Saudi Arabia is top oil supplier to China

Saudi Arabia is top oil supplier to China
BI-ME and Bloomberg
22 August 2007

Saudi Arabia was the top supplier of crude oil to China in July, beating Angola, Oman and Russia as the Middle Eastern country increased exports to gain from demand in the world's fastest-growing major economy.

Saudi Arabia, the world's biggest oil producer, exported 2.33 million metric tons of crude oil to China last month, about 548,677 barrels a day and 57% more than the same period in 2006, the Beijing-based Customs General Administration said today.

Angola, the second-largest supplier to China in July, shipped 2.2 million tons, a 28% increase from last year.

China's crude oil imports surged 39% to a record in July, according to customs data released earlier this month. Oil imports by the world's second-biggest energy user have tripled in the last five years as production from domestic fields failed to keep pace with demand.

Oman, Russia and Iran were among China's top five suppliers in July, shipping 1.56 million, 1.27 million and 1.24 million respectively.

Saudi Arabia was also China's biggest crude supplier in the first seven months of this year as sales from the kingdom increased by 6.8% to 14.32 million tons.

Imports from Sudan surged more than 12-fold to 1 million tons in July after China National Petroleum, the country's largest oil producer, increased output of the Dar Blend crude oil from its production-sharing field in the African nation. The field started production last August.

China imported 14.83 million tons of crude last month. Shipments in the first seven months rose 15% to 96.37 million tons.

Aramco invites engineering bids for refinery

By Oliver Klaus
Aug 20, 2007
DUBAI (MarketWatch)

Saudi Arabian Oil Co. has invited engineering firms to bid for a contract to help it build an estimated $8-billion refinery in eastern Saudi Arabia, people familiar with the plans said Monday.

Saudi Aramco, the world's largest national oil company, has invited international engineering companies to bid by Sept. 15 for the contract to carry out early engineering for and manage the construction of the new refinery, the sources said.
The plant, known as East Coast refinery, is the fourth new facility planned in the kingdom and will boost total domestic crude oil refining capacity to above 3.5 million barrels a day by 2012, more than double the U.K.'s.

The refinery, due for completion around late 2011, will process 400,000 barrels a day of Saudi crude and will be at Ras Tanura on the Persian Gulf, already home to the country's largest refinery with a capacity of 550,000 barrels a day, the sources said.

Aramco will meet selected contractors Monday for a project briefing in Bahrain, the people said.

Companies including KBR Inc. KBR, Foster Wheeler Ltd. FWLT, and WorleyParsons Ltd. (WOR.AU) have bid for similar contracts in the kingdom.

The new project is aimed at meeting fast-growing demand for refined products from the local power and industrial sectors.

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.

OPEC to Maintain Its Current 30mbpd Output Level

by Adam Smallman
Dow Jones Newswires
Jun 15, 2007

The Organization of Petroleum Exporting Countries said Thursday that there was no need for the group to inject further oil supplies into the market in the face of rising demand, an implicit rebuke to the International Energy Agency's call this week for urgent new supplies from the group.

In an unusual statement well ahead of its formal policy meeting Sept. 11 in Vienna, OPEC Secretary General Abdalla Salem el-Badri said 12-member OPEC, which currently meets 35% of the world's oil consumption, would maintain its daily output of 30 million barrels a day.

"However, considerable uncertainties continue to surround world oil demand and demand for OPEC oil," he added.

"But a combination of current high inventory levels and increasing OPEC spare capacity, which is expected to reach around 15% in the second half of this year, means there are adequate supplies available to cope with any upward revisions to oil demand forecasts."

In the statement, El-Badri continued, "OPEC notes oil markets remain well supplied and market fundamentals do not require any additional supply from the Organization at this time."

"OPEC will continue to monitor developments and is prepared to help mitigate any tightness which may emerge at any future stage," he added.

Without identifying the International Energy Agency directly, the producer group's statement appears to be a response to this week's hard-hitting report by the agency that warned of the prospect of a world oil supply deficit this year due to record demand, rising project delays and a reluctance by OPEC to ship more crude over the summer.

The IEA Tuesday raised its estimated daily need for OPEC's oil this year by half a million barrels to 31 million barrels, and expressed concern about its ability to offset demand with planned capacity expansions by the end of this year of just 700,000 barrels.

With the need for OPEC crude this year set to climb 2.5 million barrels a day, the challenge to OPEC "would appear to be a key impending market dynamic," the agency said.

"We need an awful lot more crude," IEA supply expert David Fyfe said at the time. "To us, the balance looks particularly stark at the moment."

El-Badri added that the group will keep a close eye on the state of the market, but noted that oil stockpiles held by industrialized nations are comfortable.

Stocks are some 34 million barrels above their five-year average and are at a record in Europe, with oil stockpiles in the U.S. 24 million barrels above their five-year average, he said.

Gasoline stocks Stateside are generally climbing, he noted, and OPEC's output of 30 million barrels a day will help keep stocks comfortable assuming "there is no significant change in market conditions."

El-Badri also said there were expectations of increased oil output from non-OPEC producers this year, a sharp contrast with the IEA's view.

The agency said this week that oil supply growth from non-OPEC producers is set to fall below the psychologically significant 1 million barrels a day this year, thanks to project delays, field exhaustion, and maintenance programs.

It signals the end to three consecutive quarters of plus-1 million barrels-a-day growth from non-OPEC suppliers.

"We're concerned about delays in new project start ups," the agency's Fyfe said, "and to be honest, they're proliferating."

Also, the medium-term picture for Russia, the world's largest oil producer, is one of stasis, with its output reaching a plateau within two years thanks to the uncertain investment climate under President Vladimir Putin and constraints in oil services.

The agency said the country's output may climb 7% to 10.6 million barrels a day by 2010 but then slip a little over the next two years.

The IEA also revised year-on-year world oil demand growth for this year significantly higher to 2%, against its 1.8% forecast last month, pushing outright demand through 86 million barrels a day for the first time.

Though well short of the 4% demand growth seen in 2004, it is double last year's growth despite consistently high oil prices.

Aramco to build $8bn refinery

Aramco to build $8bn refinery
by Reuters
13 June 2007

Saudi Aramco, the state oil company of OPEC kingpin Saudi Arabia, has launched a project to build a new oil refinery, the Middle East Economic Digest (MEED) reported.

MEED said the refinery at Ras Tanura, with a processing capacity of up to 400,000 barrels per day (bpd) of Arabian heavy crude, will cost about $7 billion to $8 billion.

Saudi Aramco has a 550,000 bpd oil refinery in Ras Tanura in the east of the kingdom, the world's largest oil exporter.

Saudi Arabia Curbs Asian Shipments

Oil Rises More Than $1 After Saudi Arabia Curbs Asian Shipments

By Mark Shenk
June 11 (Bloomberg)

Crude oil rose more than $1 a barrel after Saudi Arabia, the world's biggest exporter, told Asian refiners that it would curb shipments for a ninth month in July.

Saudi Aramco, the world's largest state oil company, will cut supplies of its Arab Light and Arab Heavy crude to refiners in Japan, China and South Korea by between 9.5 percent and 10 percent below their contracted volume, officials said. The Organization of Petroleum Exporting Countries last year pledged to cut supplies by 1.7 million barrels a day to support prices.

``I suspect that the Saudis are worried about rising inventories,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``They have been creamed a couple times when inventories have risen too high and they've lost control of the market.''

Crude oil for July delivery rose $1.17, or 1.8 percent, to $65.93 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Prices are down 8 percent from a year ago.

Brent crude oil for July settlement rose $1.01, or 1.5 percent, to $69.61 a barrel on the London-based ICE Futures exchange.

``The Saudi headlines are both good and bad news,'' said Tim Evans, an energy analyst with Citigroup Global Markets Inc. in New York. ``The Saudis reduced supplies to Asia again, which is bullish. On the other hand this is evidence that Asian demand is lousy.''

No Shortage

Iran's Oil Minister Kazem Vaziri-Hamaneh said there's no shortage of crude oil globally and the high oil price is because of low product stockpiles. Iran, OPEC's second-largest oil producer, will start gasoline rationing ``very shortly,'' he said after attending the Asia Oil and Gas Conference in Kuala Lumpur today.

The U.S. increased its criticism of Iran's stonewalling of nuclear inspectors, and the United Nations atomic agency's chief warned of a ``brewing confrontation'' over Iran's uranium enrichment program.

``I am increasingly disturbed by the current stalemate and the brewing confrontation -- a stalemate that urgently needs to be broken, and a confrontation that must be defused,'' International Atomic Energy Agency Director General Mohamed ElBaradei told diplomats today at the IAEA's Vienna offices, according to a copy of prepared remarks given to reporters.

Iran says it is enriching uranium as part of a nuclear- energy program permitted under the Non-Proliferation Treaty. The U.S. says the Iranians are disguising plans to build an atomic bomb, a violation of the accord.

Concern that the dispute over Iran's nuclear program might disrupt shipments from the country has supported prices over the past year. Attacks on oil facilities in Nigeria have curtailed shipments and also bolstered prices.

Regular gasoline at the pump, averaged nationwide, slipped 1 cent to $3.081 a gallon yesterday, according to AAA, the nation's largest motorist organization. Prices touched a record $3.227 a gallon on May 24. Retail gasoline prices are up 6.3 percent from a year ago.

Jubak on Saudi Oil

Saudi Arabia is running the U.S. economy.

I'm not sure the Saudis want the task, but they've got it. Because the United States still doesn't have a national energy policy, we've thrown decisions about how fast our economy grows and whether our standard of living rises or falls into the hands of Saudi Arabia's oil ministry. [...]

It's now Saudi Arabia that's trying to find a delicate balance. In the Organization of Petroleum Exporting Countries (OPEC), the Saudis are the swing producer -- the only major oil producer with enough extra production capacity to increase supply when the price of a barrel of crude soars, and the only major oil producer with the political will and foresight to cut supply when prices fall too low. Right now, the Saudis are producing at 8.5 million barrels a day. Depending on whose figures you believe, their production capacity is anywhere from 9 million to 11 million barrels a day.

If the Saudis allow oil prices to climb too high, then consumers will cut back on use, and energy alternatives will become sufficiently attractive to investors to cut into oil's share of the global energy market. Worst case: Oil prices will climb so high that they cause a global recession that will certainly cut demand.

If the Saudis allow oil prices to fall too much, they will reduce the revenue they get for oil and reduce their clout among those oil-producing countries that are only willing to follow the Saudi lead as long as it lines their pockets. Worst case: Revenue falls so far that the Saudis and other oil-producing countries don't have the cash to support their own plans for growing their economies and providing the jobs and subsidies that keep many oil-country governments in power. [...]

The U.S. economy is no exception. Total oil imports into the United States jumped by 14% in March from February to hit record levels. And even as gasoline prices soar in the United States, consumption growth continues. U.S. gasoline demand in May was up about 1% from May 2006.

How much clout does that give the Saudis over the U.S. economy?The United States imports about two-thirds of its oil at a cost of about $300 billion a year. According to a study by the Rand Corp., each $10 increase in the cost of a barrel costs the average American household $700 a year.

In January 2004, the price of oil was $34.27 a barrel, according to the St. Louis Federal Reserve. It closed at $65.08 on June 1, 2007. Using Rand's numbers, that's an increase of $2,156 per household for oil. In that same period -- when the Federal Reserve's short-term interest rate increases pushed the yield on the 10-year Treasury note to 4.95% from 4.30% -- U.S. Gross Domestic Product growth dropped from 3.9% in 2004 to 3.2% in 2005, 3.3% in 2006 and to 0.6% in the first quarter of 2007. I certainly can't tease out the effects of higher oil prices from the effects of higher interest rates, but my suspicion is that the former has had a bigger effect on the U.S. economy in this period than the latter, thanks to the continued availability of cheap money from global sources such as Japan.

Saudi Arabia has no interest in killing the U.S. or the global golden goose. Sending our economy or, worse yet, the global economy into a recession, or even quarter after quarter of growth below 2%, would wreak havoc with Saudi revenues.

But it is in Saudi self-interest to charge the most the market will bear; after all, oil is an exhaustible resource. Even though we can debate about when that resource might be so depleted that Saudi Arabia can't produce significant oil, we all know that one day the oil will be gone. So every time a terrorist attack in Nigeria, a flare-up in tension between the United States and Iran or an expropriation by Venezuela's Hugo Chavez spikes the price of oil, you can bet the Saudis are studying the market response. If a price spike doesn't result in a significant decline in consumption, then the inclination of any rational oil producer would be to let prices drift higher (or to push them higher by cutting production). [...]

June 5th - MSN Money

Saudi Arabia sees no need for raising production

Saudi Arabia sees no need for raising crude oil production
05.28.07
RIYADH (Thomson Financial)

The surge in oil prices is being driven by political factors and there is no need for additional crude supplies, Saudi Arabia's assistant oil minister said on Monday.

'What brings prices up is politics, what brings them down is politics,' Prince Abdul Aziz bin Salman bin Abdul Aziz told Agence France-Presse, referring to tensions in major crude producers Nigeria, Iraq, Iran and Venezuela.

'We have a well-supplied market,' he said on the sidelines of a European-Gulf forum today. 'We have always said, and OPEC has always committed itself to keep the market well-supplied and balanced. Never has this market been more balanced with crude than today,' said Prince Abdul Aziz, who is assistant oil minister for petroleum affairs.

He said that while there was no need for additional crude supplies, there is a problem with refining capacity. He was referring to what Saudi officials say is a need to invest in expanding refining capacity in consumer countries.

OPEC kingpin Saudi Arabia was sticking to its output quota of 8.5 mbpd, he said.

Saudi Cautious on Oil Plans

Saudi cautious on oil plans as demand uncertain

May 10, 2007
By Simon Webb

DUBAI (Reuters) - Saudi Arabia's reluctance to commit to boosting oil production capacity beyond 2009 is a response to the potentially huge impact on future demand of energy efficiency, alternative fuels and high prices.

Demand uncertainty is providing little incentive for oil producers to risk investing billions of dollars on long-term projects to boost capacity, as they worry it will lie idle.

"This is a major concern for producers," said David Kirsch, manager of market intelligence at Washington-based consultancy PFC Energy.

"If you assume certain conservation measures, alternative fuels and the introduction of some form of carbon limiting legislation, you could take as much as 6 million barrels per day (bpd) off global demand by 2015."

Under the greener world scenario, PFC projects demand growth could be limited to 4 million barrels per day between 2007 and 2015, taking global consumption to 89 million bpd from around 85 million bpd now, Kirsch said.

Without environmental and conservation policies, demand could soar to as much as 95 million bpd, he said.

The International Energy Agency (IEA), adviser to 26 industrialized nations, has pegged the untrammeled demand scenario even higher, at 99 million bpd in 2015.

Faced with such disparate projections, Saudi Oil Minister Ali al-Naimi sent the strongest signal yet last week from the world's biggest oil exporter that it needs concrete signs of demand before committing to further supply boosts beyond its 12.5 million barrels per day target in 2009.

"Our feeling now, with the thrust and push for conservation, efficiency and the use of alternatives, is that we probably need not go beyond 12.5 million bpd," Naimi said after a gathering of Asian and Middle East energy ministers in Riyadh.

Naimi has called for better data on future demand, turning the tables on oil consumers that press producers for commitments to boost output capacity.

Saudi Arabia sits on a quarter of the world's oil reserves and is seen as one of the principal sources of future supply growth. The IEA has forecast the kingdom may need to boost output to as much as 18 million bpd by 2030.

Targeting that kind of capacity boost would be unwarranted in the current price environment and may anyway be unsustainable, said Sadad Husseini, a former top executive at Saudi Arabian oil firm Saudi Aramco.

"I think the oil minister's comments introduce a certain realism to all these projections that wasn't there before," he said. "It's not that demand will go down, it's that it will level off at these higher
prices."

Soaring energy costs globally, as the industry strains to bring new capacity online, are making producers more cautious.

"Making such investments at a time when capital expenditure costs are at an all-time high entails a significant risk. The last thing we need is idle capacity," OPEC President and United Arab Emirates Oil Minister Mohammed al-Hamli said in Riyadh.

HIGH PRICES CURB DEMAND

High prices have slowed annual demand growth from the breakneck pace of 2004, when the world's thirst for oil grew more than 3 million bpd. Last year, annual growth was just over 750,000 bpd, according to the IEA.

As oil markets reeled from the 2004 growth, Saudi Arabia accelerated its plans to expand to the 2009 target to ensure it kept spare capacity of at least 1.5 million bpd to deal with any surprise global supply outages. Naimi said then that the kingdom could raise capacity further to 15 million bpd if needed.

Since then, as well as encouraging conservation and alternatives, high prices have allowed non-OPEC producers to begin drilling oilfields that were previously deemed too expensive, a process that continues to play out.

"We still haven't seen the full effect of the high price scenario on non-OPEC supply," said Husseini.

Saudi Arabia and other OPEC members late last year agreed to cut production by 1.7 million bpd to bolster prices. Even before then, the kingdom had reined in supply on slower demand for its oil.

According to a Reuters survey, Saudi Arabia was producing around 8.5 million bpd in April, down from around 9.45 million bpd in March 2006. With capacity of around 11.3 million bpd, it is already sitting on spare capacity of nearly 3 million bpd.

Should demand growth again begin to quicken, the kingdom could quickly install new capacity, the IEA said.

"We are not too concerned about our long-term numbers," said William Ramsay, the IEA's deputy executive director. "They can put in spare capacity very quickly if they want to."