Keep calm and carry on: OPEC's approach to the shale boom
A rise in output of North American tight oil will not trouble OPEC, the group's secretary general said on Tuesday, maintaining his view that the new supply source will not significantly impact the group's market share.
Abdullah Al-Badri, attending the annual Oil and Money conference in London, referred to forecasts of rising production of tight oil, also known as shale, but said that would not be a problem for the 12-member OPEC.
"I do not think that with this quantity OPEC is in trouble," Badri said.
The Organization of the Petroleum Exporting Countries, sceptical of information available, has been looking more closely at shale oil this year. It decided in May to carry out its own investigation on shale's potential.
Already, the US shale boom has altered the landscape of oil trade. For example, OPEC members Nigeria and Algeria have seen demand for their crude fall in the US, the world's top consumer, because of growing domestic supply.
But this need not alarm core OPEC members such as Saudi Arabia in the longer run, according to a senior International Energy Agency (IEA) official also at the conference.
"In the next few years we will continue to see growth in US shale oil, which is very good news for the US and the rest of the world," IEA Chief Economist Fatih Birol told Reuters.
"But I don't think that this has either the resource base or the economics to replace Middle East oil," he added. The IEA advises industrialized countries on energy policy.
Tight oil output would be in decline by 2018 and the cost of such developments means that a sharp drop in oil prices would restrain supplies, Badri said.
"This tight oil is hanging on the cost. If the (price) were to drop to $60 to $70, then it would be out of the market completely."
Current prices, of $108 a barrel for Brent crude, are at an acceptable level for producers and consumers, he said.
- Tourism is the real target of the Tunisia attacks: industry set to suffer
- FIFA scandal probe: No deaths in 2022 World Cup construction, Qatar says
- The UAE harnesses the power of celebrity endorsements
- Gazans reach beyond Israeli blockade through start-up
- France is playing a risky dating game in the Gulf: experts