Oopsie for Aramco IPO - The Biggest Saudi Oil Field Is Fading Faster Than Anyone Guessed

[Tom Kirkman + 8,860]

I'm shocked.  Shocked, I tell you!

Bullwinkle: "Hey Rocky, watch me pull a rabbit out of my hat."

Rocky: "Again?"

 



Or if you prefer the original shorts:

https://youtu.be/kx3sOqW5zj4

 

Fairly lengthy article from Bloomberg, here is the intro excerpt:

The Biggest Saudi Oil Field Is Fading Faster Than Anyone Guessed

It was a state secret and the source of a kingdom’s riches. It was so important that U.S. military planners once debated how to seize it by force. For oil traders, it was a source of endless speculation.

Now the market finally knows: Ghawar in Saudi Arabia, the world’s largest conventional oil field, can produce a lot less than almost anyone believed.

When Saudi Aramco on Monday published its first ever profit figures since its nationalization nearly 40 years ago, it also lifted the veil of secrecy around its mega oil fields. The company’s bond prospectus revealed that Ghawar is able to pump a maximum of 3.8 MMbpd―well below the more than 5 MMbpd that had become conventional wisdom in the market.

"As Saudi’s largest field, a surprisingly low production capacity figure from Ghawar is the stand-out of the report," said Virendra Chauhan, head of upstream at consultant Energy Aspects in Singapore.

The Energy Information Administration, a U.S. government body that provides statistical information and often is used as a benchmark by the oil market, listed Ghawar’s production capacity at 5.8 MMbpd in 2017. Aramco, in a presentation in Washington in 2004 when it tried to debunk the "peak oil" supply theories of the late U.S. oil banker Matt Simmons, also said the field was pumping more than 5 MMbpd and had been doing so since at least the previous decade.

The prospectus offered no information about why Ghawar can produce today a quarter less than 15 years ago―a significant reduction for any oil field. The report also didn’t say whether capacity would continue to decline at a similar rate in the future. ...

[Justin Hicks + 162]

7 minutes ago, Tom Kirkman said:

I'm shocked.  Shocked, I tell you!

Bullwinkle: "Hey Rocky, watch me pull a rabbit out of my hat."

Rocky: "Again?"

 



Or if you prefer the original shorts:

https://youtu.be/kx3sOqW5zj4

 

Fairly lengthy article from Bloomberg, here is the intro excerpt:

The Biggest Saudi Oil Field Is Fading Faster Than Anyone Guessed

It was a state secret and the source of a kingdom’s riches. It was so important that U.S. military planners once debated how to seize it by force. For oil traders, it was a source of endless speculation.

Now the market finally knows: Ghawar in Saudi Arabia, the world’s largest conventional oil field, can produce a lot less than almost anyone believed.

When Saudi Aramco on Monday published its first ever profit figures since its nationalization nearly 40 years ago, it also lifted the veil of secrecy around its mega oil fields. The company’s bond prospectus revealed that Ghawar is able to pump a maximum of 3.8 MMbpd―well below the more than 5 MMbpd that had become conventional wisdom in the market.

"As Saudi’s largest field, a surprisingly low production capacity figure from Ghawar is the stand-out of the report," said Virendra Chauhan, head of upstream at consultant Energy Aspects in Singapore.

The Energy Information Administration, a U.S. government body that provides statistical information and often is used as a benchmark by the oil market, listed Ghawar’s production capacity at 5.8 MMbpd in 2017. Aramco, in a presentation in Washington in 2004 when it tried to debunk the "peak oil" supply theories of the late U.S. oil banker Matt Simmons, also said the field was pumping more than 5 MMbpd and had been doing so since at least the previous decade.

The prospectus offered no information about why Ghawar can produce today a quarter less than 15 years ago―a significant reduction for any oil field. The report also didn’t say whether capacity would continue to decline at a similar rate in the future. ...

Gotta remember this is without fracturing. All of their production has been through conventional means, and this report is based on conventional recovery. I think the old gal's got more in her.

[Justin Hicks + 162]

And with $111 billion this year in revenue, Saudi ARAMCO has to be doing something right....

https://www.wsj.com/articles/aramco-is-the-most-profitable-company-on-earth-ratings-agencies-say-11554102173

[Ian Austin + 131]

27 minutes ago, Tom Kirkman said:

I'm shocked.  Shocked, I tell you!

Bullwinkle: "Hey Rocky, watch me pull a rabbit out of my hat."

Rocky: "Again?"

 



Or if you prefer the original shorts:

https://youtu.be/kx3sOqW5zj4

 

Fairly lengthy article from Bloomberg, here is the intro excerpt:

The Biggest Saudi Oil Field Is Fading Faster Than Anyone Guessed

It was a state secret and the source of a kingdom’s riches. It was so important that U.S. military planners once debated how to seize it by force. For oil traders, it was a source of endless speculation.

Now the market finally knows: Ghawar in Saudi Arabia, the world’s largest conventional oil field, can produce a lot less than almost anyone believed.

When Saudi Aramco on Monday published its first ever profit figures since its nationalization nearly 40 years ago, it also lifted the veil of secrecy around its mega oil fields. The company’s bond prospectus revealed that Ghawar is able to pump a maximum of 3.8 MMbpd―well below the more than 5 MMbpd that had become conventional wisdom in the market.

"As Saudi’s largest field, a surprisingly low production capacity figure from Ghawar is the stand-out of the report," said Virendra Chauhan, head of upstream at consultant Energy Aspects in Singapore.

The Energy Information Administration, a U.S. government body that provides statistical information and often is used as a benchmark by the oil market, listed Ghawar’s production capacity at 5.8 MMbpd in 2017. Aramco, in a presentation in Washington in 2004 when it tried to debunk the "peak oil" supply theories of the late U.S. oil banker Matt Simmons, also said the field was pumping more than 5 MMbpd and had been doing so since at least the previous decade.

The prospectus offered no information about why Ghawar can produce today a quarter less than 15 years ago―a significant reduction for any oil field. The report also didn’t say whether capacity would continue to decline at a similar rate in the future. ...

Gotta love it - the trading community pulls a number out of a certain orifice and it becomes “the general rule/principle”. Nevermind he fact that they just announced a net profit that’s greater than that of the 10 largest free market producers in the world - combined, and that’s after about a 50% tax burden. We think we have it bad in N.America with Corporate Tax, but our politicians have nothing on a few hundred princes..... 

Apparently their crown jewel (no pun intended) field pumps less than we all thought. That also means, through the power of arithmetic, that others produce more than assumed (see Line about predictions and certain orifices). Regardless, I challenge anybody on this forum to name a field that produces > 3.5 MM bpd. 

The US Shale lovers have been all over these forums talking down on Aramco (I’m pretty neutral on the Saudis myself). However, most would “bend over and take it in a certain orifice” to have a field of both that size and quality

Edited April 4, 2019 by Ian Austin