Wednesday, May 11, 2016

Two Articles In WSJ On Salman's Plans For Saudi Transformation -- May 11, 2016

Probably one of the best summaries regarding Saudi Arabia was posted here.

Today there were two articles -- one a news story of sorts and the other an op-ed -- in the WSJ regarding Saudi Arabia.

First, the "news article of sorts": Saudi Aramco signals rise in oil output.
Saudi Arabia’s state-owned oil company is likely to increase its production to meet rising demand this year, its chief executive said, as the company begins an expansion that includes a partial IPO and new refining capabilities.
“We’re seeing a global increase in demand,” Amin Nasser, the chief executive of Saudi Arabian Oil Co., known as Saudi Aramco, said at a news briefing Tuesday at the company’s headquarters. “We are meeting that call on us.”
Saudi Arabia, the world’s largest exporter of crude oil, is already pumping at near-record levels of about 10.2 million barrels a day. That output was part of an overall Saudi strategy for dealing with oil prices that collapsed more than 70% from June 2014 to January 2016: Pump flat out and compete with other countries for crude buyers.
Note the "near-record levels of about 10.2 million bopd." That "near-record" number never seems to change (see first link above).

Mr. Nasser’s comments suggest the kingdom’s oil company isn’t changing course. Saudi Arabia’s output tends to increase in the summer to deal with rising air-conditioner use when temperatures in the kingdom reach scorching levels, but Mr. Nasser said Aramco would pump more to meet demand elsewhere, particularly in the U.S. and India.
Then note this:
Mr. Nasser declined to give an average figure for crude production this year but said the new output would come mostly from expansions of current fields.
Jim Krane, a fellow at Rice University’s Baker Institute where he studies Saudi energy policy, said the kingdom has no choice but to increase production if it wants to protect its share of crude markets and increase its refining capacity. He said the Saudis were also considering the possibility of oil demand falling in the future.
“If the Saudis want to avoid being stuck with most of their reserves stranded underground, the signs now say they better sell it off sooner rather than later,” Mr. Krane said.
Aramco plans to keep its maximum sustainable output capacity of 12 million barrels a day for now, but could expand it in the future if needed, he said. Saudi Arabia’s capacity is a closely watched figure because it shows how much the kingdom could help if there were a sudden shortage of oil supplies from elsewhere in the world.
Saudi Arabia is also looking to increase its production of natural gas, with plans to nearly double its output in 10 years. Earlier this year, Mr. Nasser had said Aramco wanted to raise its gas output to 23 billion standard cubic feet a day from about 12 billion cubic feet.
Saudi Aramco also plans to increase its refining capacity to eight million to 10 million barrels a day from its current capacity of about 5.4 million barrels a day.
The expansion is part of Aramco’s plan to be the world’s leading energy-chemicals company by 2020 and represents the future of its fossil-fuels business.
 We can re-visit these numbers ten years from now to see how Saudi has done.

The world's top ten energy-chemicals companies are listed here (by revenue, some numbers rounded):
  • BASF, Germany, $90 billion
  • Dow Chemical, US, $60 billion
  • Bayer, Germany, $50 billion
  • Saudi Basic Industries, Saudi Arabie, $50 billion
  • LyondellBasell Industries, US, $40 billion
  • E.I.Du Pont, US, $35 billion
  • Linde, Germany, $20 billion
  • Henkel, Germany, $20 billion
  • Air Liquide, France, $20 billion
  • PPG Industries, US, $15 billion
Now, the second article, the op-ed: the 30-year-old Saudi revolutionary. This is an extremely disappointing op-ed. It is essentially a short history and a shorter overview of current events in Saudi Arabia. It was written by a "Ms House, a former publisher of The Wall Street Journal who is the author of On Saudi Arabia: Its People, Past, Religion, Fault Lines -- and Future. To be so knowledgeable about Saudi Arabia to have a book published on the subject, one would expect a comment or two from the writer with her views about the chances Mr Salman has of reaching any of his goals.

But all we get, as noted, is a brief history lesson and an even shorter overview of current events.

I hope Mr Salman has read the history of the Wars of the Roses (British history), called the Cousins' Wars at the time. Dan Jones would be a great place to start. The Wars of the Roses involved three or four brothers/cousins with royal blood and three very powerful families. Henry V chose his son Henry VI to be the next king, but that did not work out so well. In contrast, Salman, they say, is one of 7,000 princes, although clearly first among equals.

Salman needs to be most concerned about the adherents and leaders of the "harsh and intolerant Wahhabi religious philosophy." If they played any role in 9/11, taking out Salman should be child's play in comparison.

The individual who may be most vengeful once the old man dies is the 55-year-old deposed heir in waiting, Mohammed bin Nayef. It's hard for me to believe that he will simply fade away.

Salman will need support from the third influential group: princes, businessmen, and technocrats to keep the others at bay. He needs to show results in twelve months or he could be toast if there is anything to be learned from the Wars of the Roses, the Bolshevik revolution, or even earlier Saud revolutions. By the way, google "Saud revolutions" and note what shows up.

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