Hoarding is exactly what the government is doing right now by filling the SPR, and frankly it's the best thing that could happen. It drives prices up. High prices encourage demand destruction. They also finance new well development. The hoarded oil gives us a buffer to fall back on once shortages become more prevalent. High prices are what we need in order to adapt to what's coming, and the sooner they happen, the better.
Apparently, they are not heeding the IEA's request to increase oil supplies - to say the least.
Quote:
Crude Market Update
Thu, Jul 5 2007, 10:48 GMT
by Trade The News Staff
- Saudi Aramco announced late yesterday that it has raised its European oil prices to their highest level in three years as maintenance in the North Sea fields resulted in increased demand for Russian and Middle Eastern supplies. The company said that prices for August deliveries Europe were raised by 40 to 70 per barrel.
Saudi Aramco Raises Oil Prices for Europe to a Three-Year High
By Nesa Subrahmaniyan
July 5 (Bloomberg) -- Saudi Aramco, the world's largest state oil company, increased prices of most crude oil grades for export to Europe to a three-year high as maintenance at North Sea fields increased demand for Middle Eastern and Russian supplies.
The Dhahran, Saudi Arabia-based company raised prices for shipments to Europe in August by between 40 cents and 70 cents a barrel, Aramco said in an e-mailed statement late yesterday. The oil producer also increased prices of Arab Medium and Arab Heavy prices for shipment to Asia, and cut prices of all grades it sells to the U.S. by 35 cents to 50 cents a barrel.
Lower oil supply from the North Sea and a drop in output in Nigeria, Africa's biggest producer, are prompting European refiners to seek alternatives. Aramco cut prices for export to the U.S. after stockpiles in that country rose to a nine-year high and were 11 percent more than the five-year average in the week ended June 22.
``European prices are strong because North Sea maintenance is at its peak in August,'' said Anthony Nunan, an assistant general manager for risk management at Mitsubishi Corp. in Tokyo. ``U.S. crude stockpiles are still high.''
For customers in Europe, Saudi Aramco increased the premium on its Extra Light crude to a record 65 cents a barrel, and narrowed the discount for Arab Light to $3.20 a barrel. In relation to benchmark prices Arab Light is at the highest level since September 2004. European prices are expressed as a differential to Intercontinental Exchange's weighted average of North Sea Brent oil.
Morris Beschloss
Special to The Desert Sun
July 5, 2007
--------------------------------------------------------------------------------
An exclusive interview with one of America's leading energy gurus, Phil Flynn, in Chicago last week disclosed the hard facts U.S. oil producers and consumers will be facing this year.
OPEC's desire to restrict shipments on what they know is a vanishing resource. The Middle East oil monopoly also is adamant in squeezing the top prices out of its oil availability, realizing that alternative energy sources eventually will cut into crude oil demand.
Saudi Arabia, the only remaining "swing" producer, conceivably could be losing production in one or more of its five major oil fields at this time.
As a well known long time oil bull many people assume that I am a believer in the Peak Oil theory. That at some point we would be at an oil production peak and we will soon run out. Peak oil is almost a religion among its believers and they are as devoted to it as the hard core Al Gore like global warming is the end of mankind as we know it crowd. The truth is that the belief I hold is that the market and ingenuity will eventually solve both problems.
As for oil when the price gets high enough and so called traditional production starts to peak we will look to non-traditional sources of oil and we will find ways to be more efficient with the oil we have. And the non traditional oil sources are dismissed but the hard core Peak Freaks when they do their calculations. Take for example a story that was written by Joe Carroll of Bloomberg News about one of many non-traditional energy source called shale oil. According to the story Colorado and Utah have as much oil as Saudi Arabia, Iran, Iraq, Venezuela, Nigeria, Kuwait, Libya, Angola, Algeria, Indonesia, Qatar and the United Arab Emirates combined when you take a look at shale oil which is oil trapped in limestone. And the amount of oil that is there is enough oil to according to Bloomberg is enough supply to feed the US for a century.
Hey Phil, when Colrado and Utah start producing as much oil as the faltering Saudis - which you realize as already having production declines - I'll subscribe to your shale oil theory. _________________ It's already over, now it's just a matter of adjusting.
Posted: Thu Jul 19, 2007 1:03 pm Post subject: Re: Is Opec at Peak Production
Dubai oil production goes off a cliff -
Quote:
Sunday, Jul 15, 2007
By Matt Chambers
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--Production of Dubai's crude oil has fallen as much as a third in the past two years and is a fraction of that recorded in some government statements, company documents show, undermining the already fragile position of one of the world's top three oil price reference points.
Current output in the booming Persian Gulf sheikdom, one of seven semi-autonomous enclaves in the United Arab Emirates, is some two-thirds below the figure released by the national government, according to calculations by Dow Jones Newswires using data from the previous operators of the fields. It has fallen as much as a third in the past two years.
The Dubai government took over operating the oil fields in April from a joint-venture led by ConocoPhillips Corp. (COP), which has since complained of poor financial returns due to the structure of the previous operating agreement.
Daily output in the first three months of this year fell to between 65,000 barrels and 80,000 barrels against the 240,000 barrels stated on the U.A.E. government's Web site.
Dubai's crude is often used as a basis to price oil exports to Asia, including cargoes from Iran and Saudi Arabia.
Like blended Brent crude sourced from the North Sea between the U.K. and Norway, its relevance is under threat as supplies dwindle.
. . .
Halting Decline
Dubai, which remains secretive about its oil industry, is trying to ease its dependence on crude but in April employed London-listed contractor Petrofac PLC (PFC.LN) to help stem the output declines.
. . .
Petrofac and Dubai Petroleum Establishment, the state-owned company that took over the fields, both declined to comment.
A senior oil adviser to the Dubai government, Jim O'Connell, declined to verify or reject Dow Jones Newswires' calculations, which were emailed to him.
When asked about the figures, U.A.E. Oil Minister Mohamed Al Hamli referred inquiries back to the Dubai government.
A person familiar with Dubai's oil production policy said: "While ConocoPhillips will have you believe it (the local oil industry) is in decline, there is still a lot of potential in Dubai's production."
No Incentives
The previous operators have said the terms of the Dubai oil production agreement, which started in 1961 and ended five years early, gave little profit.
With little incentive to boost production, this has probably contributed to the decline in output at the offshore fields.
Dubai's daily crude production in the three months to March 30 slid below 65,000 barrels, according to calculations using figures in corporate filings by ConocoPhillips. Filings by Spain's Repsol YPF SA (REP), a former junior partner of ConocoPhillips in Dubai, translate into output estimated around 80,000 barrels. Spokespeople for both companies backed their published figures and wouldn't comment on why they indicate different production levels.
These figure contrast with an average last year of 88,000 barrels, and 100,000 barrels in 2005, based on corporate filings by Repsol and Germany's RWE AG (RWE.XE), another junior partner in the old joint venture.
Its agreement with the Dubai government now over, ConocoPhillips gave its recent figure for Dubai daily production as 21,000 barrels when it released its first-quarter report this year.
With Houston-based ConocoPhillips owning a 32.5% stake in the venture, this represents total production of 64,615 barrels for the Dubai fields. Production numbers for the last two years are based on similar calculations from figures in filings by Repsol and RWE.
ConocoPhillips said last year that the loss of its Dubai operations "is not expected to have a material impact on our financial statements or proved reserves," indicating the little value it attributed to the Dubai oil fields.
Corporate filings also show the owners of the field believed they could profitably extract less than 150 million barrels of oil between 2006 and the 2012 termination of the agreement, indicating Dubai's outright oil reserves are probably much less than its official estimate of 4 billion barrels, a level unchanged in almost 20 years.
If Dubai is able to achieve its stated aim of halting field decline and could produce at 65,000 barrels a day for another 30 years, it would pump a little more than 700 million barrels of oil.
The U.A.E., on its Web site, concedes Dubai's reserves have fallen over the past decade and will be exhausted within 20 years.
Madrid-based Repsol, which had a 25% stake in the fields, attributed 36.6 million barrels of its proven reserves at the end of 2005 to Dubai, which translated to total proven reserves of 146.4 million barrels for the partners combined.
The International Energy Agency has expressed skepticism over Dubai's official reserve figures and in recent reports estimated it at between 1.6 billion and 2 billion barrels, citing the American Association of Petroleum Geologists. The U.A.E. cited the same figure in its 2006 yearbook.
The Dubai government has been privately critical of ConocoPhillips' efforts to improve performance at the declining fields.
The person familiar with Dubai's oil production policy said it is hoped the industry can operate for another 30 years. The government has publicly said it expects to be able to extend the fields well beyond 2010.
With neither the current nor previous operators prepared to comment on the field, it is hard to gauge what chances Dubai's government has of maintaining crude production.
Posted: Thu Jul 19, 2007 2:37 pm Post subject: Re: Is Opec at Peak Production
This author/analyst at the Oil Drum believes Saudi Arabia has peaked and is in decline. In the most recent forecast or world oil production posted at the Oil Drum, this is what was said about Saudi Arabia oil production:
Quote:
5. Saudi Arabia Crude Oil & Lease Condensate Production
Saudi Arabia remains a key producer in the world and continually reminds the world of its enormous reserves and surplus production capacity.
This paragraph on capacity in IEA's 12 June 2007 Oil Market Report, page 15, explains Saudi Arabia’s current surplus capacity situation within an OPEC context.
Notional spare capacity stands at 4.0 mb/d, while our measure of effective spare capacity (excluding Indonesia, Iraq, Nigeria and Venezuela) stands at 2.85 mb/d. Although these volumes are physically producible, even this lower figure likely overstates what OPEC could actually shift onto the market given current prices and shortages in refinery upgrading capacity. Heavy, sour Saudi Arabian and Kuwaiti crude accounts for 88% of the effective spare capacity figure. In the absence of substantial discounts, these volumes might struggle to find buyers while sizeable amounts of refinery upgrading capacity remain offline for scheduled and unscheduled maintenance. Readily marketable spare crude capacity may therefore be much lower, and a more accurate reflection of current market tightness.
In other words, this IEA paragraph says that the world has only 0.35 mb/d spare capacity of readily marketable light sweet crude because the spare capacities of 2.20 mb/d from Saudi Arabia and 0.30 mb/d from Kuwait are hard to sell heavy sour crudes. Given the statements in this IEA monthly market report, the following forecast assumes no effective spare capacity of easily marketable Saudi Arabia crude.
The new production capacities from AFK, Shaybah expansion, Nuayyim and Khurais are just enough to offset decline from existing fields. Aramco has scheduled Manifa last because it will produce heavy oil which is less marketable than lighter grades.
It is also assumed that Saudi Arabia will produce their fields while maintaining the annual depletion rate of remaining reserves at less than about 5.3%/yr, which should ensure that reservoir damage does not occur due to overproduction from their fields. The figure of 5.3%/yr was selected because the annual depletion rate of remaining reserves reached a peak of 5.3%/yr in the third quarter of 2006 (Fig 9), based upon estimated ultimate recoverable reserves (URR) of 175 Gb for Saudi Arabia.
The estimated URR of 175 Gb is equal to 155 Gb of non heavy crude plus 20 Gb of heavy crude. Although the heavy sour crude fields of Safaniya and Manifa may ultimately produce much more than 20 Gb, only 20 Gb is assigned because this low quality crude is difficult to market and difficult to process by refineries. The non heavy crude URR of 155 Gb includes 85 Gb for Ghawar (light), 15 Gb for Abqaiq (extra light), 8 Gb for Berri (extra light) and the remaining URR is assigned to Aramco’s other non heavy crude fields including Marjan, Qatif, Khurais, Zuluf, Shaybah, Abu Safah and Khursaniyah. The estimated URR is based mainly on the information sources about Saudi Arabia, located at the end of this article.
As of June 2007, Aramco’s total C&C production is 112 Gb, being 64% of the URR 175 Gb. Over half of the 112 Gb has been produced from the super giant Ghawar. Abqaiq, Berri and Safaniya have also been significant producers. As Aramco has produced over half of the estimated URR, the production curve is forecast to follow a typical post peak decline curve, shown by the red line in Fig 9.
Fig 9 - Saudi Arabia Crude Oil & Lease Condensate Production to 2020 (bottom up forecast) - click to enlarge
Figs 9 and 10 have been updated for Aramco’s most recent project schedule, released in June 2007. Due to both Al Khafji (0.30 mbd) and Shaybah ph 2 expansion (0.25 mbd) being removed from Aramco’s recent project schedule, the probability that Aramco has passed peak production in 2005 is almost a certainty.
The solid red line shows a “Do Nothing” forecast scenario in Fig 10. This represents a production decline rate of 8%/yr which is equivalent to ultimate recoverable reserves of 148 Gb (billion barrels). Of course this scenario is highly unlikely but serves as a lower bound for the production profile.
The “New Peak?” dashed red line represents a scenario for which another peak is attained. However, the inset in the chart explains that another 1.75 MB/D would be required from other projects and infill drilling. This is highly unlikely and confirms that a peak in 2005 has passed.
The “Bottom Up” dark blue line represents the most likely scenario and includes the forecast to 2020 from Fig 9 and a 5%/yr decline thereafter.
Fig 10 - Saudi Arabia Crude Oil & Lease Condensate Production to 2080 - click to enlarge
This nice technical analysis is appreciated. However, many of us laymen here have said SA is in decline for a long time, just by looking at the numbers SA publishes - they've been going down since Nov of 04. If it looks like a duck and quacks like a duck, its a duck.
Joined: Apr 06, 2006 Posts: 2607 Location: 3 miles NW of Champoeg, Republic of Cascadia
Posted: Thu Jul 19, 2007 3:28 pm Post subject: Re: Is Opec at Peak Production
Maybe they're just trying to create shortages to jack the price up. Uh...quack? quack? There's all that other data to explain away, though.
Any of you fellows have a graph handy depicting the decline in SLC over the last few years? _________________ Cogito, ergo non satis bibivi
The god damn plane has crashed into the mountain!
Posted: Thu Jul 19, 2007 6:03 pm Post subject: Re: Is Opec at Peak Production
Another way is to look at how many new rigs they have brought online. If they are adding drilling rigs and the production continues to drop....look out.
I thought i saw a graph of the number of rigs versus production and it often has an inverse relationship. Not sure where i saw that though
The Peak of Light Sweet Crude? is almost two years old - the story, that is. I wish blogs could be updated with new data; I prefer the forum format generally. _________________ Cogito, ergo non satis bibivi
The god damn plane has crashed into the mountain!
Posted: Fri Jul 20, 2007 10:15 am Post subject: Re: Is Opec at Peak Production
This PO thread that OPEC shipments are falling needs to be linked here as well. It was started by DP and worth a read.
DantesPeak wrote:
Oil Movements has suddenly revised its OPEC shipment projection downwards. Lower shipments are blamed on falling demand for high-sulphur oil that is difficult to refine:
Quote:
7/19/07 Oster Dow Jones 15:30:53
July 19, 2007
DJ OPEC Oil Exports In 4 Wks To Aug 4 Seen -240,000B/D -Tracker
LONDON, Jul 19, 2007 (Dow Jones Commodities News via Comtex) -- Seaborne OPEC oil shipments are expected to fall by 240,000 barrels a day in the four weeks to Aug. 4 from the previous one-month period because of weak demand for high-sulfur oil in the West and less attractive financial terms for storing oil that are also cutting into demand, U.K. tanker tracker Oil Movements said Thursday.
Shipments from Organization of Petroleum Exporting Countries are expected to fall to 23.95 million barrels a day from 24.19 million barrels a day in the four weeks to July 7, said Roy Mason, head of the consultancy.
"It's a demand issue. Weak demand for sour crude in the West, but it's not altogether surprising because U.S. stocks are healthy," Mason said, referring to high-sulfur, or sour, oil that is more costly and difficult to process for refiners that prize low-sulfur crudes.
Sailings from key OPEC Middle East countries, whose spare oil production capacity comprises mostly sour crudes, are seen dropping 380,000 barrels a day.
The recent pricing structure known as "backwardation," when front month futures contracts trade at a premium to longer dated contracts, was also making it less profitable to hold oil in storage. This, Mason said, was further eating into demand for OPEC oil.
Mason estimated that OPEC now had about 1 million barrels out of the market as a result of decreased consumption from refiners. "OPEC compliance is near its highest level," he said, referring to the group's adherence with its two output reductions that started taking effect last November.
This 8% decline rate, coupled with the double digit decline rates coming out of the North Sea and Cantarell, simply show that using US decline rates of 3% are not a good model for estimating world decline rates. It, in fact, supports Simmons arguments that new technology only increases the rate of production and then decline. Technology does not make more oil.
Now, with rising gas prices, unceasing demand, rising oil prices, I call bullshit on the argument that SA is withholding production because of over supplied markets.
Posted: Wed Aug 15, 2007 12:02 pm Post subject: Re: Is Opec at Peak Production
Interesting article found by Leanan quoting the King of Saudi Arabia as saying the oil boom is over and people are going to have to get used to a different kind of lifestyle - understatement?
Posted: Mon Sep 24, 2007 7:40 am Post subject: Re: Is Opec at Peak Production
Syrian production to drop by half.
Quote:
Syria''s oil output forecast to fall by more than half
Power & Materials 9/23/2007 4:59:00 PM
DAMASCUS, Sept 23 (KUNA) -- Oil production in Syria is forecast to drop 360, 000 barrels per day next year, Oil Minister Sufian Al-Allaw said on Sunday, Allaw said in a statement that the output of the crude peaked in 1995 and 1996, indicating that the output has recently dropped by 385,000 bpd recently.
The official expressed hope to locate new traps of crude as a result of wide-scale exploration operations.
Syria's oil output was estimated, over the past years, at some 500,000 bpd. (end) am.rk KUNA 231659 Sep 07NNNN
Posted: Mon Sep 24, 2007 12:00 pm Post subject: Re: Is Opec at Peak Production
seahorse2 wrote:
Syrian production to drop by half.
Quote:
Syria''s oil output forecast to fall by more than half
Power & Materials 9/23/2007 4:59:00 PM
DAMASCUS, Sept 23 (KUNA) -- Oil production in Syria is forecast to drop 360, 000 barrels per day next year, Oil Minister Sufian Al-Allaw said on Sunday, Allaw said in a statement that the output of the crude peaked in 1995 and 1996, indicating that the output has recently dropped by 385,000 bpd recently.
The official expressed hope to locate new traps of crude as a result of wide-scale exploration operations.
Syria's oil output was estimated, over the past years, at some 500,000 bpd. (end) am.rk KUNA 231659 Sep 07NNNN
Joined: Oct 15, 2004 Posts: 2021 Location: Arkansas
Posted: Tue Oct 30, 2007 8:44 am Post subject: Re: Is Opec at Peak Production
Though this article doesn't address Opec directly, when the former head of Saudi Aramco says the world is at peak production and prices should rise, it deserves to be posted here and everywhere.
Quote:
Oil production has peaked, prices to soar - Sadad al-Huseini
Sadad al-Huseini says that global production has reached its maximum sustainable plateau and that output will start to fall within 15 years, by which time the world’s oil resources will be “very severely depleted”.
In an exclusive interview with lastoilshock.com, the former head of exploration and production at Saudi Aramco, said that oil production had reached a structural ceiling determined by geology rather than geopolitics, and that the technical floor for the oil price will rise by $12 annually for the next 4 to 5 years as new fields become increasingly costly to exploit.
According to al-Huseini the technical floor - the basic cost of producing oil excluding factors such as geopolitical risk and hedge fund speculation - is currently about $70 per barrel, meaning the minimum oil price could hit $106 in 2010 and $130 by 2012. Actual crude prices, including financial market factors, could be be as much as $125 by as early as 2010.
Al-Huseini said that Saudi Arabia’s plans to raise production capacity to 12 million barrels per day by 2012 represented “an achievable number”, as the country had announced oil investments of $55 billion between 2003 and 2011. But he cautioned that since some of the new production will come from entirely new fields “how the reservoirs will respond will be determined as they start producing”.
However, al-Huseini disparaged Western expectations that the Kingdom would produce significantly more than 12 mb/d. It was unfair, he said, to expect Saudi to “pull everybody’s chestnuts out of the fire”.
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