Posted on 01/11/2012 10:05:38 AM PST by bayouranger
While the green movement naively harbours hopes it will be able to shut down unconventional oil and gas development, in Saudi Arabia they are already contemplating a time when North American fossil fuel will replace their oil.
Looking past the din of protesters, state-owned oil giant Saudi Aramco is resigned to the fact that its influence will wane because of the massive unconventional fossil-fuel development underway in North America. As such, Saudi Arabia has no plans to raise its production output to 15 million barrels per day from 12 million, said Khalid Al-Falih, the powerful chief executive of Aramco.
“There is a new emphasis in the industry on unconventional liquids, and shale gas technologies are also being applied to shale oil,” Al-Falih, president and CEO of Saudi Aramco, warned a domestic audience in a speech in Riyadh Monday.
“Some are even talking about an era of ‘energy independence’ for the Americas, based on the immense conventional and unconventional hydrocarbon resources located there. While that might be stretching the point, it is clear that the abundance of resources and the more ‘balanced’ geographical distribution of unconventionals have reduced the much-hyped concerns over ‘energy security’, which once served as the undercurrent driving energy policies and dominated the global energy debate.”
Aramco is the powerful state entity that manages the Kingdom’s nine-million-barrel-plus oil output. Saudi Arabia has long dominated oil markets by leveraging its spare oil capacity and, as the OPEC kingpin, striking a delicate balance between the interests of oil consumers and the exporter group.
But the oil chief’s remarks reveal Saudi fears that the market dynamics are changing and its dominance over energy markets is under threat by new unconventional finds.
OPEC estimated in a recent report that global reserves of tight oil could be as high as 300 billion barrels, above Saudi Arabia’s conventional reserves of 260-billion barrels, which are currrently seen as the second-largest in the world after Venezuela.
Global output of non-conventional oil is set to rise 3.4 million bpd by 2015, still dominated by oil sands, to 5.8 million bpd by 2025 and to 8.4 million bpd by 2035 when tight oil would be playing a much bigger role. By 2035, the United States and Canada will still be dominating unconventional oil production with 6.6 million bpd, the group forecasts.
Last year, even as the world consumed nearly 30 billion barrels of oil, not only was the industry able to replace this production but global petroleum reserves actually increased by nearly seven billion barrels, as companies increasingly turned toward higher risk areas, Al-Falih noted.
Clearly, the Kingdom is preparing for new market realities as the discussion on energy has changed from scarcity to abundance, particularly due to the new finds that can be produced ‘feasibly and economically.’
In the past, Saudi Arabia, along with its OPEC allies, could drive prices down by opening the taps to ensure unconventional fossil fuels remained firmly buried in the ground. But most analysts now expect oil prices to remain high, at least over the medium term, thanks to tight supplies and continued demand from emerging markets. That’s great news for Canadian oil sands developers, which need prices around US$60 to US$70 per barrel, to make their business models economically feasible.
Saudi Arabia’s own break-even oil price has also risen sharply in the past few years, making it less likely to pursue a strategy of lower prices. The Institute of International Finance estimates that Saudi Arabia’s break-even price has shot up US$20 over the past year to US$88, in part due to a generous spending package of US$130-billion announced this year to keep domestic unrest at bay.
The Saudis now find themselves between a shale rock and a hard place: While high crude prices mean the Saudis can maintain their excessive domestic subsidies for citizens, in the long run that means the world is developing new sources, making it less dependent on Saudi oil.
Although the Saudis have vigorously fought the Ethical Oil ads, which paint them in a negative light, they already know their oil is less welcome in the Americas — Saudi oil made up a mere 9.3% of U.S. oil imports last year, down from 11.2% five years ago, according to the U.S. Department of Energy.
But while Saudis would be cheering on the green groups with ‘No KXL’ signs, they don’t hold out much hope for renewable energies either. Calling them ‘green bubbles,’ Al-Falih says governments should stop focusing on unproven and expensive energy mix, as there is frankly no appetite for massive investments in expensive, ill-thought-out energy policies and pet projects.
“The confluence of four new realities — increasing supplies of oil and gas, the failure of alternatives to gain traction, the inability of economies to foot the bill for expensive energy agendas, and shifting environmental priorities — have turned the terms of the global energy dialogue upside down. Therefore, we must recast our discussion in light of actual conditions rather than wishful thinking,” the pragmatic chief said.
Somebody should explain this wishful thinking to the green movement.
Measured in Dollars, we are already past that point.
Measured in Barrels, who knows, maybe, maybe not.
Measured in unemployed following the boom, I sure hope not.
Est.’s on the Green River are off the charts, but geographiclly it sits in Co, Wy, Ut. on the western side of the Rockies.
They know that when they cannot sell their oil anymore, they will have to go back to living off camel dung.
I had a conversation a couple of months ago with the principal of an engineering firm that does lots of work in the Haynesville Shale in NW Louisiana. His crew also doing some work in Pennsylvania in the Marcellus Shale. I asked him about the tree huggers, etc. and how much of a problem they really were.
His comment was that once the royalty checks began to flow to landowners and local governments, that the racket from the enviros tended to abate.
Yep! Thanks for correction.
Yep! Thanks for correction.
Thanks. What’s holding back barrel production in TX?
Capitalism is the only thing to silence the muggers.
I don’t think anything is really holding back production in Texas. But you are talking about a rather big hill to climb compared to where we were in the 1980’s.
Remember the shale production in the Bakken has several years head start on the shale in Texas’ Eagle Ford and Permian Basin.
But it is not for lack of drilling. Lots of rigs working here now.
Nearly half of all drilling rigs operating in the United States are drilling in Texas 927 out of 2,007 at last count.
“...georgraphically it sits in Co, Wy, Ut. on the side of the Rockies.”
Hmmm, guess my memory is fading. Then again, it was a research paper I wrote in college back in 1985. Last time I looked at it was 20 years ago. Guess I need to read it again before I quote it next time.
Thanks.
Mainly from us, the taxpayers. They have a real scam going. The EPA gives them grants, they sue the gov’t for some bogus reason, and the EPA gives them even more $. It’s money laundering, pure and simple.
http://ostseis.anl.gov/guide/oilshale/
More than 70% of the total oil shale acreage in the Green River Formation, including the richest and thickest oil shale deposits, is under federally owned and managed lands. Thus, the federal government directly controls access to the most commercially attractive portions of the oil shale resource base.
I would argue that it might not be the problem it is thought to be.
As early as say 1985 the practice of Saudization began in earnest. That is foreign employees were eased out and replaced by Saudis. It was and is not now an easy process because there is not the backstop of experience to rely on. They now have 25 years more experience in the various non oil production businesses and manufacturing concerns than back then.
However, many ambitious young Saudis came to America and received first rate educations in a variety of fields. They are now in a generational position to take over from their fathers and uncles.
Years ago there was argument and disagreement in Saudi Arabia about conservation of resources, especially oil resources. While the change will produce a disruption of sales, it is not a shock, in fact there are likely plans in place to mitigate the change.
The loss of oil revenue will be the incentive for continuing growth and increased capacity of other industry. The current decrease will prolong the stream from known capacity
You were on the money on estimates 1.3 to 2.0 Trillion BOE. Recoverable is estimated at 750 billion BOE. Big numbers!
Northeast of this is the Niobrara.
Those koranimals tried to destroy America. (Spit)
Yeah, I know. FYI...my memory is fading.
I was quoting from memory based on a research paper I wrote in college (1985). Last time I looked at it was 20 years ago. I’ll be sure to read it and get my facts straight before quote it again.
Thanks.
There is oil shale over at the Appalachian mountains. It just isn’t continuous with the Green River.
I didn’t mean to pile on after others pointed it out. I just wanted to give a link for more information.
As long as Obama Democrats and RINOs are in office they have nothing to worry about.
The world’s cheapest oil to extract comes from Saudi Arabia and costs $2 a barrel, not the 30-60 bucks that they say it cost. they have been bleeding the world dry for 80 years it is now time to get off the Saudi teat.
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