Shale oil ‘unlikely to hurt Saudi exports’

The entry of shale oil into world markets is not likely to pose any major challenge to conventional oil exporters such as Saudi Arabia in the Gulf in the near future, according to fossil fuel researchers and analysts.
Analysts argue that factors such as the cost of the production, environment threats and alternative markets will ensure there is continued demand for conventional oil even if the US market is saturated with shale oil. Asharq Al-Awsat discussed the issue with three prominent experts in the oil market and economy.
Turki Al-Hoqail, an economic analyst based in Washington DC, said the shale oil revolution in the US has the potential to change the map of global oil trade in the long term because it would ensure that the US achieves self sufficiency in its oil demand and reduce imports.
Kamel Al-Haremi, a Kuwaiti oil-analyst, said the US depends for 85 percent of its oil needs on local output and neighboring producers Canada and Mexico. Only 15 percent of oil is imported from regions such as the Middle East. He feared that this low percentage will also disappear when the US achieves self sufficiency in the field of shale oil by between 2017 and 2020 and will emerge as a dominant force in the oil market.
On the other hand, Saudi Shoura Council Member Fahd bin Jama, a well-known oil analyst, said he believed that the US shale oil will be not a cheap affair.
“The flooding of the oil market with the shale oil will not be logical because the cost of a barrel will be around $ 60 and its flooding will eat away profit margins of companies in the field and, which will, in turn, strengthen the survival of the conventional sources of oil at least for the next 30 years,” he said.
Al-Hoqail also supported this view. He says that the shale oil, with a production cost of $ 65-$ 75, will never be a threat to Gulf oil exporters including Saudi Arabia. Production costs vary between $ 7 to $ 15 in the region, he says.
Al-Haremi says shale oil might still remain profitable because Gulf oil producers base their budgets on a price base of $ 90 per barrel.
Even if the US market is to be dominated by products from Canada, China and India will need the Saudi oil. This will compensate for any loss in the US market, Al-Hoqail said.