[Graeme]

Energy Revolution? OPEC Countries Become the Biggest Fans of Solar Energy

$this->bbcode_second_pass_quote('', 'W')ouldn't it be ironic if the biggest oil exporters in the world became the biggest solar energy investors with plans to export solar energy?

That may seem like a far-fetched idea but it's exactly what Saudi Arabia has in mind. Here's a telling quote from one of the companies looking to provide some of the country's solar energy needs.

I think in 2020 we're going to look back and say -- if we pick one year as a point of inflexion -- I'm very confident it will be 2015."

-- Paddy Padmanathan, CEO of ACWA Power, a renewable energy developer in the Middle East

What's driving the world's largest oil exporter to solar may tell us more about the future of energy than you think.

Saudi Arabia is better off selling oil than consuming it
One of the challenges being a developing nation that's made its money on oil exports is that a rising standard of living can eat into previous energy exports. Over the past decade, Saudi Arabia's oil consumption has risen 53% while its production is up just 5%. The result is falling oil exports, which is where the country makes its money.

A recent Chatham House paper suggested that at its current pace Saudi Arabia would actually become a net oil importer by 2038. That's only 23 years away, hardly a long time in the oil industry.

On top of the fact that Saudi Arabia would like to export more oil instead of consuming it, oil is a relatively expensive way to produce electricity. Renewable energy is much cheaper than oil power generators today, particularly in desert areas. A project bid below $0.06 per kWh in Dubai earlier this year showed the potential solar energy has in the Middle East and with Saudi Arabia getting 55% of its electricity from oil, there's an economic driver to making a change.

[C8]

not sure where I read the article but the reality of SA solar is pretty grim so far. It appears their engineering is not very reliable and the solar units made have lots of slipshod problems. They also have a terrible time with sandstorms. Some guy has to use a broom and wipe the sand off of the panels. When you get to thousands of panels this becomes very expensive to have an army of people do this- many panels do not function anyway.

There seems to be a big gulf between the PR reports and the reality. I am not sure the sandstorm issue can be overcome at all given the resources it requires.

[ennui2]

$this->bbcode_second_pass_quote('pstarr', 'I')t's why Iran has embraced nuclear

[shortonoil]

OPEC "says" it is ready to cut 0.4 to 0.9 mb/d for a market that is 4.75 mb/d oversupplied.

<i>Now, that should really solve the problem?</i>

As we have been saying for almost three years the market will never again come back into balance, and for almost 3 years it has not. Petroleum production is the act of producing energy, not volume. As long as that is not understood, and appreciated they will just keep pushing on a string.

http://www.thehillsgroup.org/

[ROCKMAN]

"I've been at a loss to explain this long drop in prices." And can you explain why the current oil price (after the "long drop") is 30% higher then the inflation adjusted average oil price for the great majority of the last 60 years?

[peripato]

$this->bbcode_second_pass_quote('rockdoc123', '')$this->bbcode_second_pass_quote('', 'E')ntropy mate, entropy. The world economy is weaker than it was two years ago. And far weaker than in 2008. It could only support oil at $140+ up to 2008 and only $100+ up to 2014.

[ROCKMAN]

p - Come on, bro, is that all you got??? LOL.

[ROCKMAN]

How a "production cut" can actually lead to no decrease in production...or even a slight increase:

Reuters: The Algiers agreement seems to have been designed to engineer an increase in prices by changing market sentiment rather than reducing the physical supply of crude. OPEC issued a statement:

(1) OPEC’s 14 members committed themselves to a collective production target ranging between 32.5 million and 33.0 million barrels per day.

(2) A high-level committee will be established to study and recommend the implementation of the production level by individual member countries and consult with non-OPEC oil producing countries.

But the critical question is whether the production target will affect the actual number of barrels being marketed by the organization's members. Should the collective production target be characterized as a cutback, a freeze or continued, albeit restrained, growth? The answer depends on the baseline against which the target is measured and what would have happened in the absence of a deal.

OPEC members produced an average of 33.24 million barrels per day in August, according to estimates by secondary sources published in the organization's own monthly oil market report. If the production target is compared with the production level in August, then it represents a cut of somewhere between 250,000 and 750,000 barrels per day. But OPEC members, led by Saudi Arabia, boosted their production during the summer, in part to meet strong domestic demand for power generation. Saudi Arabia’s own oil production showed a seasonal increase of around 400,000 barrels per day between May and August.

In most years, Saudi Arabia’s output has been reduced once the summer heat is over and the need for direct crude combustion in power plants falls. Before the summer, OPEC members were producing around 32.25 million barrels per day, with an extra 200,000 barrels per day being produced by Gabon, which rejoined OPEC on July 1. If the production target is compared with pre-summer OPEC+Gabon output of 32.5 million barrels per day, it represents a production freeze compared with the first half of 2016 or even a slight increase.

[ROCKMAN]

Reuters - Lukoil, Russia's second biggest oil producer, is not ready to reduce its oil output but will join oil market stabilization measures if Russia joins them, RIA news agency quoted Lukoil Chief Executive Vagit Alekperov as saying. TASS news agency also cited Alekperov as saying that all Russian oil producers could sign a protocol on stabilizing oil production. It later clarified in Alekperov's quote that he was talking about the need to sign such a protocol in case Russia decides to join the process of output stabilization.

And while the right side of the mouth says the above the left side of the mouth says:

Reuters - Russia's Pacific island of Sakhalin is expected to increase oil production by 8 percent in 2016 from a year ago, a regional official said, which would add to the global glut the industry currently faces.

Vera Sherbina, head of Russia's regional government of Sakhalin, told a conference on Wednesday that oil and gas condensate production at the island, which comes mostly from offshore, will climb to 18.1 million tonnes, or about 362,000 barrels per day (bpd), this year, up from 16.7 million tonnes in 2015.

[rockdoc123]

$this->bbcode_second_pass_quote('', 't')otal nonsense. An insult to thinking Americans. More oil industry/mainstream economist lies.

I wonder if rockdoc would argue high oil prices have no effect on individual American consumers? Whether the rapid rise from $30 to $80/barrel oil after 2006 (which sent $200 billion American dollars every year thereafter overseas to our foreign oil suppliers) had no effect on the aggregate American consumer base

[ennui2]

$this->bbcode_second_pass_quote('', '
')The reason people didn't pay off their mortgages in 2007-2008 was because they were over-leveraged...

[shortonoil]

"I've been at a loss to explain this long drop in prices." And can you explain why the current oil price (after the "long drop") is 30% higher then the inflation adjusted average oil price for the great majority of the last 60 years?"

Absolutely not true. For example, an inflation adjusted barrel of oil for 1980 would presently be $63.04. For 1960 it would be $23.44. For 2015, the last year that we have a full annual price, it was $48.67.

When the BLS computes inflation numbers they include ALL products sold in the market. That includes baby diapers, and hair spray. There is absolutely no reason to believe that the inflation rate of baby diapers, and toilet paper maps the inflation rate of oil. If plotted they don't even produce the same form of curve. The only thing that they have in common is that both slope up, and to the right. Using inflation adjusted numbers on oil prices is using two numbers for which there is no reason to believe they have anything to do with each other. It is a red herring.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'Y')ou do the math. Please! It's real easy: $50*barrels_imported/a_year.

[ROCKMAN]

"...the current oil price (after the "long drop") is 30% higher then the inflation adjusted average oil price for the great majority of the last 60 years?"

Absolutely not true. For example, an inflation adjusted barrel of oil for 1980 would presently be $63.04. For 1960 it would be $23.44. For 2015, the last year that we have a full annual price, it was $48.67."

Once again the sad use of cherry-picking to defend the indefensible. Forks can look at this chart and decide for themselves. As far as the implication that inflation adjusting isn't important I wonder how many here would accept their current job for the salary it was earning in 1960. BTW the adjustments typically use the ge in the value of the $...not any particular product. Here's a published chart similar to most you'll find.

http://inflationdata.com/Inflation/Infl ... _Chart.asp

For 28 years (1946 - 1974) tthe price ran about 50% below the current price. And for the 28 years (1986 - 1994) the price averaged around $35/bbl. But let's make it simple: does anyone think oil selling at the UNADJUSTED PRICE of $39/bbl in 1979 (I. A. = $117/bbl) oil was "worth" less the it is today?

[peripato]

$this->bbcode_second_pass_quote('ROCKMAN', 'p') - Come on, bro, is that all you got??? LOL.

[ROCKMAN]

p - You need to tune up your sarcasm meter, bro...I was agreeing with your view. You need to keep your "rock's" straight. LOL

[tita]

OPEC is releasing a monthly report on oil markets that contains aggregate data from various sources about oil supply/demand and economic perspectives.
http://www.opec.org/opec_web/en/publications/338.htm

I was looking at the supply/demand balance part in the releases from jan to nov, and their recent numbers are quite bullish. In just two months, we went from a little bit oversupplied market (+0.06 MMbbls/d in Q2) to a strong deficit market (-0.47 MMbbls/d in Q2 and -1.3 MMbbls/d in Q3). The reason for this is because demand estimations for 2015 and 2016 have been constantly revised upward (+ 0.5MMbbls/d for each year from initial estimations), while the supply has not much increased. Add to this the upward revisions of demand forecast for 2017 (+1.53 in november instead of +1.16 in january), and you end up with an increasing deficit instead of a balanced market. These revisions have been going on all the year. If they continue, this imply that the deficit will increase.

They also forecast that the supply from non-OPEC producer will be mainly driven by the USA, increasing by 0.59 MMbbls/d in 2017 and 0.87 MMbbls/d in 2018 (both include NGLs). The other non-OPEC production staying the same. IMHO, they are quite right... more than the eia.

OPEC production has been quite stable, most members respecting the cuts while production growth from Iran and Lybia was compensated by the decrease of Venezuela. They have something like 1.2 MMbbls/d of cuts... And may be able to produce a little more than 34 MMbbls/d. Which is precisely the value of the demand minus non-OPEC oil production they forecast in Q3 and Q4 2018.

Which raise the million dollar question: What will they decide on their next meeting? Prolonging the pact till the end of 2018 while forecasting supply/demand deficit is a call for higher prices... And a boost for US shale production. Probably a 3 months extension is enough to keep the market happy, while the door is still open for an extension in their june meeting.