Shadows picked up by satellites suggest Saudi Arabia under reported its oil stores last year

  • Satellite images of two major oil refineries in Saudi Arabia suggest reserves may have been higher than reported.
  • Satellite technology allows the levels of oil in tanks to be estimated according to the shadows cast by their floating roofs.
  • Saudi Arabia reported falling oil reserves last year and agreed as part of OPEC to extend production cuts into 2018.

LONDON – New satellite imagery of two of Saudi Arabia’s largest oil refineries suggests the Kingdom may have under-reported its oil stores in the first half of 2017.

Satellite images gathered by tech start up Bird.i suggest the level of crude oil held in two major refineries in Saudi Arabia, Ras Tanura and Yanbu, increased between January and June 2017. This is despite the Kingdom’s official figures that show supplies declined, and a commitment to reduce supply in the face of low prices.

Bird.i collects and analyses satellite, drone and airborne images from numerous sources, some of which are captured in monochrome and some in full colour. The technology allows the fullness of oil tanks to be estimated according to the shadows cast by tanks’ floating roofs: more shadow suggests the roof and oil stores are low. Factors such as the time the photos were taken, the position of the sun and the satellite’s position are also taken into consideration.

Images taken of the Ras Tanura refinery, Saudi Arabia’s biggest refinery with a capacity of 550,000 barrels per day, suggest stocks were relatively low in January compared to in May, when the shadows cast were much shorter – indicating a higher supply.

Copyright © Birdi Ltd. – Image © 2018 DigitalGlobe, Inc.Ras Tanura refinery in January 2017.
Copyright © Birdi Ltd. – Image © 2018 DigitalGlobe, Inc.Ras Tanura refinery in May 2017 — where less shadow can be seen.
Screen Shot 2017 12 20 at 10.32.10Google Maps

Images of Yanbu terminal, a major refinery on the Red Sea with a capacity of 225,000 barrels per day, suggest stocks in November 2016 were relatively low compared to those in May 2017, when the tanks look to be “almost full,” according to Corentin Guillo, founder and CEO of Bird.i.

However, a third – and the most recent – image of Yanbu, taken in December 2017, shows more shadow, suggesting oil supplies fell again in the second half of the year.

Copyright © Birdi Ltd. – Image © 2018 DigitalGlobe, Inc.Yanbu refinery in November 2016.
Copyright © Birdi Ltd. – Image © 2018 DigitalGlobe, Inc.Yanbu refinery in May 2017 — less shadow visible.
Copyright © Birdi Ltd. – Image © 2018 DigitalGlobe, Inc.Yanbu refinery in December 2017.
Screen Shot 2017 12 20 at 10.39.10Google Maps

Saudi Arabia is one of the world’s largest oil producers and key member of the Organisation of the Petroleum Exporting Countries (OPEC). In November 2016, OPEC members agreed to cut oil production in the face of an oil glut and falling prices, and in November 2017 both OPEC and non-OPEC producers agreed to extend oil output cuts until the end of 2018.

Saudi Arabia also reported falling stores throughout 2017. In official data submitted to the Joint Organisation Data Initiative (Jodi), the Kingdom reported oil stocks had declined by 5.4 million barrels between January and June 2017, and were on a downward trajectory between March and September.

Screen Shot 2017 12 20 at 08.32.36Jodi

“The direction of the oil price is particularly difficult to predict given the combination of global demand, technological change and politics which feed into its valuation,” said Laith Khalaf, senior analyst at Hargreaves Lansdown.

“It would be pretty destabilising for the oil price, and for OPEC, if Saudi Arabia was shown to be saying one thing and doing another,” he said.

But Khalaf cautioned above ground storage tanks are not the full picture: satellite images are “far from conclusive evidence,” he said, since reserves are also held overseas and in underground tanks.

Saudi Arabia’s economy is heavily dependent on oil, a problem – in the face of a finite supply and low oil prices – the Kingdom is trying to solve. Its Vision 2030 project seeks to diversify the economy and boost the state’s coffers.

As part of this project, the Kingdom plans to float state oil giant Saudi Aramco, which uses both Ras Tanura and Yanbu refineries.

“In order to comply with the normal listing rules, Saudi Aramco would have to reveal precise information about its current reserves and how they have been calculated,” said Mihir Kapadia, CEO of Sun Global Investments.

“However, it is not yet clear whether the share sale would include ownership of the ground reserves, and therefore we may be uncertain about the level of transparency from the company,” he said.

“The [official government] figure of 266 billion barrels [in reserves] matters because it estimates the proven value of the commodity, especially as it could appreciate after peak oil,” said Kapadia.

“One of the key aspects for the [Aramco’s] valuation would be the reserve total,” he said.

Saudi Arabia’s oil ministry did not immediately respond to a request for comment.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.