OPEC keeps oil output ceiling at 30m barrels a day

OPEC Secretary General02 June 2013, VIENNA – The Organization of the Petroleum Exporting Countries kept its current oil-production ceiling at 30 million barrels a day Friday in a widely expected move that members described as an easy decision. But concerns about the growing threat from shale oil overshadowed the group’s otherwise smooth meeting.

OPEC ministers in an open session before their meeting in Vienna almost universally dismissed the notion that growing U.S. shale oil production threatened to reduce their oil revenues, but behind closed doors the countries suffering the worst effects of the American boom pressed the group to address the problem, said people present.

They got little in return for their efforts, however, as OPEC’s Secretary General, Abdalla Salem el-Badri, promised the group would launch a study of the effect of shale oil on its members, but ultimately said it was up to the affected individual countries to seek out new markets on their own.

The rift over the scale of the threat highlights how shale oil’s uneven impact on its members is already setting them against one another.

OPEC’s decision not to change its 30 million barrel-a-day production ceiling–which has been consistently exceeded since it was agreed to in December 2011–comes as most ministers said they were satisfied with current prices, but rising oil output in North America threatens to erode demand for OPEC’s crude.

U.S. oil production has risen to a 21-year high, thanks to oil unearthed from shale rock formations beneath the plains of Texas and North Dakota by a new combination of technologies called fracking. OPEC’s own analysts forecast that demand for its oil will fall by 400,000 barrels a day this year.

Three African OPEC members that produce oil of similar grade to U.S. shale oil–Nigeria, Algeria and Angola–have suffered the worst effects. They collectively saw their shipments to the U.S. fall by 41% from 2011 to 2012, according to data from the U.S. Energy Information Administration.

These countries rebuffed the threat of shale oil to reporters at the start of the OPEC meeting.

Algerian oil minister Youcef Yousfi said his country had experienced no difficulties. “For me there is no problem for shale oil from the United States,” he said. “We are adapting ourselves to the market…We don’t have any difficulty marketing our production.”

But once reporters had left the room, “Algeria, Iran, Venezuela and to some extent Nigeria were quite worried in the meeting about growing shale oil supplies,” said a senior delegate from an OPEC country in the Persian Gulf.

In response to these concerns, Mr. el-Badri said OPEC will now study the effects of shale oil on its members. “Ministers would like to know the magnitude of this supply…how long it will last, the sustainablility, the cost, the effect on environment, what is the future of this type of oil,” he said.

Mr. el-Badri did not say how long the study would take or what action could follow.

OPEC delegates from the worst-affected countries took little comfort from this move.

Some African countries have expressed their concerns about shale oil, but there is little that OPEC can do to help, said one delegate from a country whose exports to the U.S. have shrunk. Several OPEC members not affected directly by shale oil, namely Libya, Iran and Iraq, have their own political problems and could not afford to reduce exports to prop up oil prices, the delegate said.

Under the leadership of Mr. el-Badri, OPEC has been too slow to react to market shifts and is getting complacent, said another OPEC delegate from a country whose U.S. oil exports have been curbed. “He needs to make some progress on addressing shale,” the delegate said ahead of the meeting.

There was no sign of assistance for other members coming from wealthier Arab states from the Persian Gulf region, who have suffered few effects from shale oil because they produce heavier crude and are less dependent on U.S. markets.

When asked about whether OPEC should assist Nigeria, Angola or Algeria, the oil minister from OPEC’s largest member, Saudi Arabia, refused to answer. “Go ask Angola; go ask Nigeria,” said oil minister Ali al-Naimi, gesturing across the conference table.

Mr. Naimi bristled when pressed about whether OPEC had any responsibility to help protect the interests of these members. “We had enough of shale oil and talks of shale. Please talk about anything else,” he said.

Countries suffering the effects of shale must search out new markets on their own, said one senior Gulf OPEC delegate ahead of the meeting Thursday. “They also can offer their crude at discounted price,” to draw new customers, the delegate said.

Angola and Nigeria have already started seeking new markets for their crude displaced from the U.S., OPEC said in its in-house magazine published Friday.

Nigeria is earmarking more of its oil for Asia after exports to the U.S. fell to the lowest level in 15 years, OPEC said. “Emerging markets like India and China have been growing, and they have absorbed a large part of Angolan exports,” Angolan oil minister Jose Maria Botelho de Vasconcelos told the magazine.

However, Nigerian oil minister Diezani Alison-Madueke, who warned earlier this month that shale oil could reduce the revenues of African oil exporters by 25%, suggested China may not be a long-term panacea for OPEC.

“Asia itself will still have growing energy needs for quite a while, but remember that China itself may be discovering shale gas pretty soon, and oil,” she told reporters after the meeting.
*Benoit Faucon, Hassan Hafidh & Summer Said, Upstreamonline
Sarah Kent, Nicole Lundeen and James Herron contributed to this article.

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