Some concerns on Saudi production may be answered

I remember one time taking a bus up to the Arctic Circle in Sweden, and being cautioned on the way not to ask the local Lapp how many reindeer they had. It was considered impolite. Gerald Posner notes in Secrets of the Kingdom, that the Saud family feel much the same way when asked about Saudi oil. Which makes it a little more difficult to discern exactly what is going on with production over there at the moment. However, in a relatively unreported remark by their oil minister in San Francisco last weekend he mentioned that they planned on becoming more open.
"The IEF Secretariat, based in Riyadh, can serve a useful and productive role in fostering greater dialogue and cooperation between producers and consumers of oil. The Joint Oil Data Initiative (or JODI) is now working to complete its global database of oil statistics. When it is released this summer, the JODI database will help improve oil market data transparency where we need it most - in fast growing, developing economies."
This would be very useful since there are some increasing worries about current Saudi production beginning to emerge.

For example he also said
"Saudi Arabia can produce 11 million barrels per day, of which 1.5 million is considered a cushion over and above demand. Total capacity should increase to 12.5 million barrels by 2009."
But there are the occasional rumors that there is a slight discrepancy between what is being said and what is actually happening. Consider today's article in Rigzone. They report a difference between Saudi production claims to have produced this year, some 848 million barrrels, and an outside count.
But OPEC estimates based on secondary sources put the total at 839 million barrels. And the International Energy Agency pegs it at 814 million barrels - a 34 million barrel difference.
When things are getting this tight, this is a disturbing difference, of about 360,000 bd in the wrong direction. This is particularly true since there are no signs of any additional production coming on line between now and the Haradh development next year.

There are also concerns with depletion rates and oil replacement from the older fields. Consider this from al Jazeera:
The IEA notes in its November report that Riyadh has "increased drilling to offset anticipated decline". Much of the current steadying of Saudi supply has been from two reasonably small new fields, Qatif and Abu Sa'fa.
The decline, which this 800,000 bd production is offsetting is coming from the depletion of Abqaiq, Ghawar and Berri. Which while very realistic, does not agree with the remarks made at the CSIS meeting in February 2004, when they gave rates of 2.8% for Abqaiq and 4.1% for Berri. Since they equate this to 4.3% for Yibal (which went down a lot faster than that), this is a worry. The only way to sustain production at that level would be to drill more wells, and since in that area they are apparently getting only 3,000 bd from their wells (source - same meeting) they don't have enough drilling rigs.

Speaking of little reported news I was surprised not to see the Moscow power outage given more coverage over here. With over 20,000 people trapped in subways and 1,500 in elevators it is a warning to us all of our vulnerability and reliance on perhaps too centralized a power system. Incidentally the article refers to Tula as a nearby city, having also been there (it is where Tolstoy is buried) it is not exactly next door - its actually some 193 km away and gives some idea of the size of the problem since they are also powerless. (But the Energy Bulletin caught it.)

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From everything I have studied they have said before they will ease restrictions and come forth with more accurate information, But this doesnt happen so until it does dont count your chickens ;)

As for production being so easily raised then why are we not seeing it now?? Also how are they keeping up with current production?? by using methods like injecting massive amounts of water into alot of their wells. This is known to cause damage and increase the amount of unrecoverable oil. This water injection is used on old wells yet they are using it to keep up with production. They run a real risk of some of their wells collapsing because of the rate at which they are extracting the oil. What would happen if this happend tomorrow??

Many things to think about whats going on over there and until we get valid concrete information its basically a wait and see furture for the US. I dont think we can afford to do this for very long as we now get 65% (?) of our oil from other places and our economy depends on it.

Thanks Rajiv. All fixed. :)

Thanks gentle folk, my typing is getting bad tonight, I had to fix two other links as well.

The interest of Saudi is to maintain opacity for both domestic and foreign relations; it takes little thought to understand why. I remember someone commenting elsewhere that they are "the Jewish Arabs," which means they are shrewd and secretive because they see it's to their best interest.

From one perspective, it's silly to try and estimate their total remaining reserves and possible productive capacity. On the other hand, it would be nice to know just how much is left to extract. But from a pragmatic planning viewpoint, neither makes any difference because oil supplies are finite in the longterm, which because of oil's unique properties alternatives should be implemented rapidly so those properties can be utilized maximally. Consummerism's profligate waste must be replaced by the stingiest conservationism whether Saudi has 500 billion barrels or 100 billion barrels remaining under the sand.

This whole charade reminds me of the guy who constantly asks and is turned down by the same gal at the dance and justifies his persistence by reasoning that all he needs is the right pick-up line. Eventually at some later dance, the gal takes pitty and says yes to one dance but has no intention of assenting to another, yet saying yes just once is her mistake as that one success is all the justification needed for the guy to persist for as long as it takes to get another. In the real world, the guy is the USA's longstanding Open Door Policy and the gal is every country not wanting to associate with or be seen as giving into the ugly American.

The main reason I think they are wanting to get to the bottom of this smoke and mirrors act is that they are realizing that they will have todo something eventually. By getting a better grasp on the timeline they can milk it out to the very end and decide how things will go down.

This would not be my approach to the current situation but I am not in charge on the government or the markets. I really think they (elites) look at the bottom (poor) people as expendable.

They know the worlds population needs to decrease so whats the difference if they wait till its alittle too late?? it wont effect them for the most part only the followers.

The very top % might have to endure some suffering but in the end they will still rule what ever population that is left.(at least they hope)

This is where knowing now will make a difference. If you tell the starving masses we had a chance to do something but we didnt really care then that might create a BIG problem. But if they say we learned what we could and have tried to plan the best we could to ease your suffering they may not be faced with an uprising and take a chance of being over thrown.

I suppose they could face an uprising regardless of what they do, but If I was in their shoes I would be getting alittle worried about now.

The choices of today could make a big difference between a long slow slope or a big fast slippery one.

I have no way of knowing the truth about the Saudi reserves but their statements and smiley faces remind me of the old USSR just before Gorbachev threw in the towel on communism in 1988 or thereabouts. The old communist system was failing miserably (as we know in retrospect) but very few in the West knew this at the time.

It seems to me the Saudis are also madly pulling levers behind the curtain in order to keep the West at bay.

I do not believe that the next generation of the Saudi Royal family expects to live out their lives in the Kingdom.

Having actually been there, I will state that their pipelines and other infrastructure make excellent targets. Everything is visible in the desert. If you bury it, sandstorms expose it again. Where we use 4" and 6" flowlines for our oil production, ARAMCO uses 12, 24 and 36" flowlines, running parallel across the desert to gathering facilities.

Everybody lives in cities in Saudi, with desert in between. Oil structures stick out like neon signs against the backdrop of their desert. I have no idea how they have managed to keep terrorists from creaming them in the past. Which is why I actually think their so-called "terrorists" are part of some internal operation. My 6th grade son could disable their setup with a single RPG round. Their oil infrastructure is like our electricity infrastructure - highly visible, easily accessed and wholly undefended. A short drive through any metropolitan area in the US will reveal large high-tension lines an SUV could pull over with a little effort. The Saudi oil system is as vulnerable, but somehow all their "terrorists" haven't hit them where it hurts...

It is simply not in the best interests of the Saudis to over-produce their fields. And my experience with many in the Middle East leads me to believe that they feel few compunctions about lying to Christian infidels or other enemies. Their religion and history speak volumes on this topic. To take them at face value is to allow oneself to be intentionally misled.

I have many anecdotes in my Middle East dealings which illustrate this attitude. It is an integral part of doing "business" there. One must take it into account to gain bargaining advantage, which gains their respect.

Shouldn't we include this pervasive attitude in our discussion? If we do, then we must discount everything the Saudis say, and look to other avenues for our one does when working with them on their turf. And no, they would never admit any of this - it would not be to their advantage, would it?

Never lose sight of the fact that they have more cash than any of them could spend in a lifetime of trying. Their driver is not always profit.

Just a few thoughts from me...

I read somewhere on these posts that the maximum recoverable amount from an oil field was around 60%. Never understood this figure.

Why can't someone drill below the reservoir allow the oil to drain down by gravity and then pump it out.

Would'nt this allow 80-90% recovery? I am sure someone here can tell me why this simple scheme will not work??


ppk -

In most reservoirs, the oil is trapped in the rock with water. Since oil floats on water, it will never be at the bottom. This is usually salt water, and cannot just be dumped anywhere. The earth is also squeezing on the oil with the weight of the overlying rock - this makes the oil, which is less dense, move towards the surface when it is free to move.

In most fields, even when there is no water in the reservoir, water tends to migrate in from other places. In a few fields, the oil is pressurized by gas in solution. Once the gas is produced, there is no pressure to drive the oil out, At that point, water is usually used to chase the oil upwards - water injection.

Since oil is contained in between grains of sand or in tiny pores of limestone, you never can quite get all of it to let go of the rock and chased to the well. A certain percentage coats the sand grains and cannot be recovered, or is in some wierd corner of the reservoir and cannot be flushed out.

It's not a "pool" of oil in a cave. It is sand grains that must have a certain size (porosity) to form spaces in between the grains and interconnectedness (permeability) to allow the oil to flow in and be trapped in the first place. This is never ideal, but chaotic like Nature is. So within each reservoir, there are pore spaces that are unfavorably connected, unfavorably shaped, too small, etc. and the oil is forever trapped.

Hope that helps...

OT -

I wonder if the f/X channels Peak Oil disaster movie (they are owned by FOX) isn't another attempt to discredit PO? I mean, nothing cools an issue like a cheesy disaster movie, and it will let the talking heads from "Renta-Pundit" have a field day making fun of the issue whenever it comes up.


Makes sense. Thanks.

I don't believe a word the Saudis say. These guys were all educated at Yale, Princeton, etc. They know how the PR game works in the US. If you read what they say closely, you will notice that they never actually lie, but they also don't answer the question.

"The market is well supplied"

Well, yes, I'd call 80Mbd quite a large supply and if it were used more carefully, i.e., in less demand, it'd sell for less than $50. So it's the demand side that's to blame, not supply.

"We stand ready to supply the market"

Of course they do. They can stand or sit or do whatever they want. What they're not doing is producing more light, sweet crude, because they can't. They readily supply 9.5Mbd and will probably continue for some time. But they've never claimed they will be able to meet EIA's "call" in 2020. That would be a lie and they avoid that.

Dave -

Make no misteak - if it is in their interest, they will lie to an infidel. I have been told as much repeatedly by Muslims in non-Middle East countries. "The enemy of my enemy is my friend" is axiomatic with them.

We (US) are definitely THE infidel in the Middle East. We are tolerated simply because we are their cash cow, and we have a really big military stick. I have overheard waay too much in my travels in that area to believe any save a few very close friends.

However, parsing Saudi statements is a very healthy way to see their POV. Your assumptions above are correct, IMO.

In the FX flik, riots are supposedly sparked when gas hits $5/gal at the pumps, which is absurd when Europe already pays that amount. IMO, it's a sop for Homeland Security and the newly proposed ID card--increased repression has to be justified somehow.

Another tactic the administration uses via MSM is saturation. They ply the TV/AM and "news" with whatever they wish us to become "used to". That takes away the urgency and makes it part of the background noise - desensitizes the populace to the issue.

That leaves them free to spin the issue whichever way they wish, as it fades into yesterdays news. When it pops back up, their spin has become defacto "fact".

f/X flick maybe???