Peak Oil

Ambrose Evans-Pritchard of the Telegraph has embraced the reality of Peak Oil

Saudi oil well dries up

Ambrose Evans-Pritchard

theTelegraph,

5 September, 2012

If Citigroup is right, Saudi Arabia will cease to be an oil exporter by 2030, far sooner than previously thought.

A 150-page report by Heidy Rehman on the Saudi petrochemical industry should be sober reading for those who think that shale oil and gas have solved our global energy crunch.

I don't wish to knock shale. It is a Godsend and should be encouraged with utmost vigour and dispatch in Britain. But it is for now plugging holes in global supply rather than covering the future shortfall as the industrial revolutions of Asia mature.

The basic point – common to other Gulf oil producers – is that Saudi local consumption is rocketing. Residential use makes up 50pc of demand, and over two thirds of that is air-conditioning.

The Saudis also consume 250 litres per head per day of water – the world's third highest (which blows the mind), growing at 9pc a year – and most of this is provided from energy-guzzling desalination plants.

All this is made far worse across the Gulf by fuel subsidies to placate restive populations.

The Saudis already consume a quarter of their 11.1m barrels a day of crude output. They are using more per capita than the US even though their industrial base as a share of GDP is much smaller.

The country already consumes all its gas. (Neighbouring Kuwait is now importing LNG gas from Russia:

From Heidy Rehman at Citi:

• Saudi Arabia Could be an Oil Importer by ~2030 — Saudi Arabia is the world’s largest oil producer (11.1mbpd) & exporter (7.7mbpd). It also consumes 25% of its production. Energy consumption per capita exceeds that of most industrial nations. Oil & its derivatives account for ~50% of Saudi’s electricity production, used mostly (>50%) for residential use. Peak power demand is growing by ~8%/yr. Our analysis shows that if nothing changes Saudi may have no available oil for export by 2030.

• It Already Consumes All Its Gas Production — Saudi Arabia produces 9.6bn ft3/day of natural gas. This is entirely consumed domestically. It is looking to raise gas production to 15.5bn ft3/day by 2015E, implying a 2011-15E CAGR of 12.7%. 

However, peak power demand is growing at almost 8% pa. We believe Saudi Arabia will need to find new sources to meet residential & industrial demand.

This may concentrate a few minds in The Kingdom. The country is already planning an 80GW nuclear blitz though they are woefully short of nuclear power experts.

It has big hopes from solar projects based on successes of solar farms in California. Both nuclear and solar would allow it export more of its oil output.

A great deal could change. New desalination filters should reduce energy use drastically, for instance. Saudi fuel subsidy policies may change.

While I don't wish to judge the claims of this report – I merely pass it on to readers since I don't know enough about the Saudi system – but it is yet another piece of evidence pointing to Peak Cheap Oil.

Jeremy Leggett, the head of the UK Taskforce on Peak Oil and Energy Security, says Britain is sleepwalking into a potential disaster by failing to prepare fully for a global supply crunch.

The refusal to listen to warning signals is comparable to the complacency in the build-up to the financial crisis, he argues, but with graver implications for the British economy.

I agree.

Where would they import it from? Mars?

Saudi Arabia May Become Oil Importer By 2030, Citigroup Says

Saudi Arabia, the world’s biggest crude exporter, risks becoming an oil importer in the next 20 years, according to Citigroup Inc.

Bloomberg,

4 September, 2012

Oil and its derivatives are used for about half of the kingdom’s electricity production, which at peak rates is growing at about 8 percent a year, the bank said today in a an e-mailed report. A quarter of the country’s fuel production is used domestically, more per capita than other industrialized nations, as the cost is subsidized, according to the note.

“If Saudi Arabian oil consumption grows in line with peak power demand, the country could be a net oil importer by 2030,” Heidy Rehman, an analyst at the bank, wrote. The country already consumes all its natural-gas production and plans to develop nuclear power, which pose execution risk amid a lack of available experts, safety issues and cost overruns, Rehman said.

Saudi Arabia, which depends on oil for 86 percent of its annual revenue, is accelerating exploration for gas and is planning to develop solar and nuclear power to preserve more of its valuable crude for export. The kingdom has refused to import gas, unlike neighboring producers such as Kuwait, and the United Arab Emirates that also lack fuel for power generation.

Young Population

Saudi Arabia’s per capita consumption in 2011 is higher than most industrialized nations, including the U.S., according to the report. The nation’s 10-year historical consumption compound annual growth rate may increase 6 percent, double its projected population growth, Rehman wrote. Saudi Arabia’s population was 28 million as of the end of 2011, International Monetary Fund data compiled by Bloomberg show.

“Indeed we would expect consumption to continue to outstrip population growth as Saudi Arabia’s currently young population ages and consumer spending increases supported by rising GDP per capita,” Rehman wrote.

The IMF forecasts a 10 percent rise in gross domestic product per capita this year to $22,635 and may climb to $23,936 by the end of 2017, the data show. Saudi Arabia’s $600 billion economy, the largest in the Arab world, may expand 5 percent this year, according to the median estimate of 12 economists surveyed by Bloomberg.

The country produced 11.2 million barrels a day of oil and natural-gas-liquids last year, 13 percent of the world’s supply and more than any other nation, according to BP Plc (BP/)’s statistical review. It was the eighth-largest gas producer, providing 9.6 billion cubic feet a day to the domestic market, according to the report.

Saudi Arabian power providers pay $5 to $15 a barrel for its fuel from state-owned Saudi Arabian Oil Co., according to the report. Brent crude, the benchmark for more than half the world’s oil, traded at $116 a barrel today on the London-based ICE Futures Europe Exchange.

“As a result of its subsidies we calculate ‘lost’ oil and gas revenues to Saudi Arabia in 2011 to be over $80 billion,” Rehman wrote. “At the domestic level, we believe the only real way to rationalize energy consumption would be to reduce subsidy levels.”

Nigerian oil output slumps

Nigeria's oil production has fallen below the government's projection

UPI,

4 September, 2012

Nigeria's oil production has fallen below government projections.

Nigeria's Federal Ministry of Finance had projected in this year's budget that the country's output would be 2.48 million barrels per day. The Central Bank of Nigeria has reported that instead the nation produced 2.12 million bpd of crude oil in the second quarter of 2012, resulting in a deficit of 36,000 bpd.

On a posting on its Web site CBN said in its 2012 March-June review of Nigeria's economy that the country's crude oil production had risen from an average of 2.06 million bpd in the period January-March to 2.12 million bpd in the second quarter, This Day newspaper reported.

Nigeria is Africa's most populated country and with an estimated 130 million inhabitants.

A member of the Organization of Petroleum Exporting Countries, Nigeria is the world's 14th largest oil producer. With oil running at roughly $100 per barrel, that generates $250 million in income per day -- $19.25 billion annually -- and probably more as Nigeria regularly evades OPEC quotas.

Nigeria's oil output is beset by a number of problems, including rampant corruption in the country's oil sector and even piracy.

For decades Nigeria's oil output has proven irresistible to the country's corrupt elements.

In October 2006, Nuhu Ribadu, head of Nigeria's Economic and Financial Crimes Commission noted that more than $380 billion has been taken by Nigerian governments since independence in 1960.

A July 2010 academic study of corruption in Nigeria noted that successive governments have mismanaged the oil wealth, "salting it away in foreign bank accounts rather than investing in education, health and other social investment and mismanaging the national economy to the point of collapse."

The U.N. Office on Drugs and crime said of the roughly Nigeria $1 trillion the country's energy sector has earned since independence in 1960 and through 1999, about $400 billion was stolen. Former Nigerian President Sani Abacha, who led the country from November 1993 until June 1999, alone is estimated to have stolen the equivalent of 2-3 percent of the country's gross domestic product for every year he was president.

This massive theft has come at the cost of the Nigerian populace. The U.N. Children's Fund reports that 70.8 percent of Nigeria's population subsists on less than $1 per day and 92.4 percent on less than $2 a day.

Nigerian President Goodluck Jonathan this year established a Joint Military Task Force, "Operation Restore Hope," to protect oil installations in the Niger Delta. Nigeria's Minister of Petroleum Resources Diezani Alison-Madueke stated that in 2011 thefts of crude oil were more than $7 billion.

As for piracy, on Wednesday, a Nigerian navy warship recaptured the hijacked Abu Dhabi Star oil tanker. Its crew of 23 Indian sailors was unhurt. The Nigerian navy found no pirates on board the Abu Dhabi Star.

The attack is the third recent oil tanker attack in the Gulf of Guinea. Recent estimates are that piracy costs the global shipping trade more than $9 billion a year.