US oil firms tell OPEC their growth will slow

The logo of the Organization of the Petroleum Exporting Countries is seen at OPEC's headquarters in Vienna, Austria, December 5, 2018. (Reuters)
Updated 23 January 2019

US oil firms tell OPEC their growth will slow

  • The United States has overtaken Russia and Saudi Arabia to become the world’s biggest crude producer
  • OPEC’s forecasts and even US government predictions have repeatedly underestimated US output growth

DAVOS: US oil producers sought on Wednesday to soothe OPEC’s worries about losing market share, telling the group that investors in the US firms wanted a reduction in growth and higher payouts.
The Organization of the Petroleum Exporting Countries and non-OPEC allies such as Russia have cut output since 2017 to support oil prices, while watching producers in the United States, which is not party to the cuts, drive up production.
The United States has overtaken Russia and Saudi Arabia to become the world’s biggest crude producer. Output is approaching 12 million barrels per day (bpd).
OPEC’s forecasts and even US government predictions have repeatedly underestimated US output growth.
The bosses of US firms Occidental Petroleum and Hess Corp, attending a session at the World Economic Forum in Davos, said that growth of US shale oil output would slow.
The session was a rare occasion when US producers and an OPEC representative, OPEC Secretary-General Mohammed Barkindo, sat on the same panel.
“I believe not as much money will be pouring into the Permian basin this time. I believe investors will hold companies accountable for returns and a lot of this didn’t happen previously,” Occidental Chief Executive Vicki Hollub said.
Echoing her comments, Hess Corp. founder and Chief Executive John Hess said shale production now accounted for about 6 percent of global production. “It will probably go up to 10 percent by mid-decade but then it flattens out,” he said.
But he added that US resources would start to degrade. “Shale is not the next Saudi Arabia. It is an important short-cycle component,” he said.
US President Donald Trump has repeatedly criticized OPEC for manipulating prices and demanded several times last year that the group bring them down. He has also praised OPEC, and its de facto leader Saudi Arabia, when prices have fallen.
Oil prices surged above $86 a barrel in October, but have since slipped back. On Wednesday, Brent was about $62.
Barkindo said OPEC aimed to balance supply and demand and had helped the United States by rescuing its oil industry from ultra-low oil prices.
“The oil industry is under siege globally,” Barkindo said, adding that OPEC wanted to talk more regularly to US producers to understand their industry better even if they could not participate in any OPEC-led production cuts.
In response, Hess said: “OPEC plays a very important role in stabilising the market and those efforts need to be recognized.”
Fatih Birol, the head of the International Energy Agency, which represents industrialized nations, said most forecasts were still underestimating US oil production growth.
“There is a huge potential in the US,” Birol told Reuters, adding that the United States could raise output by another 10 million bpd in the next decade.


Russian and Chinese investors in talks about Saudi Aramco IPO involvement

Updated 51 min 40 sec ago

Russian and Chinese investors in talks about Saudi Aramco IPO involvement

  • The initial public offering of the world’s biggest oil company is reaching a critical phase

RIYADH: Russian and Chinese investors are keen to get involved in the international element of the forthcoming initial public offering of Saudi Aramco, according to Kirill Dmitriev, the chief executive of the Russian Direct Investment Fund (RDIF).

Dmitriev told Arab News: “I would say that some Russian investors are interested. For the sovereign wealth fund (RDIF) to get invest in the Aramco IPO is still under discussion. We also have our Russia-China Investment Fund, and we have interest from Chinese investors to get involved in the Aramco IPO. We are still in discussion with our Chinese partners, and with our Russian investors.

“We are thinking what would be the different opportunities, given the interests of China and given the interest of some of the Russian investors. We will have to see how some of the details go, and nothing has been finalized, but there is definitely interest from some Russian and Chinese investors,” Dmitriev added.

The IPO of the world’s biggest oil company is reaching a critical phase, with some observers expecting the formal announcement of a listing on Tadawul just days away. Having a foreign sovereign investor, as well as a listing on a foreign stock exchange, could be a part of the later strategy to sell around 5 per cent of the state-owned company to private investors.

Dmitriev was speaking on the sidelines of the Saudi Russia CEO Forum in Riyadh, a meeting of top businessmen for both countries to coincide with the visit of President Putin.