Text size:

  • Small
  • Normal
  • Large
Workers on a natural gas drilling rig in Pennsylvania. A rising hydrocarbons production has helped the US reduce its dependence on imports. Tim Shaffer / Reuters
Workers on a natural gas drilling rig in Pennsylvania. A rising hydrocarbons production has helped the US reduce its dependence on imports. Tim Shaffer / Reuters

Middle East oil production not threatened by US shale boom

Shale oil is not going to put Middle East producers out of business anytime soon, says the chief economist of the IEA.

SINGAPORE // Middle East oil producers can relax: North America’s rising output does not threaten their status as the world’s hydrocarbons hub.

So says the industry’s consumer watchdog, the International Energy Agency (IEA).

A bounty of shale oil and a decline in American fuel consumption have helped the United States to trim oil imports and have thrown into question the importance of the country’s partners in the Middle East, where special relationships have been forged amid the world’s longest-producing fields.

“If some people say that as a result of the growth of American oil we do not need any more Middle East oil, I don’t find it right,” said Fatih Birol, the chief economist of the IEA, the Paris-based organisation representing 28 oil-consuming nations. He was speaking on the sidelines of Singapore International Energy Week.

“First, the size of the US unconventional oil resources are much lower than the Middle East oil, and second, producing US oil is much more expensive than the Middle East oil. Therefore, looking at this plus the growing oil demand, mainly driven by Asia, tells me that the Middle East is and will remain the heart of the global oil industry for many years to come.”

Fracking – the technique of forcing oil and gas out of shale formations by injecting reservoirs with a cocktail of sand, water and chemicals – has forced Arabian Gulf countries to reconsider their positions in the global energy market.

At the same conference in Singapore, Khalid bin Khalifa Al Thani, the chief executive of Qatargas, said “uncertainties” in the market were stalling investments in new capacity.

Abu Dhabi is investing US$40 billion in boosting production capacity to 3.5 million barrels per day (bpd) over the next five years from about 3 million bpd currently. Reaching that level requires building artificial islands, drilling some of the world’s longest horizontal wells and other technological feats. Part of that capacity could be kept as spare, say UAE officials, but the market could easily absorb all of it, said Mr Birol.

“I believe if this target is reached, there’ll be no problem whatsoever to find customers for that oil, and I would guess at handsome prices, and bringing significant revenues to the country,” he said. “If the UAE wants to increase the production after that, it will depend on when they get to 3.5; they will read the market conditions and they will see if there is a need.”

That outlook hinges on rising demand in the East, particularly in South East Asia, where oil demand is forecast to increase to 6.8 million bpd in 2035 from 4.4 million today, according to an IEA report released this week.

“The centre of gravity of the global energy system is shifting to Asia and South East Asia is an integral part of the Asian energy demand growth,” Mr Birol said at the release of the report. “Any policymaker who is not in this region will have to look at this region very closely to determine how this will affect his business, his investments and so on. Many companies will come here.”

Governments must also address inefficient subsidies, he warned.

“Many government say it’s a problem for us, but we do it to protect the poor,” he told the conference. “Our analysis shows exactly the opposite … Since the utilities are not getting revenues, they are to able to add infrastructure which would help the poor people lead better lives.

“So the idea of subsidies to help the poor is completely wrong.”


Back to the top

More articles

Editor's Picks

 The Greens, villas: Q1 no change. 3BR - Dh210-250,000. 4BR - Dh210-260,000. 5BR - Dh220-300,000. Q1 2013-Q1 2014 5% rise. Pawan Singh / The National

In pictures: Where Dubai rents have risen and fallen, Q1 2014

Find out how rental prices in the prime locations in Dubai have altered during the first three months of the year and the current rates you will pay according to data provided by Asteco.

 Miele coffee maker making Cappuccino at Miele Gallery in Sama Tower in Dubai. The cost of this coffee maker is around Dh 17,000. Pawan Singh / The National

Space-age coffee comes at a price from Miele

Miele have taken the coffee machine to a new level with its Dh17,000 offering that is built into your kitchen.

 The bridge of Seajacks Hydra, as the wind farm installation vessel undergoes finishing touches and testing works at Lamprell’s Hamriyah facility in Sharjah before its planned delivery on June 2, 2014. Jeffrey E Biteng / The National

In pictures: Building the Seajacks Hydra

The Seajacks Hydra, a wind farm installation vessel, is undergoing finishing touches and testing works at Lamprell’s Hamriyah facility in Sharjah before its planned delivery on June 2, 2014.

 The Wind, Energy, Technology and Environment Exhibition takes place from April 14 to April 16. Above, the Dewa showroom during last year’s Wetex. Jaime Puebla / The National

April corporate and economic calendar for the UAE and overseas

From Cityscape to Wetex to stock-market holidays to nations reporting first-quarter GDP figures, here is our helpful calendar of April's business events in the UAE and internationally.

 The rush of new supply of hotel rooms pushed Dubai occupancy rates down to 87 per cent. Sarah Dea / The National

Dubai hotel room rates rise 10 per cent

The rush of new supply pushed occupancy rates down to 87 per cent, a dip of 2.6 per cent from the previous year. Winter months are the strongest for Dubai hotels, with occupancy and prices falling to half their peaks by July.

 Get the latest information on credit cards, bank accounts and loan products in the UAE. Mark Lennihan / AP Photo

Rates report: Latest on UAE loans, accounts and credit cards

Souqamal.com brings you the latest interest rates on banking products in the UAE.


To add your event to The National listings, click here

Get the most from The National