Tuesday, July 30, 2013

Shale Revolution's Impact on Saudi Wealth and Power

The rise of the West was driven by the Industrial Revolution beginning in the 18th century. It has since been fueled by fossil fuels--initially coal and later with oil and gas. Coal was indigenous in Britain and America but it is highly polluting and left much of London and New York with a thick coat of soot on everything in sight. Oil burns relatively cleaner but much of it is in the Middle East, particularly in the Persian Gulf region. First Britain and then United States saw the significance of the region and sought to control its energy resource through dictatorial puppet regimes, many of which still survive with active support of the Western powers.

Recent US EIA report on vast shale oil and gas reserves (over a trillion barrels) in many countries, including Pakistan (9.1 billion barrels of oil and 105 trillion cubic feet of gas), has prompted a warning to Saudi government from Saudi Prince Alwaleed Bin Talal. While the Prince's warning is about economic impact, I see much broader long term implications of it for the US-Saudi alliance and the power and influence of the Saudi royalty in much of the region and the rest of the world.

The top ten countries together have 345 billion barrels of shale oil reserves These include Russia (75 billion barrels), United States (58 billion barrels), China (32 billion barrels), Argentina (27 billion barrels), Libya (26 billion barrels), Venezuela (13 billion barrels), Mexico (13 billion barrels), Pakistan (9.1 billion barrels), Canada (8.8 billion barrels) and Indonesia (7.9 billion barrels). Notable on this list are US and China, the top 2 consumers of  oil in the world, both having vast shale oil reserves of their own.



In an open letter to Saudi Oil Minister Ali al-Naimi and other Saudi ministers, published on Sunday via his Twitter account, Prince Alwaleed said demand for oil from OPEC member states was "in continuous decline". He said Saudi Arabia's heavy dependence on oil was "a truth that has really become a source of worry for many", and that the world's biggest crude oil exporter should implement "swift measures" to diversify its economy, according to news media reports.

Shortly after the Prince issued his warning, a report from OPEC published this week showed the group's oil export revenue hit a record high of $1.26 trillion in 2012. However, forecasts from the group raise doubts over whether that level of earnings can be sustained in the face of competition from shale oil. Saudi Arabia, the world's biggest oil exporter, is now pumping at less than its production capacity because of declining consumer demand, Prince Alwaleed said in the letter.

Saudi dependence on oil stems from the fact that nearly 92% of the Saudi government budget this year comes from oil , according to Wall Street Journal. The growing shale oil production in the United States means Saudi Arabia will not be able to raise its production volume to 15 million barrels of oil per day, Prince Alwaleed said. Current capacity is about 12.5 million bpd; a few years ago the country planned to increase capacity to 15 million bpd, but then put the plan on hold after the global financial crisis in 2008.

Oil-rich Gulf nations like Saudi Arabia, Qatar, UAE and Iran have used their petrodollars to influence events in the Middle East and West Asia. They have funded their favorite sectarian groups to fight bloody proxy conflicts in Lebanon,  Iraq, Pakistan and Syria.  Saudis have bankrolled radical Sunni groups in Pakistan while Iran has financially backed Shia Hezbollah in Lebanon and other radical Shia groups in Iraq and Pakistan.  Qatar, Saudi Arabia and UAE have supported pro-West elements to roll back democracy in Egypt.

Even if Saudis do heed Prince Alwaleed's warning and succeed in diversifying their economy, it is highly unlikely that the desert Kingdom would be able sustain its current power and influence over the long haul. This is going to be bad news for the rulers who will respond with violence to resist change. But it is potentially good news for the Saudi people and the Arab and Muslim world at large. It'll open up opportunities for reforms leading to positive changes in the Middle East and the surrounding region.

Related Links:

Haq's Musings

Pakistan's Vast Shale Oil and Gas Reserves

Saudi vs Turkish Influence in Pakistan

Shale Gas in Pakistan

Power Shift After Industrial Revolution

Pakistan Needs Shale Gas Revolution

Will Saudi Society Change Peacefully?

Pakistan Starts Tight Gas Production

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7 Comments:

Blogger Riaz Haq said...

Here's a Saudi Gazette story on US oil reserves:

NEW YORK — US proved oil reserves grew by a record amount in 2011, according to a government report Thursday, in the latest indicator of the North American energy boom.

The US added 3.8 billion barrels of crude in 2011, a 15 percent increase, according to the US Energy Information Administration. The amount represents a record volumetric increase in oil reserves for the second year in a row, EIA said.

Proved oil reserves stood at 29.0 billion barrels in 2011 (vs 257 billion barrels in Saudi Arabia), the highest volume since 1985.

"Horizontal drilling and hydraulic fracturing in shale and other tight rock formations continued to increase oil and natural gas reserves," said EIA Administrator Adam Sieminski.

"Higher oil prices helped drive record increases in crude oil reserves, while natural gas reserves grew strongly despite slightly lower natural gas prices in 2011."

The data came as US petroleum producers continue to push oil output to levels not seen since the early 1990s.

Energy companies have also boosted natural gas output in recent years due to the shale boom. While natural gas output varies monthly somewhat due to incremental investment decisions, US natural gas production has been at record levels in recent years.

The US added 31.2 trillion cubic feet (0.9 trillion cubic meters) of natural gas reserves in 2011, an increase of 9.8 percent, the EIA said. The 2011 natural gas volumetric increase was the second largest in US history after the 2010 rise.


http://www.saudigazette.com.sa/index.cfm?method=home.regcon&contentid=20130802175664

August 3, 2013 at 7:04 AM  
Blogger Riaz Haq said...

Here's an excerpt of a Dawn piece on Saudi funding referring to EU data:

A recent report by the European Parliament reveals how Wahabi and Salafi groups based out of the Middle East are involved in the "support and supply of arms to rebel groups around the world." The report, released in June 2013, was commissioned by European Parliament's Directorate General for External Policies. The report warns about the Wahabi/Salafi organisations and claims that "no country in the Muslim world is safe from their operations ... as they always aim to terrorise their opponents and arouse the admiration of their supporters."

The nexus between Arab charities promoting Wahabi and Salafi traditions and the extremist Islamic movements has emerged as one of the major threats to people and governments across the globe. From Syria, Mali, Afghanistan and Pakistan to Indonesia in the East, a network of charities is funding militancy and mayhem to coerce Muslims of diverse traditions to conform to the Salafi and Wahabi traditions. The same networks have been equally destructive as they branch out of Muslim countries and attack targets in Europe and North America.


http://dawn.com/news/1029713/european-parliament-identifies-wahabi-and-salafi-roots-of-global-terrorism

https://docs.google.com/viewer?a=v&pid=sites&srcid=ZGVmYXVsdGRvbWFpbnxoYWlkZXJub3Rlc3xneDo3NDEwMDI3NjViZTNjODZm

October 17, 2013 at 11:04 PM  
Blogger Riaz Haq said...

#Saudi Prince Bandar sees "major shift" in relations with the #USA

http://aje.me/19sZmzj via @AJEnglish #SaudiArabia #America

October 22, 2013 at 7:25 PM  
Blogger Riaz Haq said...

Here's a NY Times Op Ed by a former Afghan Jihadi on "foreign fighters" in Syria:

The numbers certainly demand our attention. Of an estimated 5,000 to 10,000 foreign fighters in Syria, as many as 2,000 are said to be European nationals, as well as some 100 Australian citizens and several dozen American passport holders, according to published sources. While some are fighting alongside “moderate” rebel groups such as the Free Syrian Army, most have reportedly joined the ranks of the militant Jabhet al-Nusra and the formerly Qaeda-linked Islamic State of Iraq and Syria, or ISIS.

I know the mentality of these nationless combatants. I fought beside them.

As a teenage Afghan refugee living in Pakistan in the 1980s, I joined the anti-Soviet resistance. I took up arms in a cause we called jihad, or holy war — but one focused on liberating our homeland, not exporting an ideology. War came to us through Soviet invasion: We hated it, and we wanted to live through it to see a free Afghanistan at peace.

Pitting a small, impoverished Muslim nation against an infidel invader, Afghanistan’s conflict attracted up to 20,000 foreign fighters in the 1980s, the largest contingent drawn to any Muslim country in modern history. Made up mostly of Saudis and Pakistanis, the army of volunteers also included Egyptians, Tunisians and Indonesians, among others.

Make no mistake: The Afghan mujahedeen, equipped with Western arms, won that war. International volunteers played a marginal role in sealing our victory, their numbers notwithstanding.
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With an estimated 1,500 groups fighting in Syria, the conflict is clearly far more complex than the Afghan war. Europeans and Americans of Syrian heritage are fighting to liberate their homeland from the murderous Assad regime. Sunnis from Saudi Arabia and Libya have been drawn by their solidarity with coreligionists.
The build up to intervening in Syria is all too similar to the run up to Iraq in 2003. Farivar underestimates foreign fighters by some 6,000...
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In an attempt to understand the foreign fighters, some Western experts have crafted caricatures — the revenge-seeker, the status-seeker, the identity-seeker and so on — but the legion of fighters with varied and often overlapping motives defy easy stereotypes. As the scholar Thomas Hegghammer observed: “In reality, most foreign fighters never engaged in out-of-area operations, but fought in one combat zone at the time.”
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In Afghanistan, hundreds of veterans stayed behind and followed in Osama bin Laden’s footsteps to later infamy. Others, gripped by religious fervor and martial wanderlust, went on to cause mayhem in places like Algeria and Egypt during the 1990s.

But not all did, of course. For some, their adventure concluded, quiet civilian lives beckoned. I befriended a young Arab-American from New York who was happy to be heading home at the end of the war. A Harvard-educated British convert I knew went on to become a distinguished war correspondent. I, too, became a writer and journalist. You might say that in the end, we were more closely allied in peace than we had been in war.


http://www.nytimes.com/2014/04/02/opinion/the-foreign-fighters-and-me.html

April 2, 2014 at 9:58 AM  
Blogger Riaz Haq said...

Recently, Prime Minister Nawaz Sharif confirmed that a “threat to Saudi Arabia will evoke strong reaction from Pakistan” during a meeting with the top defence-related brass, which was convened after the Kingdom’s offensive against the Houthi rebels in Yemen started. While a lot of Pakistanis are not in favour of going into what they perceive as a sectarian conflict, they fail to recognise both the strategic and economic implications if Pakistan does not support the Saudi Arabia-led offensive against the Houthi rebels. Firstly, the PML-N led government has every right to take this decision based on the number of representatives it has in parliament. However, what needs to be understood is that it’s not just the government, but also the military establishment which is backing the whole offensive due to strategic compulsions.



The two arguments against the engagement of Pakistani troops in Yemen and Saudi Arabia are: why engage our troops in a foreign country when we are fighting our own war; and why be part of a sectarian conflict? The truth is that a nation’s foreign policy is not driven by emotions but is based on long-term economic and strategic security concerns. Pakistan has taken part in Arab conflicts in the past. Fighter pilots from the Pakistan Air Force had flown Royal Saudi Air Force jets to repel an incursion from south Yemen in 1969. One should also remember that there are 400 Pakistani military trainers present in the Kingdom, already training Saudis on border management against the Islamic State on the Iraqi border.

The recent decision to support Saudi Arabia in this conflict is backed both, by the military and civilian leaderships, which see the stability of Saudi Arabia in Pakistan’s interest for two reasons: millions of Pakistanis work in the Gulf Cooperation Council (GCC) countries with the highest number being in Saudi Arabia. Apart from that, the GCC remains the largest source of foreign exchange for Pakistan. In addition, Saudi Arabia remains Pakistan’s biggest strategic ally and helps meet our energy needs. Instability within the GCC and Saudi Arabia would mean millions of Pakistanis coming back jobless, hurting us economically. We have seen what happened to Pakistanis living in Kuwait after Iraq invaded that country.

The question remains: will Pakistan’s participation in the operation in Yemen hurt Pakistan’s own war? No. Our military and air force deployment inside Saudi Arabia will be limited in numbers and the decision regarding this should be left to the military command. We regularly send troops on UN missions. Does our participation in these missions affect us? No. Secondly, the perception that the Yemen conflict is sectarian in nature is only because of Iran’s support to the Houthi rebels. In reality, this is more of an ethnic conflict with there being a quest for political power. Pakistan’s foreign policy with regards to Iran traditionally has been to defend Iran too. Hence, a serious diplomatic effort from our foreign office should be made to convince Iran that its stability as well as that of Saudi Arabia is vital for Pakistan. We cannot ignore either country.

We must also understand that there are more than 10 Muslim countries, including Turkey, backing the strikes in Yemen against the Houthis and Pakistan will eventually have to choose sides or lose support from our biggest strategic partners and energy providers. It is now up to the prime minister and his government to cash in on the opportunity and get a good economic deal for Pakistan in exchange for providing security for the GCC countries.

Pakistan could gain economically if a sound deal is negotiated for providing jobs to Pakistanis in the GCC countries, as well as negotiating a better energy deal. A good economic package negotiated at an appropriate time to benefit all Pakistanis will help the case for a greater military role in the GCC countries.

http://tribune.com.pk/story/861927/why-pakistan-needs-to-support-the-saudis/

March 31, 2015 at 4:07 PM  
Blogger Riaz Haq said...

Does #Obama Have This Right in #MiddleEast? #Israel #SaudiArabia #Iran #Syria #Libya #Iraq #Kurds #ISIS #Terrorism http://nyti.ms/1XM1LNh

Sulaimaniya, Iraq — As one could see from President Obama’s recentinterview in The Atlantic, he pretty much hates all the Middle East’s leaders including those of Turkey, Iraq, Syria, Israel, Saudi Arabia, Qatar, Jordan, Iran and the Palestinians.

Obama’s primary goal seems to be to get out of office being able to say that he had shrunk America’s involvement in Iraq and Afghanistan, prevented our involvement on the ground in Syria and Libya, and taught Americans the limits of our ability to fix things we don’t understand, in countries whose leaders we don’t trust, whose fates do not impact us as much as they once did.

After all, the president indicated, more Americans are killed each year slipping in bathtubs or running into deer with their cars than by any terrorists, so we need to stop wanting to invade the Middle East in response to every threat.

That all sounds great on paper, until a terrorist attack like the one Tuesday in Brussels comes to our shores. Does the president have this right?

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The Kurdish government, which was allowing a strong opposition party to emerge and a free press, is now backtracking, with its president, Massoud Barzani, refusing to cede power at the end of his term, and the stench of corruption is everywhere. The Kurdish democratic experiment is hanging by a thread. More U.S. aid conditioned on Kurdistan’s getting back on the democracy track would go a long way.

“It is one big game of survivor out here,” said Dlawer Ala’Aldeen, president of the Middle East Research Institute in Kurdistan. “America needs to constructively engage the Kurds, offer them conditional help and make them the partner that America deserves. Here, everyone listens to and likes America. [The Kurdish] people want America to protect them from Iran and Turkey.”

Kurdistan and Tunisia are just what we dreamed of: self-generated democracies that could be a model for others in the region to follow. But they need help. Unfortunately, Obama seems so obsessed with not being George W. Bush in the Middle East that he has stopped thinking about how to be Barack Obama here — how to leave a unique legacy and secure a foothold for democracy … without invading.

March 23, 2016 at 7:40 PM  
Blogger Riaz Haq said...

#SaudiaArabia sees #Trump's #Riyadh visit and #US-#Arab-#Islamic summit as a golden opportunity to assert leadership

http://www.arabnews.com/node/1100821/saudi-arabia

US President Donald Trump’s first official foreign trip since taking office will include three key summits on May 20-21, attended by 55 leaders and representatives from across the Islamic world, as well as several business activities, cultural, intellectual and sports celebrations.
Observers looking to follow Trump’s visit and related events can now do so via the official website which was launched Tuesday at www.riyadhsummit2017.org, along with associated mobile apps and social media feeds.
Held under the slogan “together we prevail,” the main events will be the Saudi-US Summit, Gulf Cooperation Council (GCC)-US Summit, and the Arab-Islamic-American Summit. In addition, a high-profile counter-terrorism event will be held at the King Faisal Center for Research and Islamic Studies, as well as the Tweeps 2017 social media summit.
The high-profile visit “will renew our mutual commitment to global security and further strengthen already deep business, cultural and political ties,” the website said.

On his first day in the Kingdom, Trump will visit the King Abdulaziz Historical Center, a cultural landmark highlighting the prominent history of the Arabian Peninsula and its historical role in the spread of Islam.

The Saudi-US Summit will also feature a series of bilateral meetings between King Salman and Trump, and “focus on re-affirming the long-standing friendship, and strengthening the close political, economic, security and cultural bonds between the two nations.”
The GCC-US Summit, held at the King Abdulaziz Convention Center in Riyadh, will see GCC leaders meet with Trump to discuss threats to regional security and stability and the building of stronger commercial ties between the US and the Gulf.
The Arab Islamic American Summit will see Trump meet with leaders of the world’s Islamic nations “to address ways of building more robust and effective security partnerships to counter and prevent the growing threat of terrorism and violent extremism around the globe through promoting tolerance and moderation.”
The visit by Trump also coincides with a string of associated events, including one entitled Tweeps 2017. That event — held at the Ritz Carlton Riyadh — will see the Twitter-loving US president meet with figures including King Abdallah of Jordan, Twitter CEO Jack Dorsey, and Pakistani activist Malala Yousafzai. That event will include a variety of panels, including one on countering radical views on social media platforms, which will be moderated by Faisal J. Abbas, editor in chief of Arab News.

May 17, 2017 at 2:44 PM  

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