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Why the Saudi's are lying about their Oil Production

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Having been in the oil industry for 33 years, constructing 100's of miles of oil piplines and gas projects, including tankage, Centrifugal and PD pumps, new lines, and API meters, when we had a major source of production that represented more than 20 to 25% of our supply to our refinery, we had in our inventory at the closest location, miles of spare pipe, spare pumps and spare meters. Prior to incurring any outage, we had prepared a plan, in the event of any loss of supply. We could have new lines laid, new pumps installed and new meters installed within 72 hours of outage so the refinery would not have to reduce refinery runs.

To give you a feel for such an event, on Super Bowl Sunday, in 1981, a mid-continent refinery blew up and destroyed, an approximate 100,000 b/d refinery. All pipeline employees and trarders/schedulers had to come in and re-route all of this supply and in some cases, we had to reverse flow of 500 miles of pipelines and re-route at all pump stations. The re-routing of this supply happened within 5 days as the only alternative was to shut-in production across a 5 state area. 

Looking at the damage at the Saudi facility, i am confident they left the damaged area alone, move over 100 yards as i am sure everyone noticed their was plenty of space to build a new pump station. They would move to the source of the line that was not damaged and construct and re-route the crude line to the new pump station and then into the export site/line. 

Any brand new engineer, would understand if you are having a civil war in the Yemen area, that he would have staged brand new replacement pipe, pumps, meters and even steel for new tankage,as that is what a prudent businessman would do. Please give the Saudi's credit as their last generation of Saudi's have been educated at United States University's, so i am confident that the Saudi's were prepared for an outage of some sort including damage from the war. I doubt they had to re-characterize the events to cast them in a better light, given all that was required to place these assets back into service.

 

 

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Hi Carlos

Are you saying that you believe they did get their oil processing/separators back online really quickly?

I don't know anything about that side of things and there are pundits who claimed it would take months to repair.

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Give me a break! These are H2S separators built on site, requiring months to manufacture. They have spares? No. They don’t. Sure, they can bypass the whole facility and sell sour oil instead of sweet. But how quickly can the world refineries change to accommodate that? Have no doubt, they are in some deep doodoo and global oil markets are ignoring it. This will hit about January or February 2020. 

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Given that in the world there are thousands of fields that produce crude oil with h2s in the crude oil. In Saudi Arabia it is well known, that 4 types of crude oil that are produced, Arab Heavy, Arab medium, Arab Sour and Arab light. The % of sulphur is responsible for the name.  

H2s separators are built at refineries, not at loading locations from where the crude oil is loaded for deliveries to refineries. In the world there are approximately 700 refineries and only half of these have sophisticated h2s separators units.to separate sulphur, so Saudi's do not have h2s separators in the field where the crude oil is produced, thus my earlier analyses stands, Saudi Arabia crude oil production could easily be placed back into service. 

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Elsewhere it was stated that the crude needs to be separated from the gas in the oil gas separators before it can be loaded onto oil tankers.  Quotes from another thread:

The stabilization towers remove the hydrogen sulfide from the oil, and several were hit in the attack. Now the Saudis are saying they can still fulfill their contracts, but their customers must accept a heavier oil, which appears to have more hydrogen sulfide. 

The million dollar question for all investors here, is can they still export their crude oil without processing it at the abqaiq plant?

7 of the 11 gas separator spheres got hit. They separate the natural gas from the oil. Can they still export the crude oil using tankers if it is mixed with natural gas or is it too dangerous?

Yes they can export their crude without the abquiq plant. The other fields also have GOSPs so they can send their oil directly into an export pipeline.  That is where the rest of the daily production comes from.  As far as I know, they have to stabilize the oil to put it in a ship.  The stabilization towers lower the vapor pressure of the oil after the gas has already been separated.  Definitely can't ship the oil with associated gas.  Out in West Texas the oil and gas are separated at the wellhead and after that it's OK to put the oil in a pipeline.  

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"omni-toxic"

That's a new term to me. It used to be short a stock. Now it's short a pre-stock (IPO).

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