DUBAI: Shale oil production could pose a threat to exports from the Gulf region, whose energy wealth has given it pivotal role in the global market and a geopolitical importance, experts say.
Saudi Arabia is the world’s top oil producer, but is only marginally ahead of the United States, whose output is gaining rapidly thanks in part to development of oil shale reserves.
That could significantly alter Saudi Arabia’s export mix, as the kingdom’s oil accounted for a whopping 16 percent of US imports last year.
Saudi billionaire Prince Alwaleed bin Talal has joined in raising the alarm over the kingdom’s dependence on oil exports to generate revenue, warning that the threat from shale oil and gas is “definitely coming”.
But medium-term demand is likely to continue, propped up by Asian countries’ hunger for energy, if economic growth keeps its rapid pace.
The International Monetary Fund, in a July paper on the kingdom, said that, “over the medium term, Saudi Arabia will retain a central position in the global oil market that will be shaped by both supply and demand factors.”
But it warned that the “shale gas revolution in North America” could reduce demand for oil products “going forward”.
Thanks to their ample wealth of energy resources, Gulf Arab nations have enjoyed a strong political leverage in the Middle East, cemented by multiple aid programmes to states and non-state political factions.
Saudi Arabia, in particular, has long enjoyed the status of swing producer, being able to raise and lower production and affect market balance and prices.
In contrast with the IMF, Kuwaiti energy analyst Kamil Harami sees the harm of shale production coming sooner for oil-producing Gulf Arab nations, along with Iraq, which together sit on around 40 percent of global crude oil reserves.
“Gulf countries will be affected in the short term, not only in the medium term,” he said.
The United States is on track to become the world-number-one oil producer by 2017 and a net exporter by 2030, according to the International Energy Agency (IEA).
“Shale gas production (in the United States) has also affected the petrochemical industries in the Gulf, because the region no longer has the cheapest raw material,” said Harami.
Extracting oil and gas from shale rock formations has developed rapidly in the United states, whose recoverable shale oil resources amount to 58 billion barrels, according to the US Energy Information Administration.
The EIA ranks US wealth of shale oil second globally after that of Russia, which is around 75 billion barrels.
The United States also sits on 665 trillion cubic feet of technically recoverable shale gas, EIA says. That makes it the fourth globally, after China, Argentina and Algeria.
“Around a third of Qatar’s gas exports used to go to the United States. This has stopped” due to increased local production, said Harami.
In 2010, Qatar celebrated becoming the world’s largest producer of liquefied natural gas, with an annual capacity of 77 million tonnes. Harami also pointed out the Saudi decision to shelve plans to expand its crude output capacity to 15 million barrels a day (bpd) from 12 million bpd now.
US monthly crude production has pushed past seven million bpd, helped by a surge in shale-based output, while imports dropped below eight million bpd, the EIA said in March. Saudi Arabia exported to the United States around 1.4 million bpd in the first 10 months of 2012, an amount that represented 16 percent of US imports.
AFP
