Some members of the Organization of Petroleum Exporting Countries will have difficulty coping if increasing shale-oil production in the United States pulls down global crude prices, a veteran oil industry expert warns.
Some OPEC countries needed oil prices to be $100 (U.S.) a barrel last year to balance their budgets, Yousef Habib told an audience at this week's Global Business Forum in Banff, Alta. But that figure is volatile, given changing technologies and geopolitical instability.
"Uncertainties are going to be tremendous going down the road three, five, seven years," said Mr. Habib, who is based in Texas and has worked with international companies such as Saudi Armco and Exxon Mobil Corp.
If oil prices were to fall to $60 to $65 per barrel (which he calculates as the marginal cost of production for shale oil in the United States), and if the world's spare oil production capacity were to range from 10 million to 11 million barrels a day, then some OPEC members would be in trouble, Mr. Habib said.
"It is extremely difficult for these countries which [face] geopolitical turmoil … to be able to cope" if the price of oil were to drop to $65 per barrel, Mr. Habib said, noting that Iran's break-even price was $145 per barrel last year, and Venezuela's was $120.
Global spare-oil production capacity – the volume of production that can be ramped up in 30 days and last at least 90 days – could range from two million barrels per day to about 10 million in five or six years, he calculates.
Shale-oil production in the United States is one of the factors throwing uncertainty into price, supply, and demand calculations.
While the 12-member OPEC cartel could manage if prices were to get ugly, he said, it would be because the weaker members would depend on the four richest and most stable members: Saudi Arabia, the United Arab Emirates, Qatar and Kuwait.
But even those four states are vulnerable to spillover from strife in the Middle East, he said. "The fallout on these four countries no longer should be considered a probability of zero."
Events in countries such as Iraq demonstrate how difficult it is to make industry forecasts: Its oil production now is still below what it was when Saddam Hussein invaded Kuwait 23 years ago, Mr. Habib told the conference.
Some experts think Iraq will produce between six million and nine million barrels of oil per day by 2020, but he believes that is optimistic. "I doubt if it could get to five to six million by 2020."
Walter Van de Vijver, an executive based in Texas for India's Reliance Industries Ltd. and a former executive at Royal Dutch Shell PLC, begged Canadian energy producers to continue to ship oil and gas to the United States, even as the industry eyes pipelines to Canada's east and west coasts to gain access to Asian markets.
"U.S. independence on oil is still far away out of sight," Mr. de Vijver said at the conference. "The United States still needs Canada. We still need your oil as well. So, please, don't forget about us."