Kachikwu advocates dialogue with shale producers

Nigeria’s Minister of State for Petroleum Resources, Emmanuel Ibe Kachikwu has said that the time has come to reach out to shale drillers in the United States of America in a bid to widen global involvement in the effort to stabilize the oil market.

Kachikwu said that it was not OPEC’s responsibility to keep stabilizing oil prices alone and called for a uniform front to examine the dynamics of the market and how they can work on keeping the numbers down.

“It is not the responsibility of OPEC to keep stabilizing prices all alone. The whole world has to look at the numbers and find ways to stabilize the market. Each time OPEC does it someone else takes advantage. We have to get to appoint where the focus on OPEC being the driver of stability in the oil market has to shift to the stability of the oil market that involves a consensus of all”, Kachikwu said.

Speaking in Houston at the on-going CERAWeek energy conference, Kachikwu counselled that the time had come to reach out to shale producers because everybody has to get outside the existing structure of OPEC and non-OPEC countries including Russia, and get into a global discussion on how to get the market to survive.

“I think ultimately, both people who work in the shale environment and those who work in OPEC type countries and as a matter of fact, non-OPEC type countries who are not within the shale environment, will need to get some commonality of understanding because protecting the oil industry is key.”

HE emphasized the need for shale and crude oil producer to reach a consensus for the benefit of market stability. “It doesn’t really matter where you are coming from because we have seen what happens with the shale business when the price gets too low, and we have experienced what happened in terms of consumers when the price went too high. So, a stable oil production and supply market is key,” he said.

Kachikwu noted that ultimately, the comparison between shale and normal production will shift away from the advantages of when shale can get active, to who is producing the best quality, the best priced type oil and who can who can service the immediate markets around them.

“Markets are becoming more regionalised now as you see shale doing a lot of business in the US and Latin America, while OPEC type crude is getting into Asia and other regions”, the minister said, adding that “there are enough markets, but what the indices are saying is that technology is becoming more important in the process of producing oil.”

On the International Energy Agency (IEA) forecast which claims that shale will account for a third of global energy demand, Kachikwu said OPEC’s status as a 30 per cent producer of crude oil totally negates that projection.

“I don’t see that happening. There are cost issues and OPEC still remains the cheapest producer in the world. We are going to keep working at keeping the numbers down. Also, a point will come when we will need to begin to look at price comparisons and realize that it is more economical to work with OPEC crude than shale oil”, Kachikwu stated.

However, he noted that OPEC doesn’t focus on price; rather it focuses on being the least cost producer. Kachikwu also agreed that while higher crude oil prices result in a shale response, it was important to bear in mind that shale technology is getting better by the year.

“At a point in time, it was very uncompetitive to do shale below $50 per barrel, but today, you can have shale at about $38/barrel and it is getting better”’ Kachikwu said.

He reaffirmed support for the Declaration of Cooperation adding that all parties involved would continue to review the dynamics and keep reaching out across the divide to shale producers in their individual rights, to see what can be done collectively to stabilize the market.


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