Gulf Oil and Gas accountACCOUNT

Surging Saudi Fuel Use a Bigger Threat Than US Shale Oil

Source: Reuters 12/17/2013, Location: Middle East

Rising Saudi energy demand is a bigger threat to the world's biggest oil exporter than surging U.S. shale output, Saudi Jadwa Investment bank says in a study published.

"The key long-term challenge facing Saudi Arabia's oil and gas industry remains the high and growing domestic demand for hydrocarbons," Fahad Al Turki, Head of Research at the Riyadh-based investment bank, said of the next 25 years.

"This is exacerbated by low prices locally, which will distort internal economic decisions and reduce the available income from the Kingdom's oil exports," he said.

Global demand for crude oil produced by OPEC members like Saudi Arabia is expected to fall, along with oil prices, over the next few years due partly to higher supply from North America.

An abundance of cheap natural gas liquids (NGLs), produced by the U.S. shale gas boom, could make Saudi petrochemicals industries less competitive than they have been to date.

But Jadwa Investment expects steep decline rates of tight oil wells and their limited productivity to soften the blow of the U.S. shale revolution on the oil export dependent kingdom.

Turki said the main impact on Saudi crude exports of U.S. shale would likely be the reduction of price differentials between light and heavy crudes grades, which it said may change how oil is refined in Europe.

But Jadwa sees a bigger impact from the U.S. shale industry on Saudi petrochemicals companies that use gas as a feedstock. Low priced and plentiful natural gas available to U.S. petrochemical producers could make it difficult for Saudi industry to compete and may see some open plants in the United States, Jadwa says.

Although U.S. gas costs have fallen from over $13 per million British thermal units (mmbtu) in mid-2008 to around $4.29 now, Saudi gas prices that have been fixed at around $0.75/mmbtu for many years are still much lower. But the relative lack of investment in new gas production that such low prices have contributed to sees Saudi Arabia struggle to meet demand in summer - forcing it to burn millions of barrels a week of oil in power plants.

A surge in U.S. shale gas production over the last five years has also brought with it a sharp increase in liquefied petroleum gas (LPG) supplies which could hit Saudi exports.

U.S. production of LPG - mainly butane and propane used for cooking and increasingly transport - has risen to the point where analysts expect U.S. competition to force Saudi Arabia to cut its sales prices in Asia and Europe in years to come.

Investment News in Saudi Arabia >>

Mozambique >>  8/18/2019 - Total SA is committed to developing the Mozambique natural gas project that it will take over from Anadarko Petroleum Corp. as part of its expansion i...
Trinidad and Tobago >>  8/8/2019 - The BHP Board has approved US$283 million (BHP share) in funding to develop the Ruby Project in Trinidad and Tobago. Total investment for the oil and...

United States >>  8/7/2019 - Oryx Midstream Services (Oryx), the largest privately-held midstream crude operator in the Permian Basin, announced that an affiliate of Qatar Investm...
United States >>  8/1/2019 - Shell Offshore Inc. (Shell), a subsidiary of Royal Dutch Shell plc, has taken the final investment decision (FID) for the PowerNap deep-water project ...

South Sudan >>  7/31/2019 - Following an open tender and a highly competitive international bidding process, the African Development Bank through its African Legal Support Facili...
Egypt >>  7/26/2019 - Egypt's Ministry of Petroleum and Mineral Wealth and Ministry of Electricity and Renewable Energy signed with the US Department of Energy a memorandum...

Related Categories: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 

Related Articles: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Insurance  Investment  Mergers and Acquisitions  Risk Management 


Saudi Arabia Oil & Gas 1 >>  2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 |

More News

Related Links

Gulf Oil and Gas
Copyright © Universal Solutions All rights reserved. - Terms of Service - Privacy Policy.