US shale oil & gas revolution is positive development for the global energy sector, says Majid Jafar, speaking at World Economic Forum in Davos
Despite the rapid rise in shale oil & gas production in North America in recent years, the Middle East region will remain the most important region for the worldwide energy sector, according to a leading energy executive.
Speaking at the Annual Meeting of the World Economic Forum in Davos in a session entitled “The Future of Oil & Gas”, Majid Jafar, Chief Executive of Crescent Petroleum and Managing Director of the Board of Dana Gas PJSC described how the shale oil & gas revolution in the United States was a boost to the whole industry worldwide, increasing oil & gas consumption and stabilising prices, while introducing new technologies and management techniques. In addition, he highlighted how the old theory of “peak oil” which expected oil production to reach a worldwide maximum and start declining is no longer considered the reality, with new discoveries and additional production worldwide expanding the future supply.
Majid Jafar currently serves as Chairman of the Oil & Gas Independent Companies Community as well as the Chairman of the Regional Business Community for the Middle East – North Africa region at the World Economic Forum. The Forum brings together business leaders and officials from across the world to discuss the economic priorities and developments facing the world.
During his comments in Davos, Jafar also stressed that despite the rapid rise of US production which would potentially make it the largest producer in the world by the end of this decade, the Middle East would continue to be the most important region for world oil markets, containing approximately half of the world’s oil & gas resources, and also the lowest in terms of production cost. Because of this the highest export potential would remain in the Middle East. In addition it was not correct to say that the United States could be “independent” in terms of energy since it was still affected by world oil prices and the Middle East was the most important region in determining the oil price due to its having the lowest cost oil & gas in the world.
But in order to further develop the maximum potential of the oil & gas resources in the Middle East North Africa region, increased investment in exploration and production would be required, including a greater role for the private sector, from both the region and internationally. In addition better contract mechanisms and regulatory regimes would be needed to encourage such investment, and a gradual reform of the energy subsidies in the Middle East would also be required in order to reduce the rapid growth of in domestic demand and waste of energy. According to the International Monetary Fund (IMF) energy subsidies currently cost the region over US $220 billion annually – almost half the world total.
Mr. Jafar also described how the independent energy companies, rather than the oil majors, have led the unconventional revolution, particularly in developments of both shale gas and tight oil in the USA. It is only subsequently that the large international oil companies and foreign national oil companies have bought into the US unconventional industry. He also highlighted how the political instability had reduced production potential in several Middle East countries such as Yemen, Sudan, Libya and Iraq, and that this further raised the importance of the GCC members if OPEC in oil production.
“The shale revolution, particularly but not only in North America, has transformed the international energy sector. In addition to boosting supplies and lowering energy costs, which has created 2 million jobs in the United States and restored industrial production, the shift from burning coal to using more gas for power generation has also enabled the United States to lower carbon emissions to the lowest level in twenty years. This shows that sustainable energy policy can achieve both economic and environmental benefits at the same time, without having to sacrifice one objective for the other,” he said.
Shale gas exists worldwide, also, with non-US shale resources actually much larger than those in the US itself. In fact, the Energy Information Agency (EIA) of the United States estimates that non-US shale gas resources are 32% of global technically recoverable gas resources. And China, Argentina and Algeria are all estimated to hold greater shale gas resources individually than the US. Tight oil resources are significant too, with much of this concentrated in Russia, which may help it to become the world’s largest oil producer again after its conventional oil production growth has stalled. Indeed countries in the Middle East such as Saudi Arabia have already commenced shale exploration programmes. Also the departure of many western oil & gas companies from some countries in the Middle East has further increased the opportunities for private companies from the region.
This has important policy implications, Mr. Jafar believes: “A world with a rising population level and a need for wider and greater prosperity will require substantially more energy in future than it uses today. In this context, the unconventional oil and gas revolutions should be seen as a positive development, helping to save the world from the supply shortages that looked possible even a few years ago. In addition to security of supply and tackling climate change, the world also needs to tackle the issue of energy poverty, since today over 1.3 billion people around the world live without basic electricity supply,” Jafar told the audience.
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