Mobile  |  About us  |  Photos  |  Videos  |  Subscriptions  |  RSS Feeds  |  Today's Paper  |  Classifieds  |  Contact Us
The Daily Star
WEDNESDAY, 23 APR 2014
04:38 PM Beirut time
Weather    
Beirut
25 °C
Blom Index
BLOM
1,214.01down
Middle East
Follow this story Print RSS Feed ePaper share this
Surging Saudi fuel use ‘bigger threat’ than U.S. shale oil
Reuters
A+ A-

DUBAI: 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 Wednesday.

“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 such as Saudi Arabia is expected to fall, along with oil prices, in coming years due partly to higher supply from North America.

An abundance of cheap natural gas liquids, 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 might change how oil was 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.

 
A version of this article appeared in the print edition of The Daily Star on December 18, 2013, on page 5.
Home Middle East
 
     
 
Saudi Arabia
Advertisement
Comments  

Your feedback is important to us!

We invite all our readers to share with us their views and comments about this article.

Disclaimer: Comments submitted by third parties on this site are the sole responsibility of the individual(s) whose content is submitted. The Daily Star accepts no responsibility for the content of comment(s), including, without limitation, any error, omission or inaccuracy therein. Please note that your email address will NOT appear on the site.

comments powered by Disqus
Advertisement


Baabda 2014
Advertisement
Follow us on Facebook Follow us on Twitter Follow us on Linked In Follow us on Google+ Subscribe to our Live Feed
Multimedia
Images  
Pictures of the day
A selection of images from around the world- Wednesday, April 23, 2014
View all view all
Advertisement
Rami G. Khouri
Rami G. Khouri
Israel shows Zionism’s true colors
Michael Young
Michael Young
Why confuse gibberish with knowledge?
David Ignatius
David Ignatius
Echoes of 1914 characterize the Ukraine crisis
View all view all
Advertisement
cartoon
 
Click to View Articles
 
 
News
Business
Opinion
Sports
Culture
Technology
Entertainment
Privacy Policy | Anti-Spamming Policy | Disclaimer | Copyright Notice
© 2014 The Daily Star - All Rights Reserved - Designed and Developed By IDS