Dubai: The United States shale revolution is still up to a decade away from significantly impacting Middle East oil and gas producers, analysts say, despite Saudi Arabia cutting production in August.
The International Energy Agency said on Thursday preliminary data shows a “sharp drop” in Saudi Arabian oil exports in August.
This follow’s the countrys June oil export slump to the US, which fell to 1 million barrels per day (bpd) compared to an average of 1.4 million bpd in the first five months of the year, which the IEA said was due to the shale boom.
Saudi Arabia also cut production by 330,000 barrels a day to 9.68 million a day in August, according to the IEA.
No cause for concern
But analysts say this is no cause for concern with Saudi Arabia, and other Middle East oil producing states, likely to decrease production levels to keep pricing levels high.
Prices need to remain high for many of the oil-based economies in the Middle East countries to continue, said London-based Shwan Zulal, managing director of Carduchi Consulting.
Zulal, speaking by Skype, said the other Gulf countries, including the United Arab Emirates, may follow Saudi’s lead, however, the impact of US shale oil will be minimal for them,
Saudi Arabia, the world’s biggest crude oil exporter, exported 6.95 million bpd in June compared to the United Arab Emirates, which total production reached 2.83 million bpd for the same month.
But analysts also point out that global shale revolution, including in the US, is still five to ten years away as companies wait for the necessary technology and as well as change in laws to permit shale production, partly due to environmental-related concerns.
India-based Aparajith Balan, a Programme Manager covering the Middle East and North Africa at Frost & Sullivan, said by email, the US shale boom is leading to a price drop.
“Since the US is the world’s largest consumer of oil, any drop in demand would lead to a reduction in oil prices, and hence, reduced revenues to the Middle East,” he said.
London-trade Brent Crude, a global market indicator for oil prices, traded at $98.42 per barrel as of early morning UK time on Friday. Earlier this week, Brent Crude fell to $97.60 in intraday trade, the lowest price since April 18, 2013, when it hit $96.75.
However, weakened global, especially out of China and Europe, is also contributing to falling prices.
Balan said the shale boom is likely to impact the Middle East “attractiveness for new invests as the US becomes a viable alternative for large petrochemical projects fed by the growing shale gas production.
However, Zulal said the new Russia-China gas pipeline will be a bigger, immediate threat.
He added that Qatar, a major gas producer, will more than likely to be able to accommodate a price drop due to its large global market share.
Other analysts agree that US shale gas is not an immediate threat.
“I see no impact of US shale gas on Middle East output until LNG exports start in late 2015 and then not very much until the big volumes arrive in 2018”, said UK-based Jonathan Stern, a gas expert at the Oxford Institute for Energy Studies, by email.