Kachikwu Wants OPEC’s Stiff Measures Against Shale Producers Sabotaging Global Oil

17058

The New Diplomat’s Economic Intelligence Desk With Agency Report

The Minister of State for Petroleum, Dr. Ibe Kachikwu, has expressed the need for the Organisation of Petroleum Exporting Countries (OPEC) to devise new measures aimed at stifling American shale oil producers who have been accused of sabotaging the global oil market.

Amidst the global oil glut which has continued to frustrate the economies of several oil producing nations including Nigeria, the American shale oil producers and Russia have been fingered by experts as the clog in the wheel of progress of the members of the oil cartel – OPEC after interventions in the past have hit the rock.

READ ALSO:   Oil Prices Go Past $50pb As Explosion Rocks Oil Ship Near Saudi Port

But, Kachikwu has warned that OPEC will resist any deliberate action by shale producers to sabotage the oil market again.

In their continuing efforts to stabilise the oil market, 14 OPEC member countries and 10 participating non-OPEC producing countries, led by Russia, extended their production adjustments, which originally started January 1, 2017, for a further period of nine months, beginning July 1, 2017.

READ ALSO:   Kachikwu Calls For Careful Utilization Of $200m Local Content Fund

It was expected that the move will keep roughly 2% of global production off the market in an attempt to continue to reduce glut and boost prices.

Despite attempts by the cartel to reduce the excess inventory in the market to boost prices, Reuters reported that in the Permian Basin – the largest US oilfield – producers are pumping at the fastest rate in years, taking advantage of new technology, low costs and steady oil prices to reap profits at OPEC’s expense.

READ ALSO:   Oil Price Crisis: Tension as Nigeria, Saudi Arabia, Other OPEC Officials meet tomorrow, set target for 2021

OPEC has acknowledged the global clout of shale but seeks to hinder its growth by keeping just enough oil supply on the market to hold prices below $60 per barrel for stability.

OPEC, however, realised that supply cuts and higher prices only make it easier for the shale industry to deliver higher profits after it found ways of slashing costs when Saudi Arabia turned up the taps three years ago.

READ ALSO:   BP's CEO: 2nd Wave Of COVID Hits Oil Demand Harder Than Expected!

Speaking at the recent OPEC meeting in Vienna, Noureddine Boutarfa  who represented Algeria  was quoted by Reuters as saying, “All shale companies in the US are small companies. The reality is that at $50 to $60 a barrel, (the US oil industry) can’t break beyond 10 million barrels per day.”

“For all OPEC members, $55 (per barrel) and a maximum of $60 is the goal at this stage,” said Iran’s oil minister, Bijan Zanganeh.

READ ALSO:   World’s Demand For Oil Will Drop In 2018, OPEC Warns Members

“So, is that price level not high enough to encourage too much shale? It seems it is good for both,” he added.

Kachikwu had said, though many OPEC members now appear to believe that shale has to be accommodated, there are indications that another fight is around the corner as he hinted that the cartel might review its strategies in the event of any sabotage by the shale producers following OPEC scheduling another meeting again in November to reconsider output policy.

READ ALSO:   How Fuel subsidy cost Nigeria $65bn in four years-Kachikwu

“If we get to a point where we feel frustrated by a deliberate action of shale producers to just sabotage the market, OPEC will sit down again and look at what process it is we need to do,” Reuters quoted Kachikwu as saying.

The history of the relationship between OPEC and the US shale oil industry has evolved a great deal since the cartel discovered it had a surprise rival emerging in a core market for its oil around five years ago.

READ ALSO:   COVID-19: Excitement As Oil Price Hits $50 Following Vaccine Rollout

US shale bankers went to Vienna during the recent OPEC meeting and the cartel is said to be planning to send top officials to Texas in a bid to understand whether the two industries can co-exist or are poised to embark on another major fight in the near future.

“We have to coexist,” said Khalid al-Falih, Saudi Arabia’s energy minister, who pushed through OPEC production cuts in December, 2016.

READ ALSO:   Kachikwu's Home Under Police Siege

Riyadh’s previous strategy was to pump as much oil as possible and try to kill off US shale with low oil prices.

Shale’s limitations, including rising service costs were discussed by OPEC.

“We had a discussion on (shale) and how much that has an impact,” said Ecuador Oil Minister Carlos Pérez.

READ ALSO:   What OPEC Said About Silva's Appointment As Minister Of State For Petroleum

“But we have no control over what the US does and it is up to them to decide to continue or not,” he reportedly added.
When the OPEC delegates asked the chief executive of Permian oil producer, Centennial Resource Development Inc, Mark Papa, to give a presentation on shale’s potential, he reportedly appeared to have played his cards close to his chest.

READ ALSO:   $25B NNPC Scam: Buhari’s Men Stealing To Fund His Re-Election - PDP

“In terms of the threat, we still don’t know how much (US shale) will be producing in the near future,” Venezuela’s oil minister, Nelson Martinez, said after the talk.

Some US shale leaders may also want a better insight into OPEC’s thinking and help OPEC understand that shale is not a flash in the pan.

Some of OPEC’s customers are happy to see an alternative as India, the world’s third-largest oil consumer, said it was looking to the United States for greater supply.

Subscribe to Our VIP Newsletter

Previous articleNothing to Celebrate in Nigeria’s 18 Years of Democracy, Says NANS
Next articleSouth East: Markets, Streets Deserted Over MASSOB, IPOB’s Sit-At-Home Order
Hamilton Nwosa

The New Diplomat stands for ethical journalism, press freedom, accountable republic, and gender-equity. That is why at The New Diplomat, we are committed to speaking truth to power, fostering a robust community of responsible journalism, and using high quality polls, data, and surveys to engage the public with compelling narratives about political, business, socio-economic, environmental, and situational dynamics in Nigeria, Africa, and globally. From our insightful reports of political issues to our riveting investigations and analyses of business, socio-economic, and cross-cutting sectors, The New Diplomat remains ever committed to investigative reporting and ethical journalism. Support and partner with The New Diplomat today, to guarantee a positive future for all under an atmosphere of free press!

LEAVE A REPLY

Please enter your comment!
Please enter your name here