EMEA News
Dana Gas Warns of 1 Billion Barrel Oil Glut as Saudi Aramco Calls For $25 Trillion in New Oil Capacity
In stark contrast to persistent arguments from the Organization of the Petroleum Exporting Countries and Saudi Arabia that we're headed for a chronic oil shortage, Patrick Allman-Ward, chief executive officer for Dana Gas PJSJ, said Tuesday that almost 1 billion barrels of inventoried oil must be used up before global supply and demand are closer in balance.
Allman-Ward added that the likelihood of increased production from Libya and Nigeria will result in price volatility for the rest of 2017, "and of course the oil shale is coming back in a big way."
Still, the largely Middle Eastern view that the real worry is shortage, not glut, was reiterated the same day Allman-Ward made his remarks, by Amin Nasser, president and CEO of Saudi Arabian Oil Company (Saudi Aramco).
He told the World Economic Forum in Davos that $25 trillion will need to be invested over 25 years on new oil capacity to meet rising demand, and that "It will take decades for [renewables] to replace petroleum resources.
"So what we are doing in Saudi Aramco, we are building our capacity in the oil [and] doubling our gas over the next decade; [this will] enable us to put more crude onto the market."
Speaking at the same forum, Khalid Al-Falih, energy minister for Saudi Arabia, insisted the market is rebalancing due to unexpectedly robust global demand that will amount to a 1.6 million barrel per day growth this year.
Al-Falih did not elaborate on where this demand is coming from (indeed, many analysts worry that demand from major consumers such as China is waning, not growing), but he went on to speculate that it might not be necessary for OPEC to renew its cutback deal when the six-month agreement expires in the middle of this year.
But if BP is any example to go by, the message from the production industry seems to be: not so fast.
Bob Dudley, chief executive officer for the oil giant, said his company will keep capital expenditure below $17 billion this year and next, which is $6 billion lower than 2014: "We are climbing very, very slowly out of a very tough period for the industry; our focus now is to get our own engine moving again" while staying disciplined and being ready for more volatility.
While crediting OPEC for achieving "a milestone in the industry" with regards to its cutback agreement and conceding that the market may be in balance, Dudley told Bloomberg he is planning on oil at $55 and $60 this year and next with "volatility around it."
He said the objective of BP is to "get back growing" - but to do so in a disciplined fashion.
Earlier this month, Wood Mackenzie predicted that producers this year will increase exploration and production spending by 3 percent, to $450 billion.
