Middle East national oil companies could benefit from a long-term trend of low oil prices, according to new research.
Oil prices are likely to follow a trend of between $60 and $80 a barrel for a few years, says a report from oil and gas consultants AT Kearney.
But Middle East national oil companies are well-placed to ride out the trough in prices as they have a low cost base compared with international or individual oil companies.
The study from the firm predicts oil prices are at the bottom of a pricing supercycle and are likely to stay low for some time.
This would give an advantage to Middle East national oil companies, argued study author Sean Wheeler, as they could capitalise on international companies having to give up less profitable oil fields in favour of focussing their resources on more profitable wells.
“National oil companies could acquire these resources and integrate them into their operations and still operate them more cheaply and at a better profit than international firms with their higher cost bases,” he said.
“This happened in the 1980s when reduced oil prices triggered years of low prices and it looks like history is about to repeat itself.”
Saudi Arabia primes the pumps
Saudi Arabia is cementing a place as the leader of oil producing nation’s trade body OPEC by gearing up as one of the world’s leading refiners.
The country has invested millions in state of the art technology at oil refineries and can profit from cheaper refining costs at the rate of 5 million barrels a day.
The government is on track for daily refining production of between 8 to 10 million barrels, which surpasses that of US giant ExxonMobil.
The switch in emphasis allowed the state-owned ARAMCO Trading to hit 60% of earnings from refining, in comparison to 18% a year ago.
The smart move has seen Middle East nations with refinery capabilities pick up business from less-developed oil producing nations such as Nigeria, which have little or no refining infrastructure of their own.
Selling crude is still important to ARAMCO’s business, but low oil prices will have less of an effect on the company as other oil producers will still need their services.
“The Saudis can tap a wider market because they compete globally,” Antoine Halff, chief oil analyst with the International Energy Agency.
“They diversify by looking at different parts of the value chain which gives them more market access.”