Saudi Aramco IPO -- The Economist's Perspective -- December 4, 2019

The Economist. Hard copy. (I assume the internet edition is behind a paywall.)

November 2nd - 8th, 2019.

Front cover, "To The Last Drop: Saudi Arabia's Strategy to Survive The End Of Oil."

Op-ed on page 11.

Three-page essay, starting on page 61.

First from the op-ed, page 11, near the end of the op-ed, verbatim:

America, meanwhile, remainswedded to oil, which meets 40% of its energy needs. Its thirst has been satisfied by the fracking boom, especially in he Permian basin in Texas. Yet fracking is dirty and new projects need an oil price of $40 - $50 a barrel to break-even, at twice the level Aramco requires. For the sake of the climate and efficiency, the fracking industry should eventually shrink. That, though, would make America more reliant on foreigners, just as its politics have turned inward.

Now, from the essay, page 63:

Aramco's breakeven costs for new projects, even after tax, are $31, according to Rystad Energy's data, slightly higher than Iran, Iraq or Kuwait but less than half the level of Russiant and wo-thirds the level in America.

From the NDIC, breakevens in the Bakken, released August 15, 2019:

 

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One comment: The Economist again disingenuously omits the fact that Saudi Arabia's budget is based on its only export product: oil. Several years ago Saudi said it needed $100/bbl to balance its budget. When the price of oil plummeted, Saudi Arabia initially said they only needed $80/bbl and then said they could meet their budget even at $60/bbl (Brent). Production costs are important, even for Saudi Arabia, but failing to state the budgetary requirements for Saudi Arabia completely misses the bigger picture.