Why we should not be afraid of shale oil

Why we should not be afraid of shale oil

The increasing shale oil output does not compensate for the general increase in global demand for "black gold", Russian Energy Minister Alexander Novak said at the economic forum in Davos, Switzerland.

"I'm not afraid of shale oil, because it does not solve all the problems. Yes, it shortens the consumption growth in the short-term (period - VK), but it does not cover the entire growth of consumption. Therefore, we will need to continue to develop traditional deposits," RIA Novosti cited him as saying.

According to the minister, up to 4% of production at existing fields is eliminated every year, so investments are needed to compensate for these losses. It is projected that in the next 20 years it will be necessary to increase production by 20 million barrels per day in order to compensate for the dropout, and by another 10 million barrels - to meet the growing demand.

Thus, Novak stressed that in 20 years it will be necessary to increase output by 30 million barrels per day. He noted that shale deposits cannot cope with this, that's why investments for this volume are needed now.

The deputy director of energy policy of the Institute of Energy and Finances, Alexey Belogoriev, speaking with a correspondent of Vestnik Kavkaza, said that shale oil output will not have a significant impact on oil prices in the long term.

However, he noted that a different picture emerges after considering short-term and medium-term prospects. "It is clearly not worth to downplay and underestimate the role of the increasing shale output. According to some estimates, the growth of shale production in the long term may reach 8 million barrels a day until 2024-2025. This is a huge amount,  which fundamentally changes the balance in the market," the analyst noted.

At the same time, Belogoriev noted that the relevance of the issue of increasing shale oil output is reduced in the case of relatively high oil prices.

"It is clear that even such a flexible mining sector as US shale mining reacts not so quickly. We will see a full result only in the 3rd-4th quarter of this year and next year. Most likely, the  increasing shale oil output may cause a drop in oil prices in the second half this year," he stressed.

The expert also noted that the OPEC + agreement was designed to balance the US expected increase in oil production. In addition, according to the deputy director of energy policy of the Institute of Energy and Finances, demand remains an important factor.


Vestnik Kavkaza

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