to power last year facing a balance of payments crisis that has now forced his government to turn to the IMF.
Higher prices for basic essentials including food and energy has already stirred public anger but the central bank suggested there was little prospect of any immediate improvement.
Noting average headline inflation rose to 7% in the July-April period from 3.8 percent a year earlier, the central bank said recent rises in domestic oil prices and the cost of food suggested that “inflationary pressures are likely to continue for some time.”

 

It said it expected headline inflation to average between 6.5% and 7.5% for the financial year to the end of June and was expected to be “considerably higher” in the coming year. Expected tax measures in next month’s budget as well as higher gas and power prices and volatility in international oil prices could push inflation up further, it said.
It said the fiscal deficit, which the IMF expects to reach 7.2% of gross domestic product (GDP) this year, was likely to have been “considerably higher” during the July-March period than in the same period a year earlier due to shortfalls in revenue collection, higher interest payments and security costs.
Despite some improvements, financing the current account deficit remained “challenging” and foreign exchange reserves of $8.8 billion were below standard adequacy levels at less than the equivalent of three months of imports.
The central bank said it was watching foreign exchange markets closely and was prepared to take action to curb “unwarranted” volatility, after the sharp fall in the rupee over recent days that saw the currency touch a record low of 150 against the US dollar.
Details of what Pakistan will be required to do under the IMF agreement, which must still be approved by the Fund’s board, have not been announced but already opposition parties are planning protests.
As well as higher energy prices that will hit households hard, there are also expectations of new taxes and spending cuts in next month’s budget to reach a primary budget deficit — excluding interest payments — of 0.6% of GDP.
With the IMF forecasting a primary deficit of 2.2% for the coming financial year, that implies squeezing roughly $5 billion in extra revenues from Pakistan’s $315 billion economy, which has long suffered from problems raising tax revenue.

FACTOID

Pakistan’s economic growth is set to slow to 2.9% this year.