Demand for Aramco bond offering breaks records… Tops $85B

Alternate title: No… “The biggest Saudi oil field is [NOT] fading faster than anyone guessed”… Part Deux: Take your disinvestment and shove it where the solar panels don’t function.

Guest post by David Middleton

PUBLIC CAPITAL
Aramco Breaks Record As Demand For Its Bond Tops $85 Billion
Davide Barbuscia and Rania El Gamal, Reuters
Tue, 04/09/201

DUBAI—Orders for Saudi Aramco’s debut international bonds topped $85 billion, a record breaking vote of market confidence for the oil giant despite some investor concerns about government influence over the company.

State-owned Aramco was expected to raise around $10 billion from the deal, which will be priced later on Tuesday and is seen as a gauge of potential investor interest in the Saudi company’s eventual initial public offering.

Before the six-part bond deal was marketed on April 8, Saudi Energy Minister Khalid al-Falih said initial indications of interest for the paper were over $30 billion.

Demand for the paper was the largest for emerging markets bonds since an orderbook value of more than $52 billion for Qatar’s $12 billion bonds last year, and surpasses $67 billion in demand for Saudi Arabia’s inaugural bonds in 2016.

“Purely on figures, it is a fantastic credit, “said Damien Buchet, CIO of the EM Total Return Strategy, Finisterre Capital.

[…]

Previously reluctant to do so, Aramco last week opened for the first time its books to investor scrutiny, showing it is by far the most profitable company in the world.

Having made core earnings of $224 billion last year and with $86 billion in free cash flow at the end of 2018, Aramco does not need to borrow.

[…]

Many see the deal as a relationship building exercise with international investors ahead of its planned initial public offering, scheduled for last year and then postponed to 2021.

[…]

Hart Energy

The Aramco bond prospectus noted that Ghawar’s MSC (maximum sustained capacity) was 3.8 million barrels per day (bbl/d) in 2018. Based on Aramco’s definition of MSC, it’s difficult to determine if that is a current value or an average value over the Saudi planning period (which appears to be 50 years). A 2% decline rate, typical of giant oil fields, fits a current MCS of 3.8 million bbl/d. A 1% decline rate fits a long-term average MCS of 3.8 million bbl/d.

People have often asked, “How could Saudi Arabia ever replace Ghawar, the largest oil field in the world?” They already have replaced it… and Ghawar is not “fading faster than anyone guessed.” It’s declining as gracefully as befits the world’s super-giant oil field. Based on past production and current proved reserves, I think the decline rate is probably around 2% (I will explain this in a future post).

Crude = Crude oil and natural gas condensate, NGL = Natural Gas Liquids other than wellhead condensate, MSC = Maximum Sustained Capacity, Rpt. Ghawar = Published reports of Ghawar’s production rate, DCA = Decline Curve Analysis

If Ghawar has declined to 3.8 million bbl/d, it would now be the second biggest oil field in the world, but only if you consider the Permian Basin as a single oil field (I don’t). What was the old Avis slogan?

Saudi Aramco clearly seems to be trying harder.

Part three of this series will be a more detailed look at Ghawar.

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ResourceGuy
April 9, 2019 10:34 am

If the Saudis had been concerned about reserves, production costs, or production rates they would have curtailed the burning of crude oil in power generation plants long ago. They don’t move fast on anything but I think that and all the free stuff for its citizens was still a good indicator of resource pressure or lack thereof.

HotScot
April 9, 2019 11:09 am

Correct me if I’m wrong, but all that oil comes from squished vegetation does it not?

Which means that where there is now desert, there used to be lush and plentiful vegetation. And whilst I understand tectonic plate movement influences the location of many things, would it be sufficient to shove a trillion billion barrels of oil under a sand dune?

Was Saudi Arabia once a lush forest, like many other equatorial regions?

I have no idea where I’m going with this.

Brain addled with the Democratic betrayal that is Brexit.

mark from the midwest
Reply to  David Middleton
April 9, 2019 11:27 am

Is there really that much more oil in the Middle East, or is it just a reflection of the undiscovered reserves throughout the world, as well as the fact that no one is screaming about environmental issues when you wind up a drill rig in the middle of a desolate desert

Kenji
Reply to  mark from the midwest
April 9, 2019 11:58 am

Really! Where are the Bedouin tribespeople setting up tents to stop oil pipelines? Oh yeah … they were paid-off a long time ago. Perhaps here in the States, we should issue monthly checks to the “indigenous peoples” … what’s that? They already receive monthly Govt. checks? Oh well … then I guess they have lots of free time to bang the drum in some random HS Freshman’s face.

Nicholas McGinley
Reply to  mark from the midwest
April 9, 2019 12:56 pm

And then of course, Alberta, which is the Athabasca of bitumen, and Venezuela, which is the Orinoco of extra-heavy oil.

David Chappell
Reply to  David Middleton
April 9, 2019 1:33 pm

It’s a pitythe author buys into the fallacy:
“125-85 Ma was a time of severe global warming due to a rapid increase in atmospheric carbon dioxide concentrations”

Samuel C Cogar
Reply to  David Chappell
April 9, 2019 4:04 pm

David Chappell – April 9, 2019 at 1:33 pm

It’s a pity the author buys into the fallacy:

“125-85 Ma was a time of severe global warming due to a rapid increase in atmospheric carbon dioxide concentrations”

It is just not a “pity”, David, …… it is a downright shame and embarrassment …. to/for themselves, …….. especially for the science learned individuals.

They have been told different, shown different, proven different ….. via facts, evidence, logical reasoning and proxy records such as HERE, and HERE, and again HERE, ….. yet they persist to subconsciously mimic, cite and/or reference their nurtured “religious beliefs” …. without consciously realizing the “err” of their actions. Like the person who utters dastardly curse words in public but only realizes what he/she said after they said it.

Which is proof-positive the is no such thing as “Free Will” that permits one to make conscious decisions.

So, check out my cited proxy graphs and you should note the Period from 125 to 85 Mya the CO2 was rapidly DECREASING, …… not INCREASING.

And that’s what did the dinosaurs in .

Cheers, ……. Sam the evolutionary Biologist

Samuel C Cogar
Reply to  David Chappell
April 9, 2019 4:07 pm

April 9, 2019 at 1:51 pm

Well… He is an academic.

And so is Michael Mann.

Samuel C Cogar
Reply to  David Chappell
April 10, 2019 7:12 am

@ David Middleton – April 9, 2019 at 4:48 pm

And my point is/was, you shouldn’t have quoted commentary that contained blatantly false info/data if you knew it was “blatantly false”, ……. unless you SPECIFICALLY denoted the part or portion that you disagreed with, ….. otherwise, …… viewers are likely to assume you agree to the quoted text in total, …… as did David Chappell.

David M, …. I “clicked” your posted hyper-link and read the commentary prior to reading Chappell’s post, ….. but ignored the three (3) glaring errors of the author’s belief/opinion, as denoted in the following quote, to wit:

In Late Jurassic-Early Cretaceous times, Gondwana was split apart, and (1.) as rift volcanism and sea-floor spreading developed, ocean temperatures rose and ocean waters were enriched with nutrient elements from volcanic outpourings (along mid-ocean ridges and continental margins or island arcs). Oxygen-isotope analyses of marine limestones have shown that 125-85 Ma was (3.) a time of severe global warming due to a rapid increase in atmospheric carbon dioxide concentrations (mainly from (2.) increased volcanic activities).

David Middleton, here are the aforesaid ….. “three (3) glaring errors of the author’s”, to wit:

1. increased volcanic activities … causing … rapid increase in ocean temperatures
2. increased volcanic activities … causing … rapid increase in atmospheric CO2
3. rapid increase in atmospheric CO2 … causing … severe global warming
…. and why not …..
A. severe global warming … causing … rapid increase in ocean temperatures
B. rapid increase in ocean temperatures … causing … rapid increase in atmospheric CO2

“DUH”, I sure wouldn’t have chosen that author as the source to be quoting much of anything.
I was educated to be an Educator of the Biological and Physical Sciences, and as a Degreed Professional, I still strive to act in a professional manner in all things associated with the science of the natural world.

Cheers, ….. Sam C

Samuel C Cogar
Reply to  David Chappell
April 11, 2019 3:24 am

Strike out the CO2 comment and …

Thank you, David, …….…….

Michael S. Kelly LS, BSA Ret.
Reply to  David Middleton
April 9, 2019 10:29 pm

@David Middleton – In the comments section of a recent post, someone else linked to geoexpro.com, and I found the destination article fascinating. You responded something like “+2” to geoexpro.com. Having read a few posts there (including the one you linked above), I agree wholeheartedly.

My field is space launch system engineering (my specialty is rocket propulsion), so I am not up to date on fields far removed. The posts at geoexpro are impressively written, and leave me with the feeling of having learned a lot (your posts here are the same, by the way).

I’d be interested in knowing what other sites, specifically on petroleum and geology, you find worthy.

Len Werner
Reply to  David Middleton
April 10, 2019 8:53 am

Has anyone done a calculation on just how much biomass was required to produce the total amount of hydrocarbon reserves found in these formations? Is the existence of that much biomass within the necessary time constraints of the formation of source rocks actually possible?

BillP
Reply to  HotScot
April 9, 2019 11:27 am

That shows how terrible the climate change the cave men caused was /sarc

Bruce Cobb
Reply to  HotScot
April 9, 2019 1:52 pm

Dead dinos.

MarkW
Reply to  David Middleton
April 9, 2019 3:20 pm

Live dinos?

Mark Whelan
Reply to  MarkW
April 9, 2019 10:35 pm

Dead Dinoflagellates 🙂

Bruce Cobb
April 9, 2019 12:01 pm

This all just goes to show how successful the disinvestment campaign against fossil fuels is going.

Schitzree
Reply to  David Middleton
April 9, 2019 1:16 pm

Don’t worry, regardless of whether Weepy Bill McKibben is aware of this or not, he is surely throwing a tantrum.

<¿<

John Endicott
Reply to  Schitzree
April 10, 2019 5:20 am

Indeed. When isn’t the weepy one throwing a tantrum?

Kenji
Reply to  Bruce Cobb
April 9, 2019 2:54 pm

In a related story … CALPERS and CALSTRS continue their “socially conscious” investing which continues to lag behind the roaring stock market ofvthe Trump economy. Ensuring a State of CA taxpayer bailout coming soon. Work HARDER all you socially conscious millennials … keep the Boomers FAT$$ pension$$ flowing!

Carbon Bigfoot
April 9, 2019 1:39 pm

David M. please tell HotScot where oil is synthesized. You were kind enough to give me the link to an old WUWT article but I can’t resurrect it. Many thanks.

Coeur de Lion
April 9, 2019 3:08 pm

Aramco shoul tremble. The Synod of the Church of England is continuing its pointless virtue signalling towards a ‘carbon free’ future by disinvesting in fossil fuels. The stupid ignorant deluded prelates should go and cook on twigs and dung and die of inhalation.

markl
April 9, 2019 3:46 pm

As the saying goes….. follow the money.

goldminor
April 9, 2019 6:48 pm

OT …but amazing. Just listening to The Five on Fox. Evidently New York City has passed a law which allows any person to report on an idling truck, if that truck sits at idle for over 4 minutes. The person has to verify the entire episode with video, and then they get a reward for reporting the idling offender to the city. The reward can be several hundred dollars or higher.

One stalwart well dressed fellow is shown filming a school bus sitting at idle. Which made me wonder what if you were to have a set up with the driver where the driver of the offending truck/bus gets a pieces of the action? Pay the driver 50 bucks say to go get a coffee or a bathroom break. The well dressed older man claims to have made as much as 9,000 dollars in a month performing this uncivic duty.

goldminor
Reply to  goldminor
April 9, 2019 7:02 pm

Misheard the money the one man made. It was 9,000 dollars total since the new law went into effect last year.

Donald Kasper
April 9, 2019 10:24 pm

The biggest Saudi field is flooded with sea water. Yeah, they can pump a lot of sea water, but the amount of oil is sparse. That is why their export volume is declining. It is not domestic consumption, it is production decline.

J Mac
April 9, 2019 10:40 pm

$85 billion? Hey Ho, Way To Go Aramco!

Patrick MJD
April 10, 2019 12:39 am

David, what is your opinion on the announcement from Norway? I think you hit on it with your response to the Bloomberg article but I can’t find it.

Patrick MJD
Reply to  David Middleton
April 10, 2019 3:16 am
Patrick MJD
Reply to  David Middleton
April 10, 2019 6:34 am

That’s quite a bit different to what is being spat out across Aussie MSM, but not a surprise. Well it is election year, a few weeks away, and everyone is short stroking electric cars now.

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