US Shale Boom Could Impact GCC In Long-Term

The effects of shale oil and gas production in North America could impact oil prices in the medium to long term, according to a report by Standard and Poor’s.

The report said that the effects of the shale boom on the GCC’s oil and gas producers are minimal at present but could compete with the Gulf’s oil exports once shale oil production steps up.

“This (minimal effect on GCC oil production), in part, reflects GCC-based producers’ ability to redirect their oil exports, as well as the fact that many of them export heavier crudes that are not currently being displaced by shale volumes,” said Standard & Poor’s credit analyst Karim Nassif.

“The more immediate effects of U.S. shale production, in our view, center on GCC-based natural gas producers.”

Nassif said that diverting the Gulf’s oil and gas exports, originally intended to be supplied to the U.S., to Asia and the Far East has also proved effective.

However, the report said that GCC-based oil and gas incumbents recognise that more substantive and innovative strategic plans are needed over the longer term.

Recently, Saudi Arabia’s deputy oil minister Prince Abdulaziz Bin Salman Bin Abdulaziz said that the Kingdom remains unconcerned about the shale gas boom and brushed off remarks about OPEC slashing production to support prices.

Abdulaziz echoed Saudi Arabian oil minister Ali Al Naimi’s view that there is enough global demand in the future to absorb both shale and crude supplies indicating that the world’s top oil producer is least concerned with its latest competitor – shale gas.

“We welcome any energy source that comes if it is produced efficiently. The world economy over the long term would require every kind of energy available,” he said.

However Saudi businessman Prince Alwaleed Bin Talal told Canadian newspaper The Globe and Mail recently that shale boom will be a threat to any oil-producing country that has not diversified its economy.

Alwaleed said that Saudi’s authorities do not “get it” that a surge in shale output will lead to a plunge in oil prices. He also said that Saudi’s pace of economic diversification should be quicker.

“Ninety-two per cent of Saudi Arabia’s annual budget comes from oil. Definitely it is a worry and a concern,” he said.