​The House of Saud will finally tell the truth

Saudi Arabia set to reveal depth of oil reserves

​More below.

Sure they will.

"Saudi Arabia is set to lift the lid on one of the global energy industry’s most closely guarded secrets as it prepares to sell shares in Saudi Aramco: how much crude lies beneath the desert kingdom’s sands.

“This is going to be the most transparent national oil company listing of all time,” Khalid al-Falih, the energy minister of Saudi Arabia, said in an interview with the Financial Times."

Maybe. More likely they will tell a well woven lie which helps them out the most. Regardless, Peak Oil is long over, and the House of Saud will have to learn to deal with oil priced under $50 per bbl in perpetuity. The US just discovered its largest oil discovery ever, and there are lots more just like it waiting to be found. The US also has huge oil reserves which are off limits to recovery due to government regulations.  

"'You look at a company like GE that is [in] everything from aerospace to healthcare to lighting to oil and gas. Saudi Aramco can be multiples of GE if we put our mind to it,” he said.

As well as spreading into renewable energy and speciality chemicals, Mr Falih said the company could potentially become “the next big player in global liquefied natural gas”.
 
The listing could also help propel Saudi Arabia into other sectors, he said, such as robotics and the “internet of things'."

Equating Saudi Aramco and GE is silly. GE marries labor, human ingenuity, human creativity, and myriad resources to produce value added products. Aramco uses mostly non-Saudi labor, and ingenuity to pump oil. If they cannot see the difference now, they eventually will. 

And, please explain how Saudi Aramco could help propel the Saudi economy into robotics, the internet of things, or anything else. Saudi has an infantile economy outside of oil. The people have no naturally discernible work ethic, they have no pool of talent, skills, or anything else which would allow an economy to shift from one product to another. They have no noticeable curiosity, or desire to learn, build, and no substantial entrepreneurial drive. But it is upon this foundation of sand they will build a durable, dynamic new economy. Hahahahahahahahahahahaha!

An economy can be built in Saudi Arabia, a foreign economy, but there is no evidence an economy dependent upon Saudi citizens can emerge. Today the Saudi's depends upon large numbers of foreign workers because the locals are unwilling to do the real work of maintaining a civil society. Saudi's are required to be employed in positions well above the individuals Peter Principle level, but virtually all employers view these as affirmative action hires of the worst order. These workers are a drogue chute required by the House of Saud of every business operating in the kingdom. There is no way to extend this model any further as doing so would simply add even more cost to an already cost heavy system. This is but welfare given a different name.

Unless the Saudi's have a serious come to Jesus, change their internal social structure, develop a protestant work ethic, and likely toss out their religion in favor of Calvinist protestantism, they are toast. The income from oil is declining, and will result in the decline in their standard of living, which will likely trigger unrest. Either the House of Saud is in trouble, or we should see a culling of Saudi's by the kingdom, this cannot continue as it is today. 

Here is another take:

Saudi Aramco: the Big Spoof

"Saudi Arabia is preparing to lift the hem of its robes a few inches, allowing gawkers to assess the firmness of its financial footing. Energy minister Khalid al-Falih says the kingdom will publish an audited total for its oil reserves. Western investors see this as a prerequisite for the flotation of Saudi Aramco, the national energy company optimistically valued at up to $2tn.

The longest session of Spoof in the history of the world may thus be ending. Since the eighties, world oil prices have been based partly on the belief that the country has reserves of about 260bn barrels. As in the alcohol-fuelled gambling game — which is hard to play in Saudi Arabia without getting arrested — the government plans to reveal a number it has concealed.

It would be extraordinary if the house of Saud has really been sitting on exactly 260bn barrels of oil for all 36 years. Its geologists would have needed to identify new reserves at the pace old ones were depleted.

The figure is more likely to have often been wrong. W"e may surmise it is now within a camel’s spitting distance of 260bn, though. If the number was far lower, other Opec members would diss the Saudis as lightweights, who would then have to sit next to the Omanis on the coach back to the airport after cartel meetings. If the figure was much higher, young Saudis would question the necessity for learning to craft contemporary furniture and other post-carbon jobs.

A variation on this theme comes from Per Magnus Nysveen of consultancy Rystad Energy. He believes 260bn represents remaining recoverable oil rather than the minimum roustabouts could tap. This might stand at about 70bn. Knowing the difference is imperfectly understood, Mr Falih may be poised to reveal a higher contingent number. That would justify a recoverable figure of 100bn and a value for Aramco of some $1tn.

If you think the above sounds like a shaggy dog story disguised as a valuation hypothesis, you’d be right. And be warned. The fun is only just starting in a caper set to suck in every spreadsheet jockey in energy finance."

I will enjoy this, but many will not.

Grab a beer and some corn!