I thought it was interesting that the King reportedly put current production at 9.0 mbpd. In any case, my comments on the Drumbeat thread are linked below, with an excerpt shown:

http://www.theoildrum.com/node/4199#comment-366091

Last year, in March, one of the objection to the Saudi HL plot was that the observed production decline was sharper than what the HL model predicted. I responded that I therefore expected to see a production increase.

This year, one of the objections to the Saudi HL plot is that we are seeing increasing production. I have responded that I expect to see a resumption of the production decline, probably in 2009.

We can say that it is quite likely that Saudi Arabia will have shown three straight years of annual production below their 2005 rate, at about the same stage of depletion at which the prior swing producer, Texas, peaked.

from bloomberg :

``The Saudi announcement of a possible increase in capacity to 15 million barrels a day is a robust statement; it would be a huge increase,'' ENI SpA Chief Executive Officer Paolo Scaroni said in an interview in Jeddah today. ``The world is worried about the shortage in spare capacity and any improvement will change this sentiment.''

Zuluf, Shaybah Fields

The further daily capacity includes 900,000 barrels from the Zuluf field, 700,000 barrels from Safaniyah, 300,000 barrels from Berri, 300,000 barrels from Khurais and 250,000 barrels from Shaybah, Naimi said.

...i do hope naimi has some viagra to pump up these old geezers

Limited time period surge (as opposed to sustained) capacity certainly can be brought on-line. Abqaiq is idle (AFAIK) and can pump for almost a year (and then rest).

The odd phrasing was certainly meant to confuse. One would be hard pressed to get a custom valve delivered by Dec. 31, 2008 if ordered today, much less an extra 2.x million b/day in production capacity !

If July is hot, and Saudi is burning crude to keep the air conditioners humming, KSA production may be 9.7 million b/day, but exports may not increase much.

Just first thoughts,

Alan

May: extra 300,000 bringing total to 9.45mbpd
June: extra 200,000 bringing total to 9.7mbpd

There is no extra being promised here, its the same Khursaniyah based increments that have already been announced. The only interesting thing happened with the send June announcement when they bought the 200,000 Khursaniyah phase 2 increment forward - which they previously said would require them burning off the gas rather than processing it (the gas plant isn't finished yet).

Of course, there is no way to know if 9.7 is actually 9.7 as we would count it.

Compare Naimi's quote in Bloomberg cited above with Matt Simmons' comments on each of the listed fields in "Twilight in the Desert". Either Simmons is dead wrong or Naimi is a bold faced liar. I suspect it is latter. There has been a lot of commentary about why the Saudis would obfuscate the issues. I believe the answer is fear of their own people. The "Royal" family has been blundering the countrie's wealth for decades in order to live an opulent lifestyle. (How much do the Royals have on deposit in London, NYC and Zurich?) History has not been kind to such rulers when the people learn what has happened. I believe the Royals are mainly concerned with continuing to fool their own population about the amount of oil left in the KSA. Fooling the rest of the planet is a secondary concern.

My initial thoughts/questions:

1. Any ideas about the proportional increase in light sweet in that discussion from extant fields? And what's the draw off light sweet from the new fields?

2. This is so typical of KSA's ability to push off the decision point..."we'll have more oil, really, don't change anything." Until one day, we realize that they don't.

The obfuscation, the uncertainty, really makes my head hurt.

He who controls the spice, controls the universe! The spice must flow...

Anyone who has read Simmons and the TOD for a while could legitimately wonder whether the Saudis can deliver on their promised increase. Not delivering on such a promise is tantamount to an admission of having peaked.

At this point one needs to descend into the dark side and note that SA abuts Iraq.

Let's hope and pray that Saudi Arabia can back up what they are saying, bringing significant new production on line.

If they cannot, God help us. There is absolutely nothing left standing between us and the oil hawks like Iran and Venezuela.

Forget not about the Share This button. :)

SBS news http://news.sbs.com.au/worldnewsaustralia/
showed the Jeddah conference with following snippet:

Assistant Petroleum Affairs Minister Abdulaziz bin Salman addressing the conference and saying: "..it is in our best interest that we extend the life of petroleum and we maximize the petroleum revenue..."

http://www.daylife.com/photo/05SZ8Ac2lyfVT

http://www.daylife.com/photo/0dbAdun5lOeR6

Adressing a press conference a day before:

He attributed much of the cause of this current crisis to “subjective circumstances” and warned that people should not be “overly optimistic” that anything but “temporary solutions” could be reached.

http://www.arabnews.com/?page=1&section=0&article=111096&d=21&m=6&y=2008...

That says it all.

KSA has no idle, spare capacity of light sweet oil. That's the story. It's news--at least for a lot of people.

Gregor

Can someone speak to the boost in planned Saudi Arabian oil production relative to the expected decline from other countries and the net worldwide change? Say, at the end of 2009?

And, the continued and expected growth in oil demand?

Will suppply and demand change at all?

As I see it, based on almost everything I have read here, the Saudi production boost will have zero negligible affect on prices. Is that right?

THis may already have been posted -- a link to the final statement with respect to the Jeddah conference. It is mostly a plan to look at things further and get better data.

Participants agreed that the situation requires concerted efforts from all parties -- producing and consuming countries, the oil industry and all concerned parties -- to bring stability to the international oil market for the benefit of all.

Taking into account their diverse national circumstances and priorities, as well as their shared interest in a stable global oil market and sustainable economic growth, the participants recognised the importance of the following.

* That the existence of spare capacity throughout the oil supply chain is important for the stability of the global oil market. Hence an appropriate increase in investment, both upstream and downstream, is necessary to ensure that the markets are supplied in a timely and adequate manner. Predictable energy and investment policies, as well as better access to technology, are necessary to this end.

Other things mentioned include:

-Capture more data on index fund activity

-Quality, completeness and timeliness of oil data submitted through the monthly Joint Oil Data Initiative (JODI) should be enhanced

-IEA /OPEC collaboration on study of market trends

- Find ways to help least developed countries deal with consequences of high oil prices

-Share best practices etc. to enhance efficiency

A working group will follow up on this.

I hope the King has indeed bought us some time. It is time to get our house in order. For me, it's time to replace that LP furnace with an electric heat pump. It's also time to get that 250cc motorcycle that gets 80+ mpg. Small steps for some, but for the Islander family, these represent giant leaps.

Best regards,
EI

Over the last year, the Saudis have made so many contradictory announcements about their proposed or potential oil production that the only thing that is certain is that they are making announcements.

These varying announcements suggest: (1) internal confusion and disagreements about their capacity to produce; (2) internal disagreements about how much they want to produce; (3) propaganda efforts to reduce domestic instability; and (4) propaganda efforts to boost their position with OPEC and the U.S.

This level of confusion casts doubts on the credibility of what the Saudis say regarding their oil production.

I'm going to reference my Saudi Arabia Rides to the Rescue (ASPO-USA, last week).

Saudi Arabia is offering greater volumes of Arab Light (33.4° API, Sulfur 1.77%) and Arab Extra-light (37.2° API, Sulfur 1.15%) in the June/July production hike. Arab Light crude is called "sour" because of its high sulfur content. Refiners who can process this oil will take it only if Saudi Arabia lowers the asking price. US refiners see extra Saudi oil offer [as] too pricey tells the story (Reuters, June 16, 2008).

"They [the Saudis] can offer all the oil they want. The fact is they want too much for it. There's cheaper oil out there right now," said a trader with an independent U.S. oil refiner.

Saudi official selling prices for the United States currently list Arab Light ARL-OSP-N at a nearly $3 per barrel premium to comparable U.S. domestic crude grades like Mars MRS- -- even before the cost of shipping oil from Saudi Arabia is taken into account.

Traders said they would be willing to increase purchases of Saudi crude, if prices were lowered.

Asian refiners like China's Sinopec, who are operating at a loss, are "choosy" about the the oil they buy in order to keep their costs down (Reuters, June 16, 2008). Many "simple" refiners in Asia would prefer a crude mix that includes more medium or heavy oil, not the pricey Arab light Saudi Arabia is offering. They also want these lower quality grades at a reasonable price.

Although margins for processing the kingdom's heavier grades have plummeted, Aramco has also cut the discounts it offers on these grades to their lowest levels this decade, while keeping prices of its lighter grades at relatively high levels.

In addition to keeping oil off the market in 2007, the Saudis have raised prices on all of their crude grades beyond what the refining market can currently bear. The Kingdom obviously cares very deeply about the detrimental effects on global economies of the 2008 oil price shock.

(read the article to get the links)

So, I see no details in any of the reports from Jiddah that the Saudis have discounted the crude they are selling. Aside from the 200,000 b/d -- from Khursaniyah, I believe -- increment in July, the only real move the Saudis could have made to lower oil prices would have been to lower oil prices. Thus the refiners would accept the new sour crudes, which are costlier to process, thus increasing throughput. But I see no evidence that the Saudis discounted their crude oil.

From the AP.

Al-Naimi also said that the kingdom was willing to invest to boost its spare oil production capacity above the current 12.5 million barrels per day planned for the end of 2009, reversing previous statements that the country would not go beyond that figure.

"In addition, we have identified a series of future crude oil mega-increments totaling another 2.5 million barrels per day of capacity that could be built if and when crude oil demand levels warrant their development," he said.

Given the fact that some of the fields cited (above in this thread) will not support the "mega-increments" Al-Naimi speaks of, and the fact that the Saudis have absolutely no intention of expanding capacity after 2011 (after Manifa), I believe he is lying through his teeth. To make sure you get my point, some synonyms are prevaricate, deceive, stray from the truth, palter, etc.

And when someone like Al-Naimi says that the "market is in balance", that should mean in an ideal world that it is never necessary to draw on stocks. But that quibble aside, the "market is in balance" at a price. Today, that price is $134.62/barrel. Which means that the quantity demanded at this price is equal to the supply + whatever draws on inventories are required to fill the gap that Al-Naimi says does not exist.

Now, at $134.62/barrel, the quantity demanded, at least in the OECD countries, has gone down some -- not a lot -- because of the high price. If the price were $100/barrel, the quantity demanded would be higher. If it were $80, it would be higher still. Most of the world's poor oil consumers have already been priced out of the market. There is a lot of unsatisfied demand. The market is always "in balance."

But of course the oil minister is hoping we won't notice any of this. And people generally being what they are, most of them will not notice.

-- Dave

This seems a typical appeasment announcment for the media and masses. 12.5 million barrels a day in such a short time is a physical impossibility but it looks good on paper.
They were never going to tell us what was realy debated at that meeting.

Can anyone here give me a brief explanation of how physical oil is sold? Do all physical sales take place on the spot market? Do any sales take place via futures? How much oil bypasses the market and is sold by direct deals? I keep hearing vague reports of Saudi deals with China.

I'd be most grateful if anyone who knows can give me a heads up. Thanks.

You can almost hear the chrous now: Energy Crisis Solved!!!11!111!. Instead of making the necessary and inevitable transitions, which seemed to finally be starting, now droves of Americans will hop right back into their Chevy Tahoes and Ford Expeditions. Now said necessary transitions will only be more difficult.

Great. The cliff grows ever steeper.

Oil is all about the political.

http://www.ontheissues.org/Celeb/More_George_W__Bush_Energy_+_Oil.htm

OPEC will increase oil supply out of respect for Bush
Bush said today that he would bring down gasoline prices by creating enough political good will with oil-producing nations that they would increase their supply of crude. “I would work with our friends in OPEC to convince them to open up the spigot, to increase the supply. Use the capital that my administration will earn, with the Kuwaitis or the Saudis, and convince them to open up the spigot.” Implicit in his comments was a criticism of the Clinton administration as failing to take advantage of the good will that the US built with Kuwait and Saudi Arabia during the Persian Gulf war in 1991. Also implicit was that as the son of the president who built the coalition that drove the Iraqis out of Kuwait, Mr. Bush would be able to establish ties on a personal level that would persuade oil-producing nations that they owed the US something in return.

thank you to everyone at theoildrum, those who post articles and those who make pertinent comments. it's been a great educational source for me over the past few years as i've been learning about peak oil, and now it's been helping me pass on information to my friends who seem to be coming to share my same conclusions one by one. Those conclusions are, of course, that peak oil is the most pressing and pervasive phenomenon presently affecting reality on planet earth, that many questions and concerns in the political, social, cultural, and environmental arenas, past, present, and future, begin and end there.

just wanted to make a blatantly bold statement and go on the record as saying there's no way saudi production will ever rise to 12.5 mbpd. anyone agree or disagree? anyone think that's too naive or concrete a statement?

i think it's been sufficiently demonstrated on this website that 12.5 mbpd is almost certainly impossible. i think them throwing around that number is, like many have been suggesting, a lie, an exaggeration to attempt to calm people down, fake people out.

Is this newsworthy at all? March 2008 production was already 9.2 mmbpd. The May increase took it to 9.5mmpbd (+300,000), so there is 200,000 remaining for July. E.g. no new increase.

Well, not according to OPEC's own Monthly Oil Market Report page 37.

Saudi oil production in thousand barrels per day:
Mar .... 9,031
Apr ..... 8,984
May .... 9,134

Actually the EIA, IEA, MEES, Platts and the OPEC Monthly Oil Market Report all give different figures. So we will just have to wait until August or September to find out what they actually produce.

Ron Patterson

In the Sovjetunion two men travelled in a train.

A. Asked B, where are you travelling?

B. To Odessa.

A. You are telling me that you are going to Odessa, making me belief, that you are going somewhere else. But now it happens, that i know that you indeed are going to Odessa, so why are you lying??

hi,
Last year China added around 1.4mn b/d of new refining capacity. Texas City is being restored to around 450,000 b/d this quarter, says BP, Total is building Jubail in Saudi Arabia, Shell/Aramco with Motiva on the Gulf, Repsol upgrading refineries in Spain...there is a lot of upgraded refining capacity coming onstream between now and 2010-12.

large, upgraded refineries are the name of the game really, focussed more eastwards...

fyi

ABC NIGHTLY NEWS, just this last 30 minutes, in reporting on the Saudi oil summit,a commentator whose name I did not catch (it caught me completely offguard) responded to a question by the host...Question: "What about this issue of Peak Oil, that the world simply does not have enough oil fur the long term?"

Guest commentator(quoted from memory): "Well, that time will certainly come. I don't think we are there yet, but this should cause us to think of this as a dry run (exercise) because when that time does come that we reach peak 10 or 15 years from now we could see oil prices of $500, $600 and more...'

What was fascinating was (a)that the host of ABC News asked the question right out front as a serious question and (b) the guest commentator expressed no doubt that what we are seeing now is not peak but that peak is coming very soon (15 years is no time in the energy business.

ABC news closed with a stoy about waste oil theft, by the way, and pointed out that used oil prices have gone up from 60 cents to $2.60 in that last couple of years, so if your thinking the waste oil solution is a cheap fix, guess again!

RC

Fascinating technical conundrum:
(a) The U.S. can build dozens of plants that can convert corn to ethanol fuel.
(b The U.S. can build plants to convert tar sand bitumen to fuel.
(c) The U.S. can build plants to convert soybean, palm oil and animal fats to bio-Diesel.
(d) The U.S. CANNOT find ways to refine heavy or sour oil to gasoline.

Astounding is it not?
RC

What should have been agreed in Jeddah and why it wasn't:

1) OPEC to allow an independent international commission to verify their "proven" and "probable" reserves.
This would likely result in an official confirmation of what many of us believe - that their reserves are much smaller than claimed and that spare capacity cannot be substantially improved, not even in a long term. This would result in a rush into alternatives such as tar sands, GTL, CTL, renewables, etc., not a viable outcome for most OPEC producers.
2) Western consumers to limit speculation in commodity futures markets.
This would cause hyperinflation as all the monies that now sit in commodity futures would have no where to go as most other asset classes are unattractive.
3) BRIC and other consumers to remove all subsidies.
This would cause (accelerate?) economic woes and result in widespread unrests.

So all they can do at this stage is produce some soothing promises ...

ok... i got it...

the saudis are planning to produce more oil... that they are already producing... and were planning to produce... that they don't have... that can't be discerned from any of the published reports... that won't have an effect on anything... except the fields that don't have the oil... will be further deteriorated faster... and won't effect prices for anyone anyway... because the planned production increase... is what they're currently planning... or actully producing... will actually increase demand on the supply... that can't be produced anyway... sometime now... or in the future... at some level...

i'm so glad they cleared all that up...

or is jedday SA just a cool place to take a businees trip in june?

So it doesn't look like anything has been learned from what happened at the meeting. Still FUBAR, SNAFU, or whatever.

But the world will go on. Babies will be born. Old people will die. Oil resource will be depleted... eventually to the point where the extant population will have starved or found a substitute, probably some of both. The substitute will be something that we already know about but won't support because it is incapable of supporting the World As We Know It. What will it be? It won't be neat. It will miss on some of the absolute, drop dead, must have, requirements. But when people have forgotten what those are, they won't really matter.

I think the first requirement to go will be that it is a Global Solution. Dropping this saves to cost of shipping whatever it is around the world, and it absolves those who have some of it from the obligation to share their supply of it with those who are far away. End of Globalization as we know it.

The world becomes a collection of localized economic systems that have limited interaction with each other. This reasoning doesn't give much information about the sizes of these non-integrated (disintegrated?) systems, but they are surely smaller than the current global system, and likely not in one-to-one correspondence to current recognized sovereign states.

Will such a reorganized world be capable of supporting a population similar to current size? Larger? There is no reason to hope that it will be able to support a larger pop. than present. Smaller: World population was approx. 1billion in 1800 when fossil fuel was economically unimportant. So, I suppose an Earth without fossil fuel can support 1billion again, maybe more. In 1800 there was a year by year growth of population which indicates that extant population was better off than minimal subsistence. So, I expect future population to stabilize somewhere in the range 1 to 6 billion, probably closer to 1 than to 6.

The technology for energy production in that future world will be something that was already known and in use before 1800. And, there may be more than one technology with different economic systems emphasizing different technologies because of differing local resources.

Just my two cents...