Sanctions against Russia could spur $150 oil – Former BP chief

Reuters/Stefano Rellandini

Western sanctions against Russia, coupled with ongoing political instability in Libya and the advance of ISIS militants in Iraq, could leave the global oil supply exposed and push up oil prices to $150 per barrel, former BP chief Tony Hayward has warned.

The former CEO of BP and now chairman of Glencore Xstrata said
the recent boom in US shale production has painted an unrealistic
image of the world’s global oil supply, and created a false sense
in energy security.

“The world has been lulled into a false sense of security
because of what’s going on in the US,” Hayward said in an
interview with the Financial Times.

The hydraulic fracturing boom in the US began in 2008 and has
increased US crude output by 60 percent, but Hayward warned it
could wane.

“When US supply peaks, where will the new supply come
from?” Hayward said.

Instability in oil producing countries in the Middle East, such
as Libya and Iraq, in theory would have driven up oil
prices to $150 per barrel, had it not been for the new supply
from North America.

So far, Brent crude has fallen from about $108 a barrel at the
start of the year to about $97 today.

Hayward said oil supplies from the North Sea and Alaska are
nearing maturity, and the world oil supply is dependent on new
wells in places such as Russia, Iraq, and Canada.

Rosneft’s Bazhenov field may be even larger than the North Dakota
Bakken shale shelf, which currently produces 1 million barrels of
oil per day and has brought about the shale revolution in the
America.

Sanctions may stymie output

Russia, the world’s second-largest oil producer, outputs about
10.5 million barrels of oil per day, shy of the record from the
Soviet era.

His comments followed decisions from the EU and US to widen sanctions against Russia on
Friday, targeting state-run and private oil and gas companies,
including Gazprom, Rosneft, Transneft, and Lukoil. They can no
long obtain US or EU technology or equipment for extracting deep
water, Arctic, or shale oil.

Analysts believe there will be no sudden shock to the Russian oil
and gas industry, but that future projects and long-term
development are at risk.

“Because of financial sanctions, the big gorillas are going
to start cutting their activities,” Hayward said, speaking
about Russian companies.

The sanctions will also create problems for Western companies
like Exxon Mobil, BP, Shell and others, who have joint ventures
worth billions in Russia.

ExxonMobil, for example, has a joint venture with Rosneft to
explore Russia’s Arctic, and also owns a 19.75 percent stake in
the company.

Article source: http://rt.com/business/187812-sanctions-russia-bp-oil-hayward/