The Oil Kingdom: Part One

the good news is that the price of oil is falling a lot it's also the bad news if you're determined that the u.s. kick its addiction to foreign oil president-elect Barack Obama says now is the time to do that even with the economy in recession but the oil Kingdom Saudi Arabia the world's largest supplier of oil with the US as its number one customer is pulling all the levers and spending billions to keep the oil age going we went to Saudi Arabia a few weeks ago to meet one of the most powerful men in the world Ali al-naimi the Saudi oil minister and de facto head of OPEC the oil cartel if most Americans had an opportunity to sit down with the oil minister of Saudi Arabia the thing they would like to know is where you think the price of oil is going to be say in about six months is it going to be up or down you want my classic answer no I want your honest ok as a praise I on the judgment my honest judgment is if I were to know what the price of oil six months from now I would be in Las Vegas ok he may be smiling but this is a man with serious heartburn and vertigo the price of oil has been soaring and sinking up and down uncontrollably why did the price in your opinion spike in July why did it go way up to a hundred and forty seven dollars a barrel basically there was a what's called a fear premium and the fear was that Saudi Arabia itself had peaked out that you'd reached your ceiling of how much available oil is left in your overall reserve so what's the truth the truth is here is the kingdom with more than two hundred and sixty billion barrels and I firmly believe that the potential to add another two hundred billion bottles of oil are there to be found if the oil minister of Saudi Arabia had one message it was there is no need for those fears and to make the point they let us see facilities that will increase Saudi capacity from about 10 million barrels a day to more than 12 million and they're going to the ends of the earth to do it this is Sheba a desert wilderness where temperatures can reach 135 degrees the Saudis say that 18 billion barrels of oil lie beneath these red sand dunes more than four times the proven reserves of Alaska to tap into it the kingdom's national oil company Saudi Aramco had to build an oasis here the Shia story is an amazing story and our ye'd al sham re oversees the mega project at Sheba here in the kingdom's empty quarter we're on soft sand we're not talking about a hard surface here look this is what it's like here I mean this is salt yeah the logistics are impossible the first thing we had to do is build our own Road in order to access this to get here just to get here once that was done we had to remove 100 million cubic feet of sand just to make the runway that we are currently using 100 million yeah we had to remove a sand doing in order to connect to flat areas to do that what about pipelines we built a pipeline 400 miles and length and you can imagine the challenge of building that pipeline in a topography like this but it was nothing compared to accessing the oil itself which was discovered in 1968 but for 30 years was considered too hard to extract now with sand dunes this high it's almost impossible and the economics just didn't make it at the time until the development of the horizontal drilling that's where you place a derrick on firm ground then dig down with a drill bit that snakes horizontally under the sand dunes with branching tentacles like a fishbone the drill bits can travel out for as much as five miles you know when we were growing up we always heard about the building of the pyramids this sounds like the building of the pyramids it was a huge task for everybody the che ba facility is now being expanded to extract a total of 750 thousand barrels a day of high-grade Arab extra light crude and when will you see the first drop of oil out of the new part right behind we will operate this facility very early next year so the beginning of all nine absolutely then on the other side of the kingdom there's an even bigger mega project at a field known as courious it's also scheduled to go online next year this is the biggest oil project in history Khalid Abdul kadar the project manager says 1.2 million barrels a day will be tapped here that's more than the entire daily production of some OPEC countries like Qatar and Indonesia this is a lot of walking the oil will be stored in massive tanks like this one which is seven stories high look at this Dada that is gigantic it's 300 feet across the length of a football field so can we go down yes ok be careful very careful like just about everything at courious even the tanks have the latest bells and whistles this is a floating roof yeah so when oil comes in the whole roof which is a laser wise up yes and the stair also will rise up with it so in other words we're standing on the roof of the tank and the oil will push it up will push it up all the way up there's more oil in this one field at courious than in the entire United States it's the largest oil facility to come online anywhere in the world in nearly three decades with the Saudi say 27 billion barrels of oil this has anybody projected how many years it's going to take to deplete it will take us more than 50 years 50 yes Korea's like the sand dunes presented a technological challenge the field has very little natural pressure which is necessary to bring the oil to the surface so to force the oil up there injecting seawater down deep underground we will inject about 84 million of gallon per day of seawater so where's the seawater coming from because we're here in the middle of the desert how far away is the sea it is about 150 miles from here so in addition to all of this for the oil you're also building a pipeline from life line to get the additional water all the way through here the complexity and vastness of the project are staggering with 26 contractors 106 subcontractors and 22,000 workers from around the world who have laid thousands of miles of pipeline and cables how much steel are you using here because I I'm looking it's just steel as far as I can see see we have enough structural steel here that will build two bridges equivalent size of the Golden Gate bridges in California to to these two mega projects plus three others are costing Saudi Arabia a total of sixty billion dollars over five years and they're not borrowing any of it it's all being paid for in cash still Saudi costs for producing oil are the lowest in the world how much does it cost Saudi Arabia to produce one barrel of oil this is an excellent question it is very small very little it's probably less than two dollars to to produce a barrel Saudi Arabia reportedly needs to sell oil for at least fifty five dollars a barrel to cover the cost of running the country fossil fuels finance seventy-five percent of its entire domestic spending budget but oil has sunk below that breakeven price does this worry you does this send chills through your through your spine I'm not a warrior I get concerned but I don't worry are you concerned the concern is this any price must be good for the producer for the consumer for the investor the oil companies so you're saying if the price goes too low then then production will fall and in the end we'll be squeezed we won't have enough oil that's to run our countries will skyrocket what he wants is an end to the wild swings in price which is why to keep the price from further plummeting he agreed to a cut of 1.5 million barrels a day in the October meeting of OPEC the oil cartel the point is that that Saudi Arabia wanted the 1.5 this was not something jammed down your throat no this is no no that's by the way nothing gets jammed oh they're on our throat but Iran wanted more well I'm in different countries want different levels different cuts but in the final analysis the reason prevails but are you saying that sorry Saudi Arabia influence on OPEC influence so strong now that he was able to quash a rands attempt to double the price of oil which Tehran needs to support its budget including its nuclear program and the bankrolling of militias like Hezbollah and Hamas still all Nighy me says oil is no longer used as a weapon Iran tries to keep the price way up and Venezuela's trying to keep the price way up that you don't consider that oil as a weapon if you looked at these countries you just named yes every one of them would like to sell every battle they can as is higher pricing they get away with right the sense out of the OPEC meeting - a lot of people was by cutting production your purpose was to get the price up again and that would hurt the world which is suffering an economic crisis and the world means everywhere I can assure you that price was the least on our mind but of course I say that in all honesty but the sense is you were oblivious to the concerns of the world facing this economic crisis you didn't care about the recession credit problems or anything like that that is really very unfair criticism what did governments do when the financial crisis happened they took measures to bring stability back the financial market and we see because of our responsibility a future crisis in the oil market should we not take pre-emptive measures to prevent it I think the answer is yes we should it's incumbent on us not to see the oil market destroyed the Saudis recently announced the price they would like to see oil selling for $75 a barrel about 50% higher than the current price are they trying to keep the us addicted to oil their answer when we come back

Channel: CBS

Views: 281,154

Keywords: 60, Minutes, Lesley, Stahl, Saudi, Arabia, Oil, Petroleum

Id: GP6DhKGDzek

Length: 12min 34sec (754 seconds)

Published: Sun Dec 07 2008