The Sharjah National Oil Co. (SNOC) is not one of the big beasts of the global oil world, certainly in comparison with its giant neighbors such as Saudi Aramco or the Abu Dhabi National Oil Co. (ADNOC).
As the SNOC’s CEO Hatem Al-Mosa admits, its production disappears in the rounding up of the UAE’s quota at the Organization of the Petroleum Exporting Countries (OPEC).
But Al-Mosa is a lifelong oilman, having worked at Amoco and then BP after the two companies merged, and he has a wealth of experience and insight into the business.
A conversation with him is well worth having for anybody seeking an expert view on what is happening in the energy world.
So who better to ask the burning questions of the last five months of unprecedented turbulence and volatility in the global energy business: Has there been a price war? And who won it?
On the latter, he is adamant. “Nobody won. Everybody lost very badly,” he told Arab News. “My perception is that what happened is that Russia didn’t want to continue playing with the production cuts. Saudi Arabia could at that moment have decided, ‘OK, Russia doesn’t want to play, we’ll also stop playing and we’ll continue from where we’ve stopped’,” he said.
“That wouldn’t have caused the huge crash that happened at that moment when Saudi Arabia decided to completely abandon the cuts and go for full production.”
But that was not the main reason oil prices collapsed in April. “Russia definitely didn’t want to cooperate, but didn’t have to go to that extreme,” Al-Mosa said.
“However what they all didn’t anticipate was (the coronavirus disease) COVID-19. It was in play, but COVID-19 wasn’t yet seen as a demand destroyer.”
But the big loser, he believes, has been US shale. The collapse of the oil price — the American benchmark West Texas Intermediate went into negative territory on Black Monday in April — meant that many US shale companies were no longer financially viable, and there has been a slate of bankruptcies and shut-ins since. Al-Mosa saw it coming.
“From the moment it started, I thought shale oil was going to be the biggest victim of the price war, but neither I nor anybody else thought the destruction was going to be so severe because of COVID-19. It was the perfect storm, and it just destroyed everything,” he said.
In some ways, shale had it coming. “If you look at history, before shale oil OPEC pretty much controlled prices. They tried to increase and reduce supply to have a cost matched to demand at a comfortable price for OPEC,” he said.
“Once shale oil came into the picture at the beginning of the 21st century, that formula has essentially gone away because every time OPEC ceded production to control price, shale oil went and grabbed that share.”
The price collapse in April was a reckoning. “Shale oil played in a very irresponsible manner. They were just completely driven by money, and every time there was a chance they’d grab another piece of the market share and OPEC lost some more production,” Al-Mosa said.