Is Jeff Rubin right ... or is there ANOTHER Saudi Arabia?

[Raz]

I'm inclined to agree with Jeff Rubin - that's why I have such a large position in oil & gas producers, equal to my PMs position.
However, articles such as this make me uncomfortable, at least for the intermediate term. Is this true? Is there any evidence for these assertions?

GRG55, where are you? Raz needs your opinion!


Iraqi oil may rival Saudi Arabia

By Steve Hargreaves, staff writerJanuary 12, 2010: 10:50 AM ET




NEW YORK (CNNMoney.com) -- Iraq's ravaged oil industry is on the verge of a major reconstruction and experts now believe that by the decade's end it could rival the world's top oil producers.
But major challenges lie ahead.

Iraq's success depends in large part on a mosaic of international investments.
The oil ministry has awarded contracts to at least a dozen firms from around the globe to develop its oil fields and boost production in the next seven years to over 11 million barrels a day.
That's a five-fold increase, and would put it on par with top producers Russia and fellow OPEC member Saudi Arabia.

"They have the oil in the ground," said James Placke, a senior associate at Cambridge Energy Research Associates who specializes in the Middle East. "It's getting it out that's always been the problem."

The payoff

Iraq sits on at least 115 billion barrels of proven oil reserves, the world's third-largest behind Saudi Arabia and Canada. And analysts believe there could be much more, given that the country's western desert hasn't even been explored. ...

http://money.cnn.com/2010/01/12/news...=money_markets

[jneal3]

Re: Is Jeff Rubin right ... or is there ANOTHER Saudi Arabia?

Sorry, not GRG55 here...

But even if Iraq is another Saudi Arabia, if you believe Hirsh/EJ, your positions are safe (and I'm certain you've seen this, it's to just get the ball rolling...)

Recall the rule of thumb that ten billion barrels of reserves translates into approximately one million barrels per day of oil production. To produce 3.8 million barrels per day of new oil, as CERA says are needed to maintain the plateau level that began in 2004, the discovery and development of 38 billion barrels of new oil reserves are required. By Hirsh’s calculations, that means that over a ten-year period of 5% decline as much oil has to be found and extracted as once existed in all of Saudi Arabia, eight times over. Engineers need to find and mine oil from the earth’s crust, and squeeze it out of rocks, at a rate that is equal to the discovery of one Saudi Arabia sized oil deposit every 15 months. Hirsh believes that such an engineering feat is impossible.

[sunskyfan]

Re: Is Jeff Rubin right ... or is there ANOTHER Saudi Arabia?

The odds of world economic "collapse" or cultural shift threatening oil demand are much greater than supply increase. I know it sounds outlandish but don't underestimate cultural shift. I think that High Tech will enable us to reboot a different economy much faster than most imagine.

[metalman]

Re: Is Jeff Rubin right ... or is there ANOTHER Saudi Arabia?

The odds of world economic "collapse" or cultural shift threatening oil demand are much greater than supply increase. I know it sounds outlandish but don't underestimate cultural shift. I think that High Tech will enable us to reboot a different economy much faster than most imagine.

agree. the doomers don't get it. when the oil shtf, the techies will go into high gear.

like you avatar. i'm upgrading mine to animated. came across this one that may work for you if you want me to turn it into a 100x100 for ya...

[jtabeb]

Re: Is Jeff Rubin right ... or is there ANOTHER Saudi Arabia?

I'm inclined to agree with Jeff Rubin - that's why I have such a large position in oil & gas producers, equal to my PMs position.
However, articles such as this make me uncomfortable, at least for the intermediate term. Is this true? Is there any evidence for these assertions?

GRG55, where are you? Raz needs your opinion!


Iraqi oil may rival Saudi Arabia

By Steve Hargreaves, staff writerJanuary 12, 2010: 10:50 AM ET




NEW YORK (CNNMoney.com) -- Iraq's ravaged oil industry is on the verge of a major reconstruction and experts now believe that by the decade's end it could rival the world's top oil producers.
But major challenges lie ahead.

Iraq's success depends in large part on a mosaic of international investments.
The oil ministry has awarded contracts to at least a dozen firms from around the globe to develop its oil fields and boost production in the next seven years to over 11 million barrels a day.
That's a five-fold increase, and would put it on par with top producers Russia and fellow OPEC member Saudi Arabia.

"They have the oil in the ground," said James Placke, a senior associate at Cambridge Energy Research Associates who specializes in the Middle East. "It's getting it out that's always been the problem."

The payoff

Iraq sits on at least 115 billion barrels of proven oil reserves, the world's third-largest behind Saudi Arabia and Canada. And analysts believe there could be much more, given that the country's western desert hasn't even been explored. ...

http://money.cnn.com/2010/01/12/news...=money_markets

Medium to long term there are hundreds of Saudi Arabia's (we just have to build them)

Biofuel stocks from algae have the capaility to provide ALL the heavy fuel petroluem replacment we (and the world) would ever need, using existing diesel technology and turbine engine technology. We CAN do this, it doesn't monoploize all of our productive farmland, and it is sustainable in terms of water utilization.

1,000,000 gallons of heavy fuel equivilent per acre per year. (IF you want to know how, $1.4 M in after tax dollars STARTS that conversation).

[Raz]

Re: Is Jeff Rubin right ... or is there ANOTHER Saudi Arabia?

Sorry, not GRG55 here...

But even if Iraq is another Saudi Arabia, if you believe Hirsh/EJ, your positions are safe (and I'm certain you've seen this, it's to just get the ball rolling...)

Didn't mean to poo-poo your comments in advance!
They're always welcome.

Thanks for reminding me of this.

[ThePythonicCow]

Re: Is Jeff Rubin right ... or is there ANOTHER Saudi Arabia?

Biofuel stocks from algae

I thought you weren't going to tell us this .

[ThePythonicCow]

Re: Is Jeff Rubin right ... or is there ANOTHER Saudi Arabia?

1,000,000 gallons of heavy fuel equivilent per acre per year. (IF you want to know how, $1.4 M in after tax dollars STARTS that conversation).

Hmm... starting off with the big numbers, huh ?

For the freeloaders such as myself, take a look at Google search results for "site:greenchipstocks.com algae".

[jtabeb]

Re: Is Jeff Rubin right ... or is there ANOTHER Saudi Arabia?

Hmm... starting off with the big numbers, huh ?

For the freeloaders such as myself, take a look at Google search results for "site:greenchipstocks.com algae".

I'll tell you WHAT for free (HOW is gonna cost ya)

[Fiat Currency]

Re: Is Jeff Rubin right ... or is there ANOTHER Saudi Arabia?

I'll tell you WHAT for free (HOW is gonna cost ya)

Another great example of a "technology transfer" right here on our very own iTulip. And yes, Jeff Rubin is right.

Computer Geek.gif

[LargoWinch]

Re: Is Jeff Rubin right ... or is there ANOTHER Saudi Arabia?

agree. the doomers don't get it. when the oil shtf, the techies will go into high gear.

Are you saying that in the near future, iTulipers will be selling their outlawed Gold on black market with this? ;)

[metalman]

Re: Is Jeff Rubin right ... or is there ANOTHER Saudi Arabia?

Are you saying that in the near future, iTulipers will be selling their outlawed Gold on black market with this? ;)

yeh, about the time ebay becomes a black market. :cool:

[flintlock]

Re: Is Jeff Rubin right ... or is there ANOTHER Saudi Arabia?

Medium to long term there are hundreds of Saudi Arabia's (we just have to build them)

Biofuel stocks from algae have the capaility to provide ALL the heavy fuel petroluem replacment we (and the world) would ever need, using existing diesel technology and turbine engine technology. We CAN do this, it doesn't monoploize all of our productive farmland, and it is sustainable in terms of water utilization.

1,000,000 gallons of heavy fuel equivilent per acre per year. (IF you want to know how, $1.4 M in after tax dollars STARTS that conversation).

Be careful what you wish for . They may figure out how to make Gold next and make your stash worthless.

Come on people. The real question is how much will it cost to produce this stuff. My gut tells me if it was feasible at anything close to today's oil prices, then people with serious money would already own it lock stock and barrel, with nary a chance for the little guy to get a piece of the action. It's not whether we can produce alternate energy sources. That's been done. Its at what cost. Our current economy is based on LOW cost energy. Whether its oil or cow farts we burn, I think that cost is only going up, up, up.

[GRG55]

Re: Is Jeff Rubin right ... or is there ANOTHER Saudi Arabia?

...So the Iraqis are either hoping to get a larger share of OPEC output at the expense of another cartel member, or they don't believe their own 11 million barrel per day production target.

And I don't believe it either.

The first part of the article is pure nonsense...but the latter parts of it include some valid information about what is really going on, and what's likely to happen.

Everybody here knows that the very idea that Iraq could achieve a "five-fold increase", to rival the world's two largest producers, in seven years is completely ridiculous. It's simply not physically possible. Not only would such a magnificent effort consume a wildly disproportionate share of the world's drilling fleet, experienced oilfield & oil service sector personnel and capital allocated to petroleum, but [as the article properly points out] drilling the stuff isn't enough. The processing, storage, transport, export loading and other facilities required to move that amount of oil to a paying market would take decades, not years, to build up.

Attached is a file with a "predicted" production profile for Iraq based on the contracts that were being promoted by the Iraqis in the latter half of 2009. The current contract round has inflated the 2020 production rate by roughly another 15%. This chart was put together last November just for laughs by a friend of mine who has many, many years of experience working the Iraqi oilfields as a petroleum professional.

Today everybody is playing their part. The industry is signing up to agreements that contain terms they know they cannot achieve. The Iraqi government is talking up the rosy future results and the tough terms to gain public support for letting in the foreigners. And the industry shills [and nobody shills for the industry quite as well as Cambridge Energy Research Associates :p] are doing their bit to curry favour with their valued clients, governments and Big Oil, by getting out the appropriate pre-approved soundbites..."lots of oil, just have to get it out of the ground"..."western desert never explored"...blah, blah.

In the Middle East it is quite common for governments to force the renegotiation of contracts. The article mentions that many of these oil services contracts are likely to be renegotiated in the future. That is a virtual certainty...but in a wee twist on the usual, this time it will be the oil companies that initiate that move. There's no money in any of these contracts beyond the obvious exploitation of the easiest production increases, most of which are due to a lack of money and equipment dating back to the UN sanctions. Once that so-called "low hanging fruit" has been plucked, the industry can't make an adequate return continuing to invest more capital under the terms of these contracts. So Iraq will again be faced with being starved of capital or renegotiate the agreements.

No matter what, in typical Middle East fashion, time will pass, deadlines will be ignored, targets won't be met, obligations will be reinterpreted, governments will change, and new contract arrangements will be negotiated...

[sunskyfan]

Re: Is Jeff Rubin right ... or is there ANOTHER Saudi Arabia?

Agreed, but the idea brings up the idea of a black network. One that governments can't regulate. If such a beast comes to be then all bets are off on how money will be created and regulated. The Metalman dollar will be born.