Saudi Arabia says it welcomes North America's new-found bounty of shale oil.
If global energy demand keeps growing and fossil fuels remain free of punitive tariffs, the market will expand sufficiently to accommodate new production, according to Prince Abdulaziz bin Salman bin Abdulaziz, the Saudi assistant oil minister.
“There is no danger from anybody from producing what he can do efficiently,” the prince said on the sidelines of a conference in Dubai. “So far everybody’s enjoying a wonderful, stable market. Everybody is prosperous. There are people in Texas – they say they’re pushing the pedal to the metal – and everybody’s enjoying it.”
The kingdom’s rose-coloured view contrasts with predictions by Opec that the group could lose nearly 8 per cent of its market share in the next five years to shale oil and other new production.
In its annual outlook released this month, Opec said demand for its crude would dip to between 28 million and 29.2 million barrels per day (bpd) by 2018, from 30.3 million bpd today.
The group is due to meet next month in Vienna.
In October it pumped 29.93 million bpd, with Saudi Arabia contributing 9.75 million of that, according to a survey by the oil pricing service Platts.
The kingdom is home to the bulk of the spare capacity that Opec uses to balance world markets.
“At the end of the day, the name of the game of your relevance is about how much you export, how much that export volume means to the world energy market,” said Prince Abdulaziz. “And more important, which people sometimes forget or intend to forget or try to forget, who has the excess capacity? When for any reason or another, shortages pop out, who is usually the rescuer of the energy market, and not only the energy market but also the world economy?”
The effects of fracking on North American gas and its downstream petrochemicals industry pose a larger threat to the Arabian Gulf, in the kingdom's view.
Competition from American producers able to exploit cheap and plentiful feedstock “should be a wake-up call for all the GCC petrochemical industry”, said Prince Abdulaziz.
As a hedge, regional petrochemical producers are turning their attention towards investing in North America.
Abu Dhabi’s International Petroleum Investment Company bought Canada’s Nova Chemicals in 2009, and has since overseen a revival of the company’s older plants, thanks to supplies from the Marcellus Shale and other newly opened reservoirs.
Equate Petrochemical Company, the joint venture between Dow Chemical and Kuwait’s state-owned Petrochemicals Industries, yesterday said it was evaluating options in the United States, joining Saudi Basic Industries Corporation (Sabic) in the hunt for a position there.
“We could tap into this,” Mohammad Husain, Equate’s chief executive, said on the sidelines of the Gulf Petrochemicals and Chemicals Association conference. “If we get a chance to be involved in the US, we think we have an advantage with our JV partner Dow, which is in the neighbourhood.”
ayee@thenational.ae
