410 comments on Saudi Arabian oil declines 8% in 2006
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410 comments on Saudi Arabian oil declines 8% in 2006
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Saudi Arabia, tank farms, new production and new oil fields.
On yesterday’s DrumBeat, Leanan posted two links on Saudi Arabia. The first stated that Saudi Arabia had increased crude oil production to 10.7 million barrels per day. The second link was more clear and stated that Saudi Arabia had increased production capacity to 10.7 million barrels per day. The latter figure was no real shocker since that is about the same production capacity that the EIA has been claiming Saudi has all along. The latest EIA Short Term Energy Report says Saudi has 1.7 to 2.2 mb/d in excess capacity of crude oil. And that figure has increased as Saudi production has decreased to hold Saudi capacity between 10.5 and 11.0 mb/d.
But nevertheless some people got very excited over that number and suggested that Saudi may be actually producing 10.7 mb/d and storing the excess oil in tank farms. Roger Conner suggested:
Highly unlikely. The amount of storage capacity Saudi has is no secret. They have 33 million barrels of storage capacity at Ras Tanura and another 17.5 million barrels of storage capacity at the export terminal of Al Juaymah. (Pronounced Jo-Ama) At these export terminals, different tankers are loaded with different grades of oil, according to what the customer has ordered. The tank farms here hold this oil in order that every customer can be accommodated. There is probably another 10 million barrels of storage capacity located around the country but these tanks would be special purpose tanks located at gosps or holding oil for power and desal plants. And, according to Matt Simmons, Saudi has another 10 to 15 million barrels of tanks, which they rent, in Rotterdam and the Caribbean.
It is extremely unlikely that Saudi has built millions of barrels of new tank farms for the sole purpose of collapsing the price of oil by dumping excess oil on the market. If they built such a giant tank farm in the last couple of years, we would know about it.
The tanks at Ras Tanura and Al Juaymah would normally be kept near capacity anyway, to be used for the express of offloading oil to tankers. But yes, they could be used to flood an extra million barrels per day or so on the market for a month or so. But that would not collapse the oil market. Push it down a bit for sure, but not enough to cause an outright collapse.
One more point concerning Saudi Arabian oil production. This was posted a few days ago:
Saudi went deep into the heart of the Rub al-Khali to find this little patch of oil. The “Rub al-Kaali represents one of the most extreme areas in the world with summer temperatures shifting from below 0ºC at night to over 60ºC at noon. Dunes can reach heights of more than 300 metres.” Needless to say this is one of the most inhospitable places in the world to drill wells and to lay pipelines. Yet this represents the extremes Saudi will go to in order to produce just a little more oil. But they are said to have 264.2 billion barrels of proven reserves.
Proven reserves means they know exactly where this oil is. To produce it, they would just have to go to a spot they already have plotted on the map, sink a well and produce more oil. Yet they do not do this, they instead go deep into the Rub al-Khali, search for years, (they were exploring the Rub al-Khali when I was there over twenty years ago), until they find a tiny patch of oil, then crow about it to all the world. Something here just does not make any sense.
Ron Patterson
Saudi Tank Farms
http://lcweb2.loc.gov/cgi-bin/query/r?frd/cstdy:@field(DOCID+sa0071)
Simmons on Saudi Tank Farms
http://agonist.org/story/2005/6/6/151857/0004
Rub al-Khali
http://lexicorient.com/e.o/rub_al-khali.htm
"They have 33 million barrels of storage capacity at Ras Tanura and another 17.5 million barrels of storage capacity at the export terminal of Al Juaymah"
I disagree on this point and I will elaborate: The oil could be pumped back into the ground of a depleted oilfield of high porosity where it would be possible to inject water and easily extract that oil again. Voila: a big oil tank. And how big? Massisve? It took me 45 seconds to formulate this idea so feel free to shoot me down:-)
Marco.
The oil loss, back into the reservoir, would be too high. This is really a function of grain size and permeability in the reservoir. Some of the oil would be left behind in the pore spaces in the rock. Note that this is not a factor in tanks farms and underground salt caverns.
I really need to order, from amazon, that book you reccomended!
Why do I envision in my mind's eye a giant squirrel wheel with a gigantic squirrel running madly on it?
Because your medication is far too strong.-)
Something like this?
HONG KONG -- A health club here is hoping that a car battery, some StairMasters and dozens of gym rats can help ease the world's energy problems.
Rita Wong is doing her part. One evening recently, the fit 27-year-old, dressed in black spandex, pedaled furiously on an elliptical machine at the California Fitness health club. As she worked up a sweat to a Madonna song blasting on the gym's sound system, the energy she created was transformed into electricity and stored in a battery that powers some of the gym's lights.
tinyurl http://tinyurl.com/27gexy to the wsj article
Fantastic work !!!
With my prediction of a peak in prices between
Feb 15- March 15 looking great maybe we can combine this information to guess at the next price peak.
On the back side of a declining resource prices tend to fluctuate wildly I've posted before that the overall movement of oil is controlled simply by how fast a tanker can deliver and return. This gives a rough 3 month internal per tanker.
Which leads as I explained in other posts to a cycle of 3 price peaks a year post peak. All quit rough but reasonable.
So given the information provided by Stuart and the above post we can assume that the best that can happen this summer
is a 30 day "tank" surge from KSA. In other posts I'd estimated that they could surge for up to 60 days. This would be a combination of drawing down their tank storage and pumping full tilt at a level that damages the fields.
Next you have to add in WT export land model and the collapse of Mexican production.
What all this means I think is that we can expect prices to decrease soon in the early spring bringing us off our current peak or they plateau at around 70 a barrel. I cannot see them dipping below 60 ever again. This puts the next peak in price at around June 15 to July 15 maybe shifted slightly later if SPR draws are initiated early.
So given what has just presented we can expect a small surge form KSA in the next month or two that will dampen the rise in prices we see right now and could cause a small dip.
This surge will end and we should see a very strong summer peak passing 80 a barrel with ease and headed for 100.
This will generate demand destruction finally leading to a drop and probably quite a few draws on the SPR.
And finally we get our new depletion driven peak in the fall as people fill any storage the have in preparation for winter. Oil will begin to behave like NG with full production of the entire year required to meet the demand peaks.
I don't think demand destruction from recession will be enough to hide this geologic signal. Note that 2007 would be the last year that we actually can smooth oil supplies if KSA is in decline. In 2008 we will not only see stronger price swings but real shortages begin to develop. 2009 would be the first year that Peak Oil gets attention from the MSM as a potential problem :)
Expect political upheaval in Mexico and KSA by 2009.
Finally the key is too expect a surge from KSA in the next few months but this means nothing and won't last the summer its a mix of emptying tanks and overproducing fields. Also they may start dropping some support for internal consumption to redirect some oil to export. Maybe WT could see what that would gain by moving say 10% of production to exports I'm not sure how many bpd this would be. It would cause tension internally but it would help hide their depletion for a little longer. Politically KSA has to show some sort of surge soon. They may briefly show 9 or even 10 mbpd.
Now if KSA can't even do this mini surge ....
Why?
Oil supplies aren't all that tight. People have more-or-less adjusted to $50-60/bbl levels, so why would SA want to disrupt that? Just to prove they can?
Doubtful. Very few people doubt their ability to do so - SA has announced voluntary production cuts, and I'd bet at least 95% of the people who are aware of Saudi production levels have little reason to disbelieve them. Regardless of how much people at TOD may believe SA has something to prove, SA isn't all that interested in what we think.
Until the summer rise in demand starts kicking in, there's no reason to expect much increase in Saudi production. And maybe not even then if the US housing situation turns out worse than expected.
In my opinion if we are truly post peak.
We will see a brief respite in price increases towards the end of march-april then its going to go to the stratosphere this summer. 100 plus easy and fast. Their is a really good chance that 70 will be our new low and our dip won't dip.
KSA must "open the taps" to show the world they can still produce but its a charade based on drawing down tanks overproducing fields and potentially taking supply away from the internal market.
Bush will open the SPR to "help" while KSA increases production and they probably will claim a lack of tankers for sending the oil since they have not used this excuse yet. Or maybe a bunker fuel shortage.
I'm pretty certain it will be some sort of claim based on transportation since they have not used this card.
Worst case Bush will attack Iran if needed. I'm sure he is praying hard for some reason to open the SPR to cover KSA.
We are peak oil aware its not shocking to us but I assure you once the MSM realizes that we have peaked we will see a strong political backlash.
KSA will make a charade of increasing production for a few months. But 60 days is about all they have IMHO.
This does not invalidate Stuarts graph in the least.
My point is KSA must and almost certainly will show some sort of increased production as prices cross over 70 this summer but its not based on real capacity its a sham.
I have no qualms in saying that if we are post peak oil prices will reach highs not seen before only a major effort on the part of KSA to show a fake production increase and SPR releases will keep it from spiraling out to 150-200 this year. If Stuart is right the first big one is this summer.
A fall peak is also a must as the SPR and KSA tanks are refilled.
Next year the party is over.
memmel, you get points for sheer cojones. You've really put them on the block, so to speak.
So has Stuart...this is what is truly scary. Stuart does not put his reputation on the line unless he's pretty confident. Now, mix in some nasty weather this year on top of the geologic constraints and this beast has a probability of breaking out.
I am 100% sure that PO awareness is this year. Whether we are at true peak or not will be of little consequence when a majority reacts to the reality of PO.
Tom Whipple is smack dab on target and right now is the best media mouthpiece that understands TOD and takes it serious. Kudos to you Tom because I know you are reading here. Keep up the good fight on the information front lines. There is a time and place where certain messages reverberate through the noise of disinformation. That time is fast approaching.
po awareness probably needs the market to accept that sa is going down for the count... not clear that even steady decline will establish that this year given that they will continue saying 12Mb/d by 09. People will believe what they want to believe - oil/sa is like a religion.
Again, why? That you personally consider something to be important does not mean someone else "must" do it.
KSA storage capacity is (according to other posters in this thread) only about 60Mbbl. If they really are in 8% decline, they'll be down to 8Mbbl/day by summer, so any storage-driven increase over current levels won't last for more than two months. If we see an increase over current levels for more than two months, then, KSA is not declining as you suggest.
We shall see.
I don't think that's right. A smooth 8% per annum decline would take it down to about 8.15 mbpd, if they were at 8.5 at the end of 2006. There'll be fluctuations, of course, so we could probably only start to think of further confirmation at the end of the year.
I'm rounding for simplicity, of course.
Depends on what happens. If, for example, there's a strong demand increase as we hit summer and nobody else (e.g., Russia) steps up to the plate, there'll be substantial pressure on KSA to open the taps.
If they do - for a sustained period - then we'll have one answer. If they don't, then we'll have additional (although not conclusive) evidence of another answer.
Of course, an economic lull in the US could potentially prevent demand pressure (both directly and due to knock-on effects in China), so there's no guarantee we'll see KSA tested thusly this year. A continuing decline over the course of the year would be pretty indicative, though (depending on the global oil supply situation.)
Do you have a typo in the above paragraph? Did you mean "plateau at around 60 a barrel"? Otherwise I am a little confused by how the plateau can be 70 when the current spot price is around $62.
Sorry I don't know how to explain it but the peak may turn into a plateau or drop slightly and plateau higher than 60.
Its a shoulder peak. The question is whats the new base price going forward its somewhere between 60-70 so depending on how things go price may stabilize at 70 i.e not drop from the peak price that should happen in the next few weeks. Or they could climb a bit more and drop back to 60.
In short we don't know what the floor price will be a bit later in the spring when production is geared up for summer but demand is briefly behind production capacity.
I'm not trying to call price points just trying to map the expected price oscillation signature of peak resources to oil prices. The base frequency of 3 peaks in prices a year with a higher valley price is I think intrinsic and valid for the oil supply if we are post peak.
What you are saying is that if the analysis holds out, the US presidential election in 2008 (and some other national elections due around the same date) will end up being predicated on dawning realisation of peak oil.
That's an important fact to note, not only if you are a candidate, but from the wider perspective of the reaction to the news.
Is there a prefered course of action to address the short and medium term impacts of such news? Do we know what that is? Because if we do, NOW is the time to be drawing that into a coherent package and making it available to be wrapped into candidate platforms.
Its all very well talking about the academic aspects of peak oil, its another to do something positive about it.
We have a winner :)
I almost came out and said it. But yes at the end of the day GW has to figure out how to game peak oil so it benefits the Republican party. The only positive is it will blind side Democratic candidates. American's become very aggressive when they can get cheap gas for their SUV's. So I think the show with Iran is aimed and timed to precipitate a crisis in conjunction with the new peak oil awareness that will occur at this time. Realize that trouble in Mexico will hit hard about this time too.
Seldom are Americans willing to abandon a political leader in a time of crisis so the trick is to get every thing to come together so the republicans can look like the good guys to scared SUV/McMansion owners. The Democrats will face a tough choice with the Mexican/American vote and problems with the surge of illegal immigrants from Mexico.
A lot of crap is being done now so the Republicans can win the 2008 presidential elections at almost all costs.
Understand that by 2012 we will probably be under some sort of martial law or elections will be canceled because of violence. So whoever wins in 2008 will run the country for a looong time. It's the last election with a semi-functional American middle class so its really the prize of the century.
Even more reason why the Democrats need to get policy acts together. There may not be much difference between the two parties, but they are marginally less likely to drop the bomb on someone who won't give up their oil quietly.
And don't over estimate the importance of the US (after all, in world terms their power has a close sell-by date on it). There are a number of other elections around this timeframe that will get determined by real issues and real problems for the first time in ages.
The peak isn't important per se, its the gradient of the decline and the shape of our reaction to it that define the shape of the future.
Important questions.
My prediction....Obama is the only one with enough savy and raw, instinctive trust to pull this off. He can brush aside attacks like they were flies and he can think on his feet.
You get the subliminal feeling he is telling the truth...people are lusting for someone to give a damn about them.
He will the ONLY candidate that has a chance to pull the diverse groups of people together. And he can talk about energy to people in a fashion they understand.
He will be the only chance this country has to avoid all out martial law.
I happen to agree. One thing a lot of people forget is America has a lot of fine cracks like a porcelain vase that been dropped a few times. These can be exploited to destroy the vase or they can be annealed Obama seems to be and annealer type.
Obama is pledged to the corn lobby, among other crippling flaws in depth of perception.
that's what happens when your constituency is Illinois...
now, as for a national constituency...that of course is a different matter.
Oh please... God bless the idealism. Obamma will invade Nigeria the same as Rudy- or anyone else. The democratic party can't even agree on incresing milage standards. Hardly a recipe for me to be enthusiastic. Bash/blame Bush or the republicans all you want. I suspect the problem is really in the mirror.
So I think the show with Iran is aimed and timed to precipitate a crisis in conjunction with the new peak oil awareness that will occur at this time.
Right, it has nothing to do with Iran building nuclear weapons, which should be obvous to anyone with a secret decoder ring and a Dan Brown book.
Understand that by 2012 we will probably be under some sort of martial law or elections will be canceled because of violence.
Yep, and we'll all be eating Soylent Green and chanting "IGNORANCE IS STRENGTH!" The survivors will envy the dead.
Your oil analysis is interesting, but your political analysis is just babbling paranoid lunacy.
More likely, we'll just see a perfectly rational political and market response: increased use of renewable and nuclear energy as oil prices rise, and more development of alternate extraction technologies.
Well, I don't hold out any hope for rational political responses. Market response isn't rational, either, it's based purely on the profit motive. Nuclear can't just be ramped up, though I'd expect to see an increase in the planned use of nuclear. Renewables that can be expanded are a tiny percentage, at the moment, so any significant decline in oil is unlikely to be made up by renewables, especially as there isn't much renewable liquid fuel that doesn't require oil to produce.
I was at ARAMCO in 1980/81 - before I got kicked out (much to my relief) for having an airline girlfriend.
I remember at that time seeing the giant machines they had for traversing these amazing dunes in the Rub al-Khali (the Empty Quarter).
At that time, the Americans, who more or less ran the show, explained that the Saudis were desperate to find oil outside the Eastern Province (i.e. the Shia province).
Saudis from Riadh and Jeddah feel quite out of place in the Eastern Province. The inhabitants of Eastern Province feel quite uncomfortable, or worse, when they have to visit the capital, Riadh, on official business.
In fact, the Shia do all they can not to have to overnight in Riadh - they have to get the last plane back. Quite odd considering they all, supposedly, are citizens of the same country.
Alfred, this new field is entirely within the Eastern Province. Over half the Rub al-Khali is located within the Rub al-Khali, the rest is in the Central province where Riyadh is located. The only oil in Saudi ever found outside the Eastern Province were the Hawtah Trend Fields, discovered in 1989. They are located just south of Riyadh.
The southern end of Ghawar juts into the Rub al-Khali and the new patch of oil is 70 kilometers Southeast of the southern tip of Ghawar.
Ron Patterson
http://en.wikipedia.org/wiki/Ash_Sharqiyah_Province
"Citizen" doesn't mean much in SA; it's still very tribal. Saudis have few rights, especially women, who have virtually none (it is not uncommon for "disrespectful" women to simply vanish in the desert).
There has always been a lot of fear of a "Shia crescent" forming.
Ron,
I cannot and will not disagree with your analysis per se, it is a good one, and of course Stuart is always on top of things...we will just have to wait and see.
This may be the end of the Saudi road as far as having the production clout to pull it off (we all know that day has to come...when is the question), but I am still very cautious about them.....I am an old man, and the spectre of 1982 still haunts me....
Roger Conner
Remember we are only one cubic mile from freedom
FWIW:
http://fe1.news.re3.yahoo.com/s/ap/20070226/ap_on_re_mi_ea/saudi_frenchm...
"The area where the attack occurred also is home to oil installations, which are part of the Strategic Oil Storage Project — a massive underground facility that includes five sites across the kingdom."
I thought I recall a note about KSA claiming new production expansion from a very old depleted field and Simmons claimed this field was used as as an undergound storage facilty. Although Simmons might have referring to Natural gas storage.
I don't believe that KSA is stockpiling oil to drive crush prices. I do believe that they are probably slowing stockpiling some oil to cover for short term emergencies or for future planned maintaince. At best probably enough to cover production for a coupe of weeks for unforseen events.