Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman announced that Saudi Arabia was no longer an oil-producing country. “Saudi Arabia is no longer an oil country, it’s an energy-producing country,” the Energy Minister told S&P Global Platts this week.

But that does not mean Saudi Arabia is planning on producing any fewer barrels of oil. And it does not mean that Saudi Arabia is planning on halting funding for all new oil and gas projects, as the recent IEA bombshell report has suggested the world must do to reach net-zero by 2050. Saudi Arabia has long maintained that oil will remain a dominant energy source for decades.

Saudi Arabia’s oil revenues – which will fund any green aspirations the country may undertake – have dwindled over the last year and a half, and state-run oil giant Aramco had to hold bond sales just to pay its hefty dividend to the state.

Saudi Arabia has high green ambitions that include gas production, renewables, and hydrogen.

Saudi Arabia will surely benefit from the green transition. While the Exxons, Chevrons, and Shells of the world are busy doing climate activists’ bidding in the boardroom and courtroom, NOCs – particularly in various OPEC nations – are all-too-eager to take advantage of what will surely be increased oil prices.

Already Saudi Arabia has raised its official selling price for the month of July to Asia.

But that does not stop Saudi Arabia from pursuing its green ambitions – the Saudi Green Initiative – while funding those green ambitions through oil sales. Saudi Arabia plans to generate 50% of its energy from renewables by 2030, in part to reduce its dependence on oil. In 2017, renewables made up just 0.02% of the overall energy share in Saudi Arabia.

Saudi Arabia’s Energy Minister said that the IEA’s net-zero pathway spelled out in its most recent report was like a sequel to La La Land. In fact, several oil-producing and oil-consuming nations have dismissed the report.

Nevertheless, the world’s largest exporter of crude claiming it is no longer an oil-producing country is noteworthy indeed.

Saudi Aramco Hires Banks for Debut Dollar Islamic Bond Sale

A Bloomberg report said on June 7, 2021:

Saudi Aramco, the world’s biggest energy company, hired advisers including Citigroup Inc. and Goldman Sachs Group Inc. for its first dollar-denominated Islamic bond sale.

The state-controlled company may offer three tranches of notes due in three, five and 10 years, according to a person familiar with the matter.

The firm is raising cash to help fund its commitment to pay out $75 billion in dividends, a pledge Aramco made to drum up support for its initial public offering. But with the spread of the coronavirus and widespread lockdowns curbing demand for oil last year, the price of Brent crude plunged to just below $16 a barrel at one point in 2020, the lowest since 1999.

That prompted Aramco to reduce spending, cut jobs and sell non-core assets. The price of oil, Saudi Arabia’s main source of revenue, has since climbed more than four-fold to over $70 a barrel. And while the company’s first-quarter profits soared – thanks to the recovery in both crude and gas – its free cash flow fell short of the $18.75 billion needed to pay the dividend for the period.

The planned sale would be its first since November, when it raised $8 billion from a non-Shariah compliant offering. Its debut offering of $12 billion a little over a year earlier was also hefty by Middle Eastern corporate bond standards.

More than 10 banks have been mandated to organize investor calls from Monday, Aramco said in a statement. They are: Alinma Invest, Al Rajhi Capital, BNP Paribas, Citigroup, First Abu Dhabi Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, NCB Capital, Riyad Capital, SMBC Nikko and Standard Chartered Bank.

OPEC+ Controlling Crude Market, says Vitol

Another Bloomberg report said on June 6, 2021:

Organization of Petroleum Exporting Countries (OPEC)+ appears in control of crude prices as U.S. production is lagging pre-pandemic levels, according to a senior executive at the world’s biggest independent oil trader, Vitol Group.

U.S.

The decline in U.S. drilling and output leaves little competition to efforts by the producers’ group to manage markets, Mike Muller, Vitol’s head of Asia, said during an online conference on Sunday. Brent crude closed above $70 a barrel last week for the first time in two years, as buyers demand more oil than producers are pumping.

U.S. oil producers are still employing only half the rigs they used before the coronavirus struck. Meanwhile OPEC+, as the group led by Saudi Arabia and Russia is known, is easing barrels back on to the market as demand recovers.

“There’s a perception in the market that control is with OPEC+,” Muller said at the event hosted by the consultancy Gulf Intelligence. “It will take a long time for U.S. oil to come back” to production levels seen before the coronavirus outbreak, he said.

The OPEC and partners agreed last week to continue easing production restraints in July but left markets guessing about what it will do for the rest of the year. After cutting production by some 10 million barrels a day, or a tenth of daily global demand, the group still has about 6 million barrels a day of idle capacity.

China

China’s economy will continue to grow, helping bolster oil demand and bringing down crude stockpiles, Muller said. Economic expansion and regulatory changes there will likely cause domestic refineries to process more crude, he said. “It doesn’t pay to hold inventory at all,” Muller said. “De-stocking must continue from a purely commercial perspective.”

Iran

More Iranian crude oil is likely to hit markets this year after an expected deal to limit the country’s nuclear program in return for the U.S. easing sanctions. Iran is limited in how quickly it can bring oil back to the market since a lot of its stored barrels are condensate, a light and sulfurous liquid which may be harder to sell, he said.

Given delays in negotiations last week, Muller said it is less likely more Iranian barrels will hit the market before the fourth quarter.


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