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Saudi oil min says US shale oil helps keep markets stable Kingdom welcomes new source of energy supplies

KHOBAR, Saudi Arabia, Jan 19, (RTRS): Top oil exporter Saudi Arabia welcomes the surge in US shale oil production for its stabilizing effect on crude prices, Saudi oil minister Ali al-Naimi was quoted as saying on Sunday after a meeting with US Energy Secretary Ernest Moniz. The Organization of the Petroleum Exporting Countries (OPEC) said in its annual World Oil Outlook published in November that the group faced a shrivelling market share over the next five years, with the shale energy boom set to boost rival supplies. But shale oil remains much more costly to produce than most Middle East crude and Saudi oil officials say they have nothing to fear from the rival crude revolution. “Shale oil has been also discussed and the rise in production from the United States and other countries,” Naimi was quoted by Saudi state news agency SPA as saying after their meeting in Riyadh. “The kingdom welcomes this new source of energy supplies that contribute to meeting rising global energy demand and also contribute to the stability of the oil markets.”

The North American shale oil surge has dampened oil price volatility and helped keep benchmark Brent crude trading in a $100-110 per barrel range — prices that Saudi officials say they are comfortable with — for much of the last 12 months. Last week, oil company BP said in its influential annual outlook issued that Middle East energy use will grow by 77 percent by 2035, double the increase in production, meaning as little as 65 percent of oil output will be available for export, down from 72 percent. This could put additional pressure on government budgets of countries such as Saudi Arabia that depend on oil export revenue, at the same time as supply from shale oil and other non-conventional sources meets the bulk of global demand growth. BP expects Russia and South America to join the United States in tapping shale oil over the next two decades, indicating the shale boom that has transformed the US energy market can, to some extent, be repeated in other countries. “The second-biggest coming in over time is Russia and then South America, and in South America Colombia and Argentina,” BP’s chief economist, Christof Ruhl, said at a news briefing, referring to sources of shale oil growth outside the United States.

BP’s prediction that countries other than the United States will partly re-create its shale oil boom contrasts with other long-term energy forecasts. The Organization of the Petroleum Exporting Countries, for example, assumes shale production will have no impact outside North America. The United States will become energy self-sufficient by 2035, BP said, a more concrete forecast than previously, as the shale boom allows it to surpass a previous 1970 peak in oil output and as gas supply rises. North America will become self-sufficient even earlier, in 2018. The Middle East remains the world’s largest oil exporting region and also becomes the largest consumer of oil and other fuel liquids per capita, surpassing North America, by 2035 consuming over three times the amount per person than the global average, BP said. Low, often subsidised prices for gasoline and electricity give Middle East residents little incentive to switch to fuel-efficient cars from gas-guzzlers, or cut their use of air conditioning in one of the world’s hottest climates. At the same time, countries’ efforts to develop their economies beyond oil are leading them into energy-intensive industries such as aluminium smelting. World oil demand will rise to 109 million barrels per day (bpd) by 2035, up 19 million bpd and led by China, India and the Middle East. Even so, oil will be the slowest-growing fuel over the period. BP expects Russia and South America to contribute about 1 million bpd of shale oil each by 2035 and that oil from tight rock formations will account for 7 percent of global supplies in 2035, Ruhl told reporters.


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