{"id":92007,"date":"2016-06-27T16:58:16","date_gmt":"2016-06-27T20:58:16","guid":{"rendered":"http:\/\/countingpips.com\/?p=92007"},"modified":"2016-06-27T08:58:56","modified_gmt":"2016-06-27T12:58:56","slug":"saudi-arabia-heads-from-crude-to-solar-part-ii","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2016\/06\/saudi-arabia-heads-from-crude-to-solar-part-ii\/","title":{"rendered":"Saudi Arabia Heads From Crude to Solar: Part II"},"content":{"rendered":"
June 27, 2016<\/div>
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By WallStreetDaily.com<\/u><\/a> \"Saudi<\/p>\n

Last week, my article on the Saudi Arabian oil and solar outlook, titled Saudi Arabia\u2019s Solar Planning Is Paved in Oil Production<\/a>, certainly shook up a hornet\u2019s nest in the Twittersphere.<\/p>\n

In the piece, I postulated that the Saudis \u2013 under the de facto leadership of 30-year old Mohammed bin Salman (MbS) \u2013 would move toward dramatically increasing their oil production over the coming years in order to move towards taking over the solar power market.<\/p>\n

As espoused in public statements, Saudi Arabia intends to be as much a powerhouse in solar energy as it has been in oil.<\/p>\n

MbS is a strategist. He realizes that by mid-century, oil will be worth a lot less \u2013 perhaps even zero, as the book The Energy World Is Flat<\/em> postulates.<\/p>\n

This theory, however, is not an entirely popular one.<\/p>

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Here are a few of the \u201cnicer\u201d tweets as a result of my original article:<\/p>\n

@wallstreetdaily Author of the article thinks that his Highness the Crown Prince has read this book and be part of the vision inspired by the book.<\/p>\n

@wallstreetdaily That\u2019s just a guess from the author of that book ridiculous I don\u2019t think we\u2019re gullible idiocy to believe his heresy.<\/p>\n

My Response<\/h2>\n

It\u2019s true, I am not a member of the Saudi royal family and not privy to the thoughts of MbS. And I doubt that Mohammed bin Salman has actually read the book.<\/p>\n

But MbS is the most western-savvy Saudi leader to govern an Arab nation. Notice that, during his recent visit to the U.S., he spent more time in discussion with Wall Street and Silicon Valley than to the talking heads in Washington, D.C.<\/p>\n

Not to mention he has opened the Saudi stock market up to foreigners and intends to sell 5% of the Saudi crown jewel, Saudi Aramco, in an IPO.<\/p>\n

He\u2019s likely well aware of the threat the Saudis face in that a good portion of those 260 billion barrels of proven reserves could turn into stranded assets left in the ground.<\/p>\n

The Threat Is Real<\/h2>\n

There\u2019s no shortage of evidence that Saudi Arabian energy efforts are soon to evolve.<\/p>\n

MbS is on high alert, especially since warnings that \u201cpeak oil demand\u201d could occur somewhere around 2025 are coming not only from the former oil minister, but also Mohammed al-Sabban, a senior adviser to the Minister of Petroleum of Saudi Arabia.<\/p>\n

As Jim Krane, a fellow at Rice University\u2019s Baker Institute where he studies Saudi energy policy, told The<\/em> Wall Street Journal: <\/em>\u201cIf 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.\u201d<\/p>\n

Further, a recent paper that appeared in Nature <\/em>stated that Middle Eastern nations could, ultimately, have around 38% of their reserves stranded underground as a result of climate change as well as the expected global changeover to solar power by mid-century.<\/p>\n

Oil giant BP also estimated that, at the current rate of production, Saudi reserves would last another 64 years.<\/p>\n

Not surprising, then, is that the Crown Prince recently promised that the country could increase production by a million barrels immediately<\/em> and raise the target to possible output of 20 million barrels daily. His words were: \u201cWe will sell at any opportunity we get.\u201d<\/p>\n

Talk, though, is cheap \u2013 including the recent chatter from the Saudis that the oil market glut was disappearing and the market rebalancing.<\/p>\n

Despite all of this additional supporting evidence, the main reason I believe the Saudis want to get rid of as much oil as they can, while they can, is simple: I\u2019m watching what the Saudis have actually been doing since the 1980s.<\/p>\n

Just the Facts, Ma\u2019am<\/h2>\n

They\u2019ve been busy!<\/p>\n

Saudi Aramco CEO Amin Nasser added his voice to that of MbS when he said, \u201cProduction will increase upward.\u201d No kidding.<\/p>\n

The rise this year is likely coming from the finish of the expansion project at the Shaybah field, which is increasing Saudi production capacity by 250,000 barrels.<\/p>\n

\"Soudi<\/p>\n

In addition, the Saudis are expanding the Khurais field. This will add another 300,000 barrels a day in production by the end of next year.<\/p>\n

This is just the tip of the iceberg. Since 2014, the number of oil rigs has jumped from 58 to 67. And the number has nearly doubled since 2010. Last year\u2019s number of rigs was at least a 20-year high for the Saudis.<\/p>\n

This means the Saudis are working hard to expand those current fields and develop new ones. Unlike other oil producers, the Saudis have yet to cancel one project.<\/p>\n

\"Arabian<\/p>\n

And when you hear the Saudis talk about a \u201cslight\u201d increase in production, keep in mind that, on a global scale, that\u2019ll be much larger. An increase of a mere 5% in 2015 came to 500,000 barrels a day, enough to meet all demand growth in the developed world.<\/p>\n

I\u2019m sure many will continue to disagree with this forecast, but it looks to me as if MbS and the Saudis are moving on to phase two of their oil plan. That is, to produce more \u2013 shifting the risk of stranded assets to higher-cost producers in places like the U.S.<\/p>\n

Or, as Jim Krane puts it: \u201cMove their crude to market before the world moves on [from oil].\u201d<\/p>\n

Good investing,<\/p>\n

Tim Maverick<\/p>\n

The post Saudi Arabia Heads From Crude to Solar: Part II<\/a> appeared first on Wall Street Daily<\/a>.<\/p>\n

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 <\/p>\n","protected":false},"excerpt":{"rendered":"

By WallStreetDaily.com Last week, my article on the Saudi Arabian oil and solar outlook, titled Saudi Arabia\u2019s Solar Planning Is Paved in Oil Production, certainly shook up a hornet\u2019s nest in the Twittersphere. In the piece, I postulated that the Saudis \u2013 under the de facto leadership of 30-year old Mohammed bin Salman (MbS) \u2013 […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-92007","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/92007","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=92007"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/92007\/revisions"}],"predecessor-version":[{"id":92027,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/92007\/revisions\/92027"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=92007"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=92007"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=92007"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}