Saudi Prince: Fracking Is Threat To Kingdom

As the fracking revolution eases demand for the kingdom’s oil and gas, a billionaire prince warns his nation to find new income.

Prince Alwaleed bin Talal, the billionaire Saudi Arabian investor, has warned that his country’s oil-dependent economy is increasingly vulnerable to competition from the US shale revolution, setting him at odds with his country’s oil ministry and Opec officials.

In an open letter addressed to Ali Naimi, the Saudi oil minister, the prince called on the government to accelerate plans to diversify the economy.

“Our country is facing continuous threat because of its almost total dependency on oil,” he wrote in the letter, copied to King Abdullah, Prince Alwaleed’s uncle, among others.

The letter, which was accompanied by several others addressed to officials including the finance minister, was posted to Prince Alwaleed’s Twitter account on Sunday. The letters were dated May 13 and a spokesperson for the prince confirmed they were genuine.

The Saudi oil ministry declined to comment on the letter. Saudi Arabia is the world’s largest crude oil exporter, earning $336bn from petroleum exports last year, according to data from Opec, the oil producers’ cartel.

Oil revenues account for 92 per cent of the state budget, according to Prince Alwaleed, and accounted for almost 90 per cent of the country’s export revenues according to Opec.

Opec officials have sought to play down the threat posed to the kingdom from surging North American oil production, which saw US imports from Opec members tumble to a 15-year low last year.

Despite falling US imports, the cartel saw a record windfall of $1.26tn from petroleum exports last year, according to data published by the organisation today. But the International Energy Agency forecasts demand for crude Opec to fall sharply over the next five years

“The world is increasingly less dependent on oil from Opec countries including the kingdom,” Prince Alwaleed wrote.

Speaking in Washington in April, Mr Naimi, who has been the country’s oil minister for almost 20 years, welcomed increased American output as a stabilising influence on global oil prices.

He also pointed out that Saudi crude exports to the US actually increased in 2012. That is largely because US refiners have not been able to replace the kingdom’s heavy and sour crude oil.

But Prince Alwaleed rejected Mr Naimi’s assessment, although he focused on rising US gas output rather than the country’s crude oil production, which saw its single largest annual increase ever last year.

“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 said.

Prince Alwaleed has long been a maverick figure in the Saudi monarchy, frequently taking positions that differ from official policy. Although he is the king’s nephew, few analysts count him among the most influential figure in the ruling family.

But public disagreements among the Saudi royal family are rare, although the prince is no stranger to controversy. Earlier this year he publicly attacked Forbes magazine for underestimating his personal fortune.

FT