Saudi: No Need to Boost Oil Output for 'Foreseeable Future'

[Strelnikov_]

Saudi: No Need to Boost Oil Output for 'Foreseeable Future'
by Karen Matusic
Tue, Aug 16, 2005

http://www.slb.com/news/story.cfm

Saudi Arabia sees no reason to boost its oil production for the "foreseeable future," because current record-high oil prices are the result of refinery tightness and geopolitical concerns and not the result of a crude shortfall, a Saudi oil source said Tuesday.

Daily production by Saudi Arabia, by far the world's largest exporter, will remain steady at about 9.5 million barrels a day in September, as demand from the kingdom's customers hasn't changed for "months," the source said.

. . .

Saudi Oil Minister Ali Naimi said in June that Saudi Arabia had been producing about 9.5 million barrels a day for more than a year, because refiners had turned down offers of incremental barrels.

. . .

But with most countries pumping at full throttle, only Saudi Arabia has significant spare capacity to meet any supply disruptions. The kingdom says it can pump another another 1.5 million barrels a day. Though Naimi and other Saudi oil officials say refiners have run out of capacity to process the heavy, high-sulfur crude the kingdom has in reserve, U.S. traders at big refineries said they could process more Saudi oil if the prices were lower.

SA has been claiming for the last year that they have increased production. Now they are saying that they have pumped at a steady state for the year. This could be an indication that SA has reached peak and is now making up excuses for the inability to increase production.

[Canuckistanian]

1. Why are all the industry fingers pointing at refineries?

Why can't they simply add more refineries? Last time I checked, oil companies are flushed with cash, and there's a pro-oil administration with all the means necessary to do anything they damn well please. And ecological concerns with building new refineries? Don't make me laugh.

So, what's the hold-up?

[Boomer]

2. not cost effective

I have a vague recollection of this issue having been discussed on DU before. If memory serves, building new refineries is prohibitively expensive and take many, many years. By which time the oil companies fully expect production to have dropped anyway, due to peak oil. So what's the point of spending the money?

[Canuckistanian]

6. But it's more cost effective when prices are high, no?

Here in Canada, there's a renewed interest in the tar sands, precisely because it's now cost effective to start using it.

And since most analysts are saying that gas prices aren't going to drop anytime soon, now's the time.

Besides, it ain't smart overpricing your way out of the market. If you make oil so expensive, people will just do without, and then where are the profits?

[Boomer]

7. Only if you can respond to the prices

A 5-10 year lag time does not allow for quick return of investment, so no, there's no incentive to spend enormous sums of money for refineries that won't be needed years from now.

As the productivity of oil wells falls -- and it WILL fall -- the strain on refineries will ease. A few years from now, they probably won't be running at capacity and the source of the shortage will have shifted.

[kestrel91316]

3. I hear tell that they are pumping as fast as they can, so it would be

silly to build more refineries. And besides, you can't just put those things up overnight, you know.

It's not the refineries. It's Peak Oil.

[Boomer]

8. Yup, production will be dropping soon

And then the price of oil will REALLY start hurting.

[Maru Kitteh]

4. TRANSLATION: We've hit peak output, can't increase because

from here, it just goes downhill. So glad I drive a compact.

[Imagevision]

5. This after visit from Cheney and George H.W. Bush

2 b sure!

[Strelnikov_]

9. Saudi Arabia To Boost Oil Production (April)

Saudi Arabia To Boost Oil Production
27 April 2005

http://english.aljazeera.net/NR/exeres/2AD53C02-545A-4354-ADD9-D01FDA7DB66E.htm

. . .

Saudi Arabia now pumps about 9.5 million barrels daily. If necessary, Saudi Arabia says it will eventually develop a capacity of 15mbpd.

At the meeting between US President George Bush and Saudi Arabia's Crown Prince Abd Allah bin Abd al-Aziz Al Saud in Crawford, Texas, White House National Security Adviser Stephen Hadley said the plan could be seen as positive news by financial markets.

"The problem in the oil market now is a perception that there is inadequate capacity," Hadley said. Reassurance that can be given to the market on available supply, he said, should "have a downward pressure on the price".

Bush pushed Abd Allah to help curb skyrocketing oil prices, and the White House expressed hope that the kingdom's plans would ease petrol prices.

. . .

So. I take it Ali Naimi's statement was an Arabic 'Bite Me' directed at the Chimp.