EMEA News
Saudi Tells U.S. Shale Producers to Cut Their Costs or "Get Out" of the Market
While emphasizing that the Organization of the Petroleum Exporting Countries (OPEC) was not declaring a war on U.S. shale producers, Ali Al-Naimi, oil minister to Saudi Arabia, this week warned oil executives gathered in Houston to lower their costs or "get out."
In speaking to delegates during the IHS Ceraweek event, Al-Naimi said, "The producers of those high-cost barrels must find a way to lower their costs, borrow cash, or liquidate.
"It sounds harsh, and unfortunately it is, but it is the most efficient way to rebalance markets; cutting low-cost production to subsidize higher cost supplies only delays an inevitable reckoning."
The minister also blamed the current price slump on widespread industry investments, which were in turn supposedly prompted by years of triple digit oil: "This went from the Arctic, to Canadian oil sands, to Venezuela's Orinoco tar sands, to deep water frontiers; it also led to the development of shale oil resources in some parts of the U.S."
At least one attendee at IHS Ceraweek suggested that the gloves were finally off in the long-standing shoving match between OPEC and non-OPEC producers.
Brian Ferguson, CEO of Cenovus Energy Inc. told reporters, "There will be a natural process; it will be Darwinian.
"It will be the barrels that can compete, and the companies that can compete will be the ones that survive."
He added, "I expect it to be a volatile environment."
Al-Naimi's comments come just days after the proposal by Saudi Arabia, Russia, Qatar, and Venezuela to freeze oil production - whose feasibility was dependent on the cooperation of other OPEC members - was dismissed as "ridiculous" by Iran.
