The shale gas revolution will be “very painful for many parts of the world,” with the U.S. potentially the globe’s new swing producer, the head of BP told CNBC on Tuesday.
The nascent shale industry—in which “unconventional” gas is drilled from the ground through hydraulic fracturing or “fracking”—is heavily dominated by the U.S. It has boomed in recent years, partly as a result of access to cheap financing, helping to push global oil prices to record lows.
BP CEO Bob Dudley told CNBC that the “revolution” meant the U.S. might supersede Saudi Arabia as the world’s major swing oil producer, able to alter its production to balance supply and demand.
He saw the price of oil—which has recovered somewhat this year but is still down around 40 percent from the $100+ levels seen before July 2014—remaining “lower for longer.”
“There will undoubtedly be stress out there if oil prices stay lower,” Dudley said.
Patrick Pouyanne, the CEO of French oil giant Total, added that there would be a “lag time” before declining production costs affected shale output.
“It will have an impact on the supply of U.S. shale oil or shale gas, but not immediately,” he told CNBC at a seminar of the Organization of Petroleum Exporting Countries (OPEC) on Wednesday in Vienna.
Dudley warned that there could be further consolidation in the energy industry if oil prices remained low, but that he saw BP as neither “predator nor prey” currently.
Along with shale gas production, the refusal of OPEC to cut production is viewed as a factor in the tumble in oil prices. The body will hold a key meeting on Friday at which it is expected, once again, to hold production at 30 million barrels of oil per day.
Dudley said that the “winners” from low oil prices were “clearly” importers like China, India, Indonesia and much of Europe. Even the U.S. was a beneficiary, he said, because the coastal states are predominately net importers of oil rather than exporters.
He added that BP intended to maintain its presence in Russia, despite tensions with the West, with no plans to sell its 20 percent stake in Rosneft. The Russia oil company is majority-owned by the Russian state and CEO Igor Sechin has close ties to Vladimir Putin.
“We stay out of the politics,” said Dudley, adding, “We have a lot of experience in Russia … our commitment is to remain.”
Total’s Pouyanne added that the price of oil was not only a question of supply and demand, but of geopolitics.
“When you see the situation today in the Middle East compared to last year, there is quite a lot of turmoil,” he told CNBC.