Monday, December 02, 2019

When the Saudis Can't Break Even on Oil...

Saudi Arabia is sitting atop the world's greatest reserves of light, "sweet" crude. That's the really valuable stuff you just pump out of the ground. No need to dig or boil it out. Doesn't have to be diluted, heated or pushed through pipelines at high pressures.

Saudi oil is pretty much the opposite of high-carbon, high-cost, low-value bitumen, the Athabasca sludge, the crap that Ignatieff boasted was the "beating heart of the Canadian economy for the 21st century." We chose not to construct refineries capable of processing bitumen, creating a foreign "buyers' market." In the global oil markets, we're the poor cousin.

We may be in the tar pit basement but we're not alone. Even the Saudis, with their great oil bounty, are losing money.

If the Saudis, with their low-cost, high-value conventional crude oil are losing money, what do we expect from high-cost, low-value, unconventional bitumen?


Trailblazer said...

Even sweet crude is having issues.


Purple library guy said...

That's an interesting clip, but it doesn't mean what you're saying and I don't think you really expect anyone to think so. What Petraeus means is that Saudi Arabia spends money like a swarm of drunken sailors and they're blowing those golden eggs faster than the goose can lay them. What bone Sawman means by plan 2030 is a bit more interesting; I think the Saudis see the writing on the wall, both the prospect of running out of oil and the prospect of the world moving away from oil, and they're trying to avoid a hard landing.
But neither of those things mean the Saudi national oil company itself is failing to make money right now; it's making stacks. Just, not enough to meet all the Saudi state's expenses of wars and decadence and lack of any real economy. IMO Alberta tar is usually not really commercially viable, but Saudi oil totally is.

Trailblazer said...

No doubt ARAMCO is making money.
However long term investors are becoming jittery.
Short term investors are what keeps the carbon economy alive, by hook or crook!


The Mound of Sound said...

Not quite, PLG. The Saudis originally imagined Aramco to be worth two trillion. When they moved to begin selling it off the market wasn't supporting anything near that value. Yes it makes money but not at the levels the Saudis need.

Northern PoV said...

Aramco makes oodles of $ ... at the moment.
The Aramco IPO problems relate to

1) the recent fireworks-celebration the Yemenis treated us all to
ie reminding people that the ME is a clusterf**k full of unsustainable phony countries & ruling elites that drunken Europeans created, and that could easily topple in the near future.

2) Buy & hold investors are fleeing fossil fuels, not buying them.

That said, a rational species would use only low-carbon-footprint ff (sweet crude) during the desperate race to avoid extinction.

Owen Gray said...

Oil is nearing the end of the road, Mound. But some of us cling to a delusion. It's the northern version of "The South shall rise again."

the salamander said...

.. quickly now, anyone..
- Name the top Three purchasers of Alberta diluted bitumen. If possible identify the delivery mode, route, general process, end use. Bonus points for any $$ breakdowns such as sell price, profit or subsidies, tax credits etc. Extra bonus points for identifying the recovered diluent value versus the actual Bitumen in the slurry.. seeing as that Bitumen is part of 96 % of Canada's supposed 'oil reserves'

My point is.. Jason Kenney & Trudeau must either know the answers off the top of their head.. or have a fact sheet on their forearm like Tom Brady or any NFL quarterback who flips it open in the huddle on receiving the play call from his offensive coordinator.. and lets the offense know their role. In reality, Kenney and Trudeau must know the top Ten, even Twenty purchasers.

The story goes that Alberta 'oil' in particular.. via its extraction and sale 'drives Canada's economy'.. yes, yes, there are other poorer provincial cousins chipping in a few paltry dollars here n there. Agriculture, Technology, Manufacturing, Tourism.. but seeing as British Columbia and The Maritimes are good only as 'tidewater' provinces.. good for a few lobster, farmed salmon, shellfish, herring.. they are deemed only truly suitable as exit points for dilbit & of course natural gas as LNG

Strangely we encounter oddities when consulting Statistics Canada data. One might say Alberta's 'oil patch' must therefore be the main driver of Alberta's economy.. seeing as it drives the entire country. 'All that wealth in the ground' as Trudeau remarked.. and 'energy superpower' promised Herr Harper.. But what if the facts say 2% of Canada's GDP is all the tar sands generates ? What then ?

One certainly hopes the total of subsidy, tax credits etc etc.. does not approach the $$'s that end up in our governments' general accounts.. that would be like 'buying your job' .. paying as much to get work.. as you get paid to work.. that would be ludicrous, idiocy, stupidity.. or some sort of vast grift & fraud executed by our elected public servants.. You would be charged, tried.. almost certainly convicted, just via the money trail and presumably do prison time or spend more time with your family..

Anonymous said...

Sal...........knows everything.