What could last weekend’s strikes on Saudi Arabia’s oil industry mean for petrochemical development in the Appalachian Basin?
Right now, it’s hard to say, but continued uncertainty could lead to more investment in the region centered on the Ohio River.
Given the precision nature of the attacks that took out more than half of Saudi Arabia’s oil production, companies looking to build refineries or petrochemical plants in the Middle East will have to ask themselves whether it’s worth the risk, said Tom Gellrich, of TopLine Analytics, a company that studies the downstream shale gas industry.
“People are going to wait and see what’s happening, and projects that had been slated to move forward will get delayed or pushed back, so that presents an opportunity for the Appalachian Basin for additional investment,” Gellrich said.
But don’t expect the strikes to impact U.S. shale production this year, or even next, according to the analysts at IHS Markit.
The U.S. crude oil price jumped 15 percent after the strikes, but was still $8 lower than it was last year. If sustained prices remain below the mid-$70s, the impact on next year’s production will be muted as companies return the windfall to shareholders rather than invest in production, according to IHS Markit.
A lot will depend on what happens next.
“If the Saudis are able to quickly resume production, it will give confidence back into the market and the market will go back to where it was,” Gellrich said.
But higher energy prices make it more attractive for companies to invest in safer areas, such as the U.S., he said.
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