Production of oil from shale deposits outside North America will be too costly to significantly harm the interests of established oil exporters, says a top Saudi official.
Ibrahim Al-Muhanna, an adviser of Petroleum and Mineral Resources Minister Ali Al-Naimi, was speaking at a forum organized in Kuwait City by Secretariat General of the Organization of Arab Petroleum Exporting Countries (OAPEC).
Most of OPEC members have so far played down the significance of the so-called shale boom in the US.
The International Energy Agency recently predicted that the US will overtake Saudi Arabia as the world’s No. 1 oil producer by 2020.
In his speech, cited by Reuters and other news agencies, Ibrahim Al-Muhanna addressed the increase of shale oil production which analysts have said is a growing concern for Gulf Arab producers.
“This fear is misplaced. The positive effects of shale oil on oil producing countries, including OPEC and Arab countries, in the medium term 5 to 10 years, outweigh the negative effects,” he said adding that the positive impact included giving more depth and stability to the market.
“Increases in the production of shale oil during the remaining part of this decade will be restricted to the US and Canada within the limits of 1.5 million barrels per day, which is a small quantity in a market where demand exceeds 90 million barrels per day,” he was quoted as saying.
“Production of shale oil in the remaining parts of the world is not expected before the start of the next decade at best.”
The extra supply is not a competitive threat because it costs much more to produce than oil in most of OPEC’s member countries, he said.
“There are many difficulties that face the production activities of shale oil...most importantly, the high production cost which amounts to about $70 to $ 80 per barrel,” he said.
He said global oil supplies are likely to remain balanced and prices stable at around $ 100 per barrel, with OPEC expected to maintain production at current levels this year.
“Assuming that OPEC will maintain the current production level of 30.5 million bpd, as expected, it will mean the market will stay balanced this year with anticipated withdrawals from the commercial stock in the fourth quarter,” he said.
Ihe said OPEC production would likely rise to 34 million barrels per day (bpd) by 2020, to meet an expected rise in demand.
“In this situation, OPEC spare capacity will range between 3 to 4 million bpd mostly from the Gulf countries, particularly Saudi Arabia, Iraq, Kuwait and the UAE. This is an appropriate spare capacity; neither high to put negative pressure on prices.”
Kingdom: US ‘shale boom’ not a competitive threat
