OPEC, at its Vienna meeting, grapples with shale oil
By News Desk | May 31, 2013
At first glance OPEC had one of its most straightforward meetings of recent years in Vienna this week.
With minister after minister expressing satisfaction with current oil market conditions, there was never much prospect of any change to the group’s current crude production ceiling of 30 million b/d. And when the ministers met formally on Friday it took them less than two hours to agree a rollover.
But while the Brent crude price of just over $100/barrel is pretty much exactly where the big crude exporters like it, concern is clearly growing in some quarters about the rising threat to market equilibrium posed by the burgeoning shale oil production in the US.
That concern, not surprisingly, is most keenly felt by those OPEC members that have seen a dramatic drop in their crude exports to the world’s biggest oil consumer.
Nigeria was exporting more than 1 million b/d of crude to the US in early 2010, but by last year this had fallen to less than half that level. Algeria’s exports to the US have dropped from more than 500,000 b/d in early 2010 to under 200,000 b/d in early 2013.
Nigerian oil minister Diezani Alison-Madueke told reporters on the sidelines of the OPEC meeting that the unprecedented rise in US shale production posed a concern not only for Nigeria’s export market but also for Africa as a whole.
“I don’t think, in the immediate future or in the medium term, shale… will overtly affect OPEC’s production or exports, but it is of grave concern for us,” she said.
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Elsewhere in the OPEC ranks, however, ministers seemed much more relaxed.
Take top producer Saudi Arabia, whose supplies to the US have remained steady over the past three years at around 1.1 million b/d. In Washington in April, Saudi oil minister Ali Naimi said he welcomed the additional US supply, which would “bring depth and increasing stability to global markets.”
Earlier this week, a senior Gulf OPEC delegate said the kingdom did not see shale as a problem. Indeed, because it is expensive to produce, shale creates “a floor for oil prices,” he said, though he acknowledged that it would also lead to a “big, big change” in the structure of international oil trade.
Attempting to give a unified OPEC position on shale oil to reporters after the meeting, secretary general Abdalla el-Badri said the group needed to have a better understanding of this newest source of oil supply.
Badri noted the lack of consistency in current estimates of future production from shale, saying there was “a lot of uncertain information.”
The US government’s Energy Information Administration, he said, expected shale oil production in the US to rise from a current level of around 2 million b/d to 4 million or 5 million b/d by 2035. “If that is the number, it will not impact our member countries,” he said.
Earlier this year accountants PwC said global shale oil production could rise much faster to reach 14 million b/d by 2035, 12% of the world’s total oil supply.
“We have to look into the accurate numbers and see how much [shale] will supply year by year and how sustainable it is,” Badri said.
Badri stressed that OPEC’s research would look beyond the short term to obtain a full picture of the implications of shale oil for its members in the future. Some of them have already gotten a glimpse of that future, and for them so far, it’s not comfortable viewing.
Based on reporting from Vienna by Eklavya Gupte, Margaret McQuaile, Jacinta Moran, Kevin Saville, Richard Swann and Herman Wang.
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