According to this report by Summer Said in the Wall Street Journal, a close advisor of Saudi Arabia’s Minster of Petroleum and Natural Resources Ali Al Naimi said that the production of oil from shale will be “too limited and costly” to make a significant impact on the interests of exporters, but that the so-called US shale boom was having a “psychological impact” on OPEC members.
A flare-off is seen in North Dakota. The shale gas boom in the United States is catching the eye of Saudi Arabia’s SABIC. Photo by Joe Marsh.
According to the source, Ibrahim al-Muhanna, that psychological fear is likely “misplaced” because “the increases in the production of shale oil during the remaining part of this decade will be restricted to the U.S. and Canada within the limits of 1.5 million barrels per day, which is a small quantity in a market where demand exceeds 90 million barrels per day.”
Although the shale boom may or may not significantly affect crude oil markets, the boom in natural gas production and its effects on other energy markets (coal, renewables, etc.) can’t be ignored. And for the world’s largest petrochemical company, Saudi Arabia’s SABIC, watching from the sidelines is apparently not the strategy.
Shale Gas in the United States – image via EIA.gov
In November 2012, for example, SABIC’s CEO Mohammed al Mady said that it “plans to invest in companies in the U.S and elsewhere that have technology to turn shale gas into chemical products,” according to Bloomberg. To do that would require SABIC to actually “participate in the shale-gas boom itself” instead of taking a wait-and-see approach, adding that SABIC’s “strategic focus is to examine shale gas very closely and find very competitive areas where we can invest.”
SABIC CEO Mohammed Al Mady
In an interview with Arabian Business in early February 2013, Mady referred to the shale-gas boom as a “revolution” and said the “shale gas revolution has led to advantaged energy and feedstock in North America.” Mady, who is also co-chairman of the US-Saudi Business Council, added that it was “important that [SABIC] participates” in the growth of the US industry.
One of those strategic investments surfaced on Tuesday of this week, when SABIC said on the sidelines of a forum that it is seeking to start by building a cracker (a method for converting hydrocarbons into simpler molecules) in the United States. According to this Arab News report, SABIC was in “talks with partners to invest in at least one or two projects in the US shale gas business to seize the shale revolution.”
