The Saudis announce they will produce more to help out the world, but the Globe and Mail says: "Saudi Arabia to the rescue! Or maybe not: Not everyone is celebrating the news over the weekend that the world's largest oil exporter will open its taps to supply the world with the oil it so desperately needs these days. According to these skeptics, Saudi Arabia has made such promises before – but, curiously, production never seems to rise." He reports:
Jerome a Paris, writing on The Oil Drum: Europe blog, catalogued some of the more recent news items that highlight production growth, including Saudi promises in August 2004, April 2005, July 2007 and September 2007. [snip]
“If you're wondering how it's possible to announce increases every other year, and still produce the same, it's simple: there are (more discreet) production decreases along the way.”
The devil is in the production details of Saudi Arabia, at The Oil Drum
Yesterday we have heard announcements by Ali-Naimi, the oil minister of Saudi Arabia, regarding future production capacity increments. We are to believe that Saudi Arabia will produce 12.5 million barrels per day at the end of 2009 and a potential 15 million barrels per day in the coming decade. How should such announcements be valued? Is this achievable? What is meant with production capacity? What type of liquids is Saudi Arabia referring to when talking about oil? In this post I attempt to answer these questions.
Figure 1 - Saudi Arabian production of crude oil (excluding lease condensates) & Natural Gas Liquids (including lease condensates) from January 2005 to May 2008
Setting the analytical scene - production capacity vs production and crude oil versus all liquids
When Saudi Arabia announces production targets it isn't using a clear cut definition of oil. Saudi Arabia produces two groups of hydrocarbons: crude oil and natural gas liquids. Natural Gas Liquids (NGL) are a group of hydrocarbons that fall between natural gas and oil - which consist amongst others of ethane (C2H6), propane (C3H8) and butane (C4H10).
The important difference is that crude oil can be refined into gasoline, diesel and kerosene while NGL's cannot. These are mainly used as feedstock for the chemical industry. Therefore when Saudi Arabia increases crude oil it can influence oil markets heavily, but if it increases NGL's the impact is much smaller.
Point one to watch for is therefore whether production announcements refer to crude oil or to all liquids. (continue reading at The OIl Drum)
Pretty sneaky. Some things are just so obvious. Like the Saudis are not really our friends, the price of crude stays high, they keep making billions, while we wait on our own Congress to allow American companies to drill here on our own land. Also like the global warming scam.
NASA
Scientists discover REAL cause of Global Warming is SUN--not
CO2!!!
Imagine that.
The important difference is that crude oil can be refined into gasoline, diesel and kerosene while NGL's cannot. These are mainly used as feedstock for the chemical industry. Nice difference.
Posted by: Diesel to liquids | January 29, 2009 at 05:59 AM
The House of Saud are savvy negotiators......what have we promised them for this gesture? We have already promised Israel, and the elimination of all Christians from the Middle-East...what now? More powerful chairs at US Universities? More madrassas and Islamic centres on American soil?
The mind boggles.
Posted by: Michael | June 23, 2008 at 06:19 PM
Hi Debbie. I heard about this tidbit early this morning on Fox News.
I wonder what sneaky deal they pulled behind the scenes that they are not telling the media and American people.
Sadly we Americans cannot even trust our own government anymore.
Posted by: Layla | June 23, 2008 at 12:40 PM