This is big…….

13 01 2016

Saudi Arabia state-owned oil firm Aramco slated for sale as crude prices tumble

Saudi Arabia is considering selling part of the giant state-owned Aramco oil company, with at least ten times the oil reserves of Exxon Mobil. Well……..  nobody really knows, because Aramco inexplicably revised its reserves numbers upwards by a factor of almost two in 1988.  Then, even though they’ve been pumping some 10 million barrels a day from their wells, the numbers just kept on creeping up, like magic…..

SAoilreserves

But if they’re selling, someone’s starting to feel the pinch of the oil price dropping like a stone. And who will buy?  With what money?  With Royal Bank of Scotland predicting $16 a barrel, and even worse, someone on the TV news last night talking about $10 (!), who in their right mind would buy Aramco, unless it was a fire sale?

From Peak Oil Barrel:

Saudi has the world’s largest oil field, Ghawar, and it is severely depleted. This 2004 paper, Selected Features of Giant Fields, Using Maps and Histograms, has a wealth of information on the discovery and depletion of giant oil and gas fields

Do the math, this 2004 chart says Ghawar started with 97 billion barrels of oil and was, in 2004, over 81% depleted. Of course the rest of Saudi is not that depleted. They have three fields that have been producing only a few years, Khurais, Manifa and Shaybah. These three fields, along with their other old giants, have enabled Saudi to keep production between 9 and 10 million barrels a day. But it is highly likely that they are about two thirds depleted.

Then, this just hit the news this morning:

Arch Coal, the second largest mining company in the US, filed for bankruptcy on Monday.

It is another blow for the ailing fossil fuel sector, as it struggles to adapt to environmental regulations dampening demand.

US coal production fell to 900 million short tons in 2015, the Energy Information Administration revealed on Friday, a 10% decline on the previous year.

Normally at this time of year, nothing much happens on economic fronts, but all this unraveling is a bit nerve wracking……  It’s easy to play up the idea that this is the beginning of the end of the fossil fuel era, yet it’s hard to say with any certainty that that’s not what’s happening…….

As I write, West Texas crude is trading at $30.50.

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11 responses

13 01 2016
davekimble3

Assuming that Aramco is “worth” $20 trillion, 1% of it would be worth $200 billion, so it is very unlikely there would be more than a handful of those sized stakes sold. This would leave the vast majority still in Saudi hands, so nothing much would change in terms of control.

What would change is the same as applies to all privatisations – the asset would no longer be owned by the nation, but would be owned by individuals and opaque corporate structures.

Anyway, nothing is going to happen without some organisation coming in and doing an IPO for the proposal, including an audit of the assets – something which is badly needed, and something which the Saudi royal family definitely wants to keep hidden.

So I don’t think it will ever happen, and Prince whatsit is only saying ‘we are not afraid of an audit’, when in fact that is precisely what he is afraid of.

13 01 2016
abundantdescent

The Saudis need to refinance!? Looking for a sucker? I never xpected this. Sheesh. What next?

13 01 2016
mikestasse

Investors intending to take out insurance on Saudi Arabian bonds would have to pay as much as they do with troubled Portugal. The price of insuring Riyadh’s debt has more than doubled in the past 12 months as oil prices continue to collapse, Bloomberg reports.
With crude prices at 12-year lows, the Kingdom continues to bankroll a war in Yemen. Last year, Saudi Arabia sold bonds for the first time since 2007 to cover the budget deficit.

The country’s net foreign assets dropped to $627 billion in 10 consecutive months through November. This was the longest losing streak since 2006.

“They have huge reserves and extremely low debt, but the question is, how long are oil prices going to stay at this level?” Anthony Simond, an investment manager at London-based Aberdeen Asset Management told Bloomberg.

On Tuesday, Brent benchmark fell below $31 per barrel for the first time since 2004, trading as low as $30.50. The prices rebounded in intraday trading to almost $32; however, some analysts say there is no bottom in sight for the oil market. On Tuesday, Standard Chartered said that crude was heading for $10 per barrel.

https://www.rt.com/business/328649-saudi-arabia-debt-oil/

13 01 2016
mikestasse

Saudi Arabia could be bankrupt by 2020 – IMF

The Middle East’s biggest economy, Saudi Arabia may run out of financial assets within the next five years if the government maintains its current policies, warns the International Monetary Fund.
Saudi Arabia is expected to run a budget deficit of 21.6 percent in 2015 and 19.4 percent in 2016, according the IMF’s latest regional economic outlook.

https://www.rt.com/business/319465-saudi-bankrupt-projection-imf/

13 01 2016
Mark

The thing that is odd with all that is going on with the oil industry at the moment is we keep hearing that the oil price is plummeting.
The US is paying around 80 cents a litre for petrol and the price of gas is also falling.

But the price of petrol has not fallen to the same degree in our little country and the price of gas on the east coast is expected to double because of the export of CSG which we are told is to match the world parity price as we are now part of the world market.

If we were really part of the world market now would not the cost of a litre of LPG at least halve in price to match world parity or have I missed something.

Some years ago WA LPG was selling for under 20cents litre delivered to Korean and other Asian customers but it was supposedly not possible to sell on the eastern seaboard as there was no market and it was not financially viable. At that time we were paying 60 cents a litre for LPG for cars, when in fact we could have been paying around 40 cents.

It is true that the $AS has dropped against the $US at this time, but in 2011/12 it was over par, and yet we were still paying roughly the same price as we are today with almost the same price per barrel.
The then high dollar is one of the reasons used to explain the offshoring of jobs, but the loss is continuing with our now discounted dollar.

13 01 2016
Graham

From desert Arabs to desert Arabs in 4 generations

13 01 2016
rj

This signals a bottom and makes clear the endgame of the recent price rout.

15 01 2016
Terry

It is another blow for the ailing fossil fuel sector, as it struggles to adapt to environmental regulations dampening demand.

As it says in a book that I used to rate quite highly, “Jesus Wept”!

Regulations are the cause of dampening demand?? Effing wrong about that mate; it is the “Average Punter” deciding that the future of the planet is more important.

16 01 2016
mikestasse

The “Average Punter” might be deciding that the future of the planet is more important, is I think a smaller part of the picture than the fact we have started along the path of Nicole Foss’ deflationary death spiral.

People in over their heads in debts simply cannot afford to continue their senseless consumption/spending……

16 01 2016
mikestasse

The ‘Real’ Price Of Oil Is Below $17
“You see a big destruction in the income of the oil and commodity producers,” exclaims an analyst but, as Bloomberg notes, while oil prices flashing across traders’ terminals are at the lowest in a decade, in real terms the collapse is considerably deeper. Adjusted for inflation, WTI is its lowest since 2002 and worse still Saudi Light Crude is trading at below $17 (in 1998 dollar terms) – the lowest since the 1980s… Slumping prices are a critical signal that the boom in lending in China is “unwinding,” according to Adair Turner, chairman of the Institute for New Economic Thinking.

17 01 2016
This is bigger……. | Damn the Matrix

[…] That was big………  but this is bigger. […]

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