Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Display:
[No need to SHOUT]

We're not quite there yet!

My first reaction: indeed interesting times, however I don't agree Saudi Arabia is on board! Haven't seen the signs MBS has made such a move. Saudi Arabia, UAE and Israel were the driving force to rid the White House of Democrats because of the Iran deal. The hundreds of millions were spend in support of getting a Republican elected ... that has been my analysis from January 2017. To blame Russia and Putin was a ploy and decoy to hide the truth.

From Sept. 2015, Russia entered the civil war or sectarian war by proxy mercenaries in Syria on the side of Assad. That decision caused huge waves in the region. The ties between Israel and the Arabs of the Arabian desert were strengthened after the Obama White House pushed through the Iran nuclear deal.

With the "Arab Uprising" in North African states and later in Syria, there was a struggle for power between Qatar/Turkey - Musim Brotherhood and KSA/UAE as the Salafist Islamic states. The role of Turkey was pivotal. Putin managed to loosen the ties of Erdogan's Turkey [NATO member] from the West, both the EU and the US.

Saudi Arabia has spend hundreds of millions to bribe authoritarian leaders of Muslim nations in the region to join an Islamic version of a military defense pact such as NATO had established. That failed as the most populous states like Turkey and Pakistan wavered. Recently there has been a split between the UAE and KSA as seen with the withdrawal of the mercenaries of the Emirates from the Yemen War of atrocities. The flow of arms and munities from especially the UK and US continued although criticism has grown louder in the West.

Russia is not capable to finance such support nor the military means to play a major role in the Persian Gulf. All signs pont to an extension of the US military presence by deploying its Navy in the Persian Gulf but also stationing 5,000 men on Saudi soil. This has been always a contentious remedy in the Saudi Kingdom as we remember from the First Gulf War. The rise to villain of the West by name of Saudi son Osama bin Laden was the result.

The ill fated role of the United States in the region of the Persan Gulf since 1979 and the Islamic Revolution of Khomeini has seen a titanic shift of allegiances. The Western inspired CENTO states to insulate Saudi Arabia from Communism {Pact of Baghdad] has fully collapsed. The Half Moon of the Iranian axis has been completed and runs from Teheran through Baghdad-Damascus to Beirut.

The US has become the global supplier of fossil fuels and has no dependency of oil transported from the Gulf countries. Japan, India and China are fully dependent on this source and will do everything to get the oil from Iran flowing freely. China has no democracy and has no need to set policy for the short term of 4-5 years but sets policy for future generations.

I'm sure the US and now the UK after Brexit will join forces in a last attempt to counter the Chinese influence and expansion not only for oil, but it has invested heavily in the failed states of the African continent. The new Silk Routes have cost China billions and is well underway for further expansion into Eastern Europe as well.

Global Warming - distance between America and Europe is steadily increasing.

by Oui on Tue Aug 20th, 2019 at 04:52:36 AM EST
As I summarized, Saudi Arabia is in a bind. It needs guarantees of security China and Russia can provide, but also wants the $60/bbl oil price that continuation of the Trump 'maximum pressure' campaign is providing. So MBS is trying to ride two horses at once. That, IMO, means he is likely to allow events to determine the outcome. The establishment of Russian naval and air bases on the Iranian coast combined with the announced increase in presence of the Chinese navy in the Arabian Sea and the Gulf will be two major events. We will see if they occur on schedule as announced. Chinese naval escorts for Iranian oil tankers through the Straits and the Gulf will, if it happens, be the third event.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Aug 20th, 2019 at 03:49:47 PM EST
[ Parent ]
I am not so certain that the USA and the UK will seriously challenge Chinese and Russian air and naval presence in the region. That horse may well have left the barn. More likely is a furious effort to assign blame, which will likely be doomed.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Aug 20th, 2019 at 03:54:05 PM EST
[ Parent ]
Yes.

Although I've only read the excerpts, the main points of the theses studiously avoid discussion of intermediate goods and services (value, process, people) in hydrocarbon supply chains. The scenarios advanced rely on readers' limited knowledge of marketing--crude grades (value, volume), refining capacities (MNC, national, H or V combinations), and distillates' applications demand, for example. Every "player" identified began diversifying production in the chain, like, more than a decade ago.

Add to these considerations of value bilateral FX and newly weighted and volatile, yet acknowledged, SDR credit; costs of marginal extraction from remote fields; fossil fuel demand destruction. OPEC + Russia are manipulate supply to PROP UP prices (spot, forward).

MBS undermined long-term, remedial KSA capital planning, eg. The IPO wtf, by entering a "stupid" war with the Houthi and untold indenture to US-UK pirates. Doubtless, US-UK envoys punked his personality ahh weaknesses.

US claims to market leader (share, vol, val) are overstated, given demand (or lack of) for refined heavy crude (N.A. "tar sand" reservoirs) and LNG buyers. US market position is weak. That's why POTUS DOD predictably relies on military intervention to destroy competitors' P&E.

The "gordian knot" of geopolitical allegiance by petrodollar domination (hence GBP "currency manipulation") is quite tangled. But it doesn't make much sense anymore to draw conclusions from oblique G7 "virtue signaling."

Diversity is the key to economic and political evolution.

by Cat on Tue Aug 20th, 2019 at 04:36:34 PM EST
[ Parent ]
I know very little about the state of refining capacity, but the rational explanation that I got for the Yemen war and the IPO was that KSA had been faking the reserves data for a long time. A Saudi without money is a Saudi without friends.
by generic on Tue Aug 20th, 2019 at 05:12:49 PM EST
[ Parent ]
Is fracking a factor in the Middle East? It certainly rejuvenated the US oil and gas industry.
by asdf on Wed Aug 21st, 2019 at 02:17:37 AM EST
[ Parent ]
I don't know, but it didn't make any money.
Former Shale Gas CEO Says Fracking Revolution Has Been 'A Disaster' For Drillers, Investors | naked capitalism

"The shale gas revolution has frankly been an unmitigated disaster for any buy-and-hold investor in the shale gas industry with very few limited exceptions," Schlotterbeck, who left the helm of EQT last year, continued. "In fact, I'm not aware of another case of a disruptive technological change that has done so much harm to the industry that created the change."


So who knows if it would help solve the KSA's problems.
by generic on Wed Aug 21st, 2019 at 07:13:43 AM EST
[ Parent ]
I've come to think about it more as financial engineering than normal engineering. Loosing on every sale, but making it up on volume. Fracking has a horizon of about three years till production craters yet none of it will make money unless oil prices rise significantly. And they just keep drilling. It's even less likely than Uber's flying robot taxis or anything Elon Musk keeps ranting about. For all I know the material resources of our society are handed out on the basis of winning the coke line race on Epstein's rape island.

But to come back to fracking in the KSA: No idea about the geology, but I'd assume the enormous amounts of water that would require might be prohibitive. And even if they go for it, because nothing matters I'd expect they'd need the IPO first. A fraud of the scale of fracking in the middle of the Saudi desert would need a lot of money boys on board to not be laughed out of the room.

by generic on Wed Aug 21st, 2019 at 07:49:35 AM EST
[ Parent ]
I am not an expert on fracking either, but, Saudi Arabia has been employing both secondary and tertiary recovery methods in the Ghawar field to date. Tertiary recovery seems to be CO2 gas injection.

Given that lots of the water that comes out of wells is salt water, it is possible that they could use salt water to do the fracking. That might require somewhat different chemistry. But the problem of making money remains. If there is sufficient demand destruction over the next decade then fracking might never be cost effective. But if demand holds it might be at some point. I am hoping for the former on account of the environmental effects.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Aug 21st, 2019 at 07:05:56 PM EST
[ Parent ]
Is fracking a factor in the Middle East?

Not really.

The reality is the KSA enjoys market power by dint of (1) actual reserve vol (B/D delivered) and imagined reserve vol, (2)producer combination (OPEC + Russia), (3) government combination (domestic "autocracy"), combined operating expertise (industrial, financial, geopolitical R&D), and (4) pricing power independent of complementary industry operators--so-called "swing producers", wildcatters or "independent" MNCs. They are price takers. Since The Great Disenfranchisement, OPEC embargo (Proof of Concept), their crude attempts to disrupt supply chain management, represented and led by the KSA, are legend.

Here is perennial, proverbial verse from the trades. Ghawar vs. Permian Basin: Is There Even a Comparison? Sure. SWOT.

The KSA purported interest in "fracking" (heavy crude extraction technique) from domestic reserves is academic. Anyone besides me recall hysterical Anglo-merican press reactions from "boom" to and bust of horizontal rigs orchestrated by the KSA? The top of the market (P > R-C) was just 5 years ago.

OPEC "ceded no ground in their battle for market share amid a supply glut"


That is, stories about a KSA "fracking boom" recently popularized in N.A. (principal KSA antagonist) are not only propaganda but speculative proposals to "revive" investment in  high-risk ventures which failed. Here is an example in the Globe and Mail --remote organ of Alberta tar sands marketing down the Mississippi to US refineries. Note reference dates of KSA shale R&D, beginning 2011.

Oil and gas rig counts, oil and gas prices (spot, forward, retail), and chart porn: What's the correlation? Uninterrupted supply of trash talk.

Here's a sample description of US rig operators' current debt position.
Here's a sample description of current US refinery capacity and utilization

Diversification in the industry does not imply diversification of the industry.

Diversity is the key to economic and political evolution.

by Cat on Thu Aug 22nd, 2019 at 03:24:04 PM EST
[ Parent ]
"Meanwhile, an orgy of over-production is taking place in the Marcellus Shale.", 2015

"Chasing profit" is one of the greatest weaknesses (W in SWOT) of Anglo Diseased imagination. Predictable tho' it be, I don't doubt OPEC cointel was fraught with uncertainty while the plan (Proof of Concept II) unfolded. Now here we are.

Diversity is the key to economic and political evolution.

by Cat on Thu Aug 22nd, 2019 at 03:50:47 PM EST
[ Parent ]
"price of everything and value of nothing."
~ Oscar, The Grouch

Diversity is the key to economic and political evolution.
by Cat on Thu Aug 22nd, 2019 at 03:53:59 PM EST
[ Parent ]
Saudi Arabia has not needed fracking. It still has decades of production left in the Ghawar field where it has been employing secondary recovery, water flooding, and tertiary recovery, CO2 injection. Saudi Arabia HAS recently discovered some tight rock formations that could be exploited by fracking, but tapping these reserves at this time would just reduce the overall financial yield of total Saudi oil production. If prices go back above $100/bbl that would be a different matter.

Saudi Arabia is considering fracking for the Jafurah play at the southeast end of the Ghawar oil field, but for the production of natural gas, which Saudi could employ in place of oil for many domestic uses, thus, in effect, increasing the amount of oil available for export from Saudia Arabia.


"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Aug 22nd, 2019 at 04:32:21 PM EST
[ Parent ]
"Need to know but not mission critical"
~ Michael Porter

Diversity is the key to economic and political evolution.
by Cat on Fri Aug 23rd, 2019 at 12:10:17 AM EST
[ Parent ]
TransCanada and Enbridge in Bakken battle, 2010
TRANSCANADA and Enbridge, Canada's heavyweight pipeline companies, are engaged in their latest jousting contest as they try to secure a dominant role in carrying oil from the Bakken shale formation to markets in the US. ... The prize is control over oil flows from a formation that has attracted a swarm of explorers, many of them little known outside their own households. The Bakken straddles the US-Canada border, between Saskatchewan and North Dakota/Montana.

Although ignored in Saskatchewan by Canada's top producers and largely bypassed in North Dakota, except by Williams and Marathon Oil, the Bakken play is further proof that technology can squeeze more out of rocks in a region thought to have passed its best-before date.

TC Energy
The Canadian portion of the pipeline runs from Hardisty, Alta., east into Manitoba where it turns south and crosses the border into North Dakota. From there, it runs south through South Dakota to Steele City, Neb., where it splits - one arm running east through Missouri for deliveries into Wood River and Patoka, Ill., with the other running south through Oklahoma to Cushing and onward to Port Arthur and Houston, Texas.
Nebraska court upholds state's approval of [Keystone XL] path, 2019
The Nebraska Supreme Court upheld the decision of regulators who voted in November 2017 to greenlight a route through the state. The court's decision was a victory for the $8 billion project, which has been mired in lawsuits and regulatory hearings since it was proposed in 2008.
[...]
Attorneys for the opponents argued that TC Energy's application with the commission was valid only for its preferred route, and the company formerly known as TransCanada could seek approval only for one route at a time. Nebraska state attorneys disputed that claim, saying that the commission's decision complied with the law and was in the public's interest.
[...]
If completed, the pipeline would carry oil from Canada through Montana, South Dakota and Nebraska, where it would connect to an existing pump station in Steele City, Nebraska. From there it would continue through Kansas, Oklahoma and Texas until it reaches Gulf Coast refineries. Business groups and some unions support the project as a way to create jobs and reduce the risk of shipping oil by trains that can derail.


Diversity is the key to economic and political evolution.
by Cat on Fri Aug 23rd, 2019 at 08:38:46 PM EST
[ Parent ]
How Europe's war on plastics is affecting petrochemicals
Enough to dent global oil demand? Not quite, according to the IEA, which points to petrochemicals - chiefly plastics - as "the largest source of growth in oil use" in the coming decade.
[...]
For the oil industry, plastics are therefore seen as a safe haven, as well as a key source of diversification.

"The oil industry is looking for its next growth driver and the petrochemical industry is a key market for oil demand growth," says Rob Gilfillan, head of films and flexible packaging at Wood Mackenzie, a consultancy.
[...]
Substances that are most exposed to the backlash include ethylene and propane, which are used for plastic bags and packaging.

The two most common petrochemical classes are olefins (including ethylene and propylene) and aromatics (including benzene, toluene and xylene isomers). Oil refineries produce olefins and aromatics by fluid catalytic cracking of petroleum fractions ...
Demand for polyolefin, which goes into packaging films and polyester, is also expected to take a hit at some point.
2019: What's Behind Saudi Arabia's New Downstream Strategy?
downstream d'oh
2017-2018: Refineries and feedstock worldwide
"It owns and operates the largest oil refinery in the US, the 630,000-bpd Port Arthur plant in Texas, through its wholly owned subsidiary Motiva."
2016: Refining and derivatives of crude oil: a new game between Riyadh and Tehran
"competitive gap"
2015: The largest producer of polyolefin, accounting for 56 percent, in the Middle East
2014: "Some view us as 'fly over land' and don't pay attention to the potential."

Diversity is the key to economic and political evolution.
by Cat on Tue Aug 27th, 2019 at 04:29:16 PM EST
[ Parent ]

Display:

Occasional Series