Shale production 'nonsense' after price drop: Gazprom chief

11th February 2015, Comments 0 comments

The plunge in global crude prices makes it difficult for North American shale oil producers to survive, the chairman of Russian gas giant Gazprom said in Saudi Arabia on Wednesday.

Viktor Zubkov told an industry gathering that "a lot" of shale producers are suffering from the drop in oil prices and current conditions make shale production "nonsense".

"The low price of oil, $45, $50, or even $60 (per barrel), it's not a driver for shale business," he told the International Energy Forum (IEF) in Riyadh.

Crude prices dropped from around $100 to below $50 per barrel over the past year on concerns over a supply glut and weakening demand.

Traditional producers including the OPEC cartel have refused to lower production ceilings despite the fall, in a move analysts say is aimed at driving new competitors like shale producers out of business.

Current price levels, and connected prices for natural gas, "significantly undermine the economy of shale and LNG (liquified natural gas) export projects from the United States," said Zubkov, a former Russian prime minister.

He said the current price level was "not normal" and that a "golden middle" would be preferable.

"Prices should not be too high or too low," he told the Saudi-based forum, which brings together 74 oil and gas producer, consumer and transit nations.

US benchmark West Texas Intermediate (WTI) for March delivery slid 10 cents to $49.92 a barrel on Wednesday.

Brent North Sea crude for March dropped 59 cents to $55.84 a barrel in London.

On Tuesday the International Energy Agency, another body that works for global energy security, said crude prices will recover from the $50-$60 range but will stay well below $100.

The IEA sees US shale oil production growth slowing to a trickle this year, but quickly bouncing back to post a 50 percent rise from 2014 levels.

© 2015 AFP

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