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Saudi Aramco IPO

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Re: Saudi Aramco IPO

Unread postby Plantagenet » Thu 04 Apr 2019, 17:47:19

you apparently didn't bother to read anything I wrote.


Thats a silly thing to say considering that I directly quoted from what you wrote in your post, wrote that I agreed with it, and then made further comments on the same subject.

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Re: Saudi Aramco IPO

Unread postby evilgenius » Sat 06 Apr 2019, 13:02:05

What happens if there is a revolution in Saudi Arabia, and the overall philosophy behind managing production changes? How far can you go, like if the revolution were only confined to the caste of characters within the Royal Family, before things got too far out of whack and the reserve picture had to be redrawn? I'm thinking about the kinds of pressure they would be under if American production actually did drop off dramatically, and they were called upon to take up the slack. They might feel they had to keep up appearances, as a threat to be a swing producer that can keep the rest of the oil producing countries in check. Is it possible to run Ghawar hard, and put it away wet, or wouldn't that make the picture look bleak, perhaps bleaker than it really was? I ask this because I'm trying to get a handle on the implications regarding war, if the US stumbles in the coming decade either with its shale position or its adoption of electric vehicles.
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Re: Saudi Aramco IPO

Unread postby Plantagenet » Sat 06 Apr 2019, 23:53:13

evilgenius wrote:What happens if there is a revolution in Saudi Arabia, and the overall philosophy behind managing production changes? .... Is it possible to run Ghawar hard, and put it away wet


Thats the million dollar question. Aramco has been extraordinarily secretive about their oil production capacity in the past, so the information they've released for their Bond issue is very very important in understanding the situation with regard to Aramco's oil reserves and production potential. According to the independent review, Ghawar at this time can produce a maximum of ca. 3.8 million barrels per day. Thats down over 20% from prior estimates of Ghawar production.

evilgenius wrote:....wouldn't that make the picture look bleak, perhaps bleaker than it really was? I ask this because I'm trying to get a handle on the implications regarding war, if the US stumbles in the coming decade either with its shale position or its adoption of electric vehicles.


If the production from Ghawar continues to decline, KSA would have to make it up with production from other fields. So far they've been able to do it.....but at some point they won't be able to keep it up.

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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Sun 07 Apr 2019, 10:33:13

Here is an article written by Michael Lynch for Forbes that states exactly what I had suggested with regards to Ghawar and the MSC.

https://www.forbes.com/sites/michaellynch/2019/04/05/declining-production-at-saudi-arabias-largest-oil-field-is-not-cause-for-concern/#19276aa2001b

Why did Ghawar’s production decline? Since the field still has 48 billion barrels of proved reserves (according to Aramco’s numbers), maintaining 5 mb/d should be technically easy. However, the field is not a stand-alone operation; Aramco has a choice of investments among numerous fields, and explicitly chose to add capacity elsewhere, as proven by the fact that the national capacity is 12 mb/d, showing no signs of decline.
Why invest in other fields instead of Ghawar? The economically rational explanations would be that the company wanted to exploit more favorable pricing for different crude qualities or that additional capacity in other fields had become cheaper because of geological, engineering, or geographical reasons.
 
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Re: Saudi Aramco IPO

Unread postby Plantagenet » Sun 07 Apr 2019, 21:20:12

Here is an article written by Michael Lynch for Forbes that states exactly what I had suggested with regards to Ghawar and the MSC.

https://www.forbes.com/sites/michaellynch/2019/04/05/declining-production-at-saudi-arabias-largest-oil-field-is-not-cause-for-concern/#19276aa2001b

Why did Ghawar’s production decline? Aramco ....chose to add capacity elsewhere


Both you and Michael Lynch seem unaware of the fact that Saudi Aramco actually did invest new money into Ghawar---they started a new CO2 injection program there in 2015 in an attempt to maintain oil production at Ghawar.

However, in spite of this new program and the increased spending on Ghawar, the recent independent review of Aramco's oil fields shows that oil production has fallen at Ghawar to the point that its now down over 20% from its peak a few years ago.

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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Mon 08 Apr 2019, 11:15:37

Both you and Michael Lynch seem unaware of the fact that Saudi Aramco actually did invest new money into Ghawar---they started a new CO2 injection program there in 2015 in an attempt to maintain oil production at Ghawar.


actually I'm fully aware of that program as I reported on it in one of the threads here a year ago. It was a test program involving a very small area near Haradh. Aramco was quite clear that the whole idea of the test program was to look at means of carbon storage through CO2 injection and that they were also interested in seeing what improvements might be made with respect to recovery but that was not the main goal. It was a test program not a full on tertiary recovery program as you seem to want to infer and it's main goal was carbon capture not tertiary recovery.

However, in spite of this new program and the increased spending on Ghawar, the recent independent review of Aramco's oil fields shows that oil production has fallen at Ghawar to the point that its now down over 20% from its peak a few years ago.


and as both Mike and I point out this drop in production is very likely planned as a means of dealing with MSC balanced over many fields with differing liquid properties.

Lynch pointed out something that is very true. Having 48 Gbbls of reserves left means there should be no problem whatsoever producing at 5 MMB/d especially if there is sufficient water and gas handling capacity. A general industry rule of thumb is to be careful not to strain a reservoir no more than 10% of reserves should be produced per year. 5 MMbbl/d is about 3% of total remaining reserves.
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Re: Saudi Aramco IPO

Unread postby Plantagenet » Mon 08 Apr 2019, 17:24:17

....carbon storage through CO2 injection....


I know math isn't your strong suit, but think about this for a second. If Aramco finds a natural CO2 reservoir and they drill it and produce it and inject that CO2 into an oil reservoir as part of an EOR project, the net amount of carbon sequestration is zero, because the CO2 used in the EOR project would never have been produced if not for the EOR project.

Furthermore, many studies have already shown that CO2 EOR projects, even those where the CO2 is recovered from factories etc. (which isn't what KSA is doing), accomplish no carbon sequestion, and usually result in MORE CO2 emissions.

Why is that you might wonder? Well, let me explain it to you.

Lets see how you are on chemistry......do you know that oil is a hydrocarbon? What do you think happens when oil is brought into contact with CO2?

Oil is immiscible in water....thats means it can't dissolve in water so during a water flood the oil is pushed ahead of the rising water line. However, CO2 will DISSOLVE in oil. That means the oil produced as a consequence of a CO2 EOR project contains a lot of dissolved CO2, which is then released during storage, refining, etc. Even more CO2 comes up with the produced oil. The net CO2 sequestion is about zero.

So CO2 EOR projects don't effectively sequester CO2---something everyone in the industry has known for decades... except you apparently.

no-CO2-sequestion-in-enhanced-oil-recovery

Furthermore.....in spite of your dissembling the CO2 EOR project carried out in part of Ghawar clearly did have enhanced oil recovery as a goal. I quote from a report on the project: Saudi Aramco’s first test of using carbon dioxide (CO2) injection to extend the life of a field....

Fast Start for First Saudi CO2 EOR Project

Read the sentence I quote above in bold font. It clearly says the CO2 EOR project was a test of using CO2 in an EOR program to extend the life of Ghawar. And at first it seemed to work well....except that the part of Ghawar field where they were testing had a 98% water cut.....so boosting oil production by four times just means they got it down to a 90% water cut---apparently not enough to make it worthwhile to expand the expensive CO2 EOR program.

You and Michael Lynch are not allowed your own set of facts. Your claim that Ghawar's falling rate of oil production would be reversed if only they spent some money on more drilling and modern EOR recovery methods ignores the fact that Aramco already is doing more drilling and spending more money on a modern CO2 EOR project---and it didn't work well enough to warrant expanding the program.

there should be no problem whatsoever producing at 5 MMB/d ....


Except there is.

Lets look at the facts.

The field has been producing for over half a century now. Parts of Ghawar now have a 98% water cut. Thats extremely high. That means the Saudis can drill and do CO2 EOR all they want, and they still aren't going to get much oil out of those parts of Ghawar.

It isn't too hard to figure that as parts of Ghawar are depleted of oil, the overall production capacity will fall. And thats just what has been reported.

An independent review of Saudi Aramco's oil production facilities just released as part of their current bond proposal reports that the actual current maximum production rate possible at Ghawar today is only 3.8 MMB/d.....and thats far below the number you put forward just above and down more than 20% from estimates of Ghawars production capacity made by the EIA and other analysts just a few years ago.

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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Mon 08 Apr 2019, 18:31:41

You and Michael Lynch are not allowed your own set of facts. Your claim that Ghawar's falling rate of oil production would be reversed if only they spent some money on more drilling and modern EOR recovery methods ignores the fact that Aramco already is doing more drilling and spending more money on a modern CO2 EOR project---and it didn't work well enough to warrant expanding the program.


God save us from your proselytization about a subject you do not seem to understand. The project was conducted at Uthamaniyah. They purposefully went to an area of Ghawar that was almost completely depleted in order to properly test both CO2 sequestration rates as well to evaluate EOR potential. The rest of the field is not 98% water cut, pretty hard to have 48 billion bbls of oil remaining if it was. Here is what Aramco said about the CCS - EOR evaluation program back in 2013 when it was in the planning stages. It speaks to why they conducted it in the first place.

Saudi Aramco has been actively engaged in carbon management initiatives within the oil industry. A comprehensive research framework has been developed for CCS, including CO2 capture (mobile capture, oxy-fuel combustion, and chemical-looping combustion), storage, and EOR technologies (Al-Meshari, 2011). EOR is of particular interest to Saudi Aramco as it can be a win-win solution to the challenges of rising world energy demand and climate change, by increasing oil production while reducing CO2 emissions. Saudi Aramco is working on the first CO2-EOR demonstration project in Saudi Arabia. This project will be implemented in a small part of the 'Uthmaniyah area of the giant Ghawar field, which was discovered in 1948 and started to produce oil in 1951


There were only four producing wells so doubling the oil production in an area that was nearly depleted is pretty significant. Aramco has not made any statements as to their future plans for tertiary recovery in any of their fields. IN fact they said back when the project was in it's planning stages:

While Saudi Arabia has abundant conventional oil reserves and EOR is not required at production scale for decades to come, the main objective of the CO2-EOR project is to assess the applicability to sequester CO2 in a mature zone within an oil reservoir. [/quote]

You and Michael Lynch are not allowed your own set of facts. Your claim that Ghawar's falling rate of oil production would be reversed if only they spent some money on more drilling and modern EOR recovery methods ignores the fact that Aramco already is doing more drilling and spending more money on a modern CO2 EOR project---and it didn't work well enough to warrant expanding the program.


Neither of us said anything whatsoever about spending money on EOR in Ghawar. The four wells in the test program were not done to manage production at Ghawar, the increase is so small as to not be noticeable. The type of spending that is needed to have any impact is additional laterals in MRC wells. As various laterals decrease in oil production they need to be shutoff and a new lateral drilled with an expandible liner. Choosing not to do that results in lower production. You suggest the CO2 project was done with the intention of increasing Ghawar production and nowhere has ARAMCO stated that, in fact just trying to imagine that 4 wells in a depleted part of the field could make any difference whatsoever is ridiculous.

The field has been producing for over half a century now. Parts of Ghawar now have a 98% water cut. Thats extremely high. That means the Saudis can drill and do CO2 EOR all they want, and they still aren't going to get much oil out of those parts of Ghawar.

It isn't too hard to figure that as parts of Ghawar are depleted of oil, the overall production capacity will fall. And thats just what has been reported.


Except the 48 billion bbls of oil remaining are not in the depleted parts of Ghawar. What part of 48 billion bbls reserves do you not understand?

An independent review of Saudi Aramco's oil production facilities just released as part of their current bond proposal reports that the actual current maximum production rate possible at Ghawar today is only 3.8 MMB/d.....and thats far below the number you put forward just above and down more than 20% from estimates of Ghawars production capacity made by the EIA and other analysts just a few years ago.


Wrong. What they pointed to was the MSC (maximum spare capacity) which is the level the field can be produced at without additional investment for the next few months. It is not the same thing as the maximum possible production rate. IF you don't understand that concept then there is really no point continuing your argument as you are just wrong. Find us someplace in the prospectus where it says that is the maximum rate that Ghawar can ever be produced at....good luck with that as it doesn't exist. I suspect you haven't bothered to read the prospectus or any of the comments I posted above from that document. Aramco makes it very clear that they have to manage to the MSC number they have been given by the government, hence every one of their fields has managed production to some extent.
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Re: Saudi Aramco IPO

Unread postby Plantagenet » Mon 08 Apr 2019, 21:00:10

The type of spending that is needed .... is additional laterals in MRC wells.


Hahahaahahah! :-D :) :lol: :lol: Do you really think the armies of engineers and consultants who work for Saudi Aramco haven’t thought of that?

Back here in the real world Aramco has been drilling and completing new MRC wells at Ghawar more or less continuously since at least 2004. AND Satellite surveys show the drilling activity in the Ghawar field has recently increased, suggesting Aramco may be trying to slow the production decline.

However, in spite of all the new drilling, production has now fallen more than 20% at Ghawar.

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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Mon 08 Apr 2019, 22:47:05

Hahahaahahah! :-D :) :lol: :lol: Do you really think the armies of engineers and consultants who work for Saudi Aramco haven’t thought of that?

Back here in the real world Aramco has been drilling and completing new MRC wells at Ghawar more or less continuously since at least 2004. AND Satellite surveys show the drilling activity in the Ghawar field has recently increased, suggesting Aramco may be trying to slow the production decline.

However, in spite of all the new drilling, production has now fallen more than 20% at Ghawar.


Are you actually that dense that you don't understand how this works? They were continually drilling new laterals from the MRC wells in order to maintain production since wells meet their limits through time. That is why I said that in order to increase production they would have to spend more capital and drill more laterals. What is not known is what pace that drilling has occurred at given the last report was on Haradh III which was completed back in 2010. It is entirely possible that they have decided to slow down drilling of additional laterals or have left some drilled and uncompleted.

Please show us this new satellite survey showing drilling has increased. The last time someone brought up that nonsense of trying to count rigs was a decade ago. IN 2015 Bernstein research reported their results based on images taken in 2004 to 2007. Nothing to do with recent activity. Plus from a satellite picture, it would be impossible to tell the difference between a rig out there drilling a new lateral from an existing well pad versus a rig out there doing a normal workover. Without detailed specifics on what the rigs were doing, how many laterals had been completed etc. you would have no idea whatsoever what level of production they were maintaining.
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Re: Saudi Aramco IPO

Unread postby Plantagenet » Mon 08 Apr 2019, 23:33:28

They were continually drilling new laterals from the MRC wells in order to maintain production .....


Yes, thats what I've just explained to you twice now. I'm glad to see you got it this time.

Your claim that all they need to do to boost production at Ghawar is start drilling MRC wells is silly, since they have been drilling for decades, and yet it hasn't stopped a significant fall in production revealed in the recent bond report.

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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Tue 09 Apr 2019, 09:42:30

Yes, thats what I've just explained to you twice now. I'm glad to see you got it this time.


don't be a moron...the first time it was mentioned in this "discussion" was by me up thread and the first time it was brought up on this site was by me back over a decade ago when the first wells were being drilled. Give your head a shake. :roll:

The four wells in the test program were not done to manage production at Ghawar, the increase is so small as to not be noticeable. The type of spending that is needed to have any impact is additional laterals in MRC wells. As various laterals decrease in oil production they need to be shutoff and a new lateral drilled with an expandible liner.


then you repeated what I had said. Either you have a very low attention span or a low level of literacy or perhaps both.

Your claim that all they need to do to boost production at Ghawar is start drilling MRC wells is silly, since they have been drilling for decades, and yet it hasn't stopped a significant fall in production revealed in the recent bond report.


Let me explain this once again as you are having a hard time understanding it would appear. If there are 200 separate laterals that are shut-in downhole with SMART completions each year then 200 separate new laterals with expandable liners have to be drilled in order to replace production. If they only drilled 100 new laterals production would drop, if they drilled no new laterals production would drop further. Can you demonstrate how many laterals they drilled and completed in the last couple of years? Can you even demonstrate that they completed any new laterals in that time period? Can you demonstrate they did anything whatsoever to bring on new production in Ghawar in the past year? Of course not. But apparently, that doesn't stop you from making unsubstantiated claims.
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Re: Saudi Aramco IPO

Unread postby Plantagenet » Tue 09 Apr 2019, 10:44:14

......


Well, you made it maybe five posts that time before starting in with the childish ad homs.

Have a great day, little one.

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Re: Saudi Aramco IPO

Unread postby Plantagenet » Tue 09 Apr 2019, 19:51:09

The ARAMCO Bond sale is a tremendous success. The bidding process is way oversubscribed. There are 10x as many bids as bonds to sell

the-monster-saudi-aramco-bond-offering-may-have-just-doomed-its-ipo

Ironically, the tremendous success of the Aramco bond offering may lead to the cancellation of the much-delayed IPO. Now that Saudi Aramco has demonstrated that it can raise huge amounts of money by offering bonds, why go to all the hassle of doing the IPO?

If Aramco (or Prince Muhammad and the Saudi Royal Family) decide they want more cash for infrastructure or other purposes, it would be easier for them to just issue another bond.

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Re: Saudi Aramco IPO

Unread postby Plantagenet » Thu 11 Apr 2019, 13:45:17

Here's an interesting take on the new MPC estimate of 3.5 million barrels/day of oil production for Ghawar, from a story reposted on the PeakOil.com news page:

ghawar-nightmare

This person is claiming that the new D & M review of the MPC for Ghawar and other Saudi oilfields isn't actually an estimate of the current MPC for Ghawar and the other Saudi Oilfields, but instead is an estimate of the average MPC over the next 50 years.

In this case the numbers in the D & M report would just be the results of numerical model runs rather then actually being the current MPC numbers that the D & M report says they are.

It really amazes me when people don't understand what they read. I see this so often. Many people see what they want to see---their wires are crossed somehow so they don't understand what the words they are reading actually say.

The D & M report clearly states the MPC numbers for Ghawar are the best estimate of the current actual number, reflecting the current actual condition of the oilfield. Its clearly not a number from a numerical model projecting production five decades into the future because the D & M report never says that.

Its D & M's best estimate of the current MPC for Ghawar.

And its interesting that its more than 20% lower then MPC estimates for Ghawar made just a few years ago.

The D & M independent review therefore implies that production at Ghawar has now fallen significantly from its peak.

How hard is that to understand? Just take an honest look at the data.

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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Thu 11 Apr 2019, 16:30:15

well first off it isn't MPC it is MSC...maximum spare capacity. The number is set by the government for the whole country and it is up to Aramco to stick to it by moving capacity around amongst the fields.

from the prospectus

MSC refers to the average maximum number of barrels per day of crude oil that can be produced for one year during any future planning period, after taking into account all planned capital expenditures and maintenance, repair and operating costs, and after being given three months to make operational adjustments. The Company incurs substantial costs to maintain MSC and, although the Company has historically utilised a significant amount of this spare capacity, there can be no assurance that it will do so in the future. In addition, the Government has decided in the past and may in the future decide to increase MSC.


and

The Company actively manages its prolific reserves base in accordance with the Kingdom’s laws and regulations to maximise long-term value while optimising ultimate recovery from its fields. Because of the size and number of its fields and MSC, the Company is able to maintain its desired level of overall production by tapping into new reservoirs when required to improve long term value through portfolio capacity optimisation. This approach, which differs from the typical industry practice of maximising production rates per field, is more capital efficient given the nature of the resources available and leads to more stable production and higher ultimate oil recoveries.


Furthermore, the Company’s MSC and integrated logistics network allow it to vary crude oil production, which combined with their compatibility with global refining systems, provides the Company with a unique ability to respond to changes in demand for the Company’s crude oil grades.


Bottom line is the MSC applies for a one year period, Aramco has the ability to move around its production from field to field in order to maximize recovery as well as take advantage of changing demand for various crude types.
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Re: Saudi Aramco IPO

Unread postby Plantagenet » Thu 11 Apr 2019, 17:46:16

it isn't MPC it is MSC...maximum spare capacity.


I know all these acronyms can be confusing, but nonetheless it is highly amusing when someone gets on a high horse and pretends to be an expert on a topic then makes a boneheaded error.

Actually MSC stands for maximum SUSTAINABLE capacity.

:lol: :-D :razz:

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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Thu 11 Apr 2019, 18:23:56

I know all these acronyms can be confusing, but nonetheless it is highly amusing when someone gets on a high horse and pretends to be an expert on a topic then makes a boneheaded error.


You were the one thinking it was MPC (an acronym not ever mentioned in the prospectus). Pot meet kettle. :roll:
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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Thu 11 Apr 2019, 18:40:55

and I would add that the acronym MSC which is used continuously in the document is not defined as Maximum Sustainable Capacity. Someone may have decided thats what it means but the prospectus does not say that. What it does say is

MSC ....The average maximum number of barrels per day of crude oil that can be produced for one year during any future planning period, after taking into account all planned capital expenditures and maintenance, repair and operating costs, and after being given three months to make operational adjustments.

this is in effect the definition of total spare capacity used by others

what ARAMCO meant exactly by MSC may be up for question, what isn't up for question is they did not use the acronym MPC which in the oil and gas world is used interchangeably with Marathon Petroleum Corporation.
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Re: Saudi Aramco IPO

Unread postby Plantagenet » Fri 12 Apr 2019, 00:32:50

... the acronym MSC which is used continuously in the document is not defined as Maximum Sustainable Capacity.....


It was amusing when you first demonstrated your ignorance of oilfield terminology by incorrectly defining what MSC is.

Its even funnier now that you are insisting on making the same mistake even after the facts have been explained to you. :lol: :P :-D :) 8) :razz: :twisted: :roll:

----------------

Look---I'll help you out. Check out this glossary of common acronyms used in the oil biz.

Check the "petroleum engineering" section of the glossary. There you'll find MSC is an acronym for Maximum Sustainable Capacity.....not Maximum "Spare" Capacity as you are claiming. Try to be sensible and accept reality, OK? Its not a big deal that you've made a mistake---everybody makes mistakes. But for once demonstrate that you are capable of acting like a grown up. Please try to acknowledge reality this once.

MSC is the acronym for maximum sustainable capacity

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