Saudi Aramco Sees Red Sea, Jalameed Gas Flowing This Decade ~ Real Reason for Invading Libya

Saudi Aramco, the world’s largest state-run oil company, plans within this decade to produce natural gas at new fields in northern Saudi Arabia and off the Red Sea coast, Aramco’s chief executive officer said.

“We’ve done quite well, and in the last few years we’ve made some significant discoveries,” Khalid Al-Falih said in a Bloomberg Television interview on Dec. 8. “We have made discoveries in the north of Saudi Arabia in a place called Jalameed. We’re exploring very aggressively in the Red Sea.”

Saudi Arabia, the biggest exporter of crude, wants to increase domestic supplies of gas to provide power for energy- intensive industries such as petrochemicals and metals manufacturing. Aramco is investing in gas “like never before” to bring the fuel to market quickly and free up the more valuable crude oil that Saudis have been burning to generate electricity and desalinate seawater, al-Falih said.

“By the middle of this decade, you should see them coming to fruition,” al-Falih said of the northern gas deposits. Fields off the country’s western coast would start producing after 2015, he added. Aramco plans to begin drilling for gas in shallow waters of the Red Sea next year before moving on to deeper wells in 2012.

“That will be a key exploration program for us because most of the demand is happening in the western region,” he said. “If gas is available there, that would alleviate a lot of the liquid burning.”

Preliminary reservoir tests of the Jalameed Well 3 showed commercial potential, with gas flowing at a rate of 12.1 million cubic feet a day, Saudi Oil Minister Ali Al-Naimi said when announcing the discovery in February.
Reliance on Crude

Aramco is also looking to refineries and petrochemical factories to contribute to economic growth and reduce Saudi Arabia’s reliance on oil for 85 percent of government revenue. Access to domestic sources of gas has given Persian Gulf chemical makers a price advantage over rivals elsewhere, and producers are turning to naptha and other refinery by-products to feed new plants.

“The potential in petrochemicals is unlimited in the long run,” al-Falih said.

Aramco is investing about $40 billion in three refining and petrochemical projects that together will add more than 8 million metric tons a year to the country’s annual petrochemical capacity of about 50 million tons.

The company plans to build two of these projects at the city of Jubail on the Persian Gulf. One is a 400,000 barrel-a- day plant that Aramco is developing jointly with Total SA of France. It will cost $12 billion, including financing, the venture’s former Chief Executive Officer Salem Shaheen said in March. Dow Chemical Co. is Aramco’s partner in the second Jubail facility.
‘Big Story’

“The big story for us is our joint venture with Dow,” al- Falih said. Aramco and Dow expect to make an investment decision next year and to start production in about 2015. Investment in the venture “is approaching $20 billion,” al-Falih told reporters at a petrochemicals conference in Dubai last week.

Aramco has committed $6 billion to $8 billion to expand a third major petrochemical project called Rabigh Refining and Petrochemicals Co.

Aramco wants separately to build two refineries, at Yanbu on the Red Sea and at Jazan, farther south along the coast near the border with Yemen. The Yanbu refinery is to have a refining capacity of 400,000 barrels a day.

The company has awarded construction contracts for the Yanbu plant and for the Aramco-Total facility at Jubail. It is conducting engineering and design studies for the Jazan refinery, al-Falih said.

“These are mega-refineries. Each of them will have the opportunities to have petrochemicals associated with them.”

To contact the reporters on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net Lara Setrakian in Dubai at

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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The Price of the Ticket, Us, Libya and OIl

By CONN HALLINAN

Cynicism is not a healthy sentiment, and as the late Molly Ivins pointed out, it absolutely wrecks good journalism. But watching events in the Middle East unfold these days makes it a pretty difficult point of view to avoid.

Let’s take the current U.S bombing of Libya. The rationale behind United Nations Security Council Resolution 1973 is to protect civilians from being beaten, shot up, and generally abused.

But while this applies to Libya, it does not apply to Bahrain, Saudi Arabia, or Yemen, where civilians are also being shot up, beaten, and generally abused. Is this because Moammar Gadhafi is uniquely evil? Crazier and odder, certainly, but being in the “opposition” in any of those countries is not a path to easy retirement. Civil liberties don’t exist, prisons are chock full of political prisoners, and getting whacked if you don’t like the leader is an operational hazard.

So what’s it all about? Okay, here is the cynical joke: “Is it all about oil? Nope. Some of it is about natural gas.”

Too simplistic? Maybe, but consider the following.

1) In 2009, the U.S. Energy Information Administration predicted that world oil reserves had “peaked” and that over the next several decades supplies would drop and prices would rise. There is some controversy over the study, but there is general agreement that easy-to-get petroleum sources are getting harder and harder to find.

2) Approximately 65 percent of the world’s remaining oil reserves are in the Middle East, as well as considerable amounts of natural gas. Iran has the second greatest reserves of gas outside of Russia.

3) The U.S.—with the largest economy in the world—uses around 21 million barrels of oil per day (bpd). Since it produces only 7.5 million bpd domestically, it imports two thirds of its oil. Its major sources are (in descending order) Canada, Mexico, Saudi Arabia, Nigeria, Venezuela, and Iraq.

4) China—the world’s number two economy—uses about 8 million bpd, a demand that is projected to rise to 11.3 million bpd by 2015. Since it only produces 3.7 million bpd domestically, it too relies on imported oil. It main suppliers are (in descending order) Saudi Arabia, Iran, Angola, Russia, Oman and Sudan.

It is estimated that, sometime between 2030 and 2050, China will surpass the U.S. and become the world’s number one economy—provided that it can secure enough energy for its growing industrial needs. Insuring access to oil and gas is a major focus of Chinese foreign policy, particularly because Beijing is nervous about how it currently obtains its supplies. Some 80 percent are transported by sea, and all of those routes involve choke points currently controlled by the U.S. The U.S. Fifth Fleet based in Bahrain controls the Hormutz Straits, through which Saudi Arabian, Iranian, and Omanian oil passes. The Fifth also dominates the straits of Bab el-Mandab that control access to the Red Sea and through which Sudan’s oil is shipped into the Indian Ocean. In addition the Malacca Straits between Sumatra and the Malay Peninsula is the major transit point for oil going to China. The U.S. Seventh Fleet controls that choke point.

China’s nervousness over its sea-based oil supplies is one of the major reasons behind Beijing’s crash naval program, its construction of ports in South and Southeast Asia, and its efforts to build land-based pipelines from Russia, Central Asia, and Pakistan.

The Chinese are also trying to cope with the fact that Iran, its second largest supplier of oil and gas, is currently under international sanctions that have reduced production and cut into China’s supplies. Beijing has invested upwards of $120 billion to upgrade Iran’s energy industry, but recently has had to cutback investments because its banks could end up being sanctioned for helping out the Teheran regime.

The Chinese are not the slightest bit cynical about why the U.S. is bombing Libya and not challenging Bahrain and Yemen: Bahrain hosts the U.S. Fifth Fleet, and Yemen’s port of Aden dominates the Red Sea. China can play chess.

As for Libya. The U.S. doesn’t get oil from Libya, but its allies in Europe do. And the current crisis is African Command’s (Africom) coming out party. Up to now the record of the spanking new military formation has been less than impressive. First, no one would host it, because the U.S. military in Africa makes the locals nervous. So it is still based in Germany. Then it coordinated the absolutely disastrous Ethiopian invasion of Somalia that ended up turning most of the country over to the extremist Shabab.

But Libya is a fresh slate for Africom, and that is making the Chinese even more nervous (and explains why they have been so cranky about civilian casualties in Libya). When Africom was in its infancy it war-gamed a military intervention in the Gulf of Guinea in case “civil disturbances: caused any disruptions in oil supplies. Angola, China’s other major African supplier, is in the Gulf of Guinea. It hardly seems like a coincidence that, at the very moment that African oil supplies become important, the U.S. creates a new military formation for the continent. Africom is currently advising and training the military forces of 53 countries in the region.

Okay, so here you are in Beijing. Your industries are clamoring for power. Media in the United States reflect a growing hostility toward you, with headlines in newspapers reading, “The Chinese Tiger Shows Its Claws,” and U.S. politicians routinely blame you for America’s economic problems. And the U.S. has basically puts its thumb on each one of your oil and gas sources. Nobody is cutting off any supplies at this point, but the implied threat is always there.

In end, it is not so much about oil and gas itself, as the control of energy. Any country that corners energy supplies in the coming decades will be in a powerful position to dictate a whole lot of things to the rest of the world. That’s not cynicism, its cold-blooded calculation. And right now a lot of people in the Middle East are paying the price of the ticket.

Conn Hallinan can be reached through his blog.

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6 thoughts on “Saudi Aramco Sees Red Sea, Jalameed Gas Flowing This Decade ~ Real Reason for Invading Libya

  1. Saudis to Re-open Idled Oil Field

    Saudi Aramco, the national oil company of Saudi Arabia, is proceeding with a plan announced last May to re-open oil production at its Dammam oil field. Dammam is the country’s oldest field discovered in 1938 and has been shut-in for about 30 years.

    Saudi Aramco estimates that 500 million barrels of heavy oil remain in the field and believe production could reach 100,000 barrels/day. A total of 32 million barrels were produced at Dammam before it was closed. Saudi Arabia’s — and the world’s — largest field, Ghawar, has produced 65 billion barrels and is still active today.

    This report is both positive and negative. On the positive side, even 100,000 new barrels/day is a good thing. On the negative side, if Saudi Aramco needs to re-open a long idled field to maintain its current production and spare capacity quantities, the oil situation in Saudi Arabia could be more tenuous than the country would like to have the rest of us believe.

    Read more: Saudis to Re-open Idled Oil Field – 24/7 Wall St. http://247wallst.com/2012/02/16/saudis-to-re-open-idled-oil-field/#ixzz1mZ7MVBzk

  2. Pingback: JP Morgan and the Saudi Oil Colony « Piazza della Carina

  3. Pingback: Saudi Aramco Sees Red Sea, Jalameed Gas Flowing This Decade ~ Real Reason for Invading Libya | Saif al Islam | Scoop.it

  4. The Libya attack rational was based on flawed data on oil reserve.
    We in USA alone, have discovered a reserve stored in Shale estimated
    sufficiency for all USA use for the next 260 years.

    This changed the equation, you will see USA no longer regarding SAUDIS as a group or country we respect.
    This changed everything…. And messed up Saudi Arabian Monarchy’s plans,

    Amid.

    • i hope so we will see

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