Wishful thinking? US shale revolution won't affect the Middle East, says second opinion
The shale oil revolution in the United States is not expected to present a threat to the Middle East, according to Duncan Anderson, chief executive officer at Gulf Marine Services (GMS).
“What you’ve got to remember about shale oil is that it is very expensive to produce because you need to remove it from the shale, [and] there are various processes to separate the oil. Plus, oil production costs [in the Middle East] are about a quarter to a third of shale oil in terms of operating costs, so you can still deliver oil here a lot cheaper than you would extract shale oil,” Anderson told ‘Gulf News’ in an interview.
He added that oil fields in the Middle East were particularly permeable, thus allowing for more and easier extraction of oil. With oil companies now under increasing pressure to get more oil from fields, the case for Arabian oil is boosted even further.
“I think Arabian oil and traditional forms of oil recovery will be here for a very long time indeed. Shale oil has been around for a long time in Canada in vast quantities, but it’s very expensive to produce,” he said.
Discussing other factors that may potentially influence Arabian oil, Anderson said he did not expect political disruptions to affect oil passage through the Strait of Hormuz.
“My experience is that oil production always continues whatever the political situation. If you look at political issues in Nigeria, for example, and some parts of south-east Asia, they still produce oil. There’s a pipeline being built in Fujairah, so we believe business in the UAE wouldn’t be hugely affected,” he said.
The Strait of Hormuz is one of the world’s busiest passageways for oil tankers, with around 20 per cent of the world’s petroleum passing through it.
Commenting on current oil prices, Anderson said: “What we’re looking at is sustained high oil prices. We are happy that the price has been recently at $100 (Dh367.3) a barrel. But at the same time, if it goes too high, it can drive [a] world recession.”
GMS is one of the world’s largest providers of self-propelled, self-elevating accommodation barges. Based in Abu Dhabi, the company builds and maintains its vessels in the emirate, but also operates from its offices in Saudi Arabia and the UK.
The company recently opted to list its shares on the London Stock Exchange rather than listing in the UAE stock markets.
Explaining the reason, Anderson said: “It wasn’t really a case of choosing London over the [other] stock markets. It was really a case of GMS wanting to go for premium stock exchanges because of the opportunities it presents, like accessing liquidity.”
He added that 40 per cent of the company’s revenue comes from the North Sea. After discussions with analysts, there was mutual vote to list shares in London.
The company listed shares at a value of £1.35 (Dh8.50), and are now at a value of £1.58. Analysts expect share prices to grow between £1.7 and £2.2 over a year.
As for the company’s expansion plans, Anderson said that GMS is leasing one barge and building five barges. The first one is expected to be delivered in September. The company is also targeting operations in west Africa and south-east Asia.
“Our target for [earning before interest, tax, depreciation, and amortisation (Ebitda)] margin is 65 to 70 per cent. We anticipate getting that in both the new regions that we will move into,” he said.
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