From the speech from the Saudi Arabian oil minister Ali Ai-Naimi the most senior executive person in the world’s largest oil exporter at APPEA.
Saudi Arabia ‘Optimistic’ About New Oil Finds
Clichés on the benefits of developing good trade ties with Australia. Nothing on US sanctions squeezing Iranian production. Not a bean on India buying Iran’s oil with gold. And silence on the threat of a potential blockade of the Persian Gulf.
Ali Ai-Naimi also spent a surprising amount of time talking up renewable energy.
But what about how Saudi Arabia planned to raise its production levels?
The Saudis forever talk about increasing production. They claim they have spare capacity of a few million barrels a day. When the world uses around 90 million barrels a day that much spare capacity would really take the heat out of the oil price.
But for all the talk it’s never happened. How can we believe they have this spare capacity? And how do they plan to increase production from ageing oil fields in the future?
This was the good part of the speech. We heard how Saudi Arabia is investing in technological improvements. They have increased their brain trust by employing three times as many scientists and have increased collaboration with Australian Universities. They have new seismic data and other geophysical information. That could bear fruit in the long-term.
But what about now?
Here’s what al Naimi said:
‘We are targeting the discovery of significant additional oil resources within the Kingdom… We have also initiated a program to explore frontier areas within Saudi Arabia including the Red Sea. And while are in the early stages of exploration and evaluation we are optimistic about the potential for significant discoveries’
Optimistic? Optimism doesn’t guarantee results.
Anyway one part of the plan to increase output could work. Using recent improvements in production technology the Saudis aim to increase production by ‘…Increasing aggregate recovery in our major producing fields from the current 50% average to 70%’.
The technological improvements in recent years are astonishing and could breathe new life into old fields.
The catch is that the methods are usually [b]significantly more expensive[/b]. This may be why Saudi Arabia increased the oil price ‘target’ to $100 a barrel back in January.