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Page added on January 11, 2016
Meet Manifa (And Other Giant Oil Projects) That Will Add To The Global Oil Glut
World oil consumption is more than 90 million barrels a day. Between 2009 and 2014 oil was traded for about 110 dollars a barrel; now oil is changing hands for 32 dollars a barrel. Roughly a 7-billion-dollar cash flow a day is vanishing from the global market.
Norway’s sovereign wealth fund that has accumulated a stake of 4.5 billion dollars in Apple over the past years, will turn from an Apple buyer into an Apple seller.
The China Development Bank (a Chinese policy bank) has poured nearly 50 billion dollars into Venezuela in return for oil, with the country now collapsing under the Chinese debt, having no other choice but to drill for more oil.
These are just some of the challenges the world is facing in 2016 as oil prices are heading towards 20 dollars a barrel.
Speculators and manipulators were able to manipulate the oil price to more than 120 dollars a barrel, with the production cost being roughly between 20 and 80 dollars. With a huge profit margin the world was digging for more and more liquid gold.
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Kashagan: The $50 Billion Oil Development That Doesn’t Work
Shell, Total S.A., Exxon Mobil and China National Petroleum Corporation are now stuck with a 50-billion-worth project in the Caspian Sea, called Kashagan. The project is full of problems and delays, but is expected to add 300.000 barrels of oil a day to the global oil glut the coming year.
The field is developed by the international consortium under the North Caspian Sea Production Sharing Agreement. The Agreement is made up of 7 companies consisting of Eni (16.81%), Royal Dutch Shell (16.81%), Total S.A. (16.81%), ExxonMobil (16.81%), KazMunayGas (16.81%), China National Petroleum Corporation (8.4%), Inpex (7.56%). The initial production is expected to be 90,000 barrels per day (14,000 m3/d). It should reach a production rate of 370,000 barrels per day (59,000 m3/d) Source Wikipedia
Prelude
2016 will also be the inauguration of Shells Prelude, the world’s first floating liquefied natural gas platform as well as the largest offshore facility ever constructed. We expect the media to give limited coverage to its inauguration.
Prelude FLNG is the world’s first floating liquefied natural gas platform as well as the largest offshore facility ever constructed. Prelude FLNG was approved for funding by Shell in 2011. Analyst estimates in 2013 for the cost of the vessel were between US$10.8 to 12.6 billion. Pressures from an increase in the long-term production capabilities of North American gas fields and increasing Russian export capabilities may reduce the actual profitability of the venture from what was anticipated in 2011. Source Wikipedia
Manifa
While the media attention was directed to the shale oil boom in the US, the Saudis created a giant offshore oil project called Manifa. With one single project Manifa added 1 million barrels a day to the world oil glut. Manifa will expand its capacity the coming year, adding a further 500 million barrels a day to world markets.
The project is part of the development of the Saudi oilfields, which are expected to see an increase in production to over 12.5 million barrels a day from 11 million barrels a day. The first phase of the project began production in April 2013. The field produced 500,000bpd by July 2013. It will produce 900,000bpd of crude oil once fully completed by the end of 2014. Additionally, there will also be production of 90 million standard cubic feet per day of sour gas, 65,000bpd of gas condensate, and water. Source Offshore Technology
There are plans to extend the project with a further 500 barrels a day capacity.
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ZH: With global storage levels at their limit, these massive projects (and their sunk-cost desperation for cash-flow) will add already extreme pressure an over-supplied market in which, as Morgan Stanley notes, “oil has no intrinsic value.”
14 Comments on "Meet Manifa (And Other Giant Oil Projects) That Will Add To The Global Oil Glut"
Go Speed Racer on Mon, 11th Jan 2016 7:52 pm
It is important to pronounce ‘Kashagan’ correctly.
Sound it out as ‘cash all gone’.
makati1 on Mon, 11th Jan 2016 8:05 pm
LOL Good one Go. ^_^
SugarSeam on Tue, 12th Jan 2016 1:08 am
“Manifa will expand its capacity the coming year, adding a further 500 million barrels a day to world markets.”
… fail
Anonymous on Tue, 12th Jan 2016 3:38 am
Prelude isn’t an oil project of any kind. As it’s name implies it produces LNG. There is some condensate that comes with the gas though (about 35,000bpd).
rockman on Tue, 12th Jan 2016 5:42 am
They need to check the calendar: “field produced 500,000bpd by July 2013. It will produce 900,000bpd of crude oil once fully completed by the end of 2014.” At the time the field began producing the price of Brent was over $100/bbl and remained there for almost a year. During that time the US added about 4X as much daily output as this field did.
So again who hurt the oil market worse: Manifa or Eagle Ford/Bakken?
mbnewtrain on Tue, 12th Jan 2016 8:47 am
What this article fails to mention is these oil projects will produce oil at a loss. The Saudi Manifa project is in shallow water but building these islands, causeways and pipelines is not cheap. Furthermore, this project involves gas injection (IIRC) adding to the cost. Cost for this oil will not be the like legacy fields at $5 per barrel. This oil will more likely cost $30 per barrel. Not even worth producing at todays prices.
rockman on Tue, 12th Jan 2016 8:58 am
mb – Maybe…maybe not. It’s very difficult to estimate what it costs to lift that let as opposed to develop the field. They might take a very long time (maybe never) to recover the invested capex but it still might be generating a positive cash flow. Even if they are only selling 500,000 bopd at $20/bbl that’s still $300 MILION per month in gross revenue. Their big advantage is that they don’t have to pay royalty owners and production taxes like the Rockman does. lol
Kenz300 on Tue, 12th Jan 2016 9:53 am
Clean energy is the future….fossil fuels are the past.
Climate Change is real and will impact all of us.
Fossil fuel companies will fight to the end….
There Are Now More Solar Jobs In America Than Oil Jobs
http://www.huffingtonpost.com/entry/solar-jobs-rising_569409e5e4b0cad15e65be87
shortonoil on Tue, 12th Jan 2016 10:14 am
Manifa is a vanadium laced mud hole! It sat idle for 60 years because SA couldn’t sell it. Vanadium burns up refineries so no one will buy the raw crude. All the crude coming out of Manifa has to be processed through SA’s own special refinery that they built just for this field. It cost them $38 billion to build. Apparently it works because it hasn’t burned down, yet. There will be no crude hitting the market from Manifa; its production of finished produces is slated mostly for the SA home market. It is oil, but it isn’t cheap oil!
Nony on Tue, 12th Jan 2016 12:44 pm
Manifa:
It’s probably a sunk cost now (the demetalization equipment, the causeways, etc.). Unless the cost to produce exceeds current world prices, makes sense to use it.
Doesn’t matter if the products supply the local market. That still reduces gasoline imports and frees them up for the world markets.
The overall project looks wicked cool. Would love to see an overview of how the V is removed (what sort of equipment and chemistry is involved). The ocean engineering is cool film, but the refinery machinery and economics is probably what enables it most.
Kashagan:
Think the problems are:
1. Requirements to use local labor. Bad welding.
2 Requirements to use local materials: bad pipes, fraudulent metallurgy.
3. Consortium project management: 5 actors, not the best leader. Should have ditched the committee and just had XOM take a swing at it.
[All of the above have cost implications as well as project delays.]
Floating LNG:
Wicked cool. But I don’t know much about it or how it affects oil. More of an LNG, Asia NG price thing to me.
shortonoil on Tue, 12th Jan 2016 4:48 pm
“It’s probably a sunk cost now (the demetalization equipment, the causeways, etc.).”
The Saudis developed Manifa for one reason; to free up crude from their other fields that they could sell to the world market. As long as Ghawar is producing they will keep producing from Manifa. Manifa isn’t about profit, it’s about cash flow. That is an area of particular concern to SA at present.
Pete Bauer on Tue, 12th Jan 2016 9:22 pm
shortonoil – Thanks for sharing info about Vanadium in Manifa crude.
Earlier I knew that Manifa crude is 28 API medium crude which can yield only Diesel, Fuel Oil and residues like Petcoke.
So if the Saudis are going for offshore oil, that means their onshore Oil has probably hit the peak.
ennui2 on Tue, 12th Jan 2016 11:16 pm
Vanadium has value too. It can be used in flow-batteries.
https://en.wikipedia.org/wiki/Vanadium_redox_battery
Nony on Tue, 12th Jan 2016 11:37 pm
I think the vanadium concern is overstated. See this article:
http://www.theoildrum.com/node/9056
Also, I tried looking for discussion of some special groundbreaking processing technology for the V in Manifa oil and didn’t find much.
Whole thing sounds like doomers repeating a meme to each other.