Saudi Arabia plans to raise revenues from sources other than oil

[rcjordan]

Isn't sand a little heavy to ship?

http://www.reuters.com/article/us-saudi-budget-idUSKBN0UB10D20151228

[Mackin USA]

I look at this just like our congress, there will be no executive CUTS at the top. IMFO

[ergophobe]

The Saudis have shown a remarkable ability to stay, by the standards of the region, prosperous, powerful and peaceful (at least not getting their own armies engaged in conflict) for 40 years. They may reach a breaking point (corruption, inequality, jealousy of neighbors, inability to adapt), but I wouldn't count them out just yet.

Of course, they have been talking about an economy less dependent on oil ("The stone age didn't end because they ran out of stones") for almost as long and have not managed to do so....

[Rupert]

This I find amazing:

The plan suggests the kingdom is not counting on a major recovery of oil prices any time soon but is instead preparing for a multi-year period of cheap oil.

The talk is they are doing it (OPEC) to kill off the shale suppliers. So when they run out of oil, then we can use our shale?  Something still  not right.

[Brad]

>>shale

That might be part of it, but rivalry with Iran is the key.

[rcjordan]

>rivalry with Iran

That's what I'm reading, too. BUT some economic papers point to the parallel with cheap chinese steel and other products where these country-owned producers just ramp up production to keep the revenue stream intact.  Whatever is going on, it's not being driven by good ol' capitalistic decision-making.

[Rupert]

A bit more of an idea after a few days with my oil/gas friends.

They say it is to destroy other supplies so that the Saudis keep their market share.

The bit I did not realise is that technically it is very easy to turn off production, but very difficult to turn it back on again. Pipes need to keep flowing otherwise some oils turn to wax, and well heads need to keep the pressure going. Stop it, and you have to re-drill.  Very expensive. 

Consequently several people are producing at a loss right now, (It costs more to produce than they get selling it) and smaller producers are now going bust in the North Sea. One more dur to fall on the 15th jan.  I guess the money dries up on that date.

If they keep this going and they can, as they have huge reserves of oil and cash, then the field will be very different in 3 years.  And they will be able to demand a higher price again.

[rcjordan]

100M gallons now stored in tankers (I think we have a previous thread here showing a map of tankers)

http://www.wsj.com/articles/crude-moves-out-to-sea-as-inventories-swell-1449864003

http://www.wallstreetdaily.com/2015/12/03/oil-tankers-iran-exports/

Another article I read said Saudi production costs are around $10/barrel. If so, they can afford to play the marketshare/political game.

>very difficult to turn it back on again

Same with the steel mills

[Rupert]

Well, seems raising revenue will be nothing to do with Iran now.

[Rupert]

Thanks.  Interesting. One of the best bits there:

Iran's Oil Minister Bijan Zanganeh says Iran will wait for no one's permission, including OPEC's, to boost its oil exports. He said in September, "It's our right to return to the level of production we historically had."

Our Right? Jeeze... and a bit later:

The country aims to regain its market share, no matter the price. Zanganeh said, "Our only responsibility here is attaining our lost share of the market, not protecting prices."

so even cheaper oil.

I understand gas is a different market, so Shale Gas will hold its price, shale oil not.

[rcjordan]

Not a well-written article, but worth a read for the numbers:

http://money.cnn.com/2015/11/24/news/oil-prices-production-costs/

[rcjordan]

Rupert, it's time to sell that dune-front retirement cottage in Riyadh

http://www.reuters.com/article/us-ceraweek-glut-idUSKCN0VV0O2

<added>
And that summer home in Aberdeen

http://www.upi.com/Business_News/Energy-Industry/2016/02/23/North-Sea-fading-industry-body-warns/3261456225251/

[Rupert]

Damn, Too late to sell.

I hear Aberdeen is struggling. Friends in London in the oil industry are struggling. And in Norway.

Funny, I think Norway are looking to replace oil too.  What do you think they will try to do to make money?

Financial services? Electronics? Sweat shops? Tourism?

It wont be easy for any of them, any market they go into already has strong players.

[rcjordan]

The coming disruption in several currently fundamental industries --energy distribution, media distribution, & communications come to mind, but there are others-- is going to rock our world.  There's been a worldwide movement toward urbanization for centuries now, but I could make an argument that being able to generate nearly unlimited amount of nearly free energy coupled with dirt-cheap, ubiquitous communication might reverse that.  And, if I can lower my cost of living by extraordinary amounts, do I care quite so much about what I'm going to be doing to make a dollar?

If I were advising Norway, or even the Saudis, I'd be pouring my remaining money into developing beyond-state-of-the-art medical tourism.

[Rupert]

Medical Tourism.. ah yes.  Like The Netherlands .. Or Not quite  

http://www.dignityindying.org.uk/assisted-dying/assisted-dying-overseas/


sorry, a bit black.. must be my mood.