The collapse of crude oil called during the coronavirus pandemic has forced oil corporations to choose that the fossil fuel market has peaked and the time has come for a global energy transition.
But Saudi Aramco plans to increase its production capacity so that it can pump much of the kingdom’s vast oil reserves when requesting selections, before the transfer to cleaner energy makes crude oil almost useless, resources said. industry and analysts.
Saudi Arabia relies on oil markets to finance its diversification. New York Times
With nearly 20% of the world reserves shown and production costs of only $4 consistent with the barrel, Aramco believes it can cope with its competition and continue to generate cash even when lower oil costs make it unprofitable for its rivals, according to sources.
Riyadh now plans to respond to its obvious risk in March of a war over the value of oil with Russia to increase its capacity to thirteen million barrels according to day (b/d) from 12 million b/d, officials and resources said.
Aramco’s technique contrasts radically with Western rivals such as BP and Shell, who plan to cut spending on oil production so that they can invest in renewable and green energy as they prepare for a low-carbon world.
With a renewed oil concentrate, the state-led oil giant is also reviewing ambitious downstream expansion plans and now aims to capture assets in key markets such as India and China, before building beloved mega-coppers from scratch, according to sources. . .
“We expect oil demand to continue in the long run, driven by demographic and economic expansion. Fuels and petrochemicals will be the expansion in array’s call. oil consumption,” Aramco said in a statement.
Saudi Arabia, being the cheapest producer, may see an increase in volumes and market share in the coming years.
Demand for crude oil has peaked, making it more urgent for the world’s largest oil exporter to exploit its reserves when it can generate liquidity to finance Saudi Arabia’s economic reforms, according to resources close to Saudi politics.
Saudi Arabia’s crown prince, Mohammed bin Salman, is seeking to expand new industries into dependence on the oil kingdom as a component of his ambitious Vision 2030 plan to diversify the economy.
But for the plan to succeed, Prince Mohammed wants a lot of cash, and Aramco’s oil sales are his main source of income.
“The crown prince said he would diversify, but said he would kill the oil industry. As long as I can make more cash, why? Take the cash and invest it elsewhere,” one of the sources said.
“Suppose that given the global economic situation, complete diversification will not take place until 2030,” he said. “To absolutely weed a giant economy like Saudi Arabia’s oil, it will take at least 50 years. with us, earn more money if you can. “
Aramco is also focusing on how to pump more cleaner fuel while reducing greenhouse fuel emissions to give you a better chance of competing as governments tighten carbon regulations, analysts and resources reported on the company’s plans said.
Aramco’s oil production already has a so-called carbon intensity of 10. 1 kg of carbon dioxide (CO2) per barrel produced (CO2e / boe), the lowest among its rivals, and it needs to push that price even higher later. of this year. .
“Our priorities are our low carbon intensity and low production costs, while offering the energy materials that global needs,” Aramco said.
“[Aramco] is for tactics to reduce emissions through technology, such as making engines more efficient, better fuel formulas, carbon capture and sequestration, and turning CO2 and hydrocarbons into useful products,” society said.
Aramco will continue to expand its fuel resources due to the expansion of the kingdom’s internal desires and ambitions to be a fuel exporter, resources said.
Aramco’s plan to increase its capacity to thirteen million barrels consistent with the day is at the heart of its strategy, as it is in a position to capture a larger market consistent with the percentage when recovery is requested, resources reported on Saudi Arabia’s oil thinking said.
Saudi Arabia will also need to be ready to deal with the uncertainty in oil costs expected after COVID-19 to ensure that it can keep spending plans and economic reforms largely unchanged with crude oil at a price of $40 a barrel, or $60, depending on resources. analysts.
The concept in Saudi Arabia is that since oil costs deserve to remain depressed, and can be around $50 to $60 for several years, stops in positions like the United States, where shale oil is expensive to produce, deserve the costs.
“Saudi Arabia, being the cheapest producer, may see an increase in market volumes and percentage in the coming years, even if global demand and oil costs recover, as lack of investment naturally leads to a decline in production elsewhere,” he said. Krisjanis Krustins, Middle East and Africa team manager at Fitch Ratings.
Overcoming the call of the oil peak can also lead to a new war of courage and an end to the efforts of the Organization of Petroleum Exporting Countries (OPEC) and its allies to reduce the source, so Riyadh must be armed and in a position for battle, resources. Said.
All oil manufacturers will face the desire to monetize their energy reserves and assets before wasting value. In addition to Saudi Arabia, the economies of OPEC members such as Russia, Venezuela, Iraq, and Iran are heavily dependent on oil and gas.
“There will be room for oil and the lowest carbon emitter will win,” said Amrita Sen, co-founder of the Energy Aspects expert group. “OPEC’s market strength will return, especially for those who can produce oil as cleanly as possible and Saudi Aramco does the trick. “
Another central detail of Aramco’s strategy is a review through the company’s progression organization that the company implemented in August of its expensive subsequent asset acquisition plans.
Aramco has placed bets on petrochemicals and oil refining to mitigate the slowdown in oil demand expansion.
But in a sector that would possibly be at the breaking point of long-term decline, Aramco is now looking to buy assets that investors need to divest, rather than build them from scratch, Resources said.
For example, Aramco has postponed plans to build a $10 billion refinery and petrochemical with Chinese defense conglomerate Norinco in China, resources said, confirming previous reports.
However, the Saudi company is interested in making an investment in some other allocation in China, where it would buy a stake in the Zhejiang refinery and petrochemical complex south of Shanghai and get its hands on an oil garage facility, they said.
The leaders of Zhejiang Petroleum
Aramco is also willing to invest in India and is in talks with Reliance Industries to buy a 20% stake in its oil and chemical trade negotiations that have slowed the sale price.
Reuters
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