[ennui2]

The world doesn't need more oil right now. It's a glut.

[rockdoc123]

Or are they just plain out of oil?

the statement was made in 2006 when they were just starting on the mega-projects. It was apparent that at that time their spare capacity was eaten up by demand. That was reason for the mega projects and the drive to get to 12.5 MM/bbl spare capacity by 2011.

[ennui2]

Or are they just plain out of oil?

the statement was made in 2006 when they were just starting on the mega-projects. It was apparent that at that time their spare capacity was eaten up by demand. That was reason for the mega projects and the drive to get to 12.5 MM/bbl spare capacity by 2011.

Lucky for us, it wasn't needed.

[Subjectivist]

KSA is suffering a pain in the wallet. Even though prices have been up lately look at this,

A recent report by the International Energy Agency (IEA) said Russia had overtaken Saudi Arabia as China’s leading supplier of crude oil at the end of last year. Russia Today’s analysis says its home country’s exports to the PRC had more than doubled over the course of the past years—an increase equivalent to 550,000 barrels a day.

The “oil friendship” between Russia and China is two-sided: the Polish Centre for Eastern Studies said China became Russia’s main oil customer in 2015 as well.

New projects worth several billion dollars between Moscow and Beijing have led the two countries to cooperate closely regarding energy industry issues.

http://fuelfix.com/blog/2016/04/27/mark ... to-the-us/

[ROCKMAN]

pstarr - As I've pointed out many times (despite all the critics) the KSA can only control how much oil they sell and not the price it's sold for. Which is why they've been increasing production: not to force oil prices lower and kill the US shale play but to max their income. This is no different then back in the 80's when the KSA kept cutting production trying to increase oil prices. It didn't work because the world wasn't going to pay more then it could afford. Eventually the KSA got tired of taking the hit for all the other oil exporters and opened their wells up causing the oil price to fall.

Sound rather familiar to what's happening today? The only difference his time is that the KSA wasn't willing to reduce production to help keep prices up for the benefit of the other producers. They learned that lesson in the 80's and haven't forgotten.

[rockdoc123]

Come on Rock. They keep promising. Maybe it is time to find a new girlfriend who puts out?

your mantra is somewhat tiresome. As mentioned numerous times previously all of the projects that were put in place to raise SA spare capacity to 12.5 MMB/d were completed and commissioned on time with the exception of Manifa. The spend was in the hundreds of billions of dollars. We know the work was completed because the crews responsible were from North America, Europe and Asia, many of them large consortia who report on their accomplishments. SA has been adamant since the completion of the mega-projects in 2011 that their spare capacity is at 12.5 MMB/d. There are countless numbers of foreign workers at most levels (exception being senior management) involved in the main office and various field offices of Aramco and there has been no "leak" of your imagined view that Aramco is lying about their spare capacity. That seems unreasonable even with non-disclosure agreements, there are countless "leaks" on top-secret government operations and those with a threat of death rather than law suit.
As I have said before having spare capacity means you only use it when it is needed. The world currently has enough oil at the current price, they do not need more. Saudi Arabia although interested in capturing market share are not going to go outright crazy and drop the price of crude to $10 or less by bringing on their full capacity and getting into an all out economic war with Iran and Russia. They will only do what is needed which is what they have been doing. Higher prices are better, higher market share is better but the two are not independent and driving price down to achieve more sales runs the risk of lowering net returns.
If there was a call on Saudi Arabia to deliver oil and they could not then that would be proof of their lack of spare capacity. There hasn't been since prior to the mega-projects being commissioned.

[rockdoc123]

There is no concise definition of spare capacity,

Wrong, the EIA definition (which everyone who works in the oil and gas business uses) is the volume of production that can be brought on in 30 days time and maintained for a minimum of 90 days. Nothing more sinister nor complicated. This is basically oil that has been tested under either full production previously or at the very least long term production tests. The full facilities are in-place including gathering systems, pumping, separation etc. The 30 days would be what it normally takes as a maximum to basically open up the wells and get the entire system working efficiently. There would be no need for a probability estimate given each well already has an IP and decline rate assessed.

Perhaps those successful upgrades merely maintain production at a 2005 level? Mask the decline in other fields? Perhaps the recent additions at Haradh and Manifa only make up for equivalent losses at Uthmaniyah and Shedgum and other declining legacy fields.

The plan for the mega projects was a target of 12.5 MMB/d which took into account the then current (2005 - 2006) projected declines in existing fields. These fields had long history, abundant field data and laboratory work which allows for top drawer projection of ultimate recovery. If anything ultimate recovery has improved in a few fields where they have used the MRC wells to maintain water cut at lower levels.This is all captured in various SPE publications. So unless some disaster occurred (and why would it?) then the additions offset any natural declines. Again if there was something nefarious going on why has not one of the hundreds of foreign workers who have been there in the last decade not leaked something to the public?

Your opinion. Not those of billions of the world's poor who would enjoy our copious lifestyle.

they may want the oil but cannot afford the current price. My comment the "world currently has enough oil at the current price" means just that ....at this price there are not more buyers than supply. Are you suggesting the Saudis should open up the taps so that price will drop and everyone can enjoy essentially "free" oil? Why would they do that? It's a country, not a charity.

[Tanada]

There is no concise definition of spare capacity,

Wrong, the EIA definition (which everyone who works in the oil and gas business uses) is the volume of production that can be brought on in 30 days time and maintained for a minimum of 90 days.

Then I don't see how you can say SA has 2.25 mbpd of spare capacity if spare production has never been brought on line. That would suggest that SA turns one well on, then another off simultaneously. SA is pumping full bore has has never pumped near 12.25

Add in the fact that KSA has said repeatedly they are more interested in market share than price, yet for the last six months or longer their market share has been eroding as Iran has come back into higher production rates.

[ROCKMAN]

T - "Add in the fact that KSA has said repeatedly they are more interested in market share than price, yet for the last six months or longer their market share has been eroding...". damn, buddy. It almost sounds like you're accusing the KSA of being disingenuous. You better watch it: they have friends in low places. LOL.

[Tanada]

T - "Add in the fact that KSA has said repeatedly they are more interested in market share than price, yet for the last six months or longer their market share has been eroding...". damn, buddy. It almost sounds like you're accusing the KSA of being disingenuous. You better watch it: they have friends in low places. LOL.

I know it just goes from January 2014 to January 2016, but that trend line from August 2015 to 2016 sure looks clear to me ROFLMAO!

[vtsnowedin]

T - "Add in the fact that KSA has said repeatedly they are more interested in market share than price, yet for the last six months or longer their market share has been eroding...". damn, buddy. It almost sounds like you're accusing the KSA of being disingenuous. You better watch it: they have friends in low places. LOL.

I know it just goes from January 2014 to January 2016, but that trend line from August 2015 to 2016 sure looks clear to me ROFLMAO!

I see that Iran did not make it onto that chart. I expect Iran and Iraq to be the major contributors to any increases in world production for the next few years. The question is will they be able to meet both increased demand and overcome declines by other producers?

[rockdoc123]

Then I don't see how you can say SA has 2.25 mbpd of spare capacity if spare production has never been brought on line. That would suggest that SA turns one well on, then another off simultaneously. SA is pumping full bore has has never pumped near 12.25

spare capacity does not have to be brought into full production to be classified as spare capacity. As an example if I have an oilfield with 250 wells which have all been production tested (usually flowed for days to a week) with an average IP of 1000 bopd/well and I turn on 200 and produce them full out then my production is 20,000 bopd and my spare capacity is an additional 5,000 bopd. Those wells remain spare capacity until such time as they are pulled into full production, which by definition I can do in 30 days. If a well has a problem (eg: a workover to de-scale) I might shut in that particular well for a few days to get the job done and bring on another well which was formerly sitting in spare capacity category to replace that production. My overall spare capacity remains the same. By definition SA is not pumping full bore if they maintain spare capacity. Not sure what your evidence is they are producing everything they can.

The whole point of the Saudi megaprojects was to avoid getting caught in the bind they were in 2005 where they were producing at near full current capacity and oil demand had risen rapidly. Not only does this drive prices high too quickly (with subsequent economic impacts) but it means SA miss out on taking fiscal advantage of oil in the ground. They embarked on the megaprojects so they would have the 12.5 MMB/d of total capacity. Not all the wells drilled were turned onto full production. Also current production and spare capacity refers to P1 reserves. As time progresses I might also be adding P1 undeveloped (PUDS) to the P1 producing category hence my spare capacity and overall production remain relatively stable.

Certainly SA isn't as transparent as one would like but it isn't uncommon for independent oil and gas companies to replace reserves on a regular basis (in normal times). Some of this is done through additional drilling and some through reserve upgrades. This is likely the case in SA as well.