[Pops]

Saudi Arabia's state energy company said on Monday that its dominant role in world oil supply had been altered by large new reserves in North America, sapping the urgency to develop the kingdom's own reserves.

The speech by Saudi Aramco's chief executive was the first from the globe's top oil exporter to acknowledge that unconventional oil was set to shift the energy balance of power and cut U.S. dependence on Middle East crude.

http://www.reuters.com/article/2011/11/ ... ss&rpc=401

[Cog]

I'm having a great deal of difficulty believing the Saudi's about why they aren't developing the rest of their oil.

[dissident]

This is the standard line from the wahabbi kingdom to cover its own lack of discovery and declining reserves. At the same time they talk about a production capacity of 12 million barrels per day, which we will never, ever see in practice.

[dorlomin]

Saudi Arabia's state energy company said on Monday that its dominant role in world oil supply had been altered by large new reserves in North America, sapping the urgency to develop the kingdom's own reserves.

'My dog ate my homework'
'A bigger boy did it and ran away'
'Promise mum when I left the room the vase was not broken'
'Wow tar sands make Saudi oil uneconomical so we have stopped developing more'.

[seahorse3]

I'm in the camp that high oil prices hurt the world economy. SA used to say that too and used to claim they would defend $30 barrel oil. That era has gone and passed apparently. All that to say if there is any hope for the world to grow its economy and put people back to work, avoid a depression, the root of the solution is to produce more oil and produce it cheap - back in the late 90s we were growing like ganbusters at under $10 barrel right? So, cheap oil means economic growth. So, I don't buy the SA argument either that more oil isn't needed bc the North Americans can produce the more expensive stuff and, it hasn't even been enough to increase world production, just maintain a plateau. We need to increase oil production significantly and reduce the cost of doing so.

[careinke]

The Saudi royalty are masters of deception. Their stories emphasize getting ahead through cleverness (Aladan, etc.). Western stories are based on getting ahead by hard work and being clever is frowned upon. You need to look at Saudi statements through that lens.

Their announcement was designed to avoid panic, keep up the BAU facade, and of course keep the current leaders in power.

[Pops]

I don't think this is surprising, they said last year they weren't ever going to export more than 10 or 12 Mbd (I can't remember exactly) because they were "saving it it for future generations." Whatever additional they developed would be for internal use.

Pretty good plan.

They never did reach 10Mbd this year even after the Libya cutoff and dropped back to 9.5 after a month or two.

A good review from Staniford recently.

[Arthur75]

This is the standard line from the wahabbi kingdom to cover its own lack of discovery and declining reserves. At the same time they talk about a production capacity of 12 million barrels per day, which we will never, ever see in practice.

And to say the truth I really don't see why they shouldn't manage their oil as what it is, that is capital in the ground and play with the market as they wish trying maximizing profit, and especially if it is to feed American SUVs, for guys that have been brainwashed in the stupid "economics theory" Friedmann and al, that basically in economics natural ressource must be treated as free and infinite (which is exactly the way it is handled in this theory, counting only the cost to get it off the ground).

And don't forget that the Saudis already made a huge present to the USA, when they increased their prod starting 1985 (that led to the counter oil shock or oil glut), this through a deal with Reagan, and for Reagan it was to put the last blow to the USSR (cutting their foreign revenus by two third or soemthing) and it did indeed work to plan.

Not to forget that from a technical oil industry point of view, the less speed in pumping a field also usually means the higher total amount extracted.

[basil_hayden]

Arabian Light Sweet replaced by Dakota Light Sweet, not to mention much of Arabian is heavy, sour and thousands of miles away.

don't worry - we'll be back for it in about 20 years.

[dorlomin]

OPEC expects global output of non-conventional oil to rise 3.4 million bpd by 2015, still dominated by oil sands, to 5.8 million bpd by 2025 and to 8.4 million bpd by 2035 when tight oil would be playing a much bigger role.

So Saudi is not developing new resources over the next 15 years because there will be 6 million barrels a day of unconventional.

Are they expecting zero depletion in the rest of the world and zero growth in demand or growth of something like 0.5% pa?

[dissident]

This is the standard line from the wahabbi kingdom to cover its own lack of discovery and declining reserves. At the same time they talk about a production capacity of 12 million barrels per day, which we will never, ever see in practice.

And to say the truth I really don't see why they shouldn't manage their oil as what it is, that is capital in the ground and play with the market as they wish trying maximizing profit, and especially if it is to feed American SUVs, for guys that have been brainwashed in the stupid "economics theory" Friedmann and al, that basically in economics natural ressource must be treated as free and infinite (which is exactly the way it is handled in this theory, counting only the cost to get it off the ground).

And don't forget that the Saudis already made a huge present to the USA, when they increased their prod starting 1985 (that led to the counter oil shock or oil glut), this through a deal with Reagan, and for Reagan it was to put the last blow to the USSR (cutting their foreign revenus by two third or soemthing) and it did indeed work to plan.

Not to forget that from a technical oil industry point of view, the less speed in pumping a field also usually means the higher total amount extracted.

Nothing wrong with them managing their resource as they see fit. It's not "our oil". But these routine pronouncements are BS.

Non-conventional is an irrelevant source of new oil production. For example, the tar sands in Canada are supposed to deliver about 1.5 million barrels per day by 2020. This is about 167,000 barrels per day per year for the next nine years. Meanwhile, according the IEA, world production from old fields is declining at 6.7% per year (and this rate is accelerating). Assuming 75 mbd of conventional and condensate this decline is about 5 mbd per year (and growing). So the tar sands are filling 3.3% of depletion as of now. Nothing for the Saudis to complain about.

[Pops]

I'd say they are only "routine" to Peak Geeks like us. lol

[kildred590]

I don't get it. Unconventional oil is more expensive so it doesn't affect the rate of conventional extraction.

KSA needs to expand production to cover its rising debts and the increasing local and regional demand. The oil supply situation itself is irrelevant, except that it may lower price. But when the competition is more expensive.....

[Pops]

I don't get it. Unconventional oil is more expensive so it doesn't affect the rate of conventional extraction.

KSA needs to expand production to cover its rising debts and the increasing local and regional demand. The oil supply situation itself is irrelevant, except that it may lower price. But when the competition is more expensive.....

All oil, every barrel sold at a particular time, is priced near the amount bid for the last barrel needed to meet demand at that time.

Unconventional oil may cost $80bbl to extract and so if the demand is there it gets sold at say $90.

KSA still has oil it can produce at maybe $40bbl (who knows?) so when it sells at the going price (the same as uncon-oil's $90bbl) it makes out like a bandit. There is no economic benefit in increasing production thus lowering the going price and their margin.

They may have once had a strategic interest to keep prices down but not so much any more it seems, if they in fact could in any event.

[papa moose]

I don't get it. Unconventional oil is more expensive so it doesn't affect the rate of conventional extraction.

KSA needs to expand production to cover its rising debts and the increasing local and regional demand. The oil supply situation itself is irrelevant, except that it may lower price. But when the competition is more expensive.....

My understanding was that the KSA statement was a smoke and mirrors PR campaign attemptting to hide the fact that KSA is completely unable to increase their production behind excuses of market forces beyond their control.
Just my understanding.

[vtsnowedin]

I don't get it. Unconventional oil is more expensive so it doesn't affect the rate of conventional extraction.

KSA needs to expand production to cover its rising debts and the increasing local and regional demand. The oil supply situation itself is irrelevant, except that it may lower price. But when the competition is more expensive.....

Do the Saudis have any debt? They have built up quite a reserve of gold and other assets from fifty years of oil sales. Or did you mean rising current expenses?

[rockdoc123]

KSA still has oil it can produce at maybe $40bbl (who knows?) so when it sells at the going price (the same as uncon-oil's $90bbl) it makes out like a bandit. There is no economic benefit in increasing production thus lowering the going price and their margin.

They may have once had a strategic interest to keep prices down but not so much any more it seems, if they in fact could in any event.

this is correct Pops....I've talked about it several times on different threads in the past. The Saudis tried the gambit of turning off the taps to increase price back in the seventies. I remember attending a convention back then where the keynote speaker was Sheik Yamani and he had to travel with a cadre of oversized bodyguards who stood on the stage scanning the audience for potential assassins. Although it got everyones attention the gambit backfired on the Saudis because the higher prices allowed for more non-OPEC oil to come on stream and very quickly Saudi lost their controlling market share. It became clear to them that market share was as important if not more important than higher prices. As a consequence they have set a price range that would theoretically allow them to keep prices low enough that they would not lose future market share and keep prices high enough that they could fund all of their internal needs.
The lifting cost for Saudi oil is still the lowest in the world and they can continue to produce existing wells at quite low prices assuming that a lot of additional operating cost is not incurred. The problem is that the cash flow from oil operations are needed to fund all of their infrastructure and social projects. As a consequence the dollar/bbl figure they need to defend is closer to $75 - $80. Costs have risen over the years and although lower prices can help drop the cost of steel and consumables it usually has little effect on manpower costs which have kept rising over the years.
Based on their own demand/supply projections (published monthly in the OPEC journal) there is no need for them to access the spare capacity that was put in place with the mega-projects. My guess is that they will now use that spare capacity to offset natural declines in the existing fields.

[Pops]

Moved the history discussion to here
oil-history-1970s-t63656.html

Moved the trash to the trash.

[Serial_Worrier]

Does it mean Ghawar is near collapse?