Friday, April 15, 2011

Saudi Arabian Oil Rig Count


The other day, I wrote, concerning the failure of Saudi Arabia to increase oil production in March,
The burning question is: why? Back in 2006, when their production started to gradually decline from 9.5mbd even as global oil prices were in the worst spike since the 1970s, I was an advocate of the view that the decline was largely involuntary: they'd never produced more than 9.5mbd, they'd underinvested for decades, and some of their big fields were getting very tired (particular northern Ghawar and Abqaiq) and they were starting a big rash of new projects and ramping up their rig counts at the same time.

I see current events differently. The reduction in late 2008 was clearly voluntary to support prices in the face of the great recession. There's no new projects announced, and the rig count hasn't taken off. So my take is that the failure to increase production to compensate for Libya is deliberate.
(Emphasis added now).  I must confess that when I wrote this, I had not actually examined the last two months of rig count data - I last checked in January, when it appeared that the rig count was falling lower and lower. That proved to be an important mistake.  If you look at the graph above, you can see that February and March show a sudden sharp increase that is even more pronounced than what happened in 2005.

We'll have to see what happens in current months, but this does give a little evidence to the "can't" side of the debate, versus "won't", when it comes to the Saudis not raising production.

5 comments:

Hypnos said...

If the new rigs are needed to get new production online, does this mean that spare capacity was eaten up in 2009-2010 by declines in mature fields?

Does this tell us something about the decline rate of the KSA?

Alexander Ac said...

Yes,

but this still does not explain the fact, that Saudis actually supported the intervention to Libya and Saudis also intervened to Bahrain (Saudis are close allies of Americans ), so I do not see a real reason why they should be annoyed *now*.

Seems like they keep talking that price is drove up by speculation and fear, which might actually be (partly) true...

or they think that we do not need the lost Libyan oil :-)

KLR said...

Maybe they're just gearing up for another 900 kb/d: Halliburton, Schlumberger Ride Oilfield Services Boom - Investors.com

Halliburton (HAL) reported March 28 that Saudi Aramco, Saudi Arabia's national oil firm, planned to restart its $11 billion Manifa offshore project, delayed since 2009.
Aramco puts the field's reserves at more than 10 billion barrels. It plans 31 artificial drilling islands and 13 offshore platforms. Halliburton is currently contracted for services on 93 wells.


FT blog says:

Secondly, there have also been reports that a decision has been made to speed up the start date of the 0.9mb/d Manifa oil field..

Amrita Sen answers your questions – Part one | Energy Source | Energy and environment news and analysis – FT.com

marcel.oeyen said...

Thake a look at this website:
http://www.thincs.org/

Kenneth D. Worth said...

Stuart, the Saudi's came out over the weekend and said that March production actually decreased to 8.2 mbpd. Markets were stated to be "oversupplied" despite the loss of Lybian production. This statement, of course, conflicts with the earlier data on Saudi production on which you commented. Perhaps it shows how little accuracy there is in the data. I cannot imagine the Saudi's actually came out and stated they are only producing 8.2 mbpd if they are producing more, but then again, anything is possible.

If true, production at 8.2 mbpd suggests that one of two things has occurred: 1) major Saudi fields have watered out or 2) the Saudi's are intentionally creating a dramatic price spike for reasons known only to themselves.

For those who missed it here is the Reuters article regarding the dramatic production pullback in the Kingdom:

http://www.reuters.com/article/2011/04/17/us-saudi-oil-idUSTRE73G14020110417

Best regards,

Ken