Energy Prospectus

Just keep in mind that this world now consumes 3 billion barrels per month of hydrocarbon based liquids; most of which are refined from crude oil.

Saudi Arabia should be viewed as an oil company and not a country. Their entire economy is dependent on revenues from oil, including all of the social programs. If you just look at oilfield costs (drilling, completions, facilities and operating expenses), yes $4/bbl is reasonable. However, oil sales must fund all of the country's expenditures.

Reserves in the ground and production capacity are two totally different things. Saudi Arabian production cannot exceed 10 million barrels per day for long without risking damage to their oilfields. That is only 10% of global consumption.

"Speaking after the kingdom revealed a slight upward revision to its oil reserves following an audit, Saudi Energy Minister Khalid al-Falih said actions taking by the OPEC+ alliance that included Russia were starting to bring the market back after a near-40% drop from 2018 highs. Falih said the kingdom was pumping about 800,000 barrels less a day from the record high of 10.2 million barrels per day in November. The amount it would ship overseas in February would be another 100,000 bpd less than January's 7.2 million bpd, he said."

from a non oil person...could you expand on the risk to their oil fields....don't you simply drill another oil well where you know where the reserves are?

Oil and gas in the ground is not in big underground swimming pools. The geology is much more complex that most people realize (including me).

Saudi Arabia's main oilfields have been producing for decades and they are extremely well defined.

The Ghawar Oil Field is by far the largest conventional oil field in the world and accounts for more than half of the cumulative oil production of Saudi Arabia. Although it is a single field, it is divided into six areas. From north to south, they are Fazran, Ain Dar, Shedgum, Uthmaniyah, Haradh and Hawiyah. Although Arab-C, Hanifa and Fadhili reservoirs are also present in parts of the field, the Arab-D reservoir accounts for nearly all of the reserves and production.

Saudi's large oilfields are "water drive" fields and they pump millions of barrels per day of seawater into Ghawar to maintain pressure.

The risk is that if they pull on the producing wells too hard it can cause "coning" of water into the producing wells and thus lower overall recovery of oil. These oilfields are the "Crown Jewels" of the Royal Family and they would be stupid to do anything that will damage them. Plus, why would they produce more oil just to sell it at a lower price?

Read this: http://www.gregcroft.com/ghawar.ivnu

Keep in mind that every oilfield ever discovered eventually goes on decline. Even Ghawar, which today is in secondary recovery (a waterflood).

When I worked in Saudi in the mid 80's their lifting cost was less than $0.75 per barrel, so current $4.00 doesn't surprise me.

For most of our Sweet 16 all of there cash expenses for Lease Operating expenses, production taxes, transportation & processing is $8.00 to $12.00 per BOE of production.

We may be comparing apples to oranges here because "Extraction Costs" needs to be defined. If it includes leasehold costs, drilling & completion costs, then the number is much higher ($25 to $30 per BOE of production).