[sparky]

.
Keeping in mind the sudden kiss and make up with Iran the biggest underexploited oil province
looking at the OPEC basket price AKA ( Saudi Arabia index )
one can discern a fight to keep the crude price at 105$/b ,
that's the new normal and it result in NO GROWTH whatsoever , while the West debt keep growing very nicely indeed

[ROCKMAN]

Keith - "It's not really "a reduction from current exports", the only difference is where it is refined". No...it's a reduction in oil exports. There will be 400,000 bopd less on the market for sale. Someone's refineries are going to lose about 150 million bbls of feedstock per year when that plant comes on line. Which means those refineries are going to lose every penny of profit they would have made from that oil. And the folks who buy products in the market areas of those refiners will lose access to that output. And what products aren't taken by China will be consumed internally by the KSA replacing their product imports. And that does reduce demand in the global products market to some degree. But take it to the extreme end point: the KSA refines all its oil production and sells most of the products in the global market place. That wouldn’t have a devastating impact on all the oil importing economies? I would think it would.

But the key point again is access...not whether or not that oil or its products enter the market place. Assuming that plant runs for 20 years at a minimum that's almost 3 billion bbls of oil removed from the competitive market that the rest of the consumes have to work with. This subject might be better suited under the “Future Control…” thread because that’s what we’re really talking about: who’s controlling the oil/products and not how much is being produced. Contemplate that for a moment: a future world where the KSA exports no oil to any country other than perhaps China. But they would be a major exporter of products. But again, to whom…the customers buying from refineries currently cracking KSA oil exports? Maybe…maybe not. Maybe every bbl of KSA product exported will go to China since they appear to be taking over the refining business in the KSA. I can't imagine that China doesn’t have first call on every bbl coming out of the Red Sea refinery that the KSA doesn’t consume internally.

In real estate it’s location, location, location. With oil it’s control, control, control. LOL.

[westexas]

Re: Annual 2013 Saudi net exports

Here are the 2012 EIA data:
(Total petroleum liquids production + other liquids production) - (liquids consumption) = net exports

11.53 - 2.86 = 8.68 mbpd (versus 9.1 mbpd in 2005)

If we take the monthly EIA data for 2013 at face value, Saudi Arabia averaged 11.5 mbpd through October. I estimate that the preliminary annual production number for 2013 will be between 11.5 and 11.6 mbpd. Note that the Saudis are reporting a small decline in crude oil production from 2012 to 2013, and note that their reported increase in crude oil exports was the gross number, not the total petroleum liquids net export number.

In any case, if we assume Saudi consumption of about 3.0 mbpd, their 2013 net exports would be 8.5 to 8.6 mbpd. The bottom line is that that since the Saudis themselves are reporting a decline in crude oil production, absent a very significant decline in consumption in 2013, I don't see how their 2013 net exports could be above 9.1 mbpd (the 2005 rate).

Again assuming consumption of 3 mbpd and production of 11.5 to 11.6 mbpd, their ECI Ratio (ratio of production to consumption) for 2013 would be 3.83 to 3.87. Based on the 2005 to 2012 rate of decline in the Saudi ECI ratio, their ECI ratio would be at about 3.84 for 2013.

Incidentally, one interesting aspect of "Net Export Math" is that given a declining ECI ratio, the year over year rate of depletion in remaining CNE (Cumulative Net Exports) tends to accelerate with time. For example, assuming post-2005 Saudi CNE of about 56 Gb, the 2005 to 2006 estimated year over year rate of depletion in remaining post-2005 CNE was 5.7%/year. Assuming 2013 net exports of 8.6 mbpd, their 2012 to 2013 estimated year over year rate of depletion in remaining post-2005 CNE was 9.0%/year, as estimated remaining post-2005 Saudi CNE fell from 35 Gb at the end of 2012 to 32 Gb at the end of 2013.

If we look at a similar time period for the Six Country Case History*, 1995 to 2002, the actual 1995 to 1996 year over year rate of depletion in remaining post-1995 CNE was 19.6%/year. The actual Six Country 2001 to 2002 year over year rate of depletion remaining post-1995 CNE was 46%/year.

This is why I think almost everyone is missing the point about net export declines. When a net exporter might approach zero net exports is pretty much irrelevant, since the biggest volumetric CNE depletions tend to occur early in the net export decline phase. As noted above, a rough, but pretty consistent, rule of thumb is that if we look at the time period from peak net exports to zero net exports, about half of post-peak CNE are shipped about one third of the way into the net export decline period.

Globally, I estimate that the year over year rate of depletion in remaining post-2005 Global CNE accelerated from 3%/year for 2005 to 2006 to 3.8%/year for 2011 to 2012. And this is without taking into account the "Chindia Factor." In effect, I think that we are maintaining something resembling Business As Usual as a result of an accelerating rate of depletion in the remaining volume of Global Net Exports of oil. It's as if you were maintaing your lifestyle by consuming your remaining savings at an accelerating rate of depletion.

*The six major net exporters, excluding China, that hit or approached zero net exports from 1980 to 2010

[Subjectivist]

Is China's oil import rate growing at 7% like their evonomic growth? If not how fast is it growing? Somewhere on here I read that their car fleet is required to be M-85 compliant and they are making methanol from coal.

[ROCKMAN]

Sub – here’s some recent stats and projections. I tied search for product imports and didn't find anything documented. As always taken with a grain of salt since no one has a perfect crustal ball IMHO:

China has surpassed the United States as the world’s largest consumer of foreign oil, importing 6.3 million barrels per day compared to the United States’ 6.24 million. This trend is likely to continue and this gap is likely to grow, according to the EIA’s October short-term energy outlook. Wood Mackenzie, a leading global energy consultancy, echoed this prediction, estimating Chinese oil imports will rise to 9.2 million barrels per day (70% of total demand) by 2020.

As for China, consumption is far outstripping domestic production (10.7 million bpd to 4.5 million bpd), which highlights both a growing middle class and the difficulty China is having in taking advantage of its own shale resources.

[westexas]

Re: pstarr

Note that average annual Global Net Exports (Top 33 net exporters in 2005) averaged 16 Gb/year for 2006 to 2012 inclusive.

[Tanada]

Re: pstarr

Note that average annual Global Net Exports (Top 33 net exporters in 2005) averaged 16 Gb/year for 2006 to 2012 inclusive.

Oh right.

More time to stock up!

You are assuming they are going to be willing to continue exporting as quickly as they can as long as they can. I believe at some point they will decide to cut their losses and export much less than they could theoretically export, just enough so they can claim to be working hard to export with a strait face.

[ROCKMAN]

T - I tend to see that possibility also. Heck, for all we know we may be there today if the KSA has as much spare capacity as some offer. Obvious the KSA doesn't care how many bbls they export but how many $'s they import. So the preverbal chicken/egg question: The KSA has a big budget: but is that driven by the need to spend that much or by the ability to spend that much? They seemed to be muddling along OK when they had $60 billion per year coming in. Now they are pulling in well north of $300 billion per year. Ignoring the global politics for the moment: if they could meet their budget requirements by selling half as much oil would they? If prices stayed where they are that would still be twice as much income as they were making not that long ago. OTOH would pulling that much oil off the market ramp up prices so high that it would throw the world into another recession alla the 80’s? Might not be able to see that income expectation develop.

Just one heck of a chess game. I just wonder if all they players are really up for making the right moves…whatever the heck those might be. LOL.

[Graeme]

It looks like pstarr's calculation is in the right ball park. As I recall, Citigroup predicted that KSA would be importing oil by 2030. So where will countries like China and India get their oil? I suggested Iran.

I just read today that Chindia are already increasing their imports from Iran.

China and India have significantly increased their oil imports from Iran following the recent partial suspension of sanctions on the Islamic Republic.

China imported 564,536 bpd of Iranian crude in January, which showed an 11.2-percent rise compared with December and an 82-percent increase from the same period last year.

India’s imports from Iran have also more than doubled in January, surging to 412,000 bpd, up from 189,100 bpd in December.

The figure which is the highest since February 2012 is also 44 percent higher compared with the same period last year.

And this news from Adam Sieminski (EIA) is also relevant.

The only big outstanding question is: could the U.S. potentially be a net exporter of crude oil? In the EIA’s Reference case forecast, that doesn’t seem likely. Despite the fact that our production is rising while demand is falling, we’re still importing about five million barrels a day net of of crude oil and products. It doesn’t seem likely that net imports are going to go to zero–at least not given the facts as we currently see them. It’s possible, in a high petroleum resources case combined with a technology and policy-driven low demand case, but not probable.

[calhoun]

I don't see how KSA's new refinery will change things much. Yes, there will be less crude available for export but the other side of that coin is that there will be more refined product on the export market. In the end, does the world economy care who refines the oil? If KSA exported that oil, it would just be refined by someone else so the market impact would be neutral.

Sounds to me like Saudi Arabia just wants to cash in on the mark up for refined products. Additionally, they might want a domestic refinery capacity as a long term strategic asset -- not relying on foreign refiners gives them a margin of independence.

[ROCKMAN]

Calhoun – “…more refined product on the export market. In the end, does the world economy care who refines the oil?” No…those products won’t be available in the market place. What the KSA doesn’t retain will belong to China. The oil that would have been shipped to the EU, refined and the products made available to their consumers will not make it to those EU refineries (which are already suffering financial problems). And the consumers that had been buying from those refiners will no longer have those products available to them. The products will belong to the KSA and China.

The KSA didn’t do this JV to become a product exporter. They are currently a product importer. By keeping those products internally they will be cutting not only their importing volume but also getting those products at a cheaper price. And just as important (if not more so) they become less dependent upon foreign companies/govt’s for their energy needs. In the case of China their advantage should be obvious: they don’t have to compete with other potential buyers for those 4.4 BILLION BBLS OF OIL for the next 30 years or so. And neither will they have to compete with the rest of the consumers in the world for their share of those products made from 4.4 BILLION BBLS OF OIL.

Folks need to remember the truly critical issue isn’t how much oil the KSA will produce in the future but who will have the opportunity to buy it. IOW in 20 years even if the KSA is producing at the current rate (doubtful as that may be) and all that oil and those products are being consumed by the KSA and China how will the EU handle the situation?

[Keith_McClary]

The KSA didn’t do this JV to become a product exporter. They are currently a product importer. By keeping those products internally they will be cutting not only their importing volume but also getting those products at a cheaper price. And just as important (if not more so) they become less dependent upon foreign companies/govt’s for their energy needs. In the case of China their advantage should be obvious: they don’t have to compete with other potential buyers for those 4.4 BILLION BBLS OF OIL for the next 30 years or so. And neither will they have to compete with the rest of the consumers in the world for their share of those products made from 4.4 BILLION BBLS OF OIL.

You seem to be assuming that there is an agreement that the JV refinery will get SA oil below market prices and sell product to China below market prices. That's possible, but I don't see why the Saudis would make such a deal.

If there is not such a deal and the JV is buying and selling at market prices, then the oil and products are not really "off the market", so it does not give China or SA much control.

[ROCKMAN]

“Perhaps the Saudi's now need finished product to run their business.” Actually always has and the need for imported products is growing rapidly. Last number I found the KSA was importing about 200,000 bbls of products per day.

“You seem to be assuming that there is an agreement that the JV refinery will get SA oil below market prices and sell product to China below market prices.” Actually just the opposite. I expect the oil and the refined products to be priced based on some global benchmark. I assume China is making the investment for the sake of control and not to get the oil/products at a discount and may actually be paying a premium based on their capex investment.

And yes: producing more product internally will reduce demand elsewhere in the market place. But some folks keep ignoring the key issue I keep repeating: it’s a matter of controlling the oil/products. The 4+ billion bbls of oil run through that refinery for the next 30 years or so won’t be available to any other buyer. That may seem so important today. But in 15 or so years when perhaps the KSA is exporting much less than today? Same issue with the oil China owns in the ground in Angola. China might be selling some or all of that volume in the global market place because that’s where the best profit may be. But what happens when China prefers to take all that future production to China instead.

I’m not sure why this is so difficult to understand. Consider the US ban on exporting oil. Why the ban? Easy answer: to keep that oil out of the global market place. The refinery JV’s, long term purchase contracts and direct ownership of reserves in the ground by China et al are basically the same thing: banning that oil from the market place should China et al decides it’s in their best interest to do so. Perhaps folks are just giddy over the recent increase in US oil production and forget that we still have to buy a large percentage of our oil consumption on the open market. And that open market volume appears to be shrinking. Again, not terribly important now (as long as you don’t think a 300% increase in the price of oil has been important for the US economies). But in the future? What happens to the EU when more than half of the KSA production goes to internal consumption and to China? What happens to the US if China can tie up long term an increasing amount of Canadian oil/product production? I don’t consider these questions purely hypothetical. China has not been shy about showing how they view the long term dynamics. So why should we be comfortable ignoring those same dynamics? Because the US is producing more oil? Producing more oil yet paying $620 billion/year for that oil compared to the price tag of $210 billion we had just 10 years ago. And that’s with more oil available in the market place today than ever before. Again, the global economies may not be able to handle long term much higher oil prices then we see today. So in the future who gets the oil won’t necessarily be determined by who can bid the highest but who has control of the disposition of the oil/products. And for more than 10 years with many hundreds of $billions invested China has been securing that control.

And today the US does not control one bbl of oil from beyond its borders.

[ROCKMAN]

Here’s the latest cost estimate: “Crude supply from the $17-billion Manifa project will help the company to maintain its maximum production capacity of 12 million barrels day, without raising output beyond that level, Aramco said in an emailed statement. Manifa is the last of the so-called giant oil field discoveries in Saudi Arabia to begin operations. Its output will feed the Saudi Aramco Total Refining and Petrochemical Company (SATORP) refinery and two other facilities currently under construction, Jazan and Yanbu Aramco Sinopec Refining Company (YASREF).

The CGES revealed that estimates of investment intensity per peak daily barrel range from the ultra-cheap $2,500 (per peak daily barrel) for development of the Haradh III zone of the supergiant Ghawar oilfield to $10,000 for the massive Khurais et al development and finally $17,500 for the Manifa field, the most expensive development in Saudi Arabia

Manifa is one of the largest heavy crude oil increments ever undertaken, and it is considered as the fifth-largest oilfield in the world. Furthermore, the field’s geography- in shallow waters in the fragile ecology of the Arabian Gulf- requires unique, environmentally-friendly access solutions involving a novel causeway design linking drilling islands. The offshore oilfield, which is considered as the fifth-largest oilfield in the world, made up of rigs on manmade islands linked by causeways and bridges over the Gulf – is expected to produce 500,000 barrels of oil per day by July

[misterno]

Can someone answer this question?

KSA is exporting at the highest level in 12 yrs, then why is oil price still not coming down?

Also US production is all time high.

I don't understand.