MSC, MBS, Xi and some Carrots
Now that the dust has settled following the announcement that ARAMCO is shelving its plans to increase maximum sustainable production capacity (MSC) to 13 million barrels per day I thought I would share some of my thoughts.
To do that I go back to the 1970s because, why not?!
In the late 1970s, ARAMCO had plans to take capacity from 10.5mil bbl/d to 13.5 mil bbl/d (sound familiar).
There was even discussion of taking capacity up to 16mil bbl/d.
Two things were occurring at the time:
1) Before oil was traded on the NYMEX, integrated oil companies primarily operated without the ability to easily procure oil from the open market to sustain their extensive refining networks, necessitating a secure supply. The Saudis were negotiating with Exxon, Mobil, Chevron, and Texaco on the continued buyout of ARAMCO. The capacity expansion plan was the carrot they dangled over the companies to get a good price. (FYI the eventual price remains a state secret.)
2) The Saudis wanted a bunch of new F-15s.
You can read about all of this in a GAO document HERE.
Jumping to more recent times, in 2017, shortly after MBS assumed the role of Crown Prince, he initiated a crackdown on the entrenched factions of the Royal family and dozens of clerics to consolidate his power.
Soon after that, Hydrocarbon Law Royal Decree No. M/37 was passed in December 2017.
Within the new law is Article 7 which relates to the maximum sustainable production capacity and states the following:
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