Dr.Al Sada : Current Oil Price 'Not Sustainable'

Doha, January 27 (QNA) - in the context of current oil price, which has fallen 18% since the beginning of 2016, "Current price of oil is not sustainable and hence it should change" said Qatars Energy and Industry Minister HE Dr. Mohammad Bin Saleh Al-Sada . He added in a statement issued by the Energy and Industry Ministry that the current level of oil price is below a lot of conventional oil production cost, let alone non-conventional oil. Its unsustainability therefore manifested itself visibly by a huge drop of investment estimated to be $130 Billion (20%) in 2015 alone followed by 16% in 2016. To date, since the beginning of the drop in mid-2014, it is estimated that $ 380 Billion of investment has been deferred in the oil & gas sector projects running till 2020. It is likely that this cut in capital expenditure is likely to go up if oil price remains in the current range, HE Dr. Al Sada noted, adding that it is the first time we have witnessed two consecutive years of such a huge cut in investment during the past 2 decades. Impact of this substantial drop in investment is already beginning to be seen in a drop in Drilling rigs world wide conventional and non-conventional, especially the US. It is bound to manifest itself down the road, while world demand is increasing annually, he said . HE Dr. Al Sada said the signs of drop in production, especially outside OPEC, is beginning to be seen with a drop of 400,000 bbls / day over the last 8 months in US alone from 9.6 MBPD to 9.2 MBPD. HE noted that in 2015, it was reported that 24 US Oil & Gas companies went bankrupt and sought Chapter 11 protection. That was while Brent oil averaged $ 52. With prices further down by 18% during this month from the beginning of the year, it is fitting to say that the hardship on Oil and Gas companies and bankruptcy will be further aggravated. US shale oil is reported to need an average of $55 a barrel for viable production, with the current oil price is much below this level. It is expected that Shale oil production will decline and US oil production during 2016 is expected to be at 2014 levels of 8.7 Million Barrels / day, he said . HE Dr. Al Sada said the trend is likely to continue into 2017 if we consider that even at a scenario of modest world economic growth, it is estimated that demand will increase by 1.4 MBD this year. Total demand is expected to be more than 95 MBD this year. Under the current circumstances, Oil will turn into a new Bull market before the year is out, as the current drastic price drop shuts enough production and erodes the global oversupply, he added. Qatar is the current President of the OPEC Conference.(QNA)