OPEC Posts Record 2006 Oil Revenue

OPEC Posts Record 06 Oil Revenue; Lags Western Cos by Half
by Spencer Swartz
Jul 31, 2007

The Organization of Petroleum Exporting Countries posted nominal record revenue of nearly $650 billion last year on high crude prices and increased oil production, although its sales were just half those of the top U.S. and European energy firms, the producer group said in a report released Tuesday.

But in an indication as to why it may be keeping a tight rope on future production capacity, the report showed OPEC's base of economically recoverable oil reserves last year was flat if new, higher estimates from troubled OPEC producer Venezuela are stripped out, the worst growth in this key metric in recent years.

The world's top five publicly traded oil companies, led by ExxonMobil Corp. (XOM) of the U.S., collectively raked in total revenue last year of $1.36 trillion, up 6% on the year, OPEC said in its annual statistical report released Tuesday.

The contrasting numbers underscore the financial muscle the top Western oil companies have relative to OPEC states even though those same states control nearly three-quarters of the world's proven oil reserves.

Such was the tailwind of higher oil prices that Saudi Arabia, OPEC's biggest producer and exporter, saw its oil revenue jump a fifth to $193.7 billion, even though it pumped and exported less oil last year compared with 2005, OPEC said.

Oil prices touched a record high of near-$79 a barrel last July.

The OPEC sales numbers, representing 22% revenue growth, may stoke anger by consumers shouldering high energy costs caused by tight gasoline supplies, unexpected production shutdowns in Nigeria, and OPEC production cuts the past year.

U.S. lawmakers have proposed a largely symbolic bill that would permit law suits against OPEC's 12 members under U.S. antitrust laws.

Companies such as ExxonMobil and Royal Dutch Shell PLC (RDSB.LN) typically have more business units and operate in more regions of the world compared with most OPEC states, although this has been changing the past decade, but they own just a small percentage of the world's proven oil reserves.

OPEC's annual report didn't disclose net profits, but OPEC states earn handsome returns on the oil they produce because of low production costs.

"There might be some who are critical of these numbers, but the money OPEC is earning allows these countries to invest in new energy projects, like refineries, and import more goods," said Manouchehr Takin, senior analyst at the Centre for Global Energy Studies in London. OPEC nations imported $447.3 billion worth of goods last year, up 13% on the year.

The report also didn't disclose how much OPEC states invested in new exploration programs last year, although OPEC Secretary General Abdalla Salem el-Badri told Dow Jones Newswires in June that members had earmarked $130 billion-worth of capacity expansions that would add a net 6.7 million barrels a day to current oil output by 2012.

Reserves Languish

Venezuela, where oil output has languished this decade because of underinvestment, has tightened its grip the past five years on foreign operators with new taxes and operating restrictions, and few energy analysts believe the country can tap its costly and difficult-to-exploit heavy oil reserves without foreign technology and know-how.

After relatively stable to modest increases the past decade, Venezuela's proven oil reserves jumped last year by nearly 9% to 87.04 billion barrels, according to OPEC's report. It didn't explain why.

But backing out much of that rise because of the state of Venezuela's energy sector, OPEC's total proven oil reserves rose by a mere 0.2% last year, the lowest rate of increase this decade.

Saudi Arabia's crude asset base changed little at about 264.3 billion barrels, although the kingdom is currently investing billions of dollars to boost its production capacity to 12.5 million barrels a day by 2009, up about 11% from current levels.

Including the big additions of heavy oil Venezuela added to its reserves last year, OPEC's proven oil reserves in 2006 rose 1% to 922.5 billion barrels, representing just over 77% of the world's total.

OPEC's daily production last year averaged 32.07 million barrels, up 3.2% on the year. Saudi Arabia's daily output averaged 9.208 million barrels, about 145,400 barrels fewer than in 2005, while Saudi exports averaged 7.029 million barrels, nearly 180,000 barrels less than last year.

© 2007 Dow Jones Newswires.

Aramco to invite bids for Manifa developments

Saudi Aramco to invite bids for $10 billion Manifa developments
Business Intelligence Middle East
July 31st, 2007

SAUDI ARABIA. Saudi Aramco is expected to invite companies in August to help develop Manifa oil field, with a potential production of 900,000 barrels of oil a day, sources familiar with the company's plans said earlier this week.

Aramco, the world's largest oil supplier, plans to invite prequalified companies to bid for an estimated US$3 billion worth of contracts on the company's largest-ever offshore project.

The estimated US$10 billion Manifa development programme aims to add 900,000 barrels a day of heavy crude, 120 million cubic feet a day of gas and 50,000 barrels a day of condensate to Aramco's production by mid-2011.

Manifa's heavy crude will be exported from Aramco's Al Juaymah and Ras Tanura terminals in Eastern Saudi Arabia. The gas and the condensate will be processed at the Khursaniyah gas plant.

The project also includes construction of four pipelines, a water supply system and oils and gas processing facilities.

The tender documents for the project were originally due to be released in June or July but have been delayed without explanation, sources familiar with the Aramco's tender told Dow Jones Newswires.

Companies including Bechtel Group, Fluor Corp, JGC Corp and Technip in late May submitted prequalification documents to Saudi state-owned company. They are still waiting for final to bid, sources said.

In February, Aramco awarded an estimated US$1 billion contract to Belgium contractor Jan De Nul for the Manifa project's offshore portion, covering dredging works in the Persian Gulf.

Middle East oil producers are spending income generated from four years of high oil prices on expanding and upgrading their crude oil production capacity to meet rising global demand, particularly from fast-growing Asian economies.

Saudi Arabia is the world's biggest oil exporter. The Kingdom is working to increase current output of almost 11.0 million barrels a day to 12.5 million barrels a day by 2009.

Ghawar Production Profile

Ghawar Production Profile 1960 - 2007 Chart
Saudi Arabia, Ghawar, Oil Production, OPEC, oil, Peak Oil, chart, graph

Gulf Oil Revenues to Stay in Dollars

Gulf oil revenues to stay in dollars
Reuters
26 July 2007

Core Gulf producers receive 100 % of their oil revenues in dollars and politics makes it unlikely that will change despite the U.S. currency's weakness, analysts said on Wednesday.

OPEC members Saudi Arabia, the United Arab Emirates and Kuwait between them pump about 13.5 million barrels per day of oil, nearly 16 % of the world's supply.

Record revenues from high prices have fuelled an economic boom in the region, but the weak dollar has eroded oil producers' purchasing power in currencies not pegged to the U.S. greenback. The dollar hit an all-time low against the euro earlier this week.

The potential political fallout from the impact on the dollar of any change would likely keep the region's oil sales in the U.S. currency, said Steve Brice, regional economist at Standard Chartered.

"The U.S. would probably be concerned about major producers doing this," said Brice. "Currency reform is much less politically sensitive. It's another thing to move oil receipts away from dollars. That's a very big step."

Kuwait allowed its dinar to appreciate 1.7 % against the dollar on Wednesday, encouraging investors to bet that other Gulf Arab oil producers would review their pegged exchange rates.

But while Kuwait takes small steps to shield its economy from the dollar's weakness, oil revenues in the world's seventh-largest oil exporter will stay tightly bound to the U.S. currency.

"All our oil revenue is in dollars and there is no plan to change this," said a Kuwaiti source.

OPEC's second largest producer Iran caused a stir in financial markets when it asked Japanese oil buyers to pay in yen rather than U.S. dollars two weeks ago. That move was in part politically motivated as the row drags on with the United States over Tehran's nuclear ambitions.

Libya and sometimes Syria also ask for payments in other currencies, an industry source said. But Gulf Arab producers have shown little interest.

"ENTRENCHED IN DOLLARS"

Analysts said it would make economic sense for producers to diversify payment denominations, as it would reduce the volatility associated with the close ties to one currency and better reflect the region's trade relationships.

"The trade partners of the big oil producers have changed," said Julian Lee, senior energy analyst at London's Centre for Global Energy Studies.

"The European Union and Asia are bigger partners than they were and that would suggest the idea of diversifying revenues to take that into account. But breaking the price of the oil and the dollar may be a step too far."

Kuwait gets about 38 % of imports from the euro zone, the UAE 39 % and Saudi Arabia 35 %, according to Calyon.

Anything that weakens the dollar will also hurt the region's massive dollar-weighted investments.

Gulf Arab governments save most of their oil wealth in investment funds, which do not make public the currencies they hold.

Standard Chartered estimates Gulf Arab central banks hold $75 billion to $80 billion in foreign exchange reserves, while $1.5 trillion is in public sector investment funds.

All the major benchmarks that producers use for oil contracts are set in dollars, which also makes it difficult to use any other currencies.

"The oil market is entrenched in dollars," said one industry source. "People are buying oil years out in dollars and it is difficult to see any of those people unwinding their positions and buying oil in any other currency."

IEA Oil Market Report July 2007

Saudi Arabian crude supply is revised up to 8.7 mb/d for May, with a modest cut to below 8.6 mb/d estimated for June. Latest available JODI (Joint Oil Data Initiative) data are backed up by upwardly revised tanker sailing data for May. Weaker earlier May estimates had been based on lower domestic refinery runs due to refinery maintenance. While higher June refinery runs are implied by lower anticipated refinery maintenance, early indications are of an offsetting cut in crude exports. June estimates, as for all the OPEC countries, remain subject to verification as more complete tanker sailing data become available. However, comments from Saudi Oil Minister Naimi in early July tended to reinforce perceptions of production around 8.6 mb/d. Nor has there been any sign of significant change in Saudi production policy for July and August, with term liftings reportedly remaining broadly stable at June levels.

Crude capacity for Saudi Arabia is seen by this report rising to 10.9 mb/d by end-2007 and 11.4 mb/d at end-2008. The Khursaniyah project is likely to start up in December 2007, reaching 500 kb/d of Arab Light capacity by 2008, alongside some 300 kb/d of gas liquids. Initial volumes of new extra light crude are also expected from the Shaybah field expansion and the Nuayyim project by the end of 2008. The two fields combined will eventually add a gross 300 kb/d to Saudi crude capacity. Capacity additions in Saudi Arabia for now are focussed on lighter/sweeter crude grades, before the next major heavy/sour increment expected from the Manifa project from 2011.

IEA Oil Market Report July 2007, pg. 20

OPEC oil output to rise in July

OPEC oil output to rise in July:
Petrologistics
Jul 25, 2007

OPEC oil output is expected to rise this month due to higher supply from members including Nigeria, Iraq and Angola, a consultant said on Wednesday.

OPEC's 10 members subject to output limits, all except Iraq and Angola, are expected to pump 26.9 million bpd, up from 26.8 million bpd in June, said Conrad Gerber, head of Petrologistics, which tracks tanker shipments.

The estimate, while showing rising supply in some OPEC countries, indicates top world exporter Saudi Arabia is keeping a cap on output in spite of a jump in oil prices towards a record high above $78 a barrel.

"There's no major opening of the taps," Gerber said. "They fear that if they opened the taps, prices would slide."

Nigeria is raising supply in July by about 100,000 bpd to 2.12 million bpd, Gerber said. The increase reflects fewer disruptions to the country's oil industry from militant attacks in the Niger Delta.

Iranian oil output is also on the increase -- climbing by 50,000 bpd to 3.95 million bpd, according to the Geneva-based company.

Overall supply from the 12-member Organization of the Petroleum Exporting Countries is set to rise 300,000 bpd to 30.7 million bpd, Petrologistics said, as Iraq and Angola pump more.

Iraqi output is on course to reach 2.08 million bpd, up from 1.94 million bpd in June, because the country is exporting some Kirkuk crude from its northern fields.

Storage tanks at the Turkish port of Ceyhan receive sporadic deliveries of Kirkuk by pipeline from Iraq's northern oilfields. Iraq sold 3 million barrels for shipment in July, the first such sale since January.

Angolan output, rising steadily as new fields off the country's coast come on stream, is on course to climb by 30,000 bpd to 1.69 million bpd in July.

By contrast, output in Saudi Arabia, OPEC's largest producer, is expected to hold steady at 8.6 million bpd, Petrologistics said.

OPEC, source of more than a third of the world's oil, agreed to curb supply by 1.7 million bpd, or about six percent, last year in two steps. The second stage took effect from February 1.

Despite July's rise from the 10 members party to the output curbs, output remains lower than when OPEC started cutting production in November. OPEC said the 10 were pumping 27.5 million bpd before the cutbacks began.

The exporter group is next scheduled to met in September to decide production policy.

OPEC: Fair Oil Price $60-$65

OPEC: Fair Oil Price $60-$65/Bbl; No Need to Up Output
by Ayesha Daya, Dow Jones Newswires
FWN Financial News 7/23/2007
URL: http://www.rigzone.com/news/article.asp?a_id=47988

The Organization of Petroleum Exporting Countries' head of research said Monday that a fair price for crude oil was between $60 and $65 a barrel, but said there was "no reason" for the group to raise output when it meets in September for its biannual gathering.

"I said in March that a fair price for oil was between $60 and $65. I still think this," Hasan Qabazard, OPEC's research director, told Dow Jones Newswires by phone.

He said he wasn't referring to any particular crude. "This is a range to account for the different crude qualities, not for one crude in particular," he said.

Oil prices have been climbing steadily this summer, touching 11-month highs of $76 a barrel last Thursday on falling gasoline stocks in the U.S. and strife in oil-producing Angola.

Crude fell slightly Monday on profit-taking by traders, with light crude on the New York Mercantile Exchange trading down 40 cents at $75.39 a barrel Monday, but the current price is at least $10 a barrel more than what Qabazard sees as fair. Brent crude is trading at an even higher level at more than $77 a barrel.

There are no signs that OPEC will act to contain the rally by deciding, when it next meets, to bring more crude onto the market.

"Now the price is quite high," Qabazard said. "But it has a premium in it because of refinery bottlenecks, and speculative money coming into the market," he said.

In this context, there is "no reason" for OPEC to decide to raise output at their next meeting in September, Qabazard said.

"We still believe there is no reason to raise production, because there is enough crude in the market and no takers for the crude. It will only go into stocks," he said.

Copyright (c) 2007 Dow Jones & Company, Inc.

Saudi 2010: Empire in the Making

Saudi 2010: Empire in the Making
by Mohammed Aly Sergie
July 15th, 2007

[...]The recent oil boom has filled the coffers of all oil producing countries, and the largest producer received the greatest influx. According to the Economist Intelligence Unit, Saudi's GDP has nearly doubled since 2002 from US$118.6bn to US$347.3bn in 2006. While analysts debate the ‘peak oil' theory and look towards alternative sources of energy, Saudi Arabia continues to expand its current capacity and explore for more wells. With around 25% of global oil reserves and plentiful natural gas reserves, Saudi Arabia ranks fourth in the world in natural gas reserves, and Aramco claims that only 15% of the country has been "adequately explored for gas". Few analysts predict that oil prices will drop below US$60 per barrel over the next two years (oil is currently US$77 per barrel); oil and gas will remain the main source of revenue and the economic driver in the Kingdom.

The only player in oil production in Saudi Arabia is state-owned Saudi Aramco, the world's largest oil exporter. The company has been managing oil exploration and extraction for the Kingdom over the last 70 years and has become one of the largest state-controlled companies in the world.

In 2006, Saudi Aramco markedly enhanced its operations to achieve its goal of increasing crude oil production capacity to 12.5 million barrels/day (b/d) by the end of the decade. Underdeveloped fields throughout the Kingdom are coming on stream within the next two years which will triple the number of oil rigs in operation and should increase production by two million b/d.

Saudi Aramco is also increasing its gas exploration efforts. A myriad of onshore and offshore exploration and extraction is ongoing, which will go far to feed the voracious appetite for natural gas of power, desalination and petrochemical plants.

Natural gas is what brings us to another Saudi giant: Saudi Basic Industries Corporation (SABIC). While Aramco will invest nearly US$70bn in the petrochemicals industry in the next five years (the company recently teamed up with Dow Chemicals to build a US$20bn plant in Ras Tanura), SABIC has been a leader in the petrochemicals sector over the past 30 years, and is the largest non-oil producing company in the Middle East.

Not only is SABIC a regional giant, it is also a major global player. The company is among the world's market leaders in the production of polyethylene, polypropylene, glycols, methanol, and fertilisers, as well as the fourth largest polymer producer. Fuelled by impressive profits - profits rose to a record US$5.4bn in 2006, a 6% increase on 2005, while first quarter 2007 profits remained strong at US$1.7bn, an increase of 50% compared to the same period in 2006 - SABIC has gone on an aggressive acquisition spree[...]

full article

Opec 'needs to boost output in second half'

Opec 'needs to boost output in second half'
21-07-2007

Opec should increase crude oil production in the second half of the year in a bid to alleviate high prices, the head of the US Energy Information Administration Guy Caruso said.He warned that inaction by the Organisation of Petroleum Exporting Countries could cause global inventories to fall too low. "They wouldn't be dangerously low, but low enough to apply an upward pressure on prices," Caruso said on the sidelines of a meeting of the National Petroleum Council."Based on our demand numbers, which may be slightly higher than Opec's...is that we thought we needed more production in the second half of the year or we were going to have very low inventory," Caruso said. Energy Secretary Samuel Bodman said earlier on the sidelines of the NPC meeting that he was concerned about high oil prices and the possibility that Opec might not increase supply.He said, however, that he was keeping an open mind about how much, if at all, Opec should increase output given that US market tightness had been more about low refining capacity that crude supply. "That may be changing," though, he added.While analysts suspect the group has delivered on about 1 million barrels a day of that cut, the output decrease has helped push oil prices higher at a time when strong demand is already providing support. Benchmark crude futures on the New York Mercantile Exchange ended up Opec this week issued fresh forecasts for oil demand and supply that show the implied daily consumption for its members' oil in the final three months of this year would outstrip their current supply by a hefty 1.15 million barrels.

(Source: Gulf News)

BP's recent production data

BP's recent production data, and a different view of future world oil production trends
by Tom Standing
http://www.energybulletin.net/31585.html

Saudi Arabia and OPEC: First off, many people look at the recent trend of Saudi Arabian production and have expressed suspicion that the decline may be geologically based, rather than Saudi Arabia maintaining a balance between supply and demand. The statements and actions of OPEC over the last several months have made it clear that they are taking oil off the market in order to defend $60 oil. (The recent price for “OPEC Basket” oil was around $67.) Saudi Arabia is still the premier swing producer, maybe the only OPEC member who can vary production rates at their discretion. My guess is that this is a market-related reduction and that they could return to their high point of late last year and sustain that rate for many years. They have numerous projects on the board to raise productive capacity, so I would not be surprised if they eventually reach and sustain 10 million b/d. How much higher can SA go? God only knows; not even the most analytical Saudi oilmen can say with certainty. The timing of Saudi's return to producing at capacity, and their future development of capacity, depends on world demand, the ability of non-OPEC producers to increase capacity, and the price that OPEC chooses to defend.

Saudi production vs. OPEC quota 2001 to 2007 chart

2001 to 2007 chart of Saudi oil production vs. OPEC quota.

Saudi production versus OPEC quota

2004 to 2007 Chart of Saudi Arabia's oil production with OPEC quota.