"US diplomat convinced by Saudi expert that reserves of world's biggest oil exporter
have been overstated by nearly 40%
The US fears that Saudi Arabia, the world's largest crude oil exporter,
may not have enough reserves to prevent oil prices escalating,
confidential cables from its embassy in Riyadh show.
The cables, released by WikiLeaks, urge Washington to take seriously a warning
from a senior Saudi government oil executive
that the kingdom's crude oil reserves may have been overstated
by as much as 300bn barrels – nearly 40%.
...Many analysts expect that the Saudis and their Opec cartel partners
would pump more oil if rising prices threatened to choke off demand.
However, Sadad al-Husseini,
a geologist and former head of exploration at the Saudi oil monopoly Aramco,
met the US consul general in Riyadh in November 2007 and told the US diplomat
that Aramco's 12.5m barrel-a-day capacity needed to keep a lid on prices could not be reached.
According to the cables, which date between 2007-09,
Husseini said Saudi Arabia might reach an output of 12m barrels a day in 10 years
but before then – possibly as early as 2012
– global oil production would have hit its highest point.
This crunch point is known as "peak oil".
Husseini said that at that point Aramco would not be able to stop the rise of global oil prices
because the Saudi energy industry had overstated its recoverable reserves
to spur foreign investment.
He argued that Aramco had badly underestimated the time needed to bring new oil on tap.
One cable said: "According to al-Husseini, the crux of the issue is twofold.
First, it is possible that Saudi reserves are not as bountiful as sometimes described,
and the timeline for their production not as unrestrained
as Aramco and energy optimists would like to portray."
It went on: "In a presentation, Abdallah al-Saif,
current Aramco senior vice-president for exploration,
reported that Aramco has 716bn barrels of total reserves,
of which 51% are recoverable,
and that in 20 years Aramco will have 900bn barrels of reserves.
"Al-Husseini disagrees with this analysis,
believing Aramco's reserves are overstated by as much as 300bn barrels.
In his view once 50% of original proven reserves has been reached
… a steady output in decline will ensue and no amount of effort will be able to stop it.
He believes that what will result is a plateau in total output
that will last approximately 15 years followed by decreasing output."
The US consul then told Washington:
"While al-Husseini fundamentally contradicts the Aramco company line,
he is no doomsday theorist.
His pedigree, experience and outlook demand that his predictions be thoughtfully considered."
Seven months later, the US embassy in Riyadh went further in two more cables.
"Our mission now questions
how much the Saudis can now substantively influence the crude markets over the long term.
Clearly they can drive prices up,
but we question whether they any longer have the power
to drive prices down for a prolonged period."
A fourth cable, in October 2009,
claimed that escalating electricity demand by Saudi Arabia
may further constrain Saudi oil exports.
"Demand [for electricity] is expected to grow 10% a year over the next decade
as a result of population and economic growth.
As a result it will need to double its generation capacity to 68,000MW in 2018," it said.
It also reported major project delays and accidents as
"evidence that the Saudi Aramco is having to run harder to stay in place
– to replace the decline in existing production."
While fears of premature "peak oil" and Saudi production problems had been expressed before,
no US official has come close to saying this in public.
In the last two years, other senior energy analysts have backed Husseini.
...Jeremy Leggett, convenor of the UK Industry Taskforce on Peak Oil and Energy Security, said:
"We are asleep at the wheel here:
choosing to ignore a threat to the global economy that is quite as bad as the credit crunch,
quite possibly worse."
Guardian
Showing posts with label SPR. Show all posts
Showing posts with label SPR. Show all posts
Wednesday, June 29, 2011
Is there a global shortage of Light Sweet Crude Oil?
"...the IEA’s release suddenly altered the supply and demand balance of the market.
Instead of a flood of heavy, sour oil from Saudi Arabia,
the market is now braced for the release of light, sweet oil from the emergency reserves.
...The collapse of the differential indicates that the release of the strategic reserves
is not only lowering the headline cost of oil,
but also the premiums that refineries were until a week ago paying
to secure scarce supplies of high quality, light sweet oil."
CNBC
Instead of a flood of heavy, sour oil from Saudi Arabia,
the market is now braced for the release of light, sweet oil from the emergency reserves.
...The collapse of the differential indicates that the release of the strategic reserves
is not only lowering the headline cost of oil,
but also the premiums that refineries were until a week ago paying
to secure scarce supplies of high quality, light sweet oil."
CNBC
If plenty of light sweet crude is being released by world governments,
why has the cost gone back up so quickly?
Jeff Rubin: "Why is the IEA tapping strategic reserves?"
"The IEA cites the loss of 1.5 million barrels of Libyan production
but that’s been going on since February.
So why has it taken until July for them to respond?
Perhaps it is a vote of non–confidence in Saudi Arabia’s ability
to ramp up production to its new 10 million barrel per day target.
But who in the IEA really believes Saudi Arabia could sustain that level anyway?
It hasn’t happened since the early 1970s.
...the only country capable of producing oil at that rate is Russia,
and it’s already doing it.
Other than the level of oil prices
and the resulting weakness in oil consuming economies,
what supply shock does the release redress?
...There is no doubt the loss of Libyan production
has made world oil markets even tighter
but triple-digit world oil prices aren’t really about supply shocks.
They’re about the growing imbalance between ever-surging world oil demand
and little-growing world oil supply.
And that imbalance is becoming bigger all the time.
While global inventories can still bridge the gap in the very near-term,
they are hardly a sustainable solution.
...If inventories aren’t going to be depleted,
tapping reserves today means restocking them tomorrow.
When exactly does the IEA expect to take back into inventory
to rebuild the 60 million barrels that they are now adding to the market?
What’s going to change in the world demand-supply balance
that will allow inventories be rebuilt without stoking the price pressures
that tapping reserves are supposed to relieve?
The only plausible time for restocking to happen
is during the onset of another oil -induced global recession,
which, of course, the IEA may think will occur sooner than most of us yet suspect."
Jeff Rubin
but that’s been going on since February.
So why has it taken until July for them to respond?
Perhaps it is a vote of non–confidence in Saudi Arabia’s ability
to ramp up production to its new 10 million barrel per day target.
But who in the IEA really believes Saudi Arabia could sustain that level anyway?
It hasn’t happened since the early 1970s.
...the only country capable of producing oil at that rate is Russia,
and it’s already doing it.
Other than the level of oil prices
and the resulting weakness in oil consuming economies,
what supply shock does the release redress?
How about a lack of Light Sweet Crude,
not enough refineries set up for Heavy Sour,
and Japan needing massive imports to make up for nuclear energy lost?
...There is no doubt the loss of Libyan production
has made world oil markets even tighter
but triple-digit world oil prices aren’t really about supply shocks.
They’re about the growing imbalance between ever-surging world oil demand
and little-growing world oil supply.
And that imbalance is becoming bigger all the time.
While global inventories can still bridge the gap in the very near-term,
they are hardly a sustainable solution.
...If inventories aren’t going to be depleted,
tapping reserves today means restocking them tomorrow.
When exactly does the IEA expect to take back into inventory
to rebuild the 60 million barrels that they are now adding to the market?
What’s going to change in the world demand-supply balance
that will allow inventories be rebuilt without stoking the price pressures
that tapping reserves are supposed to relieve?
The only plausible time for restocking to happen
is during the onset of another oil -induced global recession,
which, of course, the IEA may think will occur sooner than most of us yet suspect."
Jeff Rubin
Sunday, June 26, 2011
Pay Attention - On Oil Production, Consumption and Light Sweet and Heavy Sour Crude: Why did the US open up the Strategic Petroleum Reserve?
Before we started using it, there was about 76 cubic miles of oil on Earth,
or a sphere with a diameter of 5.26 miles, about as tall as the tallest mountain on Earth,
of which since 1859, we have consumed about half.
If Earth’s diameter is about 7,960 miles and the diameter
of all the oil has a diameter of about 5.26 miles, and about half of it is gone,
then less than less than ½ of 1% of Earth is made of oil.
Source: John Gilkison, New Mexico State University, February 2006
In 2000, the difference between non-OPEC light sweet and sour crude oil production
of 66 mb/d
was 41% light sweet and 59% sour.
mb/d = million barrels per day
From 2000 to 2004, non-OPEC light sweet production fell 3.26 mb/d,
from 27.06 mb/d to 23.8 mb/d.
34% to 67%, light sweet to sour.
Source: The Organization of Petroleum Exporting Countries
August 2005 monthly report on the global oil market,
data on non-OPEC and OPEC oil extraction by weight and sulphur content
from 2000 to 2004, Page 4
Oil producing nations export petroleum products only after domestic needs are met.
A ‘2000’ nation producing 5 mb/d, consuming 1.0 mb/d of light sweet
can export 1.05 mb/d of light sweet. (41% light sweet production)
If a ‘2004’ nation’s total oil production increased 6% to 5.3 mb/d,
like non-OPEC production above,
and total light sweet production dropped to 34% while domestic consumption
rose to 1.1 mb/d,
then light sweet exports fell about 33.3%, to 0.7 mb/d.
If between 2000 and 2004, non-OPEC lost 3.26 mb/d as OPEC added 1 mb/d of light sweet,
then total global light sweet production fell about 2.26 mb/d.
Source: The Organization of Petroleum Exporting Countries
August 2005 monthly report on the global oil market,
data on non-OPEC and OPEC oil extraction by weight and sulphur content from
2000 to 2004, Page 4
If total oil production rises or stays the same while light sweet production falls
while consumption rises in oil producing nations and China and India
and now Japan, after multiples of Nuclear Plants went offline…?
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