Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
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 ]

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 ]


Occasional Series