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Oil prices won’t rebound to $100/bbl before 2020 to 2025, when U.S. shale production will gradually start to decline, according to a former head of the International Energy Agency.

Demand for crude in China, India, Southeast Asia and Africa will drive up global prices in the “long term,” Nobuo Tanaka, who served for four years as the IEA’s executive director, said in an interview in Abu Dhabi. Tanaka left the IEA, an advisory body to the world’s industrialized nations, in September 2011 and currently works as a professor at the University of Tokyo School of Public Policy.

“Price will not go up to a hundred as easily as before,” Tanaka said. “The shale production in the U.S. will gradually slow down after 2020 or 2025, so again there’s a chance of higher prices coming after that.”

Brent crude, a global pricing benchmark, dropped 44% in the last 12 months and was 20 cents higher at $50.06/bbl on Tuesday in London at 12:01 p.m. local time. The Organization of Petroleum Exporting Countries, led by Saudi Arabia, decided on June 5 to keep its crude production target unchanged to force higher-cost producers, such as U.S. shale companies, to cut back. The producer group has exceeded its target for 16 consecutive months, data compiled by Bloomberg show.

Built-In Stabilizer

“Shale production is a built-in stabilizer,” Tanaka said. “OPEC used to manage the production to stabilize the price; that was the regime before but now when OPEC gave up this kind of function, now the shale oil is acting in the market as a built-in stabilizer. These are new dynamics of the market.”

The gap between crude oil supply and demand will continue until the end of the year, and a supply shortfall may develop in the third or fourth quarter of 2016, he said. “Until that time, if the current situation continues, the price will stay as low as the current one.”

Iran, the fifth-largest producer in OPEC, is preparing to bounce back from economic sanctions that choked off investment in its oil industry. The nation could boost output to 3.6 MMbopd from its current 2.9 MMbopd in six months, the Paris-based IEA said in in its monthly report Tuesday.

Iran has said it will increase oil exports by 500,000 bpd within six months of the lifting of sanctions and then double that increase to 1 MMbpd.

“Certainly that eases the market situation and means the
oversupply will continue,” Tanaka said.

Governor of Pennsylvania, Tom Wolf, has announced that Pennsylvania has entered into a three-year cooperation agreement with West Virginia and Ohio to collaborate on areas critical to maximizing economic growth in the shale gas region.

The agreement was unveiled at the Tri-State Shale Summit in Morgantown, West Virginia.

As part of the new cooperation agreement, the three neighboring states within the Appalachian basin will discuss ways to cooperate in marketing efforts to attract new businesses, strengthen workforce development programs, spur investments in expanding infrastructure and delivery of natural gas and liquids, and encourage its academic institutions to expand and collaborate on research.

Governor Wolf said, "We must work together to ensure our region has the skilled workforce necessary to fill jobs and attract new employers. The demand for workers by the energy industry and off-shoot industries, especially manufacturing, is high and still growing. Here in Pennsylvania, I have proposed to expand investments in education across the board and especially increase funding for trusted and proven job training and workforce development initiatives."

Jacobs Engineering Group Inc. (NYSE:JEC) announced today the opening of its Odessa, Texas office and central equipment yard, which significantly enhances the company’s ability to provide construction and maintenance services to new and existing clients in West Texas.

 

Jacobs’ new location serves as the company’s central hub for Permian Basin field activities, including construction and maintenance of upstream facilities and pipelines.

 

Services include civil, mechanical, electrical, piping, instrumentation, and controls services for well pads, gathering systems, compressors, pumps, separators, gas plants, stabilizers, and pipelines. Jacobs is also in the process of selecting locations for satellite yards in the region to further support its clients on West Texas construction and maintenance projects.

 

In making the announcement, Jacobs Group Vice President Chip Mitchell stated, “We are very pleased to be right where our clients need us. Our Odessa location enables the growth and expansion of our skilled teams as we support the production and transmission of oil and gas in the Permian Basin.”

 

Jacobs is one of the world's largest and most diverse providers of technical professional and construction services. Jacobs takes an integrated approach to engineering, construction and continued maintenance that offers excellent value, quality, and innovation to its clients around the globe.

Exxon Mobil Corporation (NYSE:XOM) today announced it entered into a non-monetary exchange agreement with LINN Energy, LLC (NASDAQ: LINE) to add 17,800 net acres in the Permian Basin to its U.S. oil and natural gas portfolio managed by subsidiary XTO Energy Inc.

In the exchange, LINN Energy will receive interest in about 500 net acres from ExxonMobil’s South Belridge Field, near Bakersfield, California.

In the agreement, ExxonMobil will receive 17,000 net acres in the Midland Basin core area in west Texas that is most prospective for horizontal Wolfcamp and Spraberry development, currently producing about 4,700 oil-equivalent barrels per day. ExxonMobil will also receive 800 net acres in the New Mexico Delaware Basin. Both acreage positions will be operated and developed by XTO Energy.

This is the second non-monetary exchange agreement with LINN Energy this year. In May, ExxonMobil added nearly 26,000 acres in the Permian Basin. In that agreement, LINN Energy received a portion of ExxonMobil’s interest in the Hugoton gas field in Kansas and Oklahoma.

“We continue to expand our leasehold position in a prolific area that is poised for profitable volumes growth from multiple horizons in the Wolfcamp and Spraberry formations,” said Randy Cleveland, president of XTO Energy. “Our operated-acreage position in the Midland Basin Wolfcamp core is now around 120,000 net acres. We continue to increase drilling activity in the play, currently operating six horizontal rigs, and are very encouraged by initial well results.”

This agreement extends XTO’s leasehold position across the entire Permian Basin to more than 1.5 million acres and net oil-equivalent production to more than 95,000 barrels per day.

LINN Energy will acquire ExxonMobil’s interests in the South Belridge Field, which currently produces approximately 3,400 barrels of oil per day.

“This transaction further strengthens XTO’s significant presence in one of the major U.S. growth areas for onshore oil production,” Cleveland said.

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