Saudis increase oil production, again

[mmr]

Let's see how much spare production capacity they actually have, or are willing to put to use.

Saudi Arabia moves to calm oil market

Saudi Arabia is taking steps to cool the overheating global energy market, boosting its exports to the US and re-opening old oilfields to expand production, as the world’s largest oil producer tries to prevent damage to the global economic recovery.

The Saudi cabinet on Monday said the kingdom would work “individually” and with others for the “return [of] oil prices to fair levels”. Riyadh recently said it aimed to keep oil prices at $100....

The moves by Riyadh come as rising energy prices have become a hot political issue in the US presidential race.... The kingdom has not yet publicly disclosed its moves, but Gulf and western officials and traders said the kingdom was boosting its oil exports to the US, after hiring more super-tankers last week. They said it was also reviving production at oil fields mothballed decades ago.

“The Saudis are very concerned about the oil market and are trying to find strategies to bring prices down,” said an European-based senior oil trader....

As long as they can still earn enough oil revenue to cover the large increases in social spending implemented over the last few years. Anyway,

Saudi Arabia is walking a tight line as it wants to reduce prices while, at the same time, avoiding an open confrontation with Iran. Tehran has warned Saudi Arabia several times over the last two months not to increase its oil production to offset the impact of the US and European sanctions on Tehran’s crude exports.

Saudi’s spare capacity has fallen to the lowest level since 2008 after the kingdom boosted its production to 10m barrels a day, a 30-year high.

Saudi Aramco plans to revive the Dammam, the kingdom’s first facility that produced oil in 1938 and was mothballed in 1980. [That doesn't sound good.] The state-owned company has already fast-tracked the development of the giant Manifa oil field....

[jk]

Re: Saudis increase oil production, again

i hope we'll hear from grg55 about the notion of reviving old fields. one would think that modern recovery techniques would allow some production to be achieved that way, but of course at higher cost. sorry to be so obvious, but i suppose the devil's in the details and the ultimate bottom line, as you point out mmr, is how many more barrels the saudis produce for export.

[Mega]

Re: Saudis increase oil production, again

What they don't talk about is the Grade of oil in question, some years ago BMW had a rash of engine problems in USA. They traced it to Saudi oil with a VERY high sulphar content, in other words you can bet this is NOT light sweet crude, thus very hard to process.
Mike

[we_are_toast]

Re: Saudis increase oil production, again

What they don't talk about is the Grade of oil in question, some years ago BMW had a rash of engine problems in USA. They traced it to Saudi oil with a VERY high sulphar content, in other words you can bet this is NOT light sweet crude, thus very hard to process.
Mike

Yep. Here's an article from yesterday questioning whether there is even a market for the heavy sour they might be producing.
http://www.theoildrum.com/node/9034#more

[Mega]

Re: Saudis increase oil production, again

Thanks We-r-t
Little info from Zerohedge:-
http://www.zerohedge.com/news/are-bi...-swings-coming

[Mega]

Re: Saudis increase oil production, again

Hmmmmm
http://www.telegraph.co.uk/finance/c...yan-boost.html

EJ did say we might see peek oil THIS year, could we be there & THIS IS IT?
Mike

[GRG55]

Re: Saudis increase oil production, again

What they don't talk about is the Grade of oil in question, some years ago BMW had a rash of engine problems in USA. They traced it to Saudi oil with a VERY high sulphar content, in other words you can bet this is NOT light sweet crude, thus very hard to process.
Mike

Crude oil can't be used out of the wellhead or tanker. It has to be refined into usable products. The refining process produces products, including gasoline (petrol in the UK), that must meet specific ASTM standards, and often other local regulations. The idea that one can trace an "engine problem" back through the chain to a high-sulphur crude source is as absurd as saying that a burnt out light bulb is due to electrons that came from a power plant burning high sulphur coal...

[GRG55]

Re: Saudis increase oil production, again

I'm at a mine site in Central Asia with a bog-slow internet connection that appears to work only when The State Committee for Minimizing Telecommunications Service deems it should, so I will have to be a bit brief:

1. All the hysteria about heavy, sour crude not being able to be marketed or refined is misplaced. The global crude oil slate has been slowly getting heavier and more sour for decades. And refining technology and capacity is continually being adjusted to accommodate that.
2. Markets determine the products that refiners make. The USA is a large market for transportation gasoline demand. Western Europe's lihgt vehicle fleet creates a higher comparative demand for diesel. Much of S.E. Asia's refining capacity is devoted to fuel oil for ships. Each of these regions is geared to demand a different mix of crude oils. To the degree there is an unavoidable mis-match in product output and market demand, the product is usually moved to a market elsewhere. Europe, for example, exports surplus gasoline to the USA where the light automotive fleet is still predominantly equipped with spark-ignition engines. The global system works quite well given how complex it is. But like any complex system, if there is a disruption it might be as difficult as sub-prime to "contain" :-)
3. In the specific case of Saudi Arabia, the Kingdom announced last decade a massive investment increase in drilling and development to reestablish its production surplus in order to retain its influence within OPEC. The last two major undeveloped fields in the Kingdom were Khurais and Manifa. Khurais is an inland field, parallel to and west of Ghawar, and was forecast to produce 1.1 million barrels per day after an incredible, massive investment that included bringing seawater from the Persian Gulf miles inland for waterflood voidage replacement in the reservoir. That project is complete and Aramco announced it would meet the target output rate as they commissioned it.
4. Manifa is a heavy oilfield on the Persian Gulf, partially reachable from onshore and partially in shallow offshore waters. It has produced about 150,000 +/- barrels per day for many years, and was forecast to produce 900,000 barrels per day after the development program was completed. Due to the shortage and high cost of offshore rigs just before the global financial crisis, Aramco built a causeway the length of the structure and used land rigs to drill it out. Manifa crude is not only heavy, but also contains some vanadium which can poison (deactivate) expensive refinery catalysts - and that issue factored big into how Manifa crude will be converted into marketable products.
5. Aramco is building two 400,000 barrel per day refineries in Saudi Arabia that will be supplied in large part by Manifa crude oil. The first to be completed is a joint venture with France's Total located on the Persian Gulf at Jubail, and should be ready to take Manifa crude starting in 2013. The second, expected to be complete in late 2014, is located on the other side of the peninsula at Yanbu on the Red Sea coast. The Yanbu refinery is a joint venture with Sinopec after the original JV partner, ConocoPhillips, withdrew. These refineries will also be supplied by other Saudi heavy oil sources including the Safaniya field.
6. These refineries are equipped with hydrocrackers, catalytic crackers and coking units, all of which "crack" or convert heavy, long-chain hydrocarbons into lighter hydrocarbons. Despite the heavy, sulphurous crude supply these refineries are designed to produce predominantly clean diesel and jet fuels. The Yanbu refinery output will be exported west and will meet all USA and European standards for fuel quality including ultra-low sulphur content. Final costs aren't known, but each of these refineries will probably cost close to US$15 billion before they are completed.
7. To undertake the number and scale of developments it has achieved in the past seven years (Khurais, Manifa and the refineries are far from the only major projects) Aramco had to develop a very strong technical and project execution capability. In other posts over a number of years I have several times suggested that Aramco is a most competent National Oil Company, a rarity in a field of generally hopeless entities. Naturally as capital investment rates decline so will the staffing, but Aramco will keep the core of this capability intact and that (in my opinion) is why we will now see technically difficult projects such as the resurrection of the Dammam field being undertaken by Aramco...not necessarily because they need it right now, but because they can (especially at these crude prices ).

There are numerous other old postings of mine that go into more detail on most of the above points...

[Prazak]

Re: Saudis increase oil production, again

Really glad to have your insights back, GRG55.

[lakedaemonian]

Re: Saudis increase oil production, again

Really glad to have your insights back, GRG55.

Agreed, cheers GRG55