Saudi Arabia's Strategy 'Continues To Defy Best-Business-Practices Logic,' Says American Shales Author

HOUSTON, June 22, 2016 /PRNewswire/ -- What's behind the scenes in the Kingdom? "Saudi Arabia's decision to remain the world's No. 1 oil producer by putting itself in a position of severe fiscal weakness continues to defy best-business-practices logic," says Nissa Darbonne, author of The American Shales.

Darbonne recently presented to members of ADAM-Houston, an organization of oil and gas M&A professionals. The country's 2015 net oil-export revenues declined some 50% to $130 billion in 2015, according to EIA data published last week. And net income has fallen further this year.

Meanwhile, supporting its social programs has long been estimated to require an oil price of at least $70. And its domestic crude-oil consumption on a per-capita basis is the greatest in the world, according to BP Plc's "BP Statistical Review of World Energy, June 2016."

Darbonne portrayed the Saudi strategy's likely outcome with a photo of the aftermath of when a nephew thought a lakebed was dry and returned to shore a muddied mess. "If you look closely, you'll see two footprints, two knee prints, two hands and a face," she said.

The U.S. was the No. 1 oil producer—making Saudi Arabia No. 2—in 2015, according to the BP analysis, which includes NGLs. "Saudi Arabia took control of OPEC and world oil prices in the 1980s," she said.

Since then, much has changed. The U.S. share of world oil production grew from 8.4% in 2005 to 13.9% in 2015, according to the BP data, and this was despite a headwind of world output growth of 12%. In contrast, the Saudi share, which was 13.3% in 2005, was less in 2015: 13.1%.

"Ali Al-Naimi, the Saudi petroleum minister at the time, said at IHS CERAWeek in February that 'we have not declared a war on shale.' Instead, he said, the aim is to drive higher-cost supplies out of the market," Darbonne said. "However, Saudi Arabia needs $70 oil to operate as cash-flow neutral. It is the higher-cost producer."

The American Shales, published in 2014, documents how the U.S. oil and gas unconventional-resource plays came to be from her review of thousands of public records and interviews with more than 30 play leaders, including George Mitchell and Harold Hamm. Darbonne is editor-at-large for Oil and Gas Investor magazine and began her journalism career in 1984 in the oil and gas fields of South Louisiana.

Contact:
Nissa Darbonne
713-822-1180
[email protected]

SOURCE Nissa Darbonne