U.S. may raise shale production over rallying oil prices
A gathering storm may soon hit economies of oil producing countries, as the United States of America (U.S.) has given indications of raising the production of its shale oil, sequel to the rising crude oil prices.
The Brent crude rose to $41.39 a barrel yesterday from 40 a barrel on Monday.
With the threat from shale producers, the rallying oil prices may therefore not be a complete cheer to the oil producing countries like Nigeria, which had been hoping that the prices would rebound in other to cushion their respective financial budgets.
The U.S shale producers have expressed commitments to return to business if the crude oil price reaches a $40 per barrel mark.
Chief Financial Official, Continental Resources Inc. John Hart, said his organisation is prepared to increase capital spending if U.S. crude reaches the low- to mid-$40s range, allowing it to boost 2017 production by more than 10 per cent,
Chairman and CEO, Rival Whiting Petroleum Corp, Jim Volker, however disclosed that it would stop fracking new wells by the end of March, but would “consider completing some of these wells” if oil price reaches $40 to $45 a barrel and might deploy more rigs if U.S. crude hits $70.
Some producers have already begun hedging future production, with prices for 2017 oil trading at near $45 a barrel, which could put a floor under any future production cuts.
Meanwhile, the Organisation of Petroleum Exporting Countries (OPEC) President and Nigeria’s Minister of State for Petroleum Resources, Ibe Kachikwu, said the cartel is planning to meet on March 20, to strategise for higher oil prices.
He said: “Both the Saudis and the Russians, everybody is coming back to the table. I think we’re very humbled today to accept that if we get to a price of $50, it will be celebrated. That’s a target that we have,”
Nigeria has been pushing for action by the Organization of the Petroleum Exporting Countries because the slump in oil revenue has undercut its public finances and currency, leaving the government struggling to meet its financial commitments.
Kachikwu said: “We’re beginning to see the price of crude inch up very slowly. But if the meeting that we’re scheduling, it should happen in Russia, between the OPEC and non-OPEC producers, happens about March 20, we should see some dramatic price movement.”
Kachikwu also said Nigeria was pumping 2.2 million barrels per day, in line with previous comments, of which 46 percent was coming from onshore fields.
He also said Nigeria’s average oil production cost from state firm NNPC and international companies was between $13 and $15 a barrel for onshore fields and $30 a barrel for deep offshore operations.
Also, the Chairman and Chief Executive Officer, ExxonMobil Corp. Rex Tillerson had stated that it made no sense to invest in shale oil at above $30 prices, but $40 mark might provide some opportunities.
He said: “We wouldn’t do that because we think our resources are worth more than that…When you get to $40 (per barrel), particularly companies that this is really all they have – it’s a one-play opportunity for them – I expect there will be some volumes (coming back).”