Posted on 09/23/2006 11:00:13 AM PDT by jdm
SAUDI Arabia, the world’s largest oil producer, is planning to boost future production capacity by 1.5m barrels a day to counter potential supply disruptions expected from Iran, Venezuela and Iraq. The Kingdom, which owns 25% of the world’s proven reserves, has previously said production capacity would be sustained at 12m barrels. But in a private briefing to investment bankers on Thursday, executives at Lehman Brothers in London were told by representatives of the Kingdom that the revised figure for production will be up to 13.5m barrels a day by 2011.
They were presented with an “updated assessment” document entitled Saudi Arabia’s Strategic Energy Initiative: Safeguarding Against Supply Disruptions which has been prompted by “regional conflict and high oil prices”.
The Saudi oil authorities, under Ali al-Naimi, are embarking on $30bn (E44bn, $56bn) of downstream expansion projects over the coming years and are talking to investment banks competing for the project finance work. Saudi oil advisers plan to meet executives from other banks this week.
The higher-than-expected oil capacity will come on stream from three oil fields: Munifa, with 900,000 extra barrels per day, and Shaybah and an unconfirmed third field contributing 300,000 extra barrels each. The increase in production has been prompted by geopolitical tensions. The briefing document, which has been seen by The Business, says: “In light of regional conflict and high oil prices, the Saudi leadership has recently issued a directive to decouple energy and foreign policy, and to remove all political considerations from oil production decisions.
“To increase production so as to mitigate against effects of major supply disruptions from four key exporters of concern: Iran: threats to use oil as a political weapon; possibility of war with US. Venezuela: Threats to use oil as political weapon. Nigeria: Continuing unrest. Iraq: Successful attacks against oil infrastructure and likelihood of civil war.”
New information contained in the briefing says that by June 2007 Saudi Arabia is expected to have enough spare capacity to offset all Iranian exports. By 2009/10 the goal is to satisfy global demand during a potential disruption from Iran and one of the three other major Opec exporters.
Saudi Arabia is one of the few countries which has the means to increase production capacity. Iran and Venezuela lack capital for expansion, face increasing domestic demand and their political environments precludes foreign investment.
Iran currently exports between 2.2m to 2.4m barrels of oil a day. Saudi Arabia exports nearly four times as much, approximately 8.5m and its spare capacity is 1.8m-2m.
Venezeula’s president Hugo Chavez has nationalised privately owned oil fields and unilaterally rewritten contracts requiring foreign oil companies to pay the state higher royalties than they originally agreed. He has also threatened to use the oil as a weapon against the US.
Nigeria and Iraq lack the capital, security and stability necessary for capacity expansion.
Saboteurs have dented oil production in Nigeria. Oil production is down by around 550,000 barrels a day, because members of the Movement for the Emancipation of the Niger Delta seek to “emancipate” the oil-rich region from what it sees as exploitative foreign oil companies. It wants to return the country’s oil wealth to the people and is attacking pipelines and kidnapping foreign oil workers.
In Iraq, oil production is at least 500,000 barrels a day lower than the 2m produced when Saddam Hussein was in power. The US and Iraqi military find it hard to stop saboteurs blowing up pipelines after they are repaired.
Saudi Arabia has eight refineries with a combined crude throughput capacity of 2.1m barrels a day and about 1.75m of overseas refining capacity. The Kingdom plans to upgrade and expand the Rabigh refinery by 425,000 barrels a day.
It will expand its refining capacity in North America, building two new domestic and three new overseas refineries in the next five years creating the world’s largest refinery.
Some in the oil industry warn Saudi Arabia’s targets are overambitious – a number of variables stand between it setting bold production goals and achieving them. But in the past three years, Saudi Aramco, the state-owned oil company, has increased its sustained capacity by 800,000 barrels a day. And it is investing heavily – between 2004 and 2009, the Saudi government will have spent more than $17bn (£9bn, e13.3bn) to increase its upstream capacity.
Hmmm...when do the festivities begin?
Iraq's production 1.5 million barrels per day, I didn't know that.
The Saudi's have no desire to see Iran dominate the region.
I'm simply wondering if we have a plan in effect to help the Iranian people take out their garbage.
More likely, the Saudi's are waiting for T. Boone Pickens' $100 prophecy...ya think?
They may develop the capacity and then turn off some of the spigots to control price as on the other, competing, thread.
I expect there are many plans. Probably some good, probably some not so good. We'll have to wait and see.
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