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Saudi Prince Alwaleed warns against shale oil threat to kingdom' s economy

BY SUMMER SAID

RIYADH -- Saudi Arabian billionaire Prince Alwaleed bin Talal has warned that the kingdom' s petroleum-dependent economy is increasingly vulnerable as rising production of U.S. shale oil and gas decreases global demand for crude from members of the Organization of the Petroleum Exporting Countries (OPEC).

In an open letter dated May 13 addressed to Saudi Oil Minister Ali al-Naimi and several other ministers, which was published Sunday on a Twitter account previously used by Prince Alwaleed, he said the kingdom won' t be able to fulfill its plan to increase its crude production capacity to 15 MMbbl because of the shale threat.

Saudi Arabia, the world' s biggest oil exporter, is now pumping at less than its production capacity because consumers are limiting their oil imports, Prince Alwaleed said. This means the kingdom is, "facing a threat with the continuation of its near-complete reliance on oil, especially as 92% of the budget for this year depends on oil," said the prince.

Representatives of Prince Alwaleed could not be reached for comment. A Saudi official, who did not wish to be named, confirmed that ministers received the letter in May.

In a report last month, OPEC' s own analysts predicted that demand for the group' s crude would fall next year to 29.6 MMbopd, more than 600,000 bopd below its level last year. The International Energy Agency expects demand for OPEC crude to decline again in 2015 to 29.2 MMbopd, before starting to rise gradually in the following years.

Mr. Naimi has so far played down the significance of rising shale oil production, despite the fact that some OPEC members, such as Nigeria and Algeria, have seen a sharp drop in their exports to the U.S. At the OPEC meeting in late May, he shrugged off the threat, saying it was not the first time OPEC has had to compete with a surge in output from countries outside the group.

"We disagree with your Excellency on what you said, and we see that raising North American shale gas production is an inevitable threat," Prince Alwaleed' s letter said, in comments directed at Mr. Naimi.

Dow Jones Newswires

07/30/2013

 

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