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Page added on November 23, 2015
Is Saudi Global Oil Dominance Ending?
Saudi Arabia’s world oil leadership position is under duress. Although this huge Arabian Desert peninsula had been sparsely, tribally populated, when the Ottoman Empire was crumbling by the end of World War I, a combination of positive factors vaulted Saudi Arabia (named after its founder Ibn Saud) into a world oil power leadership position:
1) Five oversized oilfields in the early 1920’s, the largest ever up to that point, shot the Saudis into an oil leadership position, which it has never vacated.
2) By teaming up with the world’s largest American-dominated oil producers in the formation of the Arab/American Oil Company (Aramco), it gained political power from the recognition of incoming President Franklin D. Roosevelt in 1934. This relationship became so powerful that FDR, just before he died in 1945, issued a statement announcing King Ibn Saud as his chosen political leader for all “Mideast decisions,” in the World War II postwar period.
With the ongoing backing of Aramco’s technology and knowledge, the Saudis built a sophisticated, and technologically advanced exploration and productive oil capability that led to the “nationalization” of that syndicate and the birth of OPEC; with the Saudis and their world-leading oil production as the anointed leader. This has led to political power, far out of proportion to its less than 30 million population. Also, as the nation encompassing Mecca and Medina, Islam’s two holiest cities, Saudi Arabia assumed religious power over the Sunni aspect of Mohammadism. Although practicing orthodox Sharia Law, it made sure, financially, that the most ardent and ruthless practitioners of this belief system (the Wahabis) spread their terrorism outside of Saudi borders.
Reaching the peak of their political, as well as energy production dominance, the Saudis embargoed their shipments to the U.S. and Western nations in 1974, due to America’s support of Israel in its successful resistance to a joint Syrian/Egyptian invasion. With U.S. backing as the 20th century ended, Saudi Arabia, as a sovereign nation, was saved from invasion by Iraq’s Saddam Hussein, but now faces its greatest threat ever. While forcing America to curb its world-class energy sector, bringing prices down to less than one half the previous $100 per barrel rate, which the Saudis could profitably live with, while continuing peak production, have temporarily secured their market position. But in doing so, they have created the greatest threat they’ve ever faced in their almost one century of existence:
a) Russia, which shares oil production world leadership with the Saudis (10 million bpd), is being economically devastated at low current world prices. Even though Moscow dominates Central and Eastern Europe, with Soviet-era built pipelines, Russia is being monetarily ruined by oil prices in the $40 range.
b) Of the five major oilfields producing much of the Saudis’ total oil production, one is on the verge of extinction, while the other four are in various stages of decline. With no major new discoveries on the horizon, a simultaneous decline may be facing Saudi Arabia, while the Iran/Russia axis, along with Venezuela, pressures OPEC to cut production, or else.
It is likely that these factors will collide in 2016, creating geopolitical changes not previously anticipated at this time.
21 Comments on "Is Saudi Global Oil Dominance Ending?"
Plantagenet on Mon, 23rd Nov 2015 7:58 pm
KSA isn’t going to be sad that Russia “is being economically devastated” by the oil glut and low oil prices. This is precisely what KSA wants—-Russia is the ally of the Shia in Iran and Syria, and Sunni KSA opposes the Shia states.
cheers!
Mark Bucol on Mon, 23rd Nov 2015 9:13 pm
Three threats to Saudi Arabia’s security and wealth:
1. New oil production to offset 5% decline of old fields cost $50 per barrel versus legacy production/exploration cost of $10 to $20 per barrel. KSA now pipes CO2 from power plants many miles to newly drilled injection wells to re-pressurize old fields. Some injection wells are drilled in 100 to 200 feet of water and miles from shore, all to keep up production in Gulf.
2. Domestic consumption, driven by cheap transportation fuels, coupled with rising population, is rising by 5% or more per year (IIRC) means less oil for export.
3. Its military expenditures for war in Yemen, plus costs for welfare programs (both wealthy and poor get handouts there) are consuming larger portions of its budget at a time when oil revenues have dropped to half from a year ago.
Long term outlook for KSA is not good.
makati1 on Mon, 23rd Nov 2015 9:17 pm
Plant, If Russia is being “devastated”:
Why is it buying tons of gold for it’s reserves?
How can it afford to protect Assad in Syria?
To upgrade it military?
Send shuttles to the space station several times a year and maintain them?
Fly more recon flights along the European and American coasts?
Etc…
You believe too much Western propaganda, I think. Back away from the punch bowl and sober up before it’s too late.
makati1 on Mon, 23rd Nov 2015 9:22 pm
BTW: Russiai is in Syria to protect Russia’s interests and base there. Protecting Assad is the means to do that.
Also, it is better to fight on someone else’ land than your own. Putin wants to keep ISIS out of Russia. Smart man.
The US is always using other countries to fight their battles of aggression. I think that is about to change, but then, the ‘exceptionalism’ here believe the oceans will always keep them safe. What a shock is coming to them. Their major enemy is their own government.
makati1 on Mon, 23rd Nov 2015 9:37 pm
Related news:
http://www.shtfplan.com/headline-news/post-paris-american-police-state-once-again-in-vogue-we-can-crush-isiss-enclave-of-terror_11192015
“The founding fathers warned of this, but could scarcely foresee the cynical nature of today’s police state – where the terrorists created by the state have become the population’s worst nightmare.
In one variation of the statement, Benjamin Franklin wrote: “Any society that would give up a little liberty to gain a little security will deserve neither and lose both.”
So true…
makati1 on Mon, 23rd Nov 2015 9:44 pm
Or this:
http://www.commondreams.org/views/2015/11/23/signs-dying-society/
1. A House Bill Would View Corporate Crimes as ‘Honest Mistakes’
2. Unpaid Taxes of 500 Companies Could Pay for a Job for Every Unemployed American
3. Almost 2/3 of American Families Couldn’t Afford a Single Pill of a Life-Saving Drug
4. Violent Crime Down, Prison Population Doubles
5. One in Four Americans Suffer Mental Illness, Mental Health Facilities Cut by 90%
“There exists a common theme amidst these signs of societal decay: The super-rich keep taking from the middle class as the middle class becomes a massive lower class. Yet the myth persists that we should all look up with admiration at the “self-made” takers who are ripping our society apart.”
Davy on Mon, 23rd Nov 2015 10:36 pm
“Russian Banks Face More Pain
The central bank will continue to shut down weak lenders.”
http://www.bloomberg.com/news/articles/2015-11-05/russian-banks-face-more-pain
“We now have full stagnation,” says Oleg Vyugin, chairman of MDM Bank, a top-30 lender. “Demand for loans from high-quality borrowers is very limited, as they remain uncertain about future income. Insolvent borrowers would be happy to take a loan, but banks are not ready to lend to them.”
Go Speed Racer on Tue, 24th Nov 2015 3:32 am
I am not an oil expert. However isn’t there something foolish about filling the well with seawater?
ThinkIng its better to just suck the oil out from the low points. Add water and now it’s harder to pump the rest of the oil?
theedrich on Tue, 24th Nov 2015 4:09 am
The gradual impoverishment of the world as a whole is becoming ever more dangerous. In the U.S., we can expect that, as usual, the ministry of propaganda will paint potential targets as “morally evil” (which resonates with the simplistic Christian view of the world) and “our” government as doing the bidding of Yahweh.
Meanwhile the supranational trillionaires (through their superPACs) will suck every last penny out of the West, oblivious to the consequences. The “humanistic” drivel about White Guilt and White “responsibilities” will simultaneously enable them to turn us (and our vassals, the Europeans) into another ThirdWorld sewer through unimpeded immigration as they cloister themselves in Disneyland-like fortresses far from the maddening crowds.
The KSA is already offloading vast numbers of its Wahhabist population onto the U.S. so it will have fewer loafers to support. Hotflash Hillary will continue to accommodate that wasteland in its offloading as long as it continues to bribe her and other biggies of the Demonic Party. Even so, it is an open question as to how much longer the rich cameldrivers can continue this game.
Russia’s resources, it seems, are not depleting quite as rapidly as those of KSA. But as the proxy war the U.S. is waging against Russia continues, and the Russian economy continues to deteriorate, Vlad the Impaler may make some as yet unexpected chess moves that will change everything very quickly. Given the affirmatively actioned incompetent in the DC White House, we may suddenly find ourselves in a very nasty situation.
rockman on Tue, 24th Nov 2015 6:16 am
Racer – A quick lesson in oil recovery. First, they aren’t “filling the well with salt water”. They are pumping down the water in injection wells…not the producing wells. There are two main forces that “push” the oil up the well to the surface: pressure depletion and water drive. Simple analogy: a balloon filled with air: as you let the air out the pressure in the balloon decreases (pressure depletion) and the remaining air comes out slower. Injecting water (although N2 and NG are more common) keeps the pressure higher and thus more oil flow. Water drive is like your separate salad dressing: the olive oil floats on top the vinegar (i.e. water). The oil in a reservoir floats on top of the salt water. AS the oil is produced the water continues to push the oil up. Sometime it does so with a strong and CONTINUOUS FORCE (strong “water drive”) and sometimes not (weak WD). In this case injecting water into the reservoir BELOW the oil water contact helps push the oil out faster.
This isn’t an exact explanation but I think you get the idea.
rockman on Tue, 24th Nov 2015 6:21 am
And so who’s economy is taking a bigger hit by the low oil prices?
Russia: As of 2012 the oil-and-gas sector accounted for 16% of the GDP.
Saudi Arabia: The petroleum sector accounts for roughly 92.5% of Saudi budget revenues and 55% of GDP.
Anonymous on Tue, 24th Nov 2015 9:14 am
Mark Bucol, in 10 years, the Middle East will blow up, it will be spectacular, and there possibly might be some nuclear explosions if Israel gets involved.
Its already in a “slow burn” due to unsustainable demography and resource depletion in what was Iraq and Syria.
Our approach, which our politicians refuse to accept in a kicking and screaming manner, should be to control our lands for our own kind in an aggressive manner.
Simply put, we need to keep the foreigners of our lands out of our lands for national security reasons, but apparently that concept is anathema to the security establishment.
shortonoil on Tue, 24th Nov 2015 9:32 am
Statements from Aramco reservoir engineers tells us that Ghawar now has a water cut of better than 50%. Some simple calculations show that Ghawar’s original 350 foot oil seam has been reduced to 30 feet, or less. Once Ghawar goes Saudi oil dominance will be a thing of the past. They are now pumping the last few barrels remaining in that field.
kanon on Tue, 24th Nov 2015 9:50 am
shortonoil: They are now pumping the last few barrels remaining in that field.
Does this mean their depletion curve will resemble fracked wells? If the 30ft measurement is accurate, what time frame does this give?
joe on Tue, 24th Nov 2015 10:58 am
Looks like NATO is siding with ISIS. We are sleeping walking into a third world war guys.
Jeff on Tue, 24th Nov 2015 2:17 pm
Ghawar will be producing oil for as long as there are people willing to buy it… There’s plenty of residual oil still remaining below the OWC, and more than one reservoir at that… Ghawar will be economical to operate at a 50:1 water cut, so 1:1 water cut is hardly anything to be alarmed about…
Ghawar’s water cut hasn’t stopped the Saudi’s from producing >10 Million BOPD this year, has it???
Hello on Tue, 24th Nov 2015 2:35 pm
So many expensive nuclear bombs getting dismantled when they could be used to solve the muslim problem once and for all. It drives a honest man mad.
GregT on Tue, 24th Nov 2015 3:18 pm
“It drives a honest man mad.”
Thanks for explaining the reason for your insanity Hello. Don’t despair though, help is available. There is an entire profession that has sprung up thanks to good people like yourself. They are commonly referred to as psychiatrists. Visit one soon, before you hurt yourself, or somebody else. Either that, or you could always just put an end to your miserable existence yourself.
makati1 on Tue, 24th Nov 2015 8:52 pm
GregT, maybe he live in the US?
“5. One in Four Americans Suffer Mental Illness, Mental Health Facilities Cut by 90%”
From my comment above.
Davy on Tue, 24th Nov 2015 9:11 pm
You drinking tonight mak your acting your usual dumbass. BTW Hello is from Europe
Go Speed Racer on Tue, 24th Nov 2015 11:25 pm
Well, Seems like Hello has got a point. We could also sell th extra bombs at fireworks stands. Light fuse and get away, LOL. Fact is, a hydrogen bomb in the middle of the Fukushima complex would save us that big cleanup bill. And they could sell tickets to watch from a safe distance. HEY Rockman, thanks for the tutorial. I was worried all the oil was in or get turned into salad dressing. But I guess it’s all figured out. When will they bring back the 1977 Lincoln Continental Mark VI ? With the 460 engine. To heck with peak oil, I want that battle barge ride. :o)