By Sonny Atumah
As the Organisation of Petroleum Exporting Countries (OPEC) and current world oil leader the United States flex muscles, the world may be heading for a very long period of economic recession contrary to predictions that the downward spiral may abate in the last quarter of 2015.

The danger signal of battering oil prices is volatility in the crude oil market. OPEC’s decision to maintain 30 million output levels in June contributed to highest levels of oil in Western Europe. OPEC members’ share of this business is desperation and risk of economic instability. Survivals of some countries threatened by depressing oil prices, now in the mid-forties dollar range are already devaluing currencies.

Oil price instability made OPEC Secretary General Abdullah al-Badri’s shuttle to Moscow last week to discuss with Russian Energy Minister, Alexander Novak on long term prospects in crude oil market. In a joint statement they said: Despite current uncertainties, signs of a more balanced market in 2016 may provide much desired stability to the oil market in the longer-term, a prerequisite for the continuity of timely and adequate investments, UPI’s Daniel Graeber reported.

The parley was a remedial measure to chart a new course for a possible United States passage of bill to lift the four-decade old ban on crude oil exports. The Senate Committee on Energy and Natural Resources passed the bill from its Chairman, Sen. Lisa Murkowski who pushed hard to convince her colleagues that the policy was due for change. As an encore, House Speaker, John Boehner at a press conference in Capitol Hill last week said ‘’ I would support lifting the ban, and hopefully we can work together on a bipartisan fashion to move our energy policies into this century.’’

A renewed zeal for market control by the United States rekindles ripples of the oil embargo between October 1973 and November 1974 which had generated several global oil shocks. The Middle East bloc in OPEC led by Saudi Arabia used oil as a geopolitical weapon against the United States accused of re-supplying the Israeli military that had two-frontal attacks by Egypt and Syria in the Yom Kippur war of 1973. The embargo spiralled price of oil in a quadruple, and skyrocketing costs of commodities in the United States.

Then United States President, Richard Nixon’s response to the situation in November 1973 was a promise that America would in ten years be energy independent. That was not to be but researches he ignited yielded fruits four decades after, in what is now the Shale revolution that has a ripple effect in global oil instability. Having cleared all obstacles that led to the ban which was for fear of America running out of oil 40 years ago, the shale boom is estimated to bring down the pump price of gasoline. One believes that America is now ruminating in frenzy that she can take her rivals in OPEC in the price war.

David Yergin of the IHS Energy Consulting in a 2013 contribution in Politico Magazine said: ‘’Then there is the geopolitical impact. The increase in U. S oil production since just 2008 is greater than the entire output of Nigeria, one of the OPEC producers and more than Iran’s entire exports prior to the sanctions that have sliced its exports levels roughly in half since 2011. Indeed without the increase in U.S oil production, it is very hard to see how the oil sanctions on Iran could have worked.

In a recent publication of the National Journal, Texas oilman, Steve Pruett explained that the unconventional oil development involves multi-stage hydraulic fracturing, horizontal drilling and enhanced oil recovery techniques got more oil to increase production,. The unconventional revolution again brought the U.S. to the fore as global number one oil producer, a deja vu for her since 1975. With this feat, the U.S. overtook Russia and Saudi Arabia as the largest oil producer in the world according to the recent BP annual statistical review of world energy production, energy demand and economic prospects.

What is the future of OPEC in global petro-geopolitics? Resilience of the U.S technology appeared invulnerable to high production costs for American shale drillers who deployed about 860 working oil rigs, thereby increasing the global glut. Saudi led OPEC had tried severally to kick the American shale out of the market through a stable oil production to maintain market equilibrium below shale drillers’ costs. This battle between the two gladiators for market share has destabilized global oil market. For almost one year now the volatile business had witnessed more bearish runs that economies are now in quandary.

The United States had tacitly been against the OPEC which destabilised her economy shortly after her oil production peaked in 1970. Since 1973 America had been in running battles with the oil cartel, often resulting in intermittent bull and bear runs. The United States had accused Saudi Arabia of not only trying to maintain market share but to gain market share. America which for over three decades suffered a price war is now refusing to be a price taker, using her longed researched technology to reduce production costs for her shale drillers, to control world oil prices.

Until the late 1950s, the amount of petroleum produced globally was greater than demand. Oil rich nations of the Middle East felt the IOCs that controlled the price of oil shortchanged them. What OPEC gained since formation in 1960 to control oil price may have been lost in superior technology of American unconventional shale. While shale has capacity to create about one million jobs in America, effect of its operation has caused severe economic hemorrhages for most OPEC members.

OPEC had over the years relied on conventional oil. This technology according to Pruett, requires vertical drilling of a well to hit a reservoir of oil known as oil field. Drillers pump oil to the surface and use pump jacks to draw oil out as the well ages. Unconventional drills well vertically several thousand feet, then horizontally into the belt of shale or other tight rock where the oil and, or natural gas are located. Using advanced hydraulic fracturing, the well is pressurized with fluid, mostly water and sand to create tiny fractures in the rock so the oil and gas can escape and be recovered.

Shale in the west, is not offering most OPEC members the best of time as producing countries actually have about 75 percent of their operations in the hands of the same IOCs that are promoting unconventional oil.

Experts categorise OPEC into three: the super wealthy countries of Saudi Arabia, Kuwait, UAE and Qatar in the Gulf Cooperation Council (GCC). These countries wield power in OPEC and invested their petrodollars in downstream investments locally and overseas. Iran which was a dysfunctional country like Iraq and Libya would join the GCC group having been left off the hook via the lifting of sanctions in the nuclear deal with the UN’s security council’s five permanent members plus Germany (P5+1). Future control of this group is said to be determined by politics than by design. Iran may pump in additional one million barrels thus compounding an already bad situation for OPEC.

Nigeria belongs to the third group of declining states that are for the ride; where oil exhaustion has sent production of conventional crude in the reverse gear. Without the requisite technology, shale impact on the non-Gulf OPEC countries is that of frustration and forced austere measures. Angola, Algeria and Venezuela belong to this group where Gabon and Indonesia had earlier pulled out; we learnt Indonesia is staging a comeback. Ecuador had been out and back.

One hopes the new GMD of the Nigerian National Petroleum Corporation (NNPC), Dr. Emmanuel Ibe Kachikwu, appointed last Tuesday by President Muhammadu Buhari, would toe the line of GCC members in OPEC to steer Nigeria to safety shores. An option for Nigeria is to invest more in exploration and production to avoid pulling out of OPEC soon. Investment in downstream activities is an option for Nigeria to weather the American shale storm.

He must avoid the pitfall of immediate past Petroleum Minister, Diezani Alison Madueke who came in similar circumstance from a super major Shell, but could not chart a course for the rehabilitation of our refineries that Nigeria relied more on refined products imports with the attendant subsidy rackets. Towards the end of the Goodluck Jonathan’s administration, the Minister initiated what observers called rummage sales of our four refineries, claiming it would be too expensive for government to rehabilitate them.

Shell the biggest player in Nigeria has a refinery in Durban, South Africa. Also, Shell owns the Shell Eastern Petroleum (Pte) Ltd Singapore with a refining capacity of 462,000 barrels per day.

ExxonMobil Corporation of Texas, United States, the number one of the six Super majors, is the largest refiner in the world with 37 refineries in 21 countries but with no refinery in Nigeria. ExxonMobil posted profit that more than doubled to $1.67 billion from its network of refineries globally in its 2015 first quarter reports. Its refining plants outside the U.S posted an almost six-fold increase in results. The company’s international refining business took advantage of tumbling crude costs to process more oil in every market in which it operates.

The new GMD should in complementarity, blend our national oil company the NNPC which he now superintends, operated by government and super majors that are publicly owned petroleum companies not operated by governments where he was. The six super majors are the largest publicly traded IOCs in the world. They are ExxonMobil (Texas, USA), Royal Dutch Shell (The Hague, Netherlands), BP/Amoco (London, UK) Total SA (Paris, France), Chevron (California, USA) and ConocoPhillips (Texas, USA).

Mother governments of these IOCs do not operate nationally owned oil companies. These governments grant publicly owned petroleum companies subsidies. The reason is that oil is of strategic importance to a nation’s security. These subsidies are also granted by these governments not to drive them overseas.

The fear is that home countries will become even more dependent than they already are on foreign nations for oil. So for those governments their oil companies are protected via subsidies at home. The United States government for instance provides large subsidies to publicly owned oil companies a tax rate of nine percent, well below the standard 25 percent corporate rate.

Kachikwu must exhibit patriotic zeal to set priorities right with his vast experience and tremendous goodwill from ExxonMobil where he is coming from as vice president, for genuine partnership to diversify our economy through backward- forward vertical linkages. Nigeria has relative comparative and competitive advantages in oil and gas resource.

Meanwhile, Congratulations Dr. Kachikwu!