Meanwhile Back in the Sandbox...

[GRG55]

Re: Meanwhile Back in the Sandbox...

The heat of the Middle East summer is over. Time for the "Arab Fall"?

Killing of Opposition Leader in Syria Provokes Kurds

Published: October 8, 2011

BEIRUT, Lebanon — Tens of thousands of people poured into the streets of a Syrian city on Saturday for the funeral of a celebrated Kurdish opposition leader whose assassination the day before unleashed fury in the country’s Kurdish regions and threatened to open a new theater of opposition to President Bashar al-Assad’s rule...

...The government has demonstrated little political strategy in coping with the revolt so far, relying almost exclusively on violence since August, deepening opposition in virtually every region of the country, and provoking extended clans in eastern and southern Syria...

Syria warns against recognition of opposition council

Sun Oct 9, 2011 5:10pm EDT

BEIRUT (Reuters) - Syria threatened Sunday to retaliate against any country that formally recognizes a recently established opposition National Council which is seeking international support for the six-month-old uprising against President Bashar al-Assad.

The formation of the council has been welcomed by Assad's Western critics, including the United States and France, however they have not embraced it diplomatically as they did the Libyan rebels who overthrew Muammar Gaddafi.

"We will take tough measures against any state which recognizes this illegitimate council," Foreign Minister Walid al-Moualem told a news conference in Damascus.

Speaking alongside a group of Latin American ministers who visited Syria to show support for Assad, Moualem also dismissed Turkish criticism of Assad's crackdown...

[llanlad2]

Re: Meanwhile Back in the Sandbox...

there are 2 ways to increase revenues. one way is to increase production....

But the other doesn't necessarily equal increased per capita income or spending power. I am sure both their military and our bombmakers will benefit though.

[charliebrown]

Re: Meanwhile Back in the Sandbox...

Just anecdotal, and my 2cents. But when Oil went to $130 in 2008 and stayed there, I remember W, flying over there personally, to talk with the Saudi's. The reported dialogue and body language, seemed to tell me that Saudi's said. "George my Friend, don't you think we are pumping all we can at $130 - $150 a barrel??. We would love to help your plight, old friend of the kingdom, but
we can't pump any faster."

[GRG55]

Re: Meanwhile Back in the Sandbox...

...As an aside I know a guy who is in the Saudi military and I had a discussion with him once where he tried to convince me they could rampup to 15 million bpd. I am fairly sure he believed what he was telling me (he may have been lying) but it made me wonder who in charge actually realises they can't.

It's likely he believed that figure. Or at least he wanted to believe it. Like the citizens of some other nations many, many Saudis are proud nationalists. There were more than a few Aramco employees I spoke with that also thought it would be achieved and dismissed my view at the time [a few suggested my questioning their ambitious national goal was offensive to them].

When I made that post in 2007, Saudi Arabia was spending many billions of Dollars/Riyals developing every significant undeveloped oil field in their country. The combined effect of unexpectedly high compound Asian crude oil demand growth, the replacement by Aramco of loss of supply from Iraq due to Gulf War 2 and the normal declines of maturing fields resulted in Saudi Arabia, by mid-decade, no longer enjoying the reserve production capability that it uses [and needs!] to exercise discipline over OPEC. Restoring that leverage was the primary reason for the aggressive development program.

Simply adding the forecast new production rates from all the Aramco development projects could convince anyone that 15 mm bpd was easily in the bag. But my contention at the time was that Saudi Arabia was suffering from the "law of big numbers".

Not only are most development production forecasts inflated and optimistic, but Aramco needed to offset the declines in existing production from mature fields just to break even. Most people unfamiliar with the industry don't understand that an oil field is a depleting asset from the first day it is put on production, that investment in increasingly expensive and complex secondary and tertiary recovery schemes is necessary as a reservoir matures, and that technology advances such as horizontal in-fill drilling and miscible injection can tap otherwise non-producable reserves but usually also contain a significant rate-acceleration component that arrests the production decline rate by bringing forward reserves that would have been produced in future. It doesn't take a genius to realize that at the historical 10 mm bpd production volume and a relatively modest 3% annual decline rate, Saudi Arabia needs to add 1 million barrels per day of new production roughly every 3 years just to hold output constant. Only so much of that can come from repeatedly working over the existing producing fields in a country with 60 years of production behind it.

The largest new development, which consists of the Khurais - Mazalij - Abu Jifan complex, is said to have alone cost $10 Billion to bring on combined production of just over 1 million barrels per day. It involved drilling 400 wells, building massive pipeline and production facilities including a pipeline from the coast across the desert to supply treated seawater for pressure maintenance injection, and consulting contracts with most of the world's largest engineering and service firms including SNC Lavalin, Saipem SA, Foster Wheeler, Jacobs Engineering and Halliburton. And it took years to accomplish. What is interesting is that Khurais was not a new oil discovery. It was first produced using a test facility in 1963 [no, that is not a typo]. It is located on a structure similar to, and parallel with the world's largest oil field, Ghawar. But it does not have the size or reservoir quality of Ghawar, and needed very high oil prices and some notable new technologies to justify its development after laying dormant for decades. And this was the project that was the best that Saudi Arabia had in its undeveloped inventory.

Khurais [and the Manifa heavy-oil field] are the last of the known Saudi mega-project fields to come on production. As to the reports that vast tracts of the Saudi peninsula, especially the Empty Quarter, have not yet been explored...well I would suggest anyone who thinks that should spend a bit of time reading about the discovery and development of the Shaybah oil field, and the very considerable and repeated efforts to find another one. Thus far without success.

[llanlad2]

Re: Meanwhile Back in the Sandbox...

It's likely he believed that figure. Or at least he wanted to believe it. Like the citizens of some other nations many, many Saudis are proud nationalists. There were more than a few Aramco employees I spoke with that also thought it would be achieved and dismissed my view at the time [a few suggested my questioning their ambitious national goal was offensive to them].

When I made that post in 2007, Saudi Arabia was spending many billions of Dollars/Riyals developing every significant undeveloped oil field in their country. The combined effect of unexpectedly high compound Asian crude oil demand growth, the replacement by Aramco of loss of supply from Iraq due to Gulf War 2 and the normal declines of maturing fields resulted in Saudi Arabia, by mid-decade, no longer enjoying the reserve production capability that it uses [and needs!] to exercise discipline over OPEC. Restoring that leverage was the primary reason for the aggressive development program.

Simply adding the forecast new production rates from all the Aramco development projects could convince anyone that 15 mm bpd was easily in the bag. But my contention at the time was that Saudi Arabia was suffering from the "law of big numbers".

Not only are most development production forecasts inflated and optimistic, but Aramco needed to offset the declines in existing production from mature fields just to break even. Most people unfamiliar with the industry don't understand that an oil field is a depleting asset from the first day it is put on production, that investment in increasingly expensive and complex secondary and tertiary recovery schemes is necessary as a reservoir matures, and that technology advances such as horizontal in-fill drilling and miscible injection can tap otherwise non-producable reserves but usually also contain a significant rate-acceleration component that arrests the production decline rate by bringing forward reserves that would have been produced in future. It doesn't take a genius to realize that at the historical 10 mm bpd production volume and a relatively modest 3% annual decline rate, Saudi Arabia needs to add 1 million barrels per day of new production roughly every 3 years just to hold output constant. Only so much of that can come from repeatedly working over the existing producing fields in a country with 60 years of production behind it.

The largest new development, which consists of the Khurais - Mazalij - Abu Jifan complex, is said to have alone cost $10 Billion to bring on combined production of just over 1 million barrels per day. It involved drilling 400 wells, building massive pipeline and production facilities including a pipeline from the coast across the desert to supply treated seawater for pressure maintenance injection, and consulting contracts with most of the world's largest engineering and service firms including SNC Lavalin, Saipem SA, Foster Wheeler, Jacobs Engineering and Halliburton. And it took years to accomplish. What is interesting is that Khurais was not a new oil discovery. It was first produced using a test facility in 1963 [no, that is not a typo]. It is located on a structure similar to, and parallel with the world's largest oil field, Ghawar. But it does not have the size or reservoir quality of Ghawar, and needed very high oil prices and some notable new technologies to justify its development after laying dormant for decades. And this was the project that was the best that Saudi Arabia had in its undeveloped inventory.

Khurais [and the Manifa heavy-oil field] are the last of the known Saudi mega-project fields to come on production. As to the reports that vast tracts of the Saudi peninsula, especially the Empty Quarter, have not yet been explored...well I would suggest anyone who thinks that should spend a bit of time reading about the discovery and development of the Shaybah oil field, and the very considerable and repeated efforts to find another one. Thus far without success.

Thanks for the detailed info GRG55. Interesting as always. Have you got a back of the envelope estimate of how much it's costing per barrel to get oil out of the Khurais field taking into the original capital and running costs? Also have you any idea if it is meeting its pre production estimates.

[Slimprofits]

Re: Meanwhile Back in the Sandbox...

http://news.yahoo.com/saudi-says-two...HRlc3QD;_ylv=3

Two people were killed and three wounded in an exchange of fire between Saudi security forces in the oil-producing Eastern Province and what the interior ministry on Thursday called gunmen serving a foreign power.

In a statement quoted on the Saudi Press Agency, the ministry said shooting erupted on Wednesday during the funeral of a person killed in what it described as a string of attacks earlier this week on security checkpoints in the province, where much of the kingdom's Shi'ite minority lives.

The ministry earlier this week denied that Shi'ites had been killed by bullets fired by police in Qatif, an administrative unit of the province. In its statement on Thursday, the ministry said two people were killed and six wounded in those incidents.

"These casualties have occurred due to the exchange of gunfire with unknown criminal elements who have infiltrated among citizens, and are firing from residential areas and narrow streets," it said.

Echoing language it used after an attack on a police station in the eastern province last month, the ministry said: "The goal of those who provoke unrest is to achieve dubious aims dictated to them by their foreign masters."

The previous references to foreign meddling have been widely read to mean Shi'ite Iran, the Sunni-led kingdom's rival for influence in the Gulf, which Sunni Arab monarchies in the region saw as the force behind unrest earlier this year in majority Shi'ite Bahrain.

[GRG55]

Re: Meanwhile Back in the Sandbox...

Saudi has been producing oil in material quantities for more than 60 years. Saudi has never ever produced at a rate of more than 10 million barrels per day on a sustained basis. For any mature oil province in the world to suggest it can increase its production under those circumstances by 50% [from 10 mm bpd to 15 mm bpd] is absurd. Even more absurd is that anyone believed such fantasies.

Link to a post I made on 09-28-07 on a thread in the Select area.
http://www.itulip.com/forums/showthr...16855#poststop

For those that may not have access [and at the risk of breaking an iTulip rule?] here's an excerpt:

"...A couple of things about Saudi oil to toss into the debate that, hopefully, are not redundant with previous commentary and may be useful observations for the already well-informed iTulip community:

• There is no technology gap. Aramco employs all the same state-of-the-art exploration, extraction and processing technologies available to the global oil industry. Two decades ago oil companies discovered there was no sustainable competitive advantage from proprietary technology, and many closed their R&D shops in the last low price phase. Today most technology is developed and commercialized in the service companies, often with pooled funding from the oil companies (including NOCs), and available to any paying customer.
• There is no material organizational capability gap. Aramco, IMHO, is by far the best managed NOC on earth. In all my discussions with Aramco staff (mostly expatriates) over the years I have come away with the firm conviction that Aramco's management systems, and complex project capabilities are every bit as good as the Fortune 100 multi-national oil company I used to toil for (which consistently outperformed its peer group in on-time, on-budget project performance).

In other words, contrary to what some people in "the west" seem to believe, there is no "low-hanging-fruit", "let's-get-in-there-and-show-the-Arabs-how-its-done", cheap and easy production increment available from Saudi Arabia (not that knowledgable iTulipers would think such things in the first place).

I listen most carefully to a pair of very experienced expat Aramco earth scientists. Expect Aramco to quietly back away from its forecast of 15 mm bbls/d in the next decade (that's already happening), and its 12.5 mm bbls/d output target for the end of this decade (coming soon)..."

Saudi Gazette
Friday, 25 November 2011 - 29 Thul-Hijjah 1432 H

JEDDAH — Saudi Arabia has stopped $100bn expansion of its oil production capacity after reaching a target of 12m barrels a day, the Financial Times said on Thursday.

The Times said in an online story that the Kingdom believes new oil resources like Libya will meet rising demand. Libya has resumed oil production after the ouster of former dictator Muammar Gaddafi.

The Times quoted Khalid Al-Falih, chief executive of the state-owned Saudi Aramco, as saying that pressure on the Kingdom to raise its output capacity had “substantially reduced.”

It said the comment was an indication that Saudi Arabia is not pushing ahead with “with an assumed expansion plan” to produce 15 million barrels a day by the end of 2020...

[mmr]

Re: Meanwhile Back in the Sandbox...

With Nigerian capacity in question and with their control over most of the world's spare production capacity, I would guess that the Saudis shouldn't have much trouble defending this price floor.

Saudi Arabia targets $100 crude price

Saudi Arabia is aiming to keep oil prices at around $100 a barrel, a third above its previous public target, in a sign that Riyadh needs higher oil revenues to sustain a big hike in public spending.

Ali Naimi, the Saudi oil minister, on Monday for the first time said the world’s largest oil producer wanted to keep oil prices at the triple-digit level.

“Our wish and hope is we can stabilise this oil price and keep it at a level around $100 [a barrel]”, Mr Naimi told CNN. “If we were able as producers and consumers to average $100, I think the world economy would be in better shape.”

Brent crude oil prices rose 56 cents on Monday to $111 a barrel amid rising tension between Western nations and Iran over Tehran’s nuclear programme.

The new favoured price – a de facto target – is a third higher than the $75-a-barrel level that King Abdullah said was a “fair price” in November 2008. Riyadh is traditionally seen as a price moderate within the Opec oil cartel. But Mr Naimi’s comments put the kingdom in line with price hawks such as Venezuela.

The revised target is in part a reflection of rising public spending in the wake of the Arab Spring. “The Saudis need to spend more money to keep their citizens quiet and prevent protests,” said Carsten Fritsch, oil analyst at Commerzbank.

Bill Farren-Price of consultants Petroleum Policy Intelligence added that there was a “consensus” within Opec that $100 a barrel was the appropriate price level to its members’ fiscal requirements and the need to invest to boost supply. “The context is an industry where a lot of new investment is predicated on that kind of price level.”...

[c1ue]

Re: Meanwhile Back in the Sandbox...

With Nigerian capacity in question and with their control over most of the world's spare production capacity, I would guess that the Saudis shouldn't have much trouble defending this price floor.

Is the $100 price floor because of the increased Saudi spending ($35 billion to buy off the Saudi version of Arab Spring?) or just a different way of ensuring Riyadh gets value for its exports?

Wouldn't an increased oil price 'floor' be just another way to offset devaluation occurring via the petrodollar standard?

[Southernguy]

Re: Meanwhile Back in the Sandbox...

Well, I think the "$100 floor" is not the consequence of any policy implemented by Saudi Arabia, just the result of two contradictory forces: Peak Oil and economic depression.
Y don´t see any possibilities of any one (thanks GRG55 for your invaluable insights) controlling the market, at least in a downward way.
Oil is running out and with it all the might of an occidental culture based on oil consumption.
Unless an unthinkable economic depression shakes the whole world, prices shall be going only one way: up. And if such depression occurs, the way up shall only be interrupted in a short timeframe.
Of course, world economic growth is more and more limited based on precisely the same boundaries set by availability of resources. If you read carefully every "big" oil and gas finding is neither big (they account at best for several weeks of world consumption) neither feasible.
As an example, the much hyped about Brazil deep water foundings one year ago are now very much in question as for they feasibility, PETROBRAS, the state commanded Brazilian oil Co. being in serious trouble just to fulfill the first step to begin exploitation: raise capital.
And that´s in a country where much hallibaloo has been made about becoming "the 6th. world economy", before that of UK.

[GRG55]

Re: Meanwhile Back in the Sandbox...

On the verge of another "permanently" chaotic MENA nation?

...A little trip down memory lane:

Jun. 29, 2005
George W. Bush
THE PRESIDENT: I am absolutely confident that we made the right decision. And not only that, I'm absolutely confident that the actions we took in Iraq are influencing reformers and freedom lovers in the greater Middle East. And I believe that you're going to see the rise of democracy in many countries in the broader Middle East, which will lay the foundation for peace.

I wonder what the Obama edition of the "Mission Accomplished" banner will look like...

Lebanon next?

15 August 2012 Last updated at 22:30 GMT

Saudi Arabia, UAE, Qatar and Kuwait urge Lebanon exodus

Four Arab states have urged their citizens to leave Lebanon amid signs that the conflict in Syria is spilling over into its western neighbour.

Saudi Arabia, the United Arab Emirates (UAE), Qatar and Kuwait urged immediate action after a string of kidnappings of Sunni Muslims by a powerful Shia clan...

[c1ue]

Re: Meanwhile Back in the Sandbox...

The whole situation there is a powderkeg.

I'm still wondering how that whole Kurdistan/Turkey/Syria/Iraq deal is going to work out.

Throw in some good old fashioned Sunni/Shi'a fighting, the fantasy of the Islamic Caliphate recedes ever further.

[GRG55]

Re: Meanwhile Back in the Sandbox...

The whole situation there is a powderkeg.

I'm still wondering how that whole Kurdistan/Turkey/Syria/Iraq deal is going to work out.

Throw in some good old fashioned Sunni/Shi'a fighting, the fantasy of the Islamic Caliphate recedes ever further.

Perhaps. But then that is not something the powerful Gulf Ruling Families, nor the wealthy merchant families that support them, want to see. But sometimes one must choose from the lesser of multiple "evils". After a long period of watching Shia Iran exert increasing influence in the Levant through Hezbollah in Lebanon and the Alawi in Syria, and now trying to link that together in a continuous arc through Shia governed Iraq (thank you America) it is now the Sunni, sponsored by the oil rich Gulf emirates that are on the offensive.

They do not want a restoration of the Sunni caliphate, but there seems a view that it would be far better to deal with a Muslim Brotherhood dominated region from Egypt to Iraq, and push Iran back to Persia. Sort of a "half-loaf is better than nothing" for the Islamists...

[c1ue]

Re: Meanwhile Back in the Sandbox...

Perhaps. But then that is not something the powerful Gulf Ruling Families, nor the wealthy merchant families that support them, want to see. But sometimes one must choose from the lesser of multiple "evils". After a long period of watching Shia Iran exert increasing influence in the Levant through Hezbollah in Lebanon and the Alawi in Syria, and now trying to link that together in a continuous arc through Shia governed Iraq (thank you America) it is now the Sunni, sponsored by the oil rich Gulf emirates that are on the offensive.

They do not want a restoration of the Sunni caliphate, but there seems a view that it would be far better to deal with a Muslim Brotherhood dominated region from Egypt to Iraq, and push Iran back to Persia. Sort of a "half-loaf is better than nothing" for the Islamists...

Agreed.

The fantasy I was referring to - though shared by Muslims to some degree - was really directed more at the US and its foreign policy there than anything else.

Among other things, Arabic is an excellent example why a common language does not itself breed any form of unity whatsoever. Esperanto R.I.P.

[GRG55]

Re: Meanwhile Back in the Sandbox...

Agreed.

The fantasy I was referring to - though shared by Muslims to some degree - was really directed more at the US and its foreign policy there than anything else.

Among other things, Arabic is an excellent example why a common language does not itself breed any form of unity whatsoever. Esperanto R.I.P.

The spoken Arabic is not a common language. Someone speaking Arabic in Morocco cannot converse with someone speaking Arabic in Oman. They might as well be speaking German and Italian...

It is the Egyptian film industry (the Bollywood of MENA) that has been the main way to bridge this gap. Everyone watches Egyptian movies and so everyone has heard and has some understanding of the Egyptian dialect.