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12 November 2012


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Abu Sinan

The sooner our relationship with the Saudis end the better. Having dealt with Saudi people, institutions and organisations for some 10 years now, I have to say there isnt a group of people I dislike like more on this planet, from top to bottom.

Interestingly enough, the biggest critics of the Saudis come from within the Islamic world itself. The image that the Saudis like to portray of themselves is false, including Mr. Adel al Jubair whose picture you have posted with this article. These people are HYPER sensitive, even their government. Adel al Jubair's brother, Nail, is the PR/Communications director at the Saudi Embassy in DC. Nothing like wasta/nepotism to keep the engines of government grinding along.

Nail al Jubair once called my former sister in law to complain about the way his brother and the Saudi Embassy had been depicted in a blog post of mine. Needless to say that made me happy!

As my former father in law worked for years as a diplomat at military section in DC, the stories I have are legion. Suffice to say that what happens within the Saudi diplomatic community here in DC would make for an entire season of Jerry Springer shows.


Which means the gas and oil was available here all the time.



Yes, but was the technology available? pl


Yes, horizontal drilling, fracking and other methods had been developed decades ago, all that was needed to implement them for unconventional oil was high prices. Without those high prices the oil stays in the ground.


Yes, I remember now that at the time of the first Gulf War people were talking about all those things in re the Iraqi demand for the north Kuwait oil field. pl


Abu Sinan said...

"The sooner our relationship with the Saudis end the better."

Agree with what you said, the sooner the better, but what happens to US petro dollars once the cord is cut?

Can US survive without the dollars as reserve currency by 2015, or 2017? or any time in the foreseeable future? So long as this hegemonic regime mind set persist in DC?

Cliffiord Kiracofe

Fortunately, we have a lot of energy resources here and in North and South America generally. The slogan is 100 years of natural gas and 200 years of coal in the US. Maybe there is an element of truth in that. We can broaden out networks/infrastructure for natural gas and oil with Canada and Mexico.

This summer on my motorcycle trip west and through the Rockies I found all manner of natural gas activity...booming in North Dakota and other places. Pulled into a motel in Wyoming jammed with gas contractors, rode through mile after mile of gas extraction and new projects in southwest Wyoming.



The Saudis don't like work. In the absence of a steady stream of US dollars I imagine they will spend what they have. What am I missing? pl


Yes, fracturing techniques have been around for well over a century. But the specific process being used to exploit shale gas and oil fields (slickwater fracturing) was developed by Mitchell Energy and came online in the late 1990s.



Yes, this is a big deal. Supplies of natural gas are growing. New drilling technology makes it possible to extract natural gas from tight shale formations that were unproductive in the past. These rock units are present in many parts of the world and are geographically extensive. They have significantly added to the natural gas resource. I have read reports that China and Continental Europe could also become self-sufficient in gas supplies. Gas prices have corrected sharply from their rapid ascent that began in 2000. The US is quickly becoming the lowest cost producer of many commodity chemicals that use natural gas as feedstock. In any case as gas supplies grow it will be interesting to see how the strategic positioning of Russia and the ME will change.

The US I believe never was a large importer of Saudi crude. Why have we historically had this "ally" type relationship with them?

Both Republican and Democratic administrations fawn over the Saudis just like we do the Israelis. As both Obama and Romney noted during their presidential debate that they would have the back of Israel although we have no such treaty. I believe we have a similar implicit security guarantee for the Saudis.



Such an implicit guarantee to the Saudis would nmot survive an absence of need on our part for their petroleum. The Israeil explicit guarantee is IMO a matter of collective hynosis practiced on the American people. pl


This year I worked in the Houston area and noticed first hand how vigorous the Oil industry is at 85 to 100 + a barrel. Being primarily a Californian and seeing first hand the terrible depression that is griping California, seeing a completely different thriving economy in Texas is startling.

Not only the increased oil production is welcomed, but the all the activity that proceeds it. The equipment manufacturing, and exporting of Oil extraction equipment worldwide is a major helper in our trade deficits. Just sitting at the entrance to the Houston Ship Channel at Galveston Island and seeing the ships leaving with heavy equipment for oil field production is astounding.

In Texas and Louisiana there are billboards advertising for all types of labor, from Laborer's, Welder's, Electrician's, and higher skilled technical people. In California a new Target store in L.A. was opening and there were over 3,000 people in line to apply for clerk jobs.

Oil at 85 keeps the extraction industry humming. Oil at 100 gives a shot of Steroids to the Oil industry.

As an added item along Interstate 10 clear though to Texas the Marines have many recruitment billboards. The Marines have much success recruiting from Southern California through to Texas.

The Chinese have taken notice of the dominance of U.S. manufacturing in the Oil, and Natural gas extraction equipment and are vigorously challenging and seeking dominance in extraction equipment technologies.

r whitman

I think Birol may be right on the energy self suffiency and net exporter thing but wrong on timing. events will come much sooner than she predicted. There is also the fact that a significant portion of US refining capacity is owned by foreign oil producers who will continue to ship their oil to the US even if there are domestic surpluses.



"The Marines have much success recruiting from Southern California through to Texas" They do well with Latinos, always have. Fancy uniforms, macho attitude, etc. pl


Oil @ $100 may help the oil industry but the rest of the economy no.


Why have we had this relationship with them? Because of the need to recycle all those Petro-dollars. That is the downside of using the dollar as reserve currency.

r whitman

The Saudis own a 50% interest in a 600,000 bbl/day refinery in Port Arthur, Texas soon to restart. Saudi oil will come to the US as long as they own that interest. The other 50% is owned by the French company Total.

Will Reks

So the so-called War on Coal waged by the WH is actually a market trend towards greater use of cheaper natural gas. I wonder what will happen to the economies of places like WV which have never been all that great in the first place.


Shepherd, isn't price the main driver for production of oil from Bakken and not technology?

Abu Sinan

When you say the Saudis dont like work you are spot on. The idea of a "work ethic" is foreign to Saudis, who hire people from Africa, Desis, almost anyone to do the work they feel to be "not fit for a Saudi". Work "fit for a Saudi"? Anything which makes good money but requires no real work, especially manual labor.

When the oil runs out on Saudi the ruling al Saud family and their lackies who have stashed hundreds of billions of dollars around the world will leave the country and those forced to remain will see their country descend into a situation very similar to what we see in Yemen today.

It doesnt matter how much money they pour onto the issue, it is a grave cultural defect. They are, besides oil, a resource poor country. Without the oil they'd fail. When one looks at other resource poor countries that have been successful, ie the Germans, you'll quickly see that the Saudis just dont have what it takes.

You look at projects like the King Abdullah University of Science and Technology you realize that they can and do spend billions to try and change things, but it is just a giant waste of time. The culture is flawed.


If someone could clarify this statement from the article I'd appreciate it.

"The IEA said it saw U.S. oil production rising to 10 million barrels per day (bpd) by 2015 and 11.1 million bpd in 2020 before slipping to 9.2 million bpd by 2035"

That number 10Mbpd must mean additional liquids under the banner of "oil" and not simply crude and condensate.


right now we use about 19 M/bbl a day. According to the IEA, we may see a peak domestic production of around 11M bbl/day in the near, 10 year future.

Interesting math, because we'd have to import about 8 M barrels of oil a day. Granted, just like today, we'll import most of it from Mexico and Canada.

It isn't th production, it is the pricing power.


"The Saudis don't like work. In the absence of a steady stream of US dollars I imagine they will spend what they have. What am I missing? Pl “

what happens if the suadis decide to offer their oil in other currencies?

I can't imagine US be willing to drop the petro dollar deal.


zanzibar said...

“The US I believe never was a large importer of Saudi crude. Why have we historically had this "ally" type relationship with them? “

Petro dollars are guaranteed by this relationship. That is the free credit card which has been supplying the countries consumption since the late 70's! In return for providing security for the saudi royals.



Energy, like many other topics is “siloed” – few experts know much outside of their area of expertise. If one looks beyond conventional wisdom/experts, there are enormous untapped North American fossil resources.

One example is underground coal gasification (UCG), a process more or less commercialized by the US DOE in the 1970s through twenty-two pilot projects. The US then walked away from this technology when global oil prices dropped. Current estimates are that UCG probably expands economically extractable cola reserves bat a factor to three to four. Current UCG activity is limited to a ltage UCG to chemicals project in China 9the largest global operating project), several pilot projects in Australia – some going well and some not, a big project in South Africa and an operational project in Alberta.

Another example is methane hydrates – found in the Arctic and along both continental shelves. These hydrates hold truly enormous amount of natural gas. It is not yet clear whether (or more probably when) this resource will economic to extract, but there are serious extraction technology development projects under way in North America and elsewhere.

A final example – and one that will move much faster than UCG and methane hydrates is advanced enhanced oil recovery (EOR) using CO2 and the recently disclosed (through SEC filings) ability to economically extract Residual Oil Zone (ROZ) oil through EOR. ROZ oil is below (until recently) economically extractable levels in current oil fields and now appears to exist in wide “fairways” between some major oil fields – where no oil was though to exist until very recently. US DOE estimates (produced by Advanced Resources International) are that there may well be 100 billion barrels of future economically extractable EOR+ROZ resources. This is another big number, but the irony is that we are close to running out of the cheap mined natural gas the EOR industry has relied on for the past 30 years. So we will need to capture CO2 vented at industrial facilities and in fossil power plant emissions to develop most of this resource. The economics are promising and I know about several companies working on new power plant projects with carbon capture to sell into this EOR market in areas where CO2 is most valuable today.

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