Aramco joins Adnoc in lithium extraction

According to Reuters, Saudi Arabia and the United Arab Emirates' national oil companies plan to extract lithium from brine in their oilfields, in line with efforts to diversify their economies and profit from the shift to electric vehicles (EVs).

Other oil companies, including Exxon Mobil, opens new tab and Occidental Petroleum, opens new tab, plan to take advantage of emerging technologies to filter lithium from brine, as the world seeks to move away from fossil fuels.

Saudi Arabian economy for decades has relied on oil, is spending billions on trying to turn itself into a hub for EVs as part of Saudi Crown Prince Mohammed bin Salman's attempts to find alternative sources of wealth.

Saudi Aramco opens new tab and Abu Dhabi National Oil Company were in the very early stages of work to extract lithium, regarded as a critical mineral by many major economies because of its use in battery manufacture.

DLE technology is in its infancy and its economics are far less certain than those of oil.

Saudi Arabia and the UAE can draw on expertise in handling oil brine and wastewater at oil production sites.

An advantage of filtering the ultra-light battery metal from salt water is that it avoids the need for costly and environmentally challenging open pit mines or large evaporation ponds, as employed in the world's leading producers Australia and Chile.

China is the biggest processor and consumer of lithium, needed for electric and hybrid vehicles.

               

Aramco to maintain oil production at 12 million bpd

Saudi Aramco, the world's largest oil-producing company, announced on Tuesday that it has received directives from the Ministry of Energy to maintain its maximum sustainable capacity (MSC) at 12 million barrels per day. This directive puts a hold on previous plans to increase production to 13 million barrels.

The determination of MSC, as outlined in the press release, is a responsibility of the state under the Hydrocarbons Law, which was enacted by Royal Decree M/37 on December 20, 2017. This law provides the framework for Saudi Arabia's oil production strategies and capacity decisions.

Aramco also indicated that it would provide an update on its capital spending guidance when it announces its full-year 2023 results in March. This update is eagerly anticipated by investors and market analysts, as it will provide insights into the company's strategic planning and investment priorities in light of the current market conditions and the ongoing energy transition.

Saudi Arabia: Work on Durra gas field going ahead

Saudi Arabia reiterated that matters regarding the offshore Durra gas field, shared with Kuwait, were going ahead as planned. “The Durra field is proceeding as planned with the Kuwaitis, with no issues at this stage in terms of... the engineering and development," Saudi Aramco CEO Amin Nasser said while speaking to reporters.

The Aramco chief said this following the remarks of the Iranian Foreign Ministry spokesman Nasser Kanaani that Tehran had informed Kuwait of its readiness to resolve the Durra field file through ‘technical and legal dialogue.’

"We consider the issue of the Durra field as a legal and technical issue, and we stressed the rights of the Iranian people, and declared our readiness to talk with the Kuwaiti side in the framework of the negotiations,” he said.

Kuwaiti Deputy Prime Minister and Minister of Oil Saad Al-Barrak has said that the Iranian claims regarding the Durra field do not negate the validity of the facts on the ground, which confirm the joint ownership of the field by Kuwait and Saudi Arabia.

Al-Barrak said in previous statements that Kuwait and Saudi Arabia would commence drilling and production from Durra field, while stressing that this “will take place without waiting for a demarcation deal with Iran.”

It is noteworthy that the Saudi Ministry of Foreign Affairs had recently disclosed the reaffirmation of Saudi Arabia and Kuwait that the natural resources in the divided submerged area in the Arabian Gulf, including the entire Durra gas field, is jointly owned by the two countries. The ministry said in a statement that Saudi Arabia and Kuwait hold exclusive and full sovereign rights to exploit the wealth in that area.

Saudi Arabia and Kuwait also renewed their previous and repeated calls to Iran to negotiate the eastern border of the submerged area divided between Saudi Arabia and Kuwait.

They proposed that the negotiations involve Saudi Arabia and Kuwait as one party and Iran as the other party, adhering to international law and principles of good neighborliness, the statement pointed out.

The Durra gas field is an offshore natural gas field located in the neutral zone between Saudi Arabia, Kuwait and Iran. Tehran said last week that it will pursue its rights over the Durra/Arash field if other parties shun cooperation. But, Riyadh and Kuwait reject Tehran’s claims over the area.

Pakistan-Saudi Arabia to create a refinery

Four Pakistani state-owned petroleum companies (SoEs) have signed on Thursday a memorandum of understanding (MoU) to facilitate US$10 billion Saudi investment in a new oil refinery at Gwadar, Baluchistan with a refining capacity of 300,000 barrels per day – the first in more than a decade and the largest in the country.

The government is reportedly in the advanced stages of negotiations with Saudi giant Aramco to execute the Greenfield refinery project at the strategic Gwadar Port and wanted to complete the initial paperwork before its tenure ends in two weeks.

Oil and Gas Development Company (OGDCL), Pakistan State Oil Company (PSO), Pakistan Petroleum (PPL), and Government Holdings (GHPL) signed the MoU to join hands and provide comfort to the Saudi firm to enter Pakistan with a major investment. The four SoEs would join the project through equity participation.

The project envisions setting up an integrated refinery petrochemical complex with a crude oil processing capacity of a minimum 300,000 bpd along with a petrochemical facility. The integrated complex shall comprise various components such as marine infrastructure, petrochemical complex, storages for crude oil and refined products, pipeline connectivity etc.

According to the Petroleum Division, despite being integral to the growth of the economy, no new refinery project has materialized in Pakistan for more than a decade and only two refineries have been added in the last 40 years. Compared to the 20 million tons of refining capacity, the actual capacity utilization is at around 11 million tons.

This is mainly due to the decreasing furnace oil demand in the country as a result of a change in the energy mix in the power sector and the fixed production slate of refineries that cannot produce just petrol and high-speed diesel and all products are produced simultaneously. Thus, as furnace oil demand declines, refineries have to lower their overall production and struggle to maintain their throughput at optimal levels.

This is despite the fact that independent consultants forecast Pakistan’s demand for petrol and diesel to grow beyond 33 million tons per annum by 2023.

To facilitate the Saudi investment in refining, the government has recently passed a new policy under which a new deep conversion oil refinery of a minimum 300,000 bpd achieving financial close of the project within five years shall be eligible for a customs duty of 7.5% for 25 years on petrol and diesel of all grades produced effective from the date of commissioning of the refinery.

The said refinery shall also enjoy a 20-year tax holiday and would also be entitled to exemption from levy of customs duties, surcharges, withholding tax, general sales tax, any other ad valorem tax or any other levies and duties on import of any equipment to be installed, or material to be used in the refinery projects without any precondition for obtaining certification by the Engineering Development Board.

These fiscal incentives and other facilitation would be recorded and protected under the project agreements between the project company, the key sponsors, investors and the concerned government and would be protected through a grant to Special Economic Zones Act.

Minister for State Musadiq Malik, who witnessed the MoU signing ceremony, said the Saudi oil firm showed a willingness to inject the entire equity into the multibillion-dollar refinery project, leading the Pakistani government to decide on a joint venture with key SoEs.

 

 

Saudi crude exports slip to five month low in November 2022

Saudi Arabia's crude oil exports fell to a five-month low in November 2022, while production also slipped, data from the Joint Organizations Data Initiative (JODI) showed on Thursday.

The kingdom's crude exports fell about 6.3% to 7.28 million barrels per day (bpd) in November 2022 from 7.77 million bpd in October 2022, marking the first reduction in exports in the last six months.

The world's largest oil exporter's crude production fell to 10.47 million bpd in November 2022 from 10.96 million bpd in the previous month.

Saudi's domestic crude refinery throughput decreased by 19,000 bpd to 2.660 million bpd in November 2022, while direct crude burn rose 49,000 bpd to 429,000 bpd.

OPEC oil output rose in December 2022, a Reuters survey found on Wednesday, despite an agreement by the wider OPEC Plus consent to cut production targets to support the market.

OPEC Plus, which comprises the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, last month had agreed to stick to a 2 million bpd oil output cut.

Chinese oil demand rose by nearly one million bpd from the previous month to 15.41 million bpd in November 2022, its highest since February 2022, the data showed.

OPEC said on Tuesday Chinese oil demand would rebound this year due to relaxation of the country's COVID-19 curbs and drive global growth, and it sounded an optimistic note on the prospects for the world economy in 2023.

Saudi Arabian state oil producer Aramco is discussing investments in petrochemicals with Chinese companies, Asharq reported citing an interview by the company's chief executive with Bloomberg.

Lately, oil prices have been caught in a tug-of-war between fears of a possible US recession and optimism over China's demand outlook.

 

 

Saudi Arabia Announces Arab Light crude prices for January 2023

Saudi Arabia, the world's top oil exporter has cut January 2023 official selling price (OSP) for its flagship Arab Light crude for Asian buyers to a 10-month low, on concerns over faltering demand and a potential increase in Russian competition.

The OSP for January-loading Arab Light to Asia was trimmed by US$2.20 a barrel from December to US$3.25 a barrel over Oman/Dubai quotes, state oil producer Saudi Aramco said on Monday.

The new OSP is just above the previous low of US$2.80 per barrel, set for March 2022.

The change was in line with market forecasts for a cut of about US$2 a barrel.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known as OPEC+, on Sunday decided to keep their plan to cut production unchanged.

The backwardation in the Dubai market structure narrowed during trading last month, implying that fears over near-term supply tightness for crude were easing.

The premium for front-month Dubai over the price for the third-month averaged US$2.76 a barrel in November 2022, down from US$4.73 in October 2022.

Saudi Arabia's OSP adjustment also came after the Group of Seven (G7) nations and Australia agreed to a US$60 per barrel price cap on Russian seaborne crude oil.

"Although the market remains cautious on lifting Russian crude as the price cap is just set, there is no doubt that more cargoes will flow to Asia and compete with the Middle Eastern crude," said a Singapore-based trader.

Saudi Arabia cut its January Arab Light OSP to northwest Europe by US$1.80 a barrel from December and kept the price to the United States unchanged.

Saudi Arabia inaugurates Jazan Port

Hutchison Ports celebrated the inauguration of Jazan in Saudi Arabia with a visit from the royal commission.

In its first phase the port consists of three industrial berths, a Single Point Mooring (SPM) facility for the Saudi Aramco refinery, and three commercial berths for containers, general cargo and bulk goods.

The President of the Royal Commission for Jubail and Yanbu, HE Eng. Khalid Al-Salem that the Port is one of the most critical enablers supporting industrial growth at The Port of Jazan City for Primary and Downstream Industries (JCPDI Port).

Eric Ip, Group Managing Director of Hutchison Ports, said, “We have been in Saudi Arabia for 22 years, and it is a very important market for Hutchison Ports. Today’s ceremony marks a new chapter for us in the Kingdom and we look forward to working closely with the Royal Commission to make Hutchison Ports Jazan a success and help JCPDI reach its full potential and contribute to the Saudi Vision 2030.”

The port will use remote-controlled cranes and state of the art systems for handling containers and bulk goods to enable electronic transitions. Training programs will be run for local talent, said Hutchison Ports Jazan CEO, Charlie Darazi.

A berth depth of 16.5m will allow containerships of over 21,000 teu to call the port, and bulk ships with capacities over 100,000 tons.

The Port has a total berth length of 1,250 meters for containers, bulk and general cargo, with a design capacity of one million teu per year and around four million tons of cargo, in addition to a liquid terminal for oil tankers of Saudi Aramco.

Andy Tsoi, Hutchison Ports Managing Director for Middle East and Africa said that JCPDI Port represents an exciting new chapter. He added that from a strategic standpoint, JCPDI sits at the crossroads of the busy east-west trade lane and the rapidly growing north-south trade. JCPDI also has the potential to be the Kingdom’s first port of call from East Asia. Therefore, given the talented local human capital and the continuing support of development policies, the port is very well-positioned for the future of the Kingdom’s maritime industry.

Minister of Investment, HE Eng. Khalid Al-Falih said that Saudi economy was booming, with 11% growth in Q1 2022 and growth of 21.5% in its Industrial Production Index (IPI).

 

 

OPEC is dead, long live OPEC plus

OPEC has been the most important factor in global oil markets with the ability to influence prices for decades. The shale revolution in the United States has brought much uncertainty for traditional producers due to the vast amounts of oil and gas that are flowing from the American energy heartland in a short period. 

The looming threat is so big, that the traditional competitor Russia agreed to align its policies with that of cartel. Moscow seems eager to squeeze all it can from the agreement, leaving little for Saudi Arabia in particular who risks losing much more due to the particular phase of the country’s economic development.

Over the years, geopolitical and economic developments have transformed the power balance between the organization’s members. One factor that determines influence more than any other is production capacity. In this context, Saudi Arabia has been the undisputed king for decades.

The level of professionalization of national oil company Saudi Aramco has made it into a formidable energy king that controls the world’s second-largest conventional oil reserves. While Venezuela's reserves are bigger, Aramco's low production costs continued Western, in particular the US political support, and relative political stability have gradually increased and maintained OPEC’s largest production capacity.

Influence is not only derived from how much one can produce but more specifically from how much one chooses not to produce. Spare capacity is the defining factor behind leverage over price development. In this area, none is bigger than Saudi Arabia. The geography and type of wells make it possible for Aramco to ramp up and bring down production relatively quickly. On average, the Arab country has usually kept 1.5 - 2 million barrels per day (mbpd) of spare capacity on hand, which is 1.5 – 2 percent of global oil demand before the Covid-19 pandemic.

The unprecedented threat of the US shale industry drove Moscow and Riyadh into each other’s arms in 2016. The first time an agreement was struck, the participants agreed to cut production by 1.8 mbpd (1.2 from OPEC and 600,000 from non-OPEC). Despite some friction and disagreements, the OPEC+ format has survived for years.

However, the disparity in interests and share of dependence on oil revenues is a continuous source of instability. According to Ronald Smith, a Moscow-based analyst at BCS GM, “as long as oil is US$45/barrel or below, it is pretty easy to get everyone in OPEC+ on the same page and cut production. And when it is US$65-70, everyone agrees it is time to put oil back on the market. But between US$50 and US$60, that is where the interests diverge.”

The price of oil currently is hovering around US$55, which means that Riyadh finds the alliance with Russia more important than the other way around. The IMF estimated that Saudi Arabia's fiscal breakeven oil price for 2021 is at US$68. Russia, in contrast is US$46. Furthermore, a larger share of the Saudi production is exported while Russians consume more of their produce domestically. Also, the economy of the latter is more diversified which gives it another trump in its negotiations with Riyadh.

Another advantage in the hands of Russian producers and the Kremlin is the weak ruble. While the riyal in Saudi Arabia is fixed against the US$, oil is traded internationally in US$ meaning the export from Russia earns producers a handsome fee when exchanged into rubles. Saudi Arabia does not enjoy the same benefit and won’t any time soon either.

The low production costs in the Arab country give it an advantage over competitors such as shale producers in the US. Riyadh expects demand for oil to return later this year when vaccination against Covid-19 kicks-in. Therefore, policymakers in the Kingdom think they'll claw back customers when oil becomes scarcer.

Recently, Saudi Crown Prince Mohammed bin Salman announced that Aramco may offer additional shares to the market in the next dew few years. This shows the necessity for Riyadh to voluntarily lower production by one mbpd while Russia will increase by 130,000 bpd. Saudi Arabia is in a rush to modernize and diversify the economy by earning much-needed petrodollars while it still can.