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While the green movement naively harbours hopes it will be able to shut down unconventional oil and gas development, in Saudi Arabia they are already contemplating a time when North American fossil fuel will replace their oil.
Looking past the din of protesters, state-owned oil giant Saudi Aramco is resigned to the fact that its influence will wane because of the massive unconventional fossil-fuel development underway in North America. As such, Saudi Arabia has no plans to raise its production output to 15 million barrels per day from 12 million, said Khalid Al-Falih, the powerful chief executive of Aramco.
“There is a new emphasis in the industry on unconventional liquids, and shale gas technologies are also being applied to shale oil,” Al-Falih, president and CEO of Saudi Aramco, warned a domestic audience in a speech in Riyadh Monday.
“Some are even talking about an era of ‘energy independence’ for the Americas, based on the immense conventional and unconventional hydrocarbon resources located there. While that might be stretching the point, it is clear that the abundance of resources and the more ‘balanced’ geographical distribution of unconventionals have reduced the much-hyped concerns over ‘energy security’, which once served as the undercurrent driving energy policies and dominated the global energy debate.”
Aramco is the powerful state entity that manages the Kingdom’s nine million barrel-plus oil output. Saudi Arabia has long dominated oil markets by leveraging its spare oil capacity and, as the OPEC kingpin, striking a delicate balance between the interests of oil consumers and the exporter group.
But the oil chief’s remarks reveal Saudi fears that the market dynamics are changing and its dominance over energy markets is under threat by new unconventional finds.
OPEC estimated in a recent report that global reserves of tight oil could be as high as 300 billion barrels, above Saudi Arabia’s conventional reserves of 260 billion barrels, which are currrently seen as the second-largest in the world after Venezuela.
Global output of non-conventional oil is set to rise 3.4 million bpd by 2015, still dominated by oil sands, to 5.8 million bpd by 2025 and to 8.4 million bpd by 2035, when tight oil would be playing a much bigger role. By 2035, the United States and Canada will still be dominating unconventional oil production with 6.6 million bpd, the group forecasts.
Last year, even as the world consumed nearly 30 billion barrels of oil, not only was the industry able to replace this production but global petroleum reserves actually increased by nearly seven billion barrels, as companies increasingly turned toward higher risk areas, Al-Falih noted.
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