Saudi Field Expansion

Saudi Arabia has pledged to increase the production from their oilfields. As many of these fields are veterans and depleting, this requires drilling and infrastructure development. Which costs big bucks. Since this ramp up is occurring now, the Saudis are learning quite rapidly about oilfield economics. When oil is consistently above $50, oilfield manufacturers, suppliers, engineering firms, etc. cannot keep up with demand. And from Econ 101, increased demand and limited supply means prices go up. The initial $12-15 billion project has now inflated to $15-18 billion. As expertly reported in Rigzone:

Costs Rising for Saudi Oil Expansion Plans

And although that is interesting in its own right, the tidbit that Saudi is focusing on a $35 a barrel floor on oil prices is most interesting. Just last year the OPEC basket was targeted roughly between $24 and $30 a barrel. This is a damn good indication that those days are long gone.