Fossil Fuel Divestment - Saudis Want Out

[traxila]

The IMF has pegged breakeven at $80-85/barrel for the Saudi's to breakeven. Probably a generous estimate considering their 2019 budget is projected to rise 13% over 2018 to $295B. Then there's the off-budget war in Yemen.

US shale production growth shows no signs of slowing and is eat up all marketshare left hanging by OPEC+R production cuts. With rumblings of discontent in Russia, this minimal level of cooperation may not even last until the summer. We should start to see "every gal for herself" behavior from oil producing nations as even they acquiesce to the reality of near term peak oil demand. That could drive brent even lower for 2019/20.

The IPO has failed. The $40B bond issuance to "buy" SABIC was initially rejected by US/global banks and is still teetering. The $10B effort to diversify the Saudi economy into finance has failed completely due to lack of interest....and that was before they kidnapped every wealthy Saudi in a $100B shakedown.

If bond issuance isn't an option past this time next year, and domestic discontent requires more and more spending, what's the next step?

Tremendous mess they find themselves in. Well deserved, but I guess it always is.

Perhaps a full throttle embrace of renewable energy? Maybe they could even turn all that Sun into liquid fuel for export.

My preference would be for the House of Saud to wither away with as little bloodshed as possible and for SA to become an open democracy, a shining example to all it neighbors.

That and a nickel will get me a Bazooka Joe.

 

[wdolson]

There was a Cambridge or Oxford Physics professor who ran the numbers for renewables and found in some parts of the world, the energy needs of countries just could not be met based on what they could do in their country. He pointed out the UK was one of these countries. It could supplement pretty well with wind power, but with the spacing requirements for windmills (they have to be spaced to they aren't stealing wind from the next windmill), there is an upper limit on how many can be installed before you start getting into diminishing returns.

He proposed one idea which was sunny, sparsely populated countries like those in North Africa could set up massive solar farms and export the electricity to Europe. There would be transmission losses transmitting power from Africa to Northern Europe, but it could be done, though I would think it would only be practical in Morocco where the power lines could run across the straits at Gibraltar. The Southern EU countries, which are mostly poorer could bring in some needed income exporting solar power generated on their territory, though Europe is more densely populated than North Africa.

Another possibility would be to find a cheap and portable storage medium, generate electricity in the deserts, store it in that medium and ship it. There is an experimental project in Scotland converting excess wind electricity into hydrogen and sending that out, but with hydrogen the losses get pretty big if you ship it any distance. If a good portable medium was developed, Saudi Arabia could take advantage of its other natural resource: lots of sunlight and continue to be an energy exporter.

 

[mspohr]

There was a Cambridge or Oxford Physics professor who ran the numbers for renewables and found in some parts of the world, the energy needs of countries just could not be met based on what they could do in their country. He pointed out the UK was one of these countries. It could supplement pretty well with wind power, but with the spacing requirements for windmills (they have to be spaced to they aren't stealing wind from the next windmill), there is an upper limit on how many can be installed before you start getting into diminishing returns.

He proposed one idea which was sunny, sparsely populated countries like those in North Africa could set up massive solar farms and export the electricity to Europe. There would be transmission losses transmitting power from Africa to Northern Europe, but it could be done, though I would think it would only be practical in Morocco where the power lines could run across the straits at Gibraltar. The Southern EU countries, which are mostly poorer could bring in some needed income exporting solar power generated on their territory, though Europe is more densely populated than North Africa.

Another possibility would be to find a cheap and portable storage medium, generate electricity in the deserts, store it in that medium and ship it. There is an experimental project in Scotland converting excess wind electricity into hydrogen and sending that out, but with hydrogen the losses get pretty big if you ship it any distance. If a good portable medium was developed, Saudi Arabia could take advantage of its other natural resource: lots of sunlight and continue to be an energy exporter.

The UK is developing a huge wind farm off the coast which will be generate a surplus to be exported to Europe. No lack of space or wind.

 

[SageBrush]

There was a Cambridge or Oxford Physics professor

Did he forget about the coast-line ?

 

[wdolson]

The UK is developing a huge wind farm off the coast which will be generate a surplus to be exported to Europe. No lack of space or wind.

David MacKay was his name. I found his TED talk:

There are a lot of other materials out there he left behind. Unfortunately he died of cancer a year or so back.

Did he forget about the coast-line ?

No, he included offshore in his calculations. At least the latter ones I saw.

 

[SageBrush]

he included offshore in his calculations.

Not in the video you linked.
This was discussed in depth. Why don't you review the discussion and let us know if you participated in it then as well.

Exec summary:
He ignores the inefficiency of fossil fuel use

One example to show you what I mean:
He presumes that a car consumes 1100 Wh/mile based on 33.4 kWh per gallon and 30 miles per gallon
Our EVs consumes about 20% of that figure.

This link
Two Terawatts average power output: the UK offshore wind resource | | Claverton Group
estimates UK off-shore wind at 2.2 TW continuous power if completely utilized, 0.08 TW for the most easily accessible. Current UK electricity consumption averages 0.04 TW. So the lowest hanging off-shore resource covers ~ electricity + transport converted to electric.

 

[mspohr]

Biggest offshore windfarm to start UK supply this week
Biggest offshore windfarm to start UK supply this week

The UK has a great wind resource and shallow enough seabed to exploit it, and could even “power most of Europe if it [the UK] went to the extreme with offshore”, he said.

The size of the project takes the burgeoning offshore wind power sector to a new scale, on a par with conventional fossil fuel-fired power stations.

Hornsea One will cover 407 sq km, five times the size of the nearby city of Hull. At 1.2GW of capacity it will power 1m homes, making it about twice as powerful as today’s biggest offshore windfarm once it is completed in the second half of this year.

 

[SageBrush]

Biggest offshore windfarm to start UK supply this week

Stage 2 is moving right along and has been bid at $76 a MWh. Absolutely amazing how prices are dropping.

DONG's Hornsea Two cost cut in half

 

[TheTalkingMule]

LOL

Saudi Oil Minister: Aramco IPO On Track For 2021 | OilPrice.com

 

[Brando]

And on the home front the battle heats up.
Tariffs on China? roll back CAFE standards?
[unintended consequence: help make sure China takes the lead in world wide electric??]
attacks on CARB, California, electric cars (even Volvo and other China cars??)

7 min.

 

[jgs]

Oil helped Norway build up a $1 trillion fund. Now it's dumping oil stocks

‘The goal of the divestment is to "reduce the vulnerability of our common wealth to a permanent oil price decline," Norwegian finance minister Siv Jensen said in a statement.’

 

[TheTalkingMule]

Apparently this new energy minister is ready to IPO. I wonder why the previous guy was so hesitant?

Saudi Aramco CEO says a public listing is likely 'very soon'

 

[wayner]

I am guessing the previous guy was hesitant as it was not easy to get a listing with coroporate governance that is acceptable to both the Saudi government and international investors. I would not be interested in buying shares in Aramco unless it was extremely cheap as I don't believe that the company will be run to benefit shareholders - I believe it will be run to satisfy the goals of the Saudi royal family. If that means selling oil at a loss to keep the family in power then they will likely do that. I really see Aramco as being analogous to other state owned oil companies like PetroBras.

 

[TheTalkingMule]

Reading more into this....it's starting to look like an extension of the domestic shakedown where Saudi businessmen were lock in a hotel until they "agreed" to a "settlement" with the Saudi gov't and handed over $100B. The first phase of this IPO will be 1% on the domestic Saudi market in 2020, second phase will be another 1% in 2021 also on the Saudi market.

So basically it's MBS telling wealthy Saudi families to pay up and cover their massive budget shortfalls. Meanwhile....OPEC share of crude continues to dwindle and members like Iraq have begun to pump more aggressively. How is this all not crumbling yet?

 

[wdolson]

It's kind of hard for Saudi Arabia to sell oil at a loss. Their oil has been some of the cheapest to produce in the world. But there is evidence their reservoirs might be depleted and they are trying to take Aramco public at the end to make a bit more money and leave investors holding the bag.

 

[Brando]

I think the Saudi's pay <$5.00 a barrel to pump out of the ground. They don't sell at a loss. Just limit their margins.

Looks to me that Saudis have failed to create a functioning economy - such as a food production base and market places to distribute and companies making export products. Solar Industry or Wind industry items??

 

[TheTalkingMule]

You'll never believe this.......the IPO's been delayed.

Saudi Aramco delays planned IPO to allow for earnings update: sources

 

[TheTalkingMule]

That's an interesting take Forbes.

Aramco IPO Delay Shows Saudi Confidence

 

[TheTalkingMule]

Report: Saudi Aramco shares to start trading in December

Could be some really really bad timing as US exports seem to just now be turning permanently positive.

 

[ItsNotAboutTheMoney]

Report: Saudi Aramco shares to start trading in December

Could be some really really bad timing as US exports seem to just now be turning permanently positive.

Well, the Saudis own the largest US refinery, (Port Arthur, TX), so they're still getting a cut.