NSA Spied on Saudis in OPEC

Der Spiegel:

A review of the section reserved for the OPEC secretary general documented that the Saudis were using underhanded tactics, even within the organization. According to the NSA analysts, Riyadh had tried to keep an increase in oil production a secret for as long as possible.

Saudi Arabia’s OPEC governor is also on the list of individuals targeted for surveillance, for which the NSA had secured approval from the secret Foreign Intelligence Surveillance Court. The documents show how careful the Americans were to suspend their surveillance when the Saudi visited the United States. But as soon as he had returned to Riyadh, the NSA analysts began infiltrating his communications once again.

Saudi Reaping $1 Billion Daily in Oil Export Revenue

Ajay Makan reports in the Financial Times that Saudi Arabia is pumping out more crude oil than at any time since at least the 1970s:

The trigger for the jump in Gulf production has been huge disruption to supplies from Libya, where striking workers and militias have reduced exports from about 1m b/d to merely a trickle. Saudi Arabia has responded by pushing output to 10.2m barrels a day in August, according to the International Energy Agency, the most in IEA records. The country is now reaping more than $1bn a day in export revenues.

Saudi Still Important to Oil Market

Will the surge in US oil production decreases the importance of Saudi oil supplies?

Arguably Saudi Arabia is more important to future oil market supplies than ever. There are two reasons for this – the kingdom’s commitment to maintain spare capacity and the nature of its contracts with customers, which allows them to ask for more oil when the market is tight.

Saudi Solar Win-Win

After years of stalling on solar, Saudi authorities now appear to be moving quickly to capitalize on the slump in costs, with contracts for the first round of 500-800 MW of solar power expected before the end of 2013 and a target of over 5,000 MW installed in the next five years.

“Solar in the Middle East is not being prompted today based on environmental or reputational concerns. It is simple economics,” Michael Parker, an energy analyst at Bernstein Research said in a May 10 note.

Time to Revise Saudi Subsidies?

Saudi Arabia’s system of electricity subsidies “should be revised,” the chief executive of Saudi Electricity Co, the country’s majority state-owned power utility, said on Tuesday.

“Subsidies are becoming a big part of the government budget,” Ali al-Barrak said at a financial conference in Riyadh. “Subsidies should be revised and done in a different way. They should be smarter and support the low-income people.”

The International Energy Agency estimates that the Saudi government incurs an annual subsidy bill of US$61 billion, the second-highest subsidy in the world after Iran.

Will Saudi Arabia Rise Crude Capacity to 15 Million Barrels?

On Tuesday, Bloomberg reported:

Saudi Arabia plans to raise production capacity to 15 million barrels a day by 2020 from 12.5 million barrels a day now, a Saudi prince said, reviving talk of a higher internal target.

The new capacity will allow the kingdom to be able to export as much as 10 million barrels of crude a day, Prince Turki Al Faisal, 68, a former head of intelligence, said in an April 25 speech at Harvard University that was posted on the university’s website yesterday.

Few hours later, Saudi Oil Minister Ali al-Naimi said there is no such plan:

Saudi Arabia’s energy minister said on Tuesday the kingdom has no plans to dramatically expand its oil production capacity to 15 million barrels per day, dispelling a suggestion put forth by a member of his country’s royal family.

Ali al-Naimi said his country will be “lucky to go past” its current oil production of about 9 million barrels per day (bpd) by 2020, as new petroleum production from other countries comes into the global market.

It will be interesting to see what analysts make of such contradictory statements, but it is important to note that Prince Turki al-Faisal does not currently hold any official position with the Saudi government. Making assertions about future government plans based on his statements would probably be inaccurate.

America’s Oil Boom and US-Saudi Relations

Will the boom in US oil production affect the ties between the Americans and Saudi Arabia?

As the United States produces oil at the highest levels in 20 years thanks to the shale boom, Saudi Arabia’s confidence in Asian markets could help keep relations between the two countries on track.

“The Saudis don’t see the North American oil boom as a threat, not in the context of the global oil market,” said a Washington-based energy consultant to governments and businesses, who did not want to be named.

Naimi said in a speech early this month in Doha that nobody should fear new oil supplies when global demand is rising, adding that Asia’s population growth should be a driver for future oil demand.

Texas Refinery is Saudi Foothold in US Oil Market

Clifford Krauss reports for the New York Times:

It is hard to imagine the desert sands of the Persian Gulf being any farther away than from this swampy refinery port known for Cajun food, sport fishing and being the birthplace of Janis Joplin.

But right in the middle of town stands a strategic outpost for Saudi Arabia’s global ambitions, although one that the Saudis appear loath to publicize.

The giant Motiva oil refinery, which just completed a $10 billion expansion that makes it the largest processor of gasoline, diesel and other petroleum products in the United States, is owned by Saudi Aramco and Royal Dutch Shell in a 50-50 partnership.

Aramco Wants to Become World’s Top Oil Refiner

Saudi Arabian Oil Co., the world’s biggest crude exporter, also expects to become the top producer of refined products such as fuel and petrochemicals, according to Khalid al-Falih, the company’s chief executive.

“In the years to come, we will become the world’s single largest oil refiner,” al-Falih said at a conference in Beijing today.

Saudi Aramco, as the company is known, is expanding refining and petrochemical production to meet domestic demand and export products that can fetch higher prices than crude. It plans to double its global refining capacity to 8 million barrels a day in 10 years, al-Falih said in the eastern Saudi city of Dhahran in January 2012.

Alarming But Not Hopeless

Abdel Aziz Aluwaisheg on the staggering costs of domestic energy consumption in Saudi Arabia and the efforts of conservation:

Saudi Arabia has by far the highest per capita oil consumption in the world. It consumes about four million barrels a day or (1.5) billion barrels per year. This translates into (48) barrels a year for every man, woman and child. By comparison, the United States per capita consumption is about (9) barrels a year and Japan’s is (5) barrels. In other words, Saudi Arabia consumes oil, per capita, at a rate of over five times the US and nearly ten times as much as Japan.

The cost of this waste is staggering: At $ 100 a barrel, domestic consumption is depriving Saudi Arabia of nearly ($ 150) billion of foreign earnings. Opportunity cost is equivalent to 20 percent of its annual budget.

The situation is certainly alarming, but not hopeless. There is a lot that can be done, as most countries have since the 1970s, when the first price shocks changed the way we looked at oil scarcity. Major oil producing nations did not suffer those shocks, and did not have to go through the same stringent conservation requirements as oil importers did. That experience led to profligate energy usage among oil producers, which now realize how such waste is depriving them of resources they could put for better use.