More Information On Khursaniya Delay - Saudi Aramco Citing Materials Cost Spike As Problem

[hatrack]

EDIT

Aramco is seeking to add 1.2 million barrels a day of Arabian Light from the Khurais field by 2009, according to its website. The Shaybah field, in the Southeast desert known as the Empty Quarter, will produce 750,000 barrels a day by 2008 from 500,000 barrels a day. The Manifa project will add 900,000 barrels a day of heavy crude from fields in the Persian Gulf from mid-2011.

Saudi Arabia, like other Gulf oil producers, is implementing large-scale energy projects to boost crude oil and refining capacity to meet rising demand. Projects in the Middle East face delays because of higher raw material and labour costs. Kuwait boosted its budget last year for the 615,000 barrels-a-day al-Zour refinery to US$14.3 billion after international bids were double initial cost estimates.

PetroRabigh, a chemicals and refining complex being built by Saudi Aramco and Sumitomo Chemical Co, is expected to cost US$9.8 billion from a 2004 estimate of US$4.3 billion.

"The costs of raw materials, such as steel and cement, have increased,'' said Faisal Hasan, head of research at Kuwait-based Global Investment House. "Salaries and wages are definitely rising for these projects.'' Saudi Aramco has so far completed work on Khursaniyah's water injection facilities in preparation for oil production, the company said today. Oil production wells, trunk lines and pipelines have also been drilled, it said.

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http://www.bi-me.com/main.php?id=16191&t=1&c=33&cg=4

[GliderGuider]

1. The Law of Receding Horizons strikes again

This is why oil sands development will fall so far below expectations. When the economists say, "The higher price of oil allows lower grade developments to become profitable", they neglect to factor in (or admit) that the rising price of oil carries all other development costs along with it. Since lower grade developments have higher relative (and simetimes absolute) development costs to begin with, they remain unprofitable in perpetuity.

This is not rocket science.

[hatrack]

2. Tar Sands produced .9% of global oil supply in 2005, 1.3% in 2007

And that increase cost billions and billions of dollars, and was made in the face of obvious looming constrints in water and natural gas.

Unless they go nuclear (which will cost billions and billions more), I can't see how they'll hit the more optimistic projections, particularly in light of Natural Resources Canada's projections of a decline of up to 15% in Canadian gas production by the end of 2009.