Oil Daily | Saudi Arabia Faces Budget Deficit as Oil Prices Fall, Plans New Debt to Cover Shortfall

【Oil-Producing Countries Dynamics】

ADNOC has drilled and tested oil in a UAE shale play operated by EOG Resources. EOG, awarded a concession for Unconventional Onshore Block 3 in Abu Dhabi, plans to explore unconventional oil in coordination with ADNOC. EOG is also exploring shale gas in Bahrain, partnering with BAPCO. Several countries, including Canada and Saudi Arabia, are exploring unconventional oil and gas potential, with the UAE potentially joining shale producers.

Iran countered Gulf Cooperation Council claims over three Persian Gulf islands and the Arash gas field, asserting their sovereignty. The Arash field, disputed between Iran and Kuwait, has hindered exploration due to territorial claims. Kuwait began constructing a plant for the Dorra field, with GCC asserting joint ownership between Kuwait and Saudi Arabia. Iran urged dialogue over one-sided claims.

Brazil's Petrobras, led by CEO Magda Chambriard, leverages strong Asian demand, particularly from China, to mitigate tariff impacts. China consumed 52% of Petrobras’ oil exports in Q2, with Europe and other Asian countries following. The US, previously a major buyer, has reduced imports, enabling Petrobras to withstand US trade policies. Tariffs on Brazil and India stem from geopolitical tensions.

Russia and China signed a memorandum for the Power of Siberia 2 gas pipeline, which will transport gas from Russia’s Western Siberia to China via Mongolia. Although crucial details, including pricing, remain unresolved, the project is seen as the largest in the global gas industry. Russia diversifies its energy exports towards China, compensating for the loss of European markets.

Saudi Arabia faces a growing budget deficit due to falling oil prices, below the necessary level for budget balance. April's oil revenues fell significantly, attributed to oversupply and economic concerns. To cover deficits, Saudi Arabia is issuing new Islamic dollar-denominated debt. Investors have shown strong interest in the Sukuk offering.

【Latest Oil Policies】

The US imposed sanctions on a network smuggling Iranian crude disguised as Iraqi oil. This move aims to hinder Iran's oil revenue, impacting its capacity to conduct hostile actions. The network, involving multiple shipping firms, used ship-to-ship transfers to mask oil origins. Nuclear talks remain stalled, with US demands over missile curbs as a key issue.

【Industry News】

Strong Asian demand has supported Brazilian oil exports. Petrobras CEO Magda Chambriard reported China as the largest buyer, comprising 52% of exports in Q2. European countries followed, while the US slipped in ranking due to redirected oil flows from Brazil, driven by trade policy tensions.

India’s manufacturing surged, driving electricity generation growth, reaching a 17-year high in August. The manufacturing sector accounts for half of India's power demand, leading to increased coal-based power generation. Despite challenges like US tariffs, India's power demand continues to rise, with coal remaining the primary electricity source.

Syria resumed crude oil exports after 14 years, following US sanctions removal. The first shipment of 600,000 barrels was sent to B Serve Energy. Civil war had halted exports and damaged infrastructure, but a new government aims to revive the economy through oil production and exports, collaborating with US firms.

【Company News】

EOG Resources explores UAE and Bahrain shale plays, holding a 100% ownership in Abu Dhabi's Unconventional Onshore Block 3. They aim to develop shale resources and have partnered with ADNOC and BAPCO. EOG's expertise could help UAE become a shale producer.

Brazil filed a bid for full International Energy Agency (IEA) membership, highlighting its role as a major oil exporter and renewable energy leader. Brazil's dual identity as an oil producer and climate champion influences its energy policies, balancing fossil fuel expansion with renewable energy goals.