By Ejiofor Alike with Agency Reports
The President of the Organisation of Petroleum Exporting Countries (OPEC) and United Arab Emirates (UAE)’s Energy Minister, Suhail Al Mazrouei, has stated that the increased production of shale oil by the United States will not hamper the efforts of OPEC and non-OPEC countries to clear the glut in the oil market.
This is coming as the Managing Director of Nigeria LNG Limited (NLNG), Mr. Tony Attah, has said Nigeria must unleash its gas potential and support NLNG’s expansion programme, Train 7 project, in preparation for a world that is fast making efforts to reduce its fossil fuel consumption and minimise carbon footprint.
In its monthly Oil Market Report (OMR) released Monday OPEC attributed the increase in US shale oil production to steady gains in the price of crude oil since the middle of last year.
According to the cartel, the oil price gains triggered more work in exploration and production, not only in the US shale oil sector, but also in the deep US waters in the Gulf of Mexico.
By the second half of the year, OPEC said it expected total US oil production to slow down or even stall.
At more than 10 million barrels per day, the United States is now rivalling Saudi Arabia, the de facto leader of OPEC, in terms of production.
Speaking Monday in an interview in Dubai, AI Mazrouei disclosed that the oil market should re-balance this year, given robust demand and producers’ compliance with their pledges to curtail supply.
He stressed that the US shale oil won’t be a “huge distorter” for the oil market as stronger demand and compliance with oil cuts have buoyed prices.
There are concerns that the surging US shale oil production would complicate efforts by OPEC, Russia and other producers to prop up crude prices by curtailing supply.
Crude oil is rebounding from its biggest weekly decline in two years, though gains are limited due to concerns over resurgence in US shale oil production.
The US oil rig count rose last week by 26, the most in a year, to 791, Baker Hughes data showed at the weekend.
American weekly crude output topped 10 million barrels a day for the first time on record, and the US government forecasts it will balloon to 11 million later this year.
Oil producers had agreed in November 2017 to extend the self-imposed limits on production output until the end of this year, seeking to counter a glut fed partly by US shale oil drillers.
“Shale oil is coming and the expectation is that it will come stronger than in 2017, and this is something that we have to watch. But considering all factors, I don’t think it will be a huge distorter of the market,” Al Mazrouei said.
He added: “What concerns us today is the level of inventories that we need to achieve the five-year average, and I see the market going in that direction and achieving balance.
“How long it will take depends on how long the increase in shale production will take. Demand for this year is expected to be good, if not better than 2017.”
This, together with “good” economic indicators and compliance with output cuts, indicate that the crude market will balance within the year, he added.
Also speaking Monday to reporters at a conference in Cairo, Egypt, the Secretary General of OPEC, Mr. Mohammad Barkindo, noted that the oil market was “on course to restoring balance” for the first time since 2014.
According to Barkindo, oil demand is set to grow by 1.6 million barrels a day in 2018, the same level as last year, with crude inventories continuing to dwindle as OPEC and other producers pursue their output cuts until the end of the year.
Barkindo added that Venezuela is proposing that OPEC seeks a five-year deal for cooperation on output with allied producers beyond 2018.
“Venezuelans see that the cooperation with non-OPEC producers shouldn’t end,” Barkindo told reporters in Cairo.
“They have put forward a proposal for the time frame of the cooperation, and that was five years. But this proposal isn’t final, and it’s a work in progress,” Bloomberg quoted Barkindo as saying.
Barkindo said producers’ “unprecedented conformity” with their targets for reducing output is driving progress towards a balanced market.
According to him, compliance reached a record level of 129 per cent in December, for a monthly average of 107 per cent last year, and preliminary estimates show that compliance in January will surpass December’s level.
Oil prices are currently at less than half their 2014 peak, with benchmark Brent crude futures up 0.8 per cent at $63.28 a barrel in London Monday.
Brent tumbled 8.4 per cent last week, in the second consecutive weekly loss.
“It’s a correction only. It will come back,” Kuwaiti Oil Minister, Bakheet Al-Rashidi told reporters in Kuwait City.
Kuwait expects cooperation on oil policy to continue beyond 2018, he said.
“We will look for criteria to make sure the market is stable at all times,” he added.
In a presentation titled “Global Energy Transition: Which Way Forward Nigeria?” at the 2nd West Africa International Petroleum Exhibition and Conference (WAIPEC) in Lagos, Attah said the global energy landscape was changing with major concerns for the environment, such as global warming, and increasing demand for cleaner energy.
He remarked that with reduced appetite for crude oil as a dependable source of energy, gas is the best option for Nigeria in the future.
“The best bet for Nigeria is gas. It is available in abundance and three times cleaner than oil in terms of carbon content. Nigeria has to begin to think about the relevance of oil in the future. Nigeria has to start to develop its gas resources in readiness for this future. Some critics say gas is not profitable but let me draw your attention to Qatar, a small fishing economy which was transformed from a GDP per capita of $2,000 in 1970 to a GDP per capita of $124, 000 in 2017 using gas,” Attah said.
“Gas can lift Nigeria, which is where NLNG comes in. NLNG is producing 22 Million Metric Tonnes Per Annum (MMTPA) but we are not resting on our oars. We want to construct a Train 7 that will increase our capacity to 30 MTPA. It is time for gas. It is time to unleash Nigeria’s potential. That is how we can survive the future with increasing appetite for renewable energy,” Attah added.
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