<HOT Hot hotThe Oil DrumDrumBeat: February 14, 2007>

84 comments on Water and Oil - another trip to Aramco's plumbing

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ace on February 14, 2007 - 3:30am Permalink | Subthread | Comments top

Hmmmm!

Perhaps Saudi Arabia's stated excess capacity really means future new capacity instead of current excess capacity.

Estimate of Saudi's new projects by end of 2009:

Hawiyah NGL 0.4 mb/d
Khursaniyah NGL 0.3 mb/d
AFK 0.5 mb/d
Nuayyim 0.1 mb/d
Shaybah phase 1 0.3 mb/d
Khurais 1.2 mb/d

Adding these volumes gives 2.8 mb/d of excess capacity crude, lease condensate and natural gas plant liquids.

If excess capacity does mean future capacity then given current field decline rates, Saudi Arabia production of crude oil & lease condensate is highly unlikely to exceed 9 mb/d ever again.

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jkissing on February 14, 2007 - 3:40am Permalink | Subthread | Parent | Comments top

Maybe we can go lower. SA says the market is ok, so no need for new cuts. Meanwhile, they are producing, according to them, 8.5Mb/d, or their cuts are twice what they agreed to do. If, therefore, 8.5Mb/d is the best they will be able to do until the vanadium refineries come on line in 2011, and given further at least 50k decline/month or 600k/yoy, then we will never see 8.5Mb/d again. Going just a little further, after 07 the limit would have to be 8Mb/d, and so forth.

If the world's fields are declining 5%/y, or 4Mb/d/y, then we need another SA every other year...

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ThatsItImout on February 14, 2007 - 3:58am Permalink | Subthread | Parent | Comments top

Your analysis is not bad, and the shopping list of projects grows, people are putting their money where their mouth is:

http://www.pipelinedubai.com/focus/2006/cf0106.html

Note that of the projects mentioned, AFK is essentially an ethane/NGL development, and there are nice glittery gifts in the form of GTL and LNG projects, meaning that natural gas is getting it's fair share, or more, and the growth of the petrochemical industry in the Persian Gulf creates some interesting new market arrangements (will we be buying our fertilizer from the Persian Gulf to grow our ethanol "freedom fuel"? (irony of ironies :-)

Only Khurais promises over 1.2 mb/d, and all eyes are, or should be on this field. It is big enough in potential that it could truly alter the marketplace, but, if it turns out to be a bust, then Simmons really gets the hat trick, as North Sea decline, Mexican/Cantarell decline, Venezuelan "difficulties" (for lack of a better word) begin to really cut into our supplier base, and then Khurais turns out to be a bust, you have to ask how many other places can make up that kind of shortfall.

The last wildcard has to be Persian Gulf/Saudi offshore. I have heard no one willing to venture a guess about how much is possible there. The Saudi's suddenly seem interested in offshore rigs, leading a good chess player to try to posit the next move:

(a) Is Saudi production suffering onshore, and thus, offshore is needed in a way it has never been?
(b)or, do our Arabian friends intend to go for an "oil fortress" Saudi style, and soon have offshore, Khurais, the natural gas and finished petrochemical trade all in their holster, so they can strike the market when and as they chose with astonishing power?

Yeah, I know, your laughing. Don't laugh too loud. We have made that mistake before.

Remember, we are only one cubic mile from freedom.
RC

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jkissing on February 14, 2007 - 4:15am Permalink | Subthread | Parent | Comments top

THere is nothing about khurais that promises 1.2Mb/d... actually, the field itself promises maybe 1/10 of that. It is the saudis that promise that incredible number, adding 'trust me'.

SA is indeed interested in off shore rigs, already poaching several looking for ng in our gulf to look for oil in theirs. Indeed, they are interested in absolutely every bit of oil infrastructure known to man - huge water pumps to relocate the persian gulf underground; on shore rigs, now up 3x and moving rapidly towards 10x; off shore rigs; in a word, we've heard of everything except tankers.

SA, mexico and venezuela are quite similar in result - production in all countries is way down - but SA, at least, is trying to do something about it. Venezuela is more like mexico, both starving their fields of internal investment and external capital/expertise. IMO all three will continue declining. Of the three, only venezuela has the potential to bring production back to former highs, but imo will not under chavez, usefully saving oil for somebody's future, not that chavez cares.

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memmel on February 14, 2007 - 4:31pm Permalink | Subthread | Parent | Comments top

Can you explain a bit about khurais. I don't know much about the field except for the vanadium.

The fact that KSA is expending so much effort to develop a field with basically unsellable oil speak volumes in itself. Just about any combination of other choices if they existed make more sense. Unless of course production has peaked.

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jkissing on February 14, 2007 - 9:01pm Permalink | Subthread | Parent | Comments top

It is manifa that has the vanadium, this is probably what sa meant when they said they had no buyers for their oil last spring. Khurais produced at one time something over 100k/d, then trickled down and was abandoned. They have great hopes with, I think, a water flood, but 1.2Mb/d seems wildly optimistic... imo more likely they might get back to their former peak for a while.

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Darwinian on February 14, 2007 - 5:05pm Permalink | Subthread | Parent | Comments top

The last wildcard has to be Persian Gulf/Saudi offshore. I have heard no one willing to venture a guess about how much is possible there.

RC, The Persian Gulf is not a wildcard. Every square inch of it has been throughly explored and no new Saudi fields have turned up there since the 60s. The Kuwait, Iran, UAE, Oman, Qatar and all other sectors of the Gulf have been throughly explored as well. Rememver the Persian Gulf is very shallow. Jackup rigs can explore every inch of it, no deepwater are needed. And it has already been done.

Safaniya, one of Saudi's oldest giant fields, is entirely offshore. Saudi is drilling more onshore as well as offshore in a near panic to try to offset the rapid decline of their old giant fields. Saudi is only trying to shore up declining production. I don't think they have any grand conspiracy planned, survival is their only concern.

Ron Patterson

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