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Saudi Arabia's Crude Oil Reserves Propaganda
Posted by ace on March 4, 2008 - 11:00am
Executive Summary
- Saudi Aramco has effectively used propaganda methods for at least the last fifteen years to convince many governments, corporations and individuals to believe their statements. However, Aramco’s statement that it is the world’s leading oil producer is now false as it now second after Russia since 2006. Nevertheless, Saudi Aramco’s repeated statement about remaining recoverable oil reserves being 260 billion barrels (Gb) is still generally accepted.
- In 2004, Saudi Aramco stated that its oil initially in place (OIIP) has been growing steadily since 1982. There is considerable doubt about the validity of this increase, given the lack of new oil discoveries and the unusual nature of its steady continuous increase. Aramco stated the OIIP was 700 Gb at year end 2003 while a more realistic estimate is 580 Gb.
- Aramco may have some high recovery factor fields such as Abqaiq and Shaybah, but an average recovery factor range from 30-37% is assumed for the total OIIP in Saudi Arabia’s fields. The trend of the recovery factor for Saudi Aramco indicates that there has been no effect on the recovery factor by recent technological advances in producing wells. Saudi Aramco has kept remaining recoverable crude oil reserves constant simply by artificially increasing the OIIP each year since 1982, accompanied by an unrealistically high average recovery factor of 52% since 1988.
- Saudi Aramco’s propaganda campaign is failing. Saudi Aramco is no longer the world’s leading crude oil producer. Saudi Aramco’s statement of 260 billion barrels of remaining recoverable reserves is almost certainly false. Instead, the remaining recoverable crude oil reserves are probably less than 100 Gb, instead of 260 Gb. It is time to call on Saudi Aramco and the other OPEC members to tell the truth about their reserves.
Definitions
OIIP – Oil Initially in Place
URR – Ultimate Recoverable Oil Reserves
RF – Recovery Factor (URR/OIIP)
1. Successful Propaganda
Almost all governments and large corporations use methods of propaganda to further their own interests. One of the masters of propaganda was Germany’s Nazi Leader, Adolf Hitler, who said, in his book Mein Kampf: “But the most brilliant propagandist technique will yield no success unless one fundamental principle is borne in mind constantly and with unflagging attention. It must confine itself to a few points and repeat them over and over”. Hitler’s propaganda principles are described further below.
It must repeat those points over and over again until the public believes it. The principles behind propaganda are the same principles of mind control, hypnotic suggestion, and mental programming: distraction and repetition. With propaganda, distraction draws attention away from information that is true and directs attention to information that is false. Repetition of the false information imbeds it in your subconscious mind so that your acceptance of its truth becomes a conditioned response. You accept this information as true without thinking whenever it is presented to you again.
The text in the figure below is from the event brochure of the 2008 Saudi Arabia International Oil & Gas Conference, hosted and supported by Saudi Aramco. Does the text below satisfy the first part of Hitler’s quote and confine itself to a few points? Yes, the few points stated are that Saudi Arabia is the world’s leading oil producer and exporter, is the main force for stability in the oil market, and has remaining recoverable reserves of 261.8 billion barrels.
Fig 1 – Saudi Aramco Propaganda, 2008 - click to enlarge
Does Saudi Aramco’s propaganda satisfy the second part of Hitler’s quote and repeat these few points over and over again? Yes, Saudi Aramco has been repeating these few points for at least the last fifteen years. In the text in the figure above, there is a reference to a 1993 estimate of 260 billion barrels recoverable reserves. The text below is from the September 1993 issue of Saudi Aramco World:
Saudi Arabia became the world's top oil-producing nation… and is also the world's number-one exporter of crude oil and natural gas liquids.
At the end of 1992, recoverable crude oil reserves in the company's fields were 258.8 billion barrels. That quantity is not only about a quarter of the world's known total, it is also 6.4 billion barrels above the total in 1988, despite the production of some 10 billion barrels of crude in the intervening years -clearest proof of a successful exploration program.
Are the points stated by Saudi Aramco true? According to the EIA, Russia produced more oil than Saudi Arabia in 2006 (9.25 mbd vs 9.15 mbd) and in the first 11 months of 2007 (9.44 mbd vs 8.69 mbd). Thus, Aramco’s 2008 statement (Fig 1) that it is the world’s leading oil producer is now false.
Is the 2008 statement about remaining recoverable reserves of 261.8 billion barrels true? Saudi Aramco says that the increase in recoverable reserves, despite the daily extraction of millions of barrels, is made possible by the discovery of new oil fields and improved technology in exploiting existing fields (Fig 1). Unfortunately, there are no independently audited reserves data of Saudi Arabia but the discussion in the following sections indicates that Saudi Aramco’s remaining recoverable reserves are far below 260 billion barrels.
Overall, Saudi Aramco’s propaganda methods would satisfy Hitler’s quote and have been successful. Many governments, corporations and individuals accept Aramco’s statements and also accept Aramco’s repeated statement of 260 billion barrels remaining recoverable crude oil reserves.
2. Ever Increasing Oil Initially in Place
The statement in Fig 1 above by Aramco includes a reference to maintaining remaining recoverable reserves by discovery of new oil fields. If new fields are discovered then this can add additional reserves and will also increase the oil initially in place (OIIP). The figure below shows OIIP from 1982 to 2003 and is from Aramco’s presentation, to the Center for Strategic & International Studies in Washington, DC, on February 24, 2004.
According to this summary of Saudi Arabia discoveries, only one significant discovery has been made since 1975, the Hawtah Trend, a collection of about six fields including Nuayyim, from 1989-91, with about 2 Gb reserves and 6 Gb OIIP. This discovery could partly explain the small step changes in OIIP in 1989 and 1991 in the figure below. However, from 1982 to 2004 there was a total change of 110 Gb OIIP which leaves a very large unaccounted 104 Gb. Page 28 of this 2005 ASPO presentation shows an increase in discovered reserves of about 5 Gb from 1982 to 2004, representing about 15 Gb OIIP which still leaves an unaccounted 95 Gb.
Fig 2 – Growth of Oil Initially In Place - click to enlarge
A common method to increase OIIP is to do further appraisal drilling to increase the reservoir volume, by infill and step-out wells. However, this appraisal drilling normally results in a staggered, extremely gradual, OIIP growth over time rather than the smooth upwards trend shown above in Fig 2. Given the lack of significant new discoveries, this 2005 ASPO presentation estimates that in 2003 the OIIP was a more realistic 580 Gb as shown below in Fig 3, instead of Aramco’s claimed 700 Gb.
Fig 3 – ASPO 2005 Oil Initially In Place - click to enlarge
In Fig 4 below, also from Aramco's 2004 presentation, it is hard to believe that Aramco forecasts 200 gb new oil discoveries from 2004 to 2025, measured as OIIP. This is partly based upon their reliance of US Geological Survey World Petroleum Assessment 2000 in Aramco’s presentation that states there is 87 Gb undiscovered recoverable oil in Saudi Arabia. The forecast 200 Gb yet to find OIIP based upon the USGS 2000 study could provide a weak basis to a continued increase in the OIIP. The future estimated OIIP increase of 200 Gb suggests an average discovery rate of about 10 Gb(OIIP)/year from 2004. It's now 2008 and there have been no discoveries announced which could comprise 10 Gb/year.
Fig 4 – Discovered & Undiscovered Oil Initially in Place by 2025 - click to enlarge
What is Aramco’s purpose of showing a continuous and gradual increase in OIIP, without supporting evidence? An answer is proposed in the following section.
3. Recovery Factors and Remaining Recoverable Reserves
Recovery factors vary according to each field and each part of a field. The recovery factor is defined as the ultimate recoverable oil divided by the oil initially in place. This 2004 ASPO presentation stated that “the average global recovery factor is about 30-35%”. This is based on data from the IHS Energy database on 9,000 fields worldwide containing 1,400 Gb reserves. The recovery factor bands are shown in the figure below.
Fig 5 – Recovery Factor Bands, 9,000 Worldwide Fields with 1,400 Gb Reserves - click to enlarge
Schlumberger discusses recovery factors in their brochure called Carbonate Reservoirs – Meeting unique challenges to maximize recovery. This brochure states that “the average recovery factor – the ratio of recoverable oil to the volume of oil originally in place – is about 35%. However, it is recognized that recovery factors are higher for sandstone reservoirs that for carbonates”. Given that the majority of Saudi Arabia’s key reservoirs are carbonate, it would seem appropriate that 35% is assumed as a reasonable upper limit for the average recovery factor of all fields, based on Schlumberger’s statements and on the 2004 ASPO presentation.
Part of Dr. Mamdouh Salameh’s expert comment to the Oil Depletion and Analysis Centre (ODAC), made on May 7, 2007 discussed Saudi Arabia’s recovery factors.
And despite the great technological strides by the oil industry, the average global oil recovery rate has been stuck at 32% of the oil in place since the early 1990s. However, rates of 50% and even 55% have been achieved in the North Sea and also in the most recently-developed, state-of-the-art “Shaybah oilfield” in Saudi Arabia respectively. But I hasten to add that 90% of Saudi oil production comes from four giant oilfields (Ghawar, Safaniya, Hanifa and Khafji), all of which are more than 50 years oil and are being kept flowing by a huge injection of water. Oil recovery rate from these four oilfields ranges between 25% and 30%.
Based on Dr Salameh’s statement, 30% is assumed as a reasonable lower limit for the average recovery factor of all Saudi Arabian fields.
The red line in the figure below is an estimate of the recovery factor from the end of 1976 to the end of 2008. The scale for the recovery factor is on the right axis. The scale for the other four lines is on the left axis. The black line represents the OIIP. The OIIP data from 1982 to 2003 is from Fig 2. The OIIP data from 2004 to 2008 is a forecast assuming that recovery factor remains the same and that annual production is replaced 100% by new recoverable reserves. The OIIP data from 1976 to 1981 is based partly on Fig 3 and includes the year end 1978 data point of 530 Gb OIIP, sourced from the April 1979 Senate staff report titled “The Future of Saudi Arabian Oil Production” as referenced on page 378 of Twilight in the Desert.
The grey line represents remaining recoverable reserves sourced from BP annual statistics review for the years 1980 to 2006. It is assumed that remaining recoverable crude oil reserves in 2007 and 2008 will be equal to 2006. The remaining recoverable reserves from 1976 to 1979 are estimated using the data point of 110 Gb for year end 1978 as referenced also on page 378 of Twilight in the Desert. The data point for the year end 1979 is 160 Gb as referenced on page 73 of Twilight in the Desert coinciding with the Saudi government acquiring 100% of Aramco.
The pink line represents cumulative crude oil production and is sourced from OPEC’s 2006 Annual Statistical Bulletin. The data point for 2007 is from the US EIA and the 2008 data point is from this recent world oil forecast. The green line is the ultimate recoverable crude oil reserves (URR) and is a sum of the remaining reserves (grey line) and the cumulative production (pink line).
The recovery factor (RF), shown by the red line, is the URR (green line) divided by the OIIP (black line). From 1976 to 1978, RF was about 27%. In 1979, upon full Saudi nationalization of Aramco, the RF increased to a 37% plateau until 1987. In 1988, the year that Aramco was renamed Saudi Aramco, RF increased by a huge step to a 52% plateau which extends to 2008.
Fig 6 – Saudi Arabia Recoverable Oil Reserves and Recovery Factor - click to enlarge
Given that there is a 37% RF plateau which may have some credibility, should the upper RF limit of 35% be increased to 37%? Some assistance could be provided by the figure below from this 2003 Statoil presentation which discusses recovery factors and possible increases due to enhanced oil recovery (EOR) methods. The figure below shows how the recovery factor increases from 20%, for small fields, to over 30% for large fields (green line). Statoil calculated a higher improved oil recovery (IOR) factor by applying EOR methods. This red line shows an optimistic peak of about 44% for large fields. However, Statoil relies on IHS 2003 data which, in turn, relies on OPEC data. Since much of the increase in RF is due to the large fields within OPEC, discussed further in Statoil’s 2003 presentation article, a strong upwards bias to the 44% RF is likely. Nevertheless, the increase of RF from 29% to 38% provides enough support to increase Saudi Arabia’s RF upper limit of 35% to 37%.
This story from Saudi Aramco World from May/June 1984 edition was emailed to me on March 5. This is a quote from Sadad al-Husseini, GM Petroleum Engineering at Aramco.
People talk about oil running out in Saudi Arabia, but even if we do nothing else but enhance our average recovery factor by 10 percent, we would add 17 billion barrels to our reserves of 165 billion.
This quote was made in mid 1984. From Fig 2 above, Aramco’s stated OIIP for 1983 was about 595 Gb; Fig 3 gives OIIP of about 550 Gb. 10 percent of 595 Gb is 59 Gb so this means that Husseini was not talking about an absolute increase in the recovery factor (RF) but rather a relative increase. Husseini’s 17 billion barrels is 2.9% of the 595 Gb and 3.1% of the 550 Gb. If it is assumed that Husseini’s RF increase is a relative 10%, this implies that the average RF for Saudi Arabia is between 29% and 31% for 1983. Applying the relative 10% increase gives a possible average RF range of 32% to 34%, which is within the 30% to 37% previously assumed RF range. Furthermore, Husseini’s reference to reserves of 165 billion could be URR. The reasoning is that Fig 6 above shows remaining reserves for 1983 of about 169 Gb but cumulative production of 51 Gb. The total URR is then 220 Gb. 220 Gb divided by 595 Gb gives a 37% RF. A relative 10% increase of 37% is 3.7% which is 22 Gb, above Husseini’s 17 Gb addition. However, the 169 Gb reserves divided by 595 Gb is 28%, coincidentally close to the 29% above.
Fig 7 – Recovery Factor vs Field Size (OIIP), based on 8,600 Fields (IHS Data 2003) - click to enlarge
An answer can now be offered to the question from the end of section 2 above: What is Aramco’s purpose of showing a continuous and gradual increase in OIIP, without supporting evidence? All oil companies, including state owned companies such as Saudi Aramco, are under great pressure by their owners to demonstrate replacement of reserves depleted by production. Aramco wanted to continue replacing annual production with new reserves, while assuming a constant RF. In the absence of sufficient real oil discoveries to increase OIIP enough to create new reserves, Aramco decided to artificially increase the OIIP each year to offset annual production losses. Aramco’s behaviour is supported by an unusually high correlation coefficient, between cumulative production (pink line) and the OIIP (black line) from 1982 to 2003 (Fig 6), of 0.99.
The amount of the OIIP increase would be calculated after the end of every year, after total production was known. The total production would be divided by RF to calculate the increase in OIIP to keep remaining reserves constant. Normally, the reverse is performed. An oil company discovers more oil then subtracts produced oil for the year to derive a year end remaining reserves figure which would vary from year to year, unlike Aramco which targets a constant idealistic remaining reserves figure. From 1979 to 1987 the OIIP was increased at just the right amount each year to maintain remaining reserves at 160 Gb. From 1988 to 2003, Aramco also increased OIIP each year at just the right amount to keep remaining reserves constant at 260 Gb, but at an incredibly high RF of about 52%.
There is additional confirmation of this practice of increasing OIIP each year, to replace production with new reserves, by a small note from Aramco’s February 2004 presentation: “(Note: the Company’s Business Plan calls for a reserves replacement of 15 billion barrels during 2005-2009)”. Aramco’s crude oil production for the year ended 2003, two months to their presentation, was 3 billion barrels. This note calling for reserves replacement of 15 billion barrels coincidentally represented exactly 5 years of 3 billion barrels/year production.
What about the effects of Aramco’s improved technology in exploiting existing fields (Fig 1)? Aramco started using advanced horizontal wells about ten years ago for their Shaybah field and in other fields such as Ghawar. Surely multilateral horizontal wells and smart wells should increase RF even just by a couple of percent since 1998. However, Fig 6 shows a constant 52% RF starting in 1988. This is odd. Perhaps the real answer is that Aramco was unable to increase RF because 52% has been unrealistically high since 1988.
4. Failing Propaganda
Saudi Aramco’s propaganda campaign is failing. Aramco says that they are the world’s leading producer (Fig 1). As of 2006, Aramco is now second to Russia which produces more crude oil per day. Saudi Aramco says that they still have 260 Gb (billion barrels) remaining recoverable oil reserves. This is unbelievable and has probably been created by artificially increasing the OIIP every year by an amount to exactly offset production (Fig 6). Aramco says that the constant remaining recoverable reserves of 260 Gb since 1993 has been due to increased discoveries and improved technology. Oil discoveries since 1993 have been minimal, at most about 10 Gb OIIP which is insufficient. Improved technology is supposed to help increase the recovery factor but Aramco’s recovery factor has been constant, at an unrealistically high 52%, since 1988 which indicates that the technology has had no effect on recoverable reserves. Instead Aramco just increases, artificially, the OIIP each year to maintain a constant remaining recoverable reserves.
A range of URR can be estimated now. Applying the previously assumed lower and upper RF limits of 30% to 37% to the estimate of 580 Gb OIIP from Fig 3 gives a URR range of 174 Gb to 214 Gb. Given that Aramco has cumulative production of 113 Gb to the year end 2007, this gives a range of remaining recoverable crude oil reserves from 60 Gb to 100 Gb, not Aramco’s propaganda statement of 260 Gb.
Ali Naimi, who joined Aramco in 1947 at age 11, prior to the kingdom’s labor laws regulating hiring ages, is shown in the picture below. This year has been declared as Saudi Aramco’s 75th anniversary which would be a symbolic year for Aramco to at least start telling part of the truth. A gradual elimination of Aramco’s propaganda campaign would surely be preferable to a sudden elimination?
Unfortunately, on March 2 just before OPEC’s March 5 meeting, Naimi was hiding the truth even more, by making further unsubstantiated and false statements raising Aramco’s propaganda to a new peak. He said that Saudi Arabia planned to add another 200 Gb of oil to its proven reserves, which is equivalent to an absurd increase of over 75%, from 260 Gb to 460 Gb. No sources were given for this planned reserve increase of 200 Gb. Naimi said that the 200 Gb reserve increase was “to reassure the world that we are not going to run out of oil in the next five to ten years as peak oil theorists say.” This statement is false. Peak oil theorists, such as one of Aramco’s former executives, Sadad al-Husseini, do not believe that oil will run out but instead decline slowly. Just as Third Reich propaganda reached a peak in 1943 by this famous speech of Hitler’s propaganda minister Joseph Goebbels, prior to the collapse of the Third Reich, it is likely that Aramco’s propaganda has reached its peak prior to the collapse of its crude oil production, Naimi’s long overdue resignation and release of the truth.
Fig 8 – H. E. Ali I. Naimi, Minister of Petroleum & Mineral Resources, The Kingdom of Saudi Arabia and Chairman of the Board of Directors, Saudi Aramco - click to enlarge
After Saudi Aramco tells the truth, the other OPEC members can do the same as it is highly likely that they have also artificially inflated their remaining recoverable crude oil reserves from 1980 to 1990 and continue to hold these reserves artificially high without making sufficient new discoveries. The two charts in the figure below show the years from 1980 to 1990 shaded in grey. The chart on the right shows that OPEC discovered most of its oil prior to 1980, as shown by the green area, and only about 20 to 30 Gb from 1980 to 1990. However, over the same decade, the chart on the left shows that OPEC reserves increased by over 300 Gb, which is greater than ten times these discoveries. These OPEC discoveries cannot possibly justify this huge increase in OPEC reserves between 1980 and 1990.
Fig 9 – OPEC 1980 to 1990 Reserves Increase not Justified by OPEC Discoveries (source of BP charts: Out of Gas, David Goodstein, Nov 30, 2006) - click to enlarge
By displaying the huge unqualified increase, of over 300 Gb, in OPEC reserves in the left chart of Fig 9, BP demonstrates that it accepts OPEC's propaganda. Do you?
5. Additional Information Sources
by Stuart Staniford
- Satellite O'er the Desert
- Saudi Arabia and Gas Prices
- Depletion Levels in Ghawar
- The Status of North Ghawar
- Further Saudi Arabia Discussions
- Water in the Gas Tank
- A Nosedive Toward the Desert
- Saudi Arabian oil declines 8% in 2006
by Euan Mearns
- Saudi Arabia - production forecasts and reserves estimates
- Ghawar reserves update and revisions (1)
- GHAWAR: an estimate of remaining oil reserves and production decline (Part 2 - results)
- GHAWAR: an estimate of remaining oil reserves and production decline (Part 1 - background and methodology)
- Saudi production laid bare
- Saudi Arabia and that $1000 bet
by Gail the Actuary
by Jerome a Paris
by JoulesBurn
by Heading Out
- Another look at the Kingdom of Saudi Arabia
- Simple mathematics - The Saudi reserves, GOSPs and water injection
- Of Oil Supply trains and a thought on Ain Dar
by Khebab
- Saudi Arabia: An Attempt to Link Oil Discoveries, Proven Reserves and Production Data
- The Hubbert Linearization Applied on Ghawar
- An Attempt to Apply The Parabolic Fractal Law to Saudi Arabia
by Ace
Contact
- Content: editors at theoildrum dot com
- Tech support: support at theoildrum dot com
License
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.
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Saudi Aramco is not the lone ranger in the propaganda department. I frequently cite the example of the Texas State Geologist, who asserted in 2005 that while Texas may not be able to match its 1972 peak production rate, it could, with the use of better technology, significantly increase its production.
As I have noted several times, it may be a coincidence, but Saudi Arabia has shown two years of annual production declines at about the same stage of depletion at which the prior swing producer, Texas, started declining (based on HL models).
The US has also steadily increased reserves since the 1980's citing primarly technology leading to better recoveries.
I don't think that Saudis are the only ones playing this game. Depending on how you count it the majority of the remaining reserves right now come from reserve growth.
Certainly its a complex subject and determining if reserve growth is justified has to be handled on a field by field basis. But if the Saudis are guilty of massive inflation for reserves then most of the world is also guilty.
Saudi reserve growth curves actually map quit well to those of other regions and or consistent with the rest of industry. If your serious about pointing fingers then we need to look at everyone.
Once you start questioning reserve growth you realize that the majority of the barrels added to reserves since the 1980's are probably made of paper.
Ace,
Many thanks for an excellent and thought-provoking post.
I feel that one area however merits further expansion:
You said:
You then do not go on to specify what these pressures are - not that I am disagreeing, but elucidation would be helpful.
I am aware of one pressure, that how much you can pump is related to the estimated size of your reserves in OPEC, but the present situation would appear to minimise the need for that.
It could perhaps also be argued that if KSA announced that reserves were indeed limited, although greater efforts would be put into substitution, prices might rocket and so the return on KSA's remaining reserves would be maximised - not that individuals or countries always clearly perceive their own best interests.
Thanks for the article, once again - any light you can throw on those points would be appreciated though!
Oil companies are under pressure from their owners (shareholders) to replace the oil which they have produced. This maintains the value of their assets - their proved reserves in both financial and volumetric terms.
Some publicly listed companies would also be under some additional pressure from those employees whose bonuses are derived from stock options. If those employees can increase the value of the reserves then this could increase the share price which increases the compensation to those employees through more valuable stock options.
Perhaps, in the case of Aramco, some departments may receive a bonus depending the amount of reserves that they can prove up. I don't know?
Therefore 37% is unsupportable as a "reasonable upper limit". The "reasonable upper limit" can't possibly be below the median for giant oil fields worldwide.
Countering biassed over-optimistic propaganda with biassed negative propaganda is not really that helpful.
Do we have URR estimates from giant and super giant fields no longer in production. My understanding is that although these fields are in general in decline but most are still in production so the final URR is not yet known.
It would be helpful if we could compare the recovery factors for sandstone versus carbonate supergiants.
Also, we should keep in mind that OOIP estimates are just that--estimates.
If memory serves, Matt Simmons put the upper end recovery factor for the overall Ghawar complex at no more than 40%.
the work of you and you (ace and stuart) and means, etal seems to support an ooip of about 170 Gb for ghawar. cummulative recovery is about 70 Gb , in excess of 40% ooip. ghawar is alledgedly producing about 5 million bpd. so a 50% recovery factor seems entirely reasonable.
one or more of the spe papers previously studied claims that the saudi's are injecting water at gravity stable rates and given all the supercomputer modelling they have alledgedly done, i tend to believe them. it would not surprise me is ghawar ultimately produces 65% of ooip in line with other gravity drainage reservoirs. get ready to handle lots of water you saudis.
spe paper 84459 gives an appraisal of 250 carbonate reservoirs worldwide.
Ace can address the cumulative production number, but I believe Greg Croft put cumulative production to date in 2004 at about 55 Gb, and who knows what the current production is?
What we do know is that Saudi Arabia has shown back to back annual declines in production--despite increased drilling and the highest nominal oil prices in history. This higher oil prices + increased drilling = lower production pattern is the same pattern we saw in Texas in the Seventies.
The hole in the argument is 5mbd for Ghawar.
And of course assuming production will remain high.
After a certain point in the life of a water drive reservoir water becomes the controlling factor in production rates. We have every indication that KSA is not planning on producing Ghawar at a 90% water cut. The engineering challenge they face once water cut starts climbing in Ghawar is huge.
If they reach 50% recovery fine but they are not going to do it with a production rate anywhere near 5mbpd more like 1mbpd.
The recovery factor argument hides the issue of how long we can keep production rates high. Given the status of Ghawar for example I'd say production rates could decline rapidly if they have not already.
Globally we could maintain 30-40mbd for years from watered out fields. But the big question is how stable is the other 40mbpd of production needed to maintain our current production rates ?
So overall expectations that increased recovery rates are possible are questionable and more important production rates from fields as they become highly depleted are even more questionable.
Its fun to pick on Saudi Arabia but the problems we highlight with them are endemic to the entire industry and at least from my reading although they are optimistic the claims they are making are not out of line by any means with the industry. I'm sure thats one reason they are a bit baffled that they are getting singled out.
Given that recovery rates of 35% are more common sure their is a lot of oil that could potentially be produced if you have a recovery rate of 65%. In fact playing with recovery rates and ooip allows you a wide range of potential production numbers. However a conservative estimate of no more than 35-40% recovery factor at high production rates makes a lot more sense as the world passes peak production and above ground factors become influential in determining how much oil will actually be pumped.
Sure we have a potential to produce a lot of oil in the long tail but will we ?
Surely they single themselves out by claiming to be the world's swing-producer with currently over 2 million barrels per day intentionally kept off the market? Don't see why that should baffle them!
Your mixing in the claim of production rate with reserves and recovery factors. I'm not saying they are not doing the same thing.
In general the oil markets have been adequately supplied despite the high price of oil and lack of expansion. We have yet to see shortages.
If you define what they mean by adequately supplied then yes no big importer has experienced shortages yet.
US economic problems could easily be placed on its own financial games and you could easily see the Saudia's be concerned that oil price will collapse as the world economy cools.
I'm not saying I believe any of this but I am saying that if you start questioning the Saudis then you make a effort to ensure that they are grossly out of line with the rest of the industry. The answer is although optimistic the claims they make are not way out of line when compared to the rest of the industry.
So bottom line is if KSA is lying then we have a pretty good chance that reserve estimates recovery factors production estimates etc etc etc are probably seriously exaggerated throughout the industry.
My personal conclusion is that either we have been feed a HUGE lie or the Saudis are only slightly optimistic in their the assertions they are making. Singling them out is not correct.
"The hole in the argument is 5mbd for Ghawar."
if the ultimate recovery for ghawar is 40% then it is dead meat already. is that what you are asserting ?
the 5 mmbpd is not my number, that was supplied by ace in a previous post. now to get to 50% recovery (85 Gb) from 5 mmbpd would mean a decline rate of about 10% assuming the decline starts at 65 Gb(wt's croft figures).
how do we know that ghawar is not producing MORE than 5 mmbpd? we dont. there is a lot we don't know, but i sure would not hang my hat on that 35 - 40 % recovery factor just because simmons says so. and dont get me wrong i think simmons has done a fantastic job of sounding the alarm.
you assert that the saudi's won't or can't produce at 90% water cut. what do you base that on?
it is my assumption that the saudi's will continue to produce ghawar as long as it is economical. a 5000 bpd (total liquid) well at 90% water is still 500 bopd, about $ 1.8 million per year in gross revenue. they probably won't be driving to the well in a rolls royce, but they could. granted also, they probably won't be exporting this oil.
international oil companies are producing wells at this water cut in ksa's near southern neighbor country (yemen).
Read my post. Assuming that production remains high past a 35-40% recovery is not in general a reasonable assumption. Reserve estimates based on enhanced recovery factors probably don't help us a lot as for as production rates go. I'm dismissive of these additional reserves as far as the rate they can be produced.
Since we are talking about a global peak in production its not clear what role watered out fields in unstable countries will play in future production especially for exports.
As far as Ghawar lets say that to get 5 million barrels of oil at a 90% water cut means 10:1 water to oil.
Thats 50 million barrels of water a day. I'm comfortable asserting that Saudi Arabia is not setting up to handle 50 mbpd of water. And I think you can see its a huge engineering project. And of course this is just one field that they would be dealing with. Your free to do the math. Russia produces high water cut fields and so does the US but the water handling facilities where built out over decades.
It makes more sense to produce the last of the field once water cuts are high at 1-2mbpd or so which fits pretty well into existing water handling infrastructure. So at least for Ghawar and probably many of the Saudi fields once water production overwhelms the current water handling capacity we can expect production rates to decline rapidly then reach a steady but much lower rate which they probably can maintain for decades.
I happen to believe that the Saudis have every intention of producing oil for decades and even maintain exports at some level I also think that people will be surprised what this level will be. I think internal consumption issues have taken even them by surprise but that something that can eventually be dealt with.
Finally its often claimed that the Saudi's produce their fields very conservatively while maintaining spare capacity however we have time periods in history where we can be pretty certain that they pushed the fields. The first gulf war for example.
Or look at this.
http://www.theoildrum.com/node/2331
The point is we are not seeing a huge difference between maximum production and normal production. In fact historically Saudi production has often swung up and down by 1mbpd.
http://www.economagic.com/em-cgi/data.exe/doeme/paprpsa
Over monthly numbers like this the changes could easily be related to filling and draining storage.
But this means even as reported production numbers drop of real production could easily be higher to refill storage.
Certainly we also have periods where Saudi production is constrained but considering the maximum production number reached over the decades its not clear that they have maintained spare capacity that when turned on is still conservatively producing the fields. In fact the periods of conservative production once you take into account they may be refilling storage and not reporting production. Out of 40 years only about nine years did they produce well below capacity.
And further more capacity has been around 8-9 mbpd for 40 years.
Time will tell but in closing if KSA is planning on keeping production high in the face of high water cuts then they probably need oil closer to 200 dollars a barrel to justify the expense.
yes the saudi's have produced their fields hard at times. they have also "rested" their wells at times.
shutting in the wells has the same effect as producing at a lower rate. that is equal, imo, to producing below capacity.
i have never claimed that the saudi's don't know what they are doing, on the contrary, i think aramco has done an excellent job of managing their fields for maximum recovery.
i doubt you belive that gravity stable production can result in increased recovery.
We have no proof that they are running gravity stable production.
We know for a period of 9 years or so they did produce well below capacity.
We know that they have maintained production capacity around 8-10 mbpd of day for over 40 years. Aramco was run by Americans till 1980. So we have no reason to believe that production was highly conservative before this.
Given the both the variability in production in the past and the current rock steady numbers KSA seems to use storage to manage production levels. They easily have enough storage to manage +/- 1mbd for thirty days.
But if they drain it they have to fill it.
We do know they practice well rotation however if this results in gravity stable or if some of what we think is well rotation is redirection to refill storage etc etc we don't know.
In fact the gravity stable rate claim for Saudi seems to lead to one group making this assertion.
http://www.ceri.ca/Publications/documents/GoE_Oct05.pdf
In any case the paper trail for gravity stable production is weak.
Maybe I should give my opinion so its clear where I stands.
I'm fairly certain that Al-Naimi knew Hubbert in fact he probably took classes under him.
I'm pretty certain given his position in Aramco before being promoted that he presented a Hubbert Analysis of KSA reserves and this is why he is in his position.
Given this I'm pretty certain that HL played a large role in determining how they managed their reserves.
Next even with this over time I think Al-Naimi have been overcome if you will at how technical advances have allowed them to keep production capacity high even as reserves dwindle. Not that this changes the overall plan but they have I think come out better than even they planned.
Next I think they plan on ensuring that they will be pumping oil for at least the next 30 years and also they plan on maintaining exports. Here I think the increase in internal consumption has been a issue they did not anticipate.
However I don't think they will maintain current production rate much longer. Their goal is to be a major exporter after all the rest have failed. This in general means beating Iran which according to the export land model will cease exporting by 2015. The point is its approaching the end game that has been planned for over 30 years. I think Saudi Arabia will still be shipping oil in 2015 just it will be 500-800 dollar a barrel oil (inflation adjusted) and exports could be as low as 2-4mbd. So basically from here on out they basically plan to keep revenue about where it is now. The ten year cut when they where supposedly swing producers was to ensure that they could still export post world peak.
Henry Groppe says SA take their cue from Exxon's practices:
Groppe figures they'll steadily pump oil for a good long while. Listening to the interview I started to figure him for another Cornucopist, yet he puts the peak in far far away 2008.
, David Strahan interview (audio and transcript).
"In any case the paper trail for gravity stable production is weak."
the paper trail IS weak. the fact that the saudi's mention it at all puts them in a separate league . the paper trail for the benifits of gravity drainage however, IS NOT weak. and the reason it has not been widely practiced..................rule of capture.
that and discounted present worth economic analysis.
Given low interest rates and a pretty reasonable expectation, IMO, for higher oil prices, I have argued, apparently like you, that deferring production makes economic sense.
"They easily have enough storage to manage +/- 1mbd for thirty days."
just curious, is this underground storage, or tanks. 30 million bbl storage tanks would be hard to hide in the desert. maybe joulesburns could do a (virtual) flyover to confirm this.
I'll check my schedule.
The only place it would really make sense to store a lot of oil would be downstream of stabilization plants (Abqaiq) or at Ras Tanura where it is piped onto tankers. Storing H2S-laden oil would seem to be a bad idea.
Here is Ras Tanura on Google Maps:
http://maps.google.com/maps?ll=26.642791,50.155833&z=14&t=h&hl=en
There are several tank sizes, most about 25 and fewer of 40-50 meter radii. From photos, the heights are about 20 meters. The biggest ones might hold 300,000 barrels and the smaller ones about 80,000. There are only about 100 tanks there total and 10 or so of the big ones, but more are scattered up the coast. It would take 100 of the larger ones to hold 30 days of 1M/day production. They obviously need to keep a lot of empty storage volume as a buffer. Perhaps it would make more sense to shut down the pumps for the water injectors on Ghawar. Better for the field, too.
Here is one project.
http://www.saudinf.com/main/y5406.htm
It mentions a number of storage sites.
They also utilize floating storage. One of the worlds largest tankers is now used as floating storage in the gulf.
http://www.country-data.com/cgi-bin/query/r-11616.html
Thats from 1992 and its already 1mbd for 30 days.
And another.
http://www.allbusiness.com/mining/oil-gas-extraction-crude-petroleum-nat...
I think this is basically the same article.
http://www.thefreelibrary.com/The+Saudi+Logistics.-a057574638
And another
http://www.arabnews.com/?page=6§ion=0&article=103972&d=25&m=11&y=2007
I can't seem to find info on the sizes of these strategic reserves.
I assume they are substantial.
This is why you really should not look at oil production except over 6 month smoothed moving averages.
The tank farm is the one in the Google Maps image linked above. It's somewhat more than I estimated, perhaps double, but they still need to keep some space available as a buffer.
The Madinah (Medina) Strategic Reserve article says that they excavated 4M metric tons of rock. Assuming a rock density 3X water, I get about 8 million barrels if all that volume could be filled with oil. In any event, I doubt that it is really used for playing the market.
I believe you slipped a decimal place. The revenue would be more like $18 million per year. With the right equipment for water handling, a 99 percent water cut would still make good money.
How interested would Aramco be in continuing production? That I obviously do not know, but from the perspective of a small operator -- onshore, with developed infrastructure from 5,000 feet or so --- whats not to like about even a 1 percent / 50 barrel per day well?
In general the larger the oilfield the greater the structural closure.
The greater the structural closure the lower the connate water saturation.
For instance, Ghawar has 1,300' of structural closure, this is the "buoyant force" if you will to overcome capillary forces holding water in place, as a result this drives the connate water saturation down to an average of 11%, and lower than 5% in the Uppermost layers if you believe the simulator xsections.
Recovery factor for a waterflood, ignoring formation volume factor is the change in oil saturation over the initial oil saturation. (Soi-So)/Soi= 1-So/Soi
So, say Ghawar has an Sor(residual oil saturation) of 20%, the theoretical recovery is 78% of the OOIP.
Take a smaller more conventional reservoir with an initial water saturation of 35%, an Sor of 20% and the theoretical maximum recoverable oil is 69%.
So nearly 10% of Ghawar's fantastic recovery under waterflood can be explained by the low connate water (high initial oil) saturation due to the immense structural closure.
Add to this the gravity stable flood per Elwood Elmore below, the large interwell distances and the favorable mobility ratio, it is the ideal waterflood.
Now Saleri wants to repeat this everywhere.
Good Luck.
I totally agree that Ghawar is probably close to the best case, and the average case of Saudi fields will be lower. My point is not that Saleri is right, but rather that Ace is likely in error the other way.
Stuart, I hope I’m wrong and that the average recovery factor for Saudi Arabia is higher than 37%.
You mention Laherrere – for those interested, here is a big list of his publications.
http://www.oilcrisis.com/laherrere/bibliography.pdf
Laherrere has access to IHS and WM data which is illuminating. Also, his charts are based upon that data. For giant fields which come from OPEC, the data is unaudited and is likely subject to gross overstatement by IHS and WM which leads to overstated RF in Laherrere’s charts. Stuart, the RF chart that you show above where you say that the median giant field has recovery of 40% is probably overstated since it is based upon overstated unaudited data. The median RF would need to be revised downwards closer to 35%. This was the same reasoning that I used in Fig 7 above. If you read this http://www.mees.com/postedarticles/oped/a46n51d01.htm you’ll find that Statoil uses IHS data. To get an RF of 44% (red line in Fig 7 for giant fields), they assume an RF of almost 80% (URR 460/ OIIP 580) for Saudi Arabia.
Here is one of his publications
Global Dialogue on Energy Security, October 2006
http://www.hubbertpeak.com/laherrere/Beijing20061009.pdf
Page 6 shows a range of 2P RF estimates for Saudi Arabia and some fields. Laherrere said that some of these estimates “look like wild guesses”.
For example for Ghawar RF, Roadifer (1986) 44%, IHS (1997) 60%, IHS (2004) 60%, IHS (2005) 70%, IHS (2006) 65%, Aramco (2004) 65%
For all of Saudi Arabia IHS RF, 1997 48%, 2004 51%, 2005 60%, 2006 59%
Aramco says for all of Saudi Arabia 56%.
Here is another one called
Uncertainty on data and forecasts, July 2006
http://www.oilcrisis.com/laherrere/ASPO2006-JL-long.pdf
Page 20 shows the IHS increase in URR for Saudi Arabia from about 320 Gb from its 2004 data to almost 400 Gb from its 2006 data. An 80 Gb increase!
WM showed an increase from about 240 Gb (2004 data) to 280 Gb (2006 data).
Both of these increases to 2006 occurred after Saudi Aramco’s presentation in Feb 2004.
If WM’s 2004 URR of 240 is divided by OIIP of 580 Gb, this gives an RF of 41%.
On page 19, Laherrere said “Saudi Arabia has been controlling OPEC for a long time because holding enough spare capacity to increase quickly when in needs (or to fight on market share as in 1986) or to
reduce production. They want to keep their leading role of swing producer, so they need to claim high reserves. Up to now, field data were confidential, but in front of Matt Simmons’ claim of overestimate, they have released some field data; which are now
accepted by the scout companies as IHS and WM.”
Both WM and IHS are consulting companies which exist by charging customers for their services and reports. Both of these consulting companies happily increased their URR for Saudi Arabia based on some Powerpoint slides from Aramco. Why? Aramco is probably a key customer. Also, these consulting companies would have difficulty reporting different numbers than what Aramco says.
Myron Horn, a geologist, is still estimating Ghawar URR as 66 Gb in the AAPG in April 2007. Assuming Ghawar has about 190 Gb OIIP this is an RF of 35%.
http://www.searchanddiscovery.net/documents/2007/07032horn/images/horn.pdf
Dr Samdouh Salameh, in section 3 above, says RF of only 25-30% for Ghawar.
Based on likely data overstatement by oil consulting companies, my upper limit of average recovery factor of 37% is not changed.
The data in the graph I posted above are labelled 1985 and 1996. That was before Petroconsultants was acquired by IHS, and while Campbell and Laherrere were associated with Petroconsultants (eg see their affiliation on the 1997 Sciam piece. So they were personally involved in preparing that data. So your theory would require not that the current IHS conspire with the Saudis to inflate global recovery data, but rather that Campbell and Laherrere personally be involved in inflating the data. This doesn't seem very likely.
Furthermore it's likely that global recovery factors have improved a bit since then.
I'm not saying for certain that recovery factors for the whole of Ghawar will necessarily be as high as North Ghawar - far from it. We have very limited data with which to project the performance of the South. Rather my point is that you are claiming that Saudi Arabia will necessarily have a rather poor global recovery, with the highest reasonable limit being only 37%. But that isn't the highest reasonable limit. For example ASPO has estimated a 45% recovery factor for a reasonable estimate. Zagar, who you cite, suggests a Saudi URR of 255Gb, higher than your "upper reasonable limit". Within the context of the TOD community, Euan, I, and Khebab, who have all studied the issue at some length, think the recovery will probably be higher than your upper limit. So you are not in fact representing the range of reasonable opinion on this question, but rather making a very biassed presentation that skews negative.
Many have studied Saudi Arabia in depth, the problem is that for about the last three decades there has been no audited data on their fields so consequently much conjecture. You choose to be optimistic when there is a lack of audited data. I choose to rely on historical audited data and on experts such as Horn or Salameh who can provide some guidance. For example, I would place significant support on the OIIP 530 Gb in 1978 and it could be 580 Gb now.
What makes you think that Petroconsultants (Campbell and Laherrere) have not inflated their OPEC data when they were at Petroconsultants? First your use of the word inflation implies that they knew the real data - they didn't then and still don't - I don't and you don't. Petroconsultants was a consulting company. They do not own any oil reserves. Consequently, many of their clients who own oil reserves could persuade them to publish reserves which support those of clients OPEC and Saudi Arabia.
Do you have Petroconsultant's data on Saudi Arabia URR from 1975 to 1985? I would be interested to see how Petroconsultants' Saudi Arabia reserves, OIIP and recovery factors changed during those years. Was Petroconsultants pressured by Aramco's statements of constant reserves and also keep proven reserves constant about 160 Gb from 1980 to 1987?
Why have you never addressed the Ghawar URR of 66 Gb from Myron Horn? Horn published this estimate as a two part article in the Oil and Gas Journal, April 2 and April 8, 2007.
http://www.searchanddiscovery.net/documents/2007/07032horn/images/horn.pdf
His report was "carried out by linking estimates of ultimate recoverable oil and gas made by industry experts over the last 60 years (Salvador, 2005) with current data on 945 giant fields (556 oil and 389 gas, Horn, 2003 modified)." (quoted from the link above)
Do you agree or disagree with Horn's Ghawar estimate? If so, why?
Horn has also estimated that Ghawar has a gas URR of about 186 TCF or around 30 Gb oil equivalent. Conjecture warning: It wouldn't surprise me if somebody had added this 30 Gb to the 66 Gb to get say 96 Gb URR oil equivalent for Ghawar. Then the word "equivalent" was dropped and Ghawar URR has become 96 Gb URR oil.
I do not believe that the upper limit of the average recovery factor of 37% is biased downwards, based partly on Horn and Salameh. Even Matt Simmons doubts that Ghawar URR oil is more than 70 Gb. North Ghawar, Shaybah and Abqaiq may have recovery factors which are higher than 37%. But, undoubtedly Aramco has many low recovery fields.
In general its not clear that this argument is important. The only reason it would be important is if the increased URR resulted in KSA able to maintain production rates for several more decades.
At least in my reading for the most part this has not happened Purdhoe bay for example. Right not its estimated final extraction could be 14Gb. However the current production rate is far lower than peak production and is still steadily dropping. Also worse the equipment is getting old and the field may well be abandoned simply because of infrastructure replacement costs. The point is your arguing about oil that may or may not exist and even if it exists and is pumped the production rate will be low.
30-35% recovery at a high production rate is very reasonable and more important as far as the short term effects and it highlights that reserve increases are from the expected result of technical advances.
Extracting oil at a 30% recovery factor from a larger OIP reserve is completely different from getting additional recovery of 10% from a smaller reservoir. Production rates are different costs water handling etc.
But we in general treat these as the same problem. Determining if the world is going to maintain or increase production capacity over the next ten years and the potential decline rate is not influenced much by additional extraction from watered out fields. Farther out say 15 years from now this argument may be important but I'd imagine that by that point in time the world will have a pretty good handle on how much oil is really left.
Or I could be wrong and all this oil from expected increases in recovery factors technical advances etc will be pumped at high rates and production will continue to grow. But the underlying problem is this since we are entering a period where these paper barrels better start showing up.
If you're suggesting that Campbell and Laherrere are inflating recovery factors, I think you're getting into tinfoil hat territory.
You can find my opinion on Ghawar reserves here.
Had a quick look at your opinion - couldn't find any acknowledgement from you about Horn.
I'll repeat the question:
Why have you never addressed the Ghawar URR of 66 Gb from Myron Horn? Horn published this estimate as a two part article in the Oil and Gas Journal, April 2 and April 8, 2007.
http://www.searchanddiscovery.net/documents/2007/07032horn/images/horn.pdf
His report was "carried out by linking estimates of ultimate recoverable oil and gas made by industry experts over the last 60 years (Salvador, 2005) with current data on 945 giant fields (556 oil and 389 gas, Horn, 2003 modified)." (quoted from the link above)
This was a report done by Horn 2004 which stated that Ghawar had remaining 18 Gb oil/gas equivalent and had produced 79 Gb oil/gas equivalent.
http://www.searchanddiscovery.net/documents/2004/horn/images/horn.pdf
Note in the first link of Horn that there was 66 Gb URR oil and about 31 Gb URR gas equivalent. If the gas oil ratio in depletion has stayed same as what is remaining then Ghawar was about 81% depleted in 2004, according to Horn. If this ratio is applied to Aramco's presentation in 2004 that Ghawar has produced 55 Gb oil then this gives Ghawar URR of 68 Gb oil.
Do you agree or disagree with Horn's Ghawar estimate? If so, why?
FF,
If North Ghawar has pretty much watered out, isn't the key question the recovery factor for the southern, and lower permeability, portion of the complex?
I never said it pretty much watered out but I think the answer to your question is yes.
FF
I'll rephrase it this way. It seems to me that while North Ghawar has accounted for a huge percentage of cumulative production to date, it will account for a vastly smaller percentage of future cumulative production, so the recovery factor on the north end is not terribly relevant to future production. The key question is what the recovery factor is for their reserves outside of North Ghawar.
Which is another way of stating the obvious: What did Texas do to offset the decline from the East Texas Field? Answer: we couldn't.
First, WOW! This is just terrific work.
Second, you are brave to touch the third-rail of discussion by mentioning Nazi propaganda. I don't believe you've violated Godwin's Law. Wikipedia's Corollaries and usage:
I'm curious: did you place bets on how far down the first mention of Godwin was before you posted?
One difference between the kind of droning, alpha-wave inducing corp/gov propaganda and Nazi propaganda is that the latter was to induce fanaticism, as opposed to the indifference so useful to Saudi.
Lastly, I don't see how someone who's been working at a company since they were 11, in a country where dissent is punished by death, is organically capable of renouncing his company. I don't think we'll see that happen.
Thanks for all your hard work
NR
Glad that I didn't violate Godwin's Law which I never heard about before you mentioned it.
I agree that Naimi, working at Aramco since he was 11 could not renounce his company. An earlier draft of the story had Naimi telling the truth but then I changed this to "Naimi’s long overdue resignation and release of the truth" just before Fig 8. Someone other than Naimi will inevitably disclose some truth about Saudi Arabia's reserves.
Naimi's resignation was mentioned by the Economist in April 2003.
http://www.economist.com/business/displaystory.cfm?story_id=E1_TSPTDNV
"A final blow seemed to come from within Saudi Arabia: well-sourced rumours this week suggested that Mr Naimi is about to be forced out of office..."
There is further discussion about Naimi's possible resignation here
http://profcutler.com/wordpress_blog/?p=265&print=1
Of course the Aramco is lieing about their oil reserves and recovery factor but what other choice do they have? Being geographically located between two strong enemy powers iran and israel and having absolutely no military strength (their soldiers can't even parade correctly) the saudi arabia is forced to seek american friendship. That means satisfying american thirst for oil at all costs and also tolerating american military presence in iraq.
Be realistic please. What will you be doing if you were at their place? The saudis are so weak that when in 1980s wahabis captured parts of kaba they can't even handle that and had to seek for pakistani help for that.
The fundamental reason of saudi arabia's weakness is the effect of how it came into being. Between 1900 and 1902 saud rebel the very strong ottoman khilafat under which almost entire muslim world was unified. Almost entire middle east as well parts of europe and central asia were part of ottoman khilafat. The ottomans were unable to defeat saud in wars because he was backed by strong british army and had to settle on losening the most important part of empire, the hijaz. In wwi the jew laurence of arabia used arab nationalism to make arabs rebel against turks due to which the ottoman empire break even when the turks had successfully wiped out almost entire elite and experienced british and its allies' troops at dardinal.
Since the very first day of its existence the saudi arabia is sitting at the lap of british and americans and doing whatever it can for their pleasure. The saudis know that if they reveal the real data about their remaining urr american as well as european and japanese (the two important allies of america) economies would suffer very very badly. The entire concept of capitalism is based on believe on infinite growth because without this believe no body will accept an interest-based economic system. Any official statement from the world's top oil exporter about declining oil reserves and production would literally blow the base of capitalism and with it go down first the stock markets and with it the investors' confidence. Everybody will start hoarding and prices of necessities like food, fuel etc will rocket lot more than it is now.
Its not that saudi's are doing the right thing but what else you can expect from them. The west is harvesting the crop it has sown. The cutting off the saudis from the khilafat makes them militarily vulnerable to their neighbours. To ensure their safety they would do everything to keep americans (and its allies) happy.
Its not that saudis have not tried to get out of that trap. In the 1970s knowing that america would not let them get any military strength they invested their money in pakistan and help it in becoming a nuclear power. Being a brother muslim country saudis had great confidence that pakistani soldiers (including those sitting at high posts at that time that had vast experience in fronts of egypt, palestine, burma, singapore etc in wwi and wwii) would help them if they get invaded from israel or iran. Unfortunately after the martyr of zia ul haq one after another corrupt govts came in rule in pakistan and the saudis stop supporting pakistan.
Another major set back to their foreign policy was the fall of soviet union. Saudis had no idea that the white bear would have so severe losses in afghan jihad. The fall of soviet union go in benefit of america and the saudis condition become even more vulnerable.
Honestly speaking its very easy for iran to conquer oil production areas of saudi arabia. The reasons are that american army being so deeply engaged in iraq could not open a new front and once the iranis control the saudi oil reserves america would not resist because iranis can blow off the oil which means dead to american and its allies economy. Of course it also mean death to the entire world's economy but no country would suffer the oil crisis more than america. That is because the more height you fell from the more injury you get. Most of the world's population live in poverty and close to farms using very little energy resources. For them it not matter much they go to their farm on foot or in motor cycle.
I was nodding along at your post, and then came to this:
The Americans both could and would open a new front - the first Iraq war happened when supplies from KSA were threatened.
It is a mistake to confuse the problems the US is having in dealing with insurgencies, in which technological advantage is minimised, with the real military strength of America in a head-on conflict with another country.
The Iranian military would be toast in very short order - even more so now that America has assets in place in Iraq.
DaveMart -
You are entirely correct: there is no way in the world that Iran could militarily take over any part of Saudi Arabia's oil production regions.
However, by the same token, I don't think there is any way that the US could militarily take over any part of Iran's oil production regions.
The US debacle in Iraq shows how easy it is for even a modest size insurgent force to make life miserable for the occupier and to deny the occupier any worthwhile net benefits of occupation. How much more oil is the US getting out of Iraq than it was getting before the invasion of Iraq? What is the return on our 'investment' in Iraq?
While the US/Israel could wreak tremendous damage on Iran through the air, neither is anywhere near being in a position to invade, occupy, and stabilize a country the size of Iran. If you think the Iraqi insurgency is bad news, wait till you see what an Iranian insurgency would look like!
I couldn't agree more in the world's present circumstances.
However, I am not entirely sure how much of that applies when things get rough in a world of severe fossil fuel shortages.
Two things constrain great power's actions, the social millieu and the actions of other great powers.
Any difficulty America is having in Irag and Afghanistan is due to these two things - all opposition locally could be wiped out along with much of it's population in relatively short order if these inhibitor's did not apply.
The first of these restraints would be drastically reduced if America was actually hurting, whereas I would suggest that they would barely figure if China felt that it really needed the oil.
There are two, perhaps three if one includes Russia, of these very large millstones that might threaten to crush the Middle east in the event of shortages.
You need to read Kennedy's Rise and Fall, if you haven't already. In it you will find the historically supportable conclusion that overreach does not strengthen a nation, but weakens it, even when going after resources.
Hyperbole. Unless Americans and their governemnt are genocidal. (The current regime ovbviously is, but Americans in general? Still a stretch.)
Most inventors and scientists don't work on genocide weapons. It took Hitler to get the atomic scientists to work on the bomb.
If America used genocide as an act of national power, I think that America's population would drop very quickly. So would everybody else's of course.
Most American government leaders don't really understand how fast technology has progressed. They calibrate other organisations' ability to make weapons of mass destruction in terms of what it costs them. Think 800 dollar toilet seats for America's military industrial complex bang for the buck model. A nuclear bomb only costs 250,000 dollars for the fissile core using the seventies and eighties level European centrifuge designs. God knows what it costs now, but it's going to be lower.
I have read 'The rise and Fall' and I agree with you that America is overstretched.
That does not mean however that it is not still immensely strong - Britain when clearly overstretched nad past it's prime remained a considerable force for a very long time.
I don't think nations moral attitude is fixed for all time, and do entertain the possibility that America, just like all other nations, if in deep enough trouble could turn genocidal.
If you think that the present regime is America is genocidal, you are obviously setting the bar pretty low.
When Alexander conquered Iraq, at the first sign of opposition, say from Mosul, he destroyed whole towns and killed or enslaved everyone in it.
And he was a pinko liberal - see Halagu Khan's conquest of Irag for a really genocidal conquest.
Without the intervention of another great power armed resistance by smaller nations is another word for suicide when push comes to shove and times are hard.
Of course in an oil constrained world intervention by another great power is not only possible but likely.
One thing to keep in mind with cycles is, and I don't know of any study in this regard but posit it, is as history advances the cycles are going faster. Think computers. Technology obviously is a major driver here, but so is necessity, per population, globalized competition, etc., etc.
The same basic laws seem to apply to society at large. The more advanced you get the faster you advance before hitting decreasing returns. We're seriously into decreasing returns at this point, I'd say.
The upshot is, the first global empire (of sorts) is also likely to be the last for the near future, but also, and more importantly, the shortest lived of the great empires, by far. I.e., the overreach and overshoot we are currently at/in will not long last.
Cheers
I think he was talking exactly about the insurgency warfare that will inevitably follow, and for which US army is all but prepared. Methinks if this happens US soldiers will be thinking of the first years in Iraq as "peaceful time".
Of course the US army can destroy Iranian military and infrastructure in a matter of days, but this will only be the beginning of the war. And the Iranians know it, and are without doubt preparing for such an eventuality.
Really? I was thinking it was a bigoted scree and at odds with many realities of history or the world today.
I particularly took notice of:
Which not only had a nasty tone, but was factually inaccurate
Somehow I think if Saudi Arabia were really a British lapdog, I'd be less worried.
I was referring to the realpolitic, not the attitudes, and should have been more clear.
Apologies.
KSA's supplies were NEVER threatened. Propaganda again trumps reality.
The things you are saying are exemplary for the type of propaganda the West is constantly using whenever it finds it convenient. They are quick to show others apparent (or perceived) faults, but they always fail to explain as to why the things are this way on the other side. Maybe because the underlying reasons often lead towards our own backyard?
For example they are quick to criticize Putin's Russia for its supposed lack of democracy and pluralism. However noone bothers to explain how could you possibly run a large, poor, corruption-ridden and almost falling apart country in any other way than this. And noone explains how Russia got there at the first place, what is the role of IMF and western directed policies in Russia's plundering in the 90s etc. And Russia is just one of the many examples, see Iran, Venezuela, Cuba, even China with its industrializing and polluting economy is taking its share of blame recently.
I don't think the people in the West have a good idea about how much this type of propaganda is offensive and frustrating for the people which it is directed against. It ain't doing any good and is just enforcing the most nationalistic and reactionary's forces in their own countries. In turn the West goes back to criticize the presence of those same forces, in a self-enforcing vicious circle.
If this goes on like that I don't see it ending well.
Didn't Russia get in that state because it spent 70 years under a disfunctional economic system. But for that Russia would today be an economic superpower. Like the countries of Eastern Europe thay are having to dig themselves out of the hole the communists left them in. Not easy.
Sure, it was a complex consequitive set of events, but Western policies after USSR collapsed didn't quite help this country either.
I don't want to play a blaming game for the past (which can lead us back to Earth formation), it's what it is and we have to live with that. Unfortunately double standards and hypocritical propaganda for internal consumption will not make the situation better for anyone.
Actually Russia was doing very well 1917-1975.
Problems started in 1980x when Russia spent more on military then it could afford. What was the name of the bankrupted country that didn't learn Russia's valuable lesson? Isn't it ... US?
Yeah, there is a lot to be said for an economy founded in slave labour in the Gulags, and who cares about a few tens of millions dead there?
It would be interesting to compare the relative importance of the gulag slaves and the plantation slaves to 'their' respective economies.
Any information on the number who died on the way over the Atlantic?
From their bills of lading, and taking the normal 'wastage' rates in the Middle passage, approximately 30% - any more would have been uneconomic, and in fact about the same proportion as died in Western sailors and soldiers posted to the West Indies from malaria and disease.
Anyone who has visited ships of the period will know that the sailors were equally crowded in their sleeping quarters, although of course they were not shackled down all day.
The real death trap in the slave economy was the Caribbean, where there was a massive wipe-out of slaves, running at about 90%, where the plantation owners got themselves into a cycle of brutality, where the more brutal they were the greater their fear of an uprising, so they became more brutal still - just like the soviets.
Mortality rates in the States were far, far lower, and with the contemporary mortality rates in Africa probably lower than if they had remained at home - not that that excuses slavery, but it was no death sentence.
Actually, speaking personally, I disapprove of both the slave trade and the massacres of the Soviets, which took place as a matter of state policy and at a far later date than the Western slave trade - capitalism survived very well after it's abolition, whereas terrorising the population was the only way of imposing those wonderful communist principles.
Two wrongs in this case certainly do not make a right.
Right on. The Destructive Labor Camps of the Gulag started around the time the Destructive Labor Camps of Colonialism had shut down as inefficient. The Communists couldn't learn from the mistakes of the Capitalists.
The Belgian Congo killed half the native population in the insane struggle to get native rubber. Only the development of the rubber plantations of South East Asian kept them from killing three quarters of the population, or more. And it was Capitalism that opened those South East Asian plantations.
Then again, the Communists did learn faster than the Capitalists did. It only took the Communists from 1921 to 1953 that Destructive Labor Camps were a bad idea. It took the Capitalists and Colonialists far, far, longer.
I agree with the sentiment, although perhaps not the dating - or maybe Mao and Pol Pot were just lovable old chaps sentimental about the good old days.
By all measurable indexes the command economy was notoriously inefficient (I don't think socialist economy is the correct term). USSR prospered in the 70s but it was mostly due to oil prices. In reality though economically and technologically it was already getting behind the competition oriented economies of the west.
But a bad system like it was does not mean there were not good parts of it (for example education and healthcare), and it does not make the system which is it's supposed antipode - US style les'affaire capitalism - automatically good or sustainable. It is not as simple as that.
That is absolutely correct. I was a little astounded about this Aramco-Hitler comparison on the first lines. Nevertheless I felt reminded many times of the Nazi propaganda machinery when reading statements of the oil majors.
It is always amazing to listen to Goebbel's last radio address in april 45, still waffling about the 'Endsieg', few days before he shot himself. It took almost 50 years to hear such stuff again - from Saddams propaganda buddy, who spoke into microphones about defeating the US army, while on the intersection behind his back US tanks were cruising Baghdad.
But Goebbels and Mohammed Said el Sahaf are only the champions of desinformation. The principles outlined by Hitler, distraction and repetition, are mainstay all over the world today.
"Any official statement...would literally blow the base of capitalism...hoarding and prices of necessities like food, fuel etc will rocket...
Its not that saudi's are doing the right thing but what else you can expect from them. The west is harvesting the crop it has sown. The cutting off the saudis from the khilafat makes them militarily vulnerable to their neighbours. To ensure their safety they would do everything to keep americans (and its allies) happy."
Your post is excellent contribution toward understanding and perspective. [The historical error of T.E.Lawrence as a Jew (?) needs correction, but your input is valuable.]
Well, if you take into consideration that the US has been drilling without any restriction like we see with OPEC for the last almost 250 years, and yet we're still the 3rd largest producer in the world, with massive untapped reserves including the 3-15 billion barrel discovery in the Gulf of Mexico, as well as fields blocked leagally (not through production quotas, including ANWR and many offshore fields, I'm inclined to belive that a lot of this hype about questioning Saudi Arabia's reserves are far overblown. Sure, they may be overstated, but I wouldn't bank on peak Saudi production any time soon.
250 yrs. i think you mean 150 yrs.
"with massive untapped reserves including the 3-15 billion barrel discovery in the Gulf of Mexico, as well as fields blocked leagally (not through production quotas, including ANWR and many offshore fields,"
i dont think chevron has booked any reserves for jacksII.
ANWR doesnt have any fields or proven reserves. ANWR may very well ultimately produce 10's of Gb's of reserves, but as of now, there are NO proven reserves in ANWR.
Saudi Arabia peaked in 2005 at 9.6 mbd, on a crude oil and lease condensate (C&C) basis.
http://www.theoildrum.com/node/3623
I hope that Saudi Arabia can prove up more reserves than my assumption of URR 185 Gb C&C. Unfortunately, I'm not hopeful. Any additional reserves would only be likely to extend Saudi's production plateau rather than creating a new peak.
However, there is some testing using steam injection, like Alberta tar sands, of producing very heavy oil in the Neutral Zone, shared equally by Saudi Arabia and Kuwait:
Saudi Arabia and Kuwait to hike Neutral Zone capacity, Feb 2008
http://www.gulfnews.com/business/Oil_and_Gas/10187424.html
Impressive post but way too pessimistic.
So the OOIP is somewhere between 580 and 700 Gb, a reasonable guess is to assume recovery factors between 40% (the median from the top 200 fields) and 52% (the official figure) which lead to an URR between 232 Gb and 364 Gb.
IMO, the URR is probably around 300 Gb which gives a recovery factor around 47 ± 5%. Proven reserves are probably inflated by 90 Gb which corresponds to the overnight reserve jumps in the 80s. The other unknown is reserve growth, that can be substantial but unlikely to affect maximum flow rates.
Hey, we've had some posts described as "Way too OPTIMISTIC" in recent weeks. Must be a well balanced site :-)
Matt Simmons was just on Bloomberg again. He seems to be popping up there more often these days.
The issue is Saudi lies, whether it is likely the Saudis are lying, and whether we should trust their words when it comes to our own energy policy.
To me, there's no question that the Saudis rely on lies about their production and future production capacity for a variety of political and business reasons. (Note, Khursaniyah has again been delayed, 4th or 5th lie in 8 weeks, depending on how you count them.)
WisdomfromPakistan points out that the Saudis may be justified in their lies. I believe that this is a cultural thing, and we are being stupid. Here are some points about lying in Arab culture:
http://www.faithfreedom.org/forum2/viewtopic.php?t=1036
http://www.islamreview.com/articles/lying.shtml
http://www.thefreelibrary.com/Shame+and+Honor,+Terribly+Twisted:+A+centr...
For more information, look up the concept of "taquiyya".
I agree that your guesses are the reasonable ones to be making given the limited information we have at present.
Amazing isn't it how the full glass that is drank from continues to fill ever more glasses. One would think the stuff isn't finite and instead the crust of the Earth is a gooey nougat of infinite oil production. Yet, we know that can't be true because there are geologic reasons for the existence of oil and those don't include a gooey crustal manufacturing of the liquid. So, either they are really inept at estimating their reserves and continually realize the error of their math and change them upward, or they are lying up a storm. However, as a reality check, we all know that in the late 80's all the OPEC countries increased their oil reserves so they could sell more. Thus we all need to work with the reserve totals from before those changes in the 80's and ignore the more recent fantasyland numbers. Furthermore, if they really had that much oil, then why wouldn't they take advantage of the current 100+ buck a barrel on a extraction scale never before seen? I rest my case.
You see I see all this exactly the opposite. Why would they overstate their reserves?? This would artificially keep that price lower than it should be. If they really have say 350 billion barrels, and that came out, the price of oil would drop and hence they would make less money. So seems to me the have an inherent interest on underestimating their reserves.
Not true. The price of oil wouldn't drop because of higher reserves--it would only drop if those reserves were pumped faster.
Overstating reserves serves to reassure oil-importing countries over the intermediate-term, and protects oil prices by discouraging investment in alternative energy sources.
Exactly right.
that's sure as hell a new twist, the saudi's understating their reserves.
From a historical point of view, what if when the german defeat at eastern front had started and it became obvious to west that germans can no longer win that war then instead of invading german controlled parts of europe (norway etc) the west would have invaded russia. The west's invasion of germany had made things easier for russians and help them in later establishing a vast empire inside eastern europe. It would be better if the nazis were allowed to exist to balance the soviets.
Any such invasion from west would have make russians transfer some strength to this new front which would not only give germans time to regain some of their strengths but also give a major blow to russian strength.
In my opinion the extreme east of russia is the best point for any american invasion. Given the vastness of russia it would be very very hard for russians to manage two fronts, one in extreme east and another in extreme west. The port cities of volga and viladivistok could have been easily capture by americans and a major blow to the trans siberian railway could have happen early in battle by american air raids. Given the weather conditions of siberia and therefore the trans-siberian railway being the only standard mode of military movements, once that railway system is destroyed russians would have severe problems transferring strength to this front giving even more times to americans to strengthen their bases inside russia.
An american base in this region would have also enable americans to keep a better eye on japanese. Not only that but it also help americans coming at a key position in politics of mongolia and china both of which could have been stopped from falling in soviets hands later on.
The russians being already at war with germans could not have give a major blow to american invasion and it has very little chances that russians resistance could be so strong that like germans were losing newly captured european countries to russians the americans would be losing canada to russians.
It must be accepted that the west had made serious mistakes understand hitler's intentions. Being an ideological person he was strictly following his ideology (for example unlike what americans are doing today the nazis always had some reason even if foraged before they invaded any country, there was atleast some sense of responsibility in hitler). Anybody who has raid main kamphf would have know that from start hitler's intention was to gain territory inside russia. In all the battles nazis fought inside europe there were no mass killings but in all the battles nazis fought inside russia there were mass killings at every step. The hitler's ideology about russians was that they are of lower race and made to serve as slaves to what he thought as supreme race, the arians and among them the most pure (in terms of race) group, the germans.
If you read the Goebbel's speech quoted in the article you can find out that there was atleast some truth in what he was saying. The soviet revolution had intentions to spread to not only entire europe but entire world. The soviets rule was indeed draconian for example stalin in 1930s sell of wheat to the extend that millions starve to death in russia just to get money to build infrastructure to industralize russia. Atleast nazis were better than soviets as they never took any such draconian actions. Of course both hitler and stalin had no respect of human life and had murdered tens of millions just to satisfy their political lusts but then they are not alone in that, see what bush is doing in iraq.
The nazis were indeed the last protectors of europe of that time because once they fall even the combined military strength of all the allied forces couldn't stop them from taking a large terretorial bounty in europe. Not only that but west had to tolerate russian presence in mongolia, china, south america and even as close to america as cuba.
Taqqiya is a shia thing. Only shias believe in it and only shias practise it. It has nothing to do with islam.
Please stop accusing islam of what saudis are doing. Saudis are traitors to islam, their very existence happened only after they rebelled the unified and holy khilafat. They always are part and parcel of the enemies of islam and from day one using their protection for their very existence.
Also please note that christians are masters of propaganda. Infact the whole concept and principles of propaganda are invented by christians. Its use started in world wars using newly developed mass media sources radio and tv. Saudis have learned all this while sitting at the lap of the west satisfying them in all means possible for them.
I would not be surprised knowing 20 years from now that some then retiring cia chief would write in his "book of life time achievements" (a common way in american elite to profess their crimes only after they are no longer in power) that saudis were speaking at gun point whatever americans wanting them to speak.
http://lexicorient.com/e.o/taqiyya.htm
I'm not making a judgement about taqiyya, and I'm not going to debate whether it's a fundamental tenet of Islam. I understand your point that Sunnis think of it as a distinguishing characteristic between them and Shi'i.
And I'm certainly not going to argue that Christians aren't masters of propaganda, because they have shown that they are. (But they are supposed to feel guilty about it.)
I'm just saying that Americans are being idiots if they think the Saudis won't fudge the truth about their reserves and oil production potential. I think Americans need to realize that different cultural standards may apply to the communications coming out of Saudi Arabia. We may think it's illogical that the Saudis would lie, but the Saudis may think lies are appropriate and for the greater good, or at least the greater good of their people.
Oh, it goes back further than Jesus. Read what Ceasar had to say about the Celts for instance. Or the anti-Gnostic writings of Roman historians, directed at what in some instances were branches of Christianity (later demonized in their turn by the Roman Church). Slandering the other tribe is a fundamental human instinct.
May be the saudis are, in good intention, giving the developed nations of world time to discover more oil reserves or develop alternates/renewables by making the party go on as long as they can. When we, a group of intellectuals at tod, can find out the truth about peak oil, the govts and agencies of developed world, given all the resources at their disposal, had found it out long before us. For example american govt would never have ordered invasion of iraq if oil is not have to go scarce. People fight for scarce things only (gold, gems, fertile land, fresh water etc) nobody fight for abundant thing (sea water, air, sand etc).
Remember once the saudis officially accept their inability to reverse the natural decline in production, the party is over. Capitalism works as long as investors have confidence. As soon as the limit is seen this confidence is gone.
Socialism works better than capitalism in a world of scarcity.
WisdomFromPakistan has made two bold assertions: 1. That Lawrence of Arabia was a Jew; 2. That Israel is a potential invader of Saudi Arabia. It would be helpful if he could supply proof of these assertions. I wonder especially if there is any evidence at all that Israel ever tried to invade Saudi Arabia. I am interested in discussions of Saudi (and world) oil production capacity from a technical standpoint; however, I tend to be turned off by people who seek to use such discussions as an opportunity to push a jihad or to grind any other kind of axe. I think it would be more profitable for WisdomFromPakistan to re-focus his efforts on addressing the original point of this post.
No, that were not the bold assertions made by WisdomFromPakistan. The bold assertion is that saudi arabia is militarity nothing and is facing two enemies therefore seeks west's protection and for that do whatever west want it to do. It do not matter what religion the lawrence of arabia was, he did used arab nationalism to make arabs rebel against ottoman khilafat.
Given the history of israel and the wars it had fought with arabs and the cruelties it had done with palestinians that show its hatred towards muslims and the terretorial expansion it gone through from 1948 to 1967 at cost of arab lands and lives, it can't be trusted.
Arabs and israel has fought three wars, in first of them saudi arabia directly fought against israel and in others it has heavily supported arab allies against israel.
http://en.wikipedia.org/wiki/1948_Arab-Israeli_War
http://en.wikipedia.org/wiki/Six-Day_War
http://en.wikipedia.org/wiki/Yom_Kippur_War
The state of israel is formed over captured arab territories and so therefore is not accepted as a legitimate govt by saudi arabia. Sitting at heart of muslim world they can't do that even if they want to thats why americans do not force them in this matter.
So, given the history of relations between saudi arabia and israel they better be considered as enemies.
Yes Jihad is an axe to crush satanic forces who value oil more than human blood and feel no shame in doing missile attacks on any country they want without even officially declaring a war (even mongols, nazis and soviets were better than that). We muslims do have the right to defend our countries no matter how bad this looks to logically, intellectually and morally bankrupt, chimpanzee-looking bandits.
You are getting way beyond the point of fact-based disputes on energy issues. Please be more civil or it is going to be necessary to start deleting things. And anyone thinking of descending to this level in response, please think again.
Wisdom, you were doing very well until the chimpanzee insults came out.
Good to read you again. Let's just take a deep breath and concentrate on being a part of the solution.
TwoThree observations:I've always enjoyed Ace's comments. But I wish we could leave the Nazi's alone. There is no benefit (that I can discern) by injecting Hitler and Goebbels into this discussion. I seriously doubt the Saudi Aramco public relations staff is taking cues from World War II propaganda specialists.
If so... where does that leave the U.S. Geologic Survey and the EIA projections?
Amen. Especially as there was nothing particularly original from the Nazis.
There was no particular reason for using Nazi propaganda other than I wanted an analogy to Aramco's propaganda and it was easy to find Nazi propaganda references on the web.
You said "where does that leave the U.S. Geologic Survey (USGS) and the EIA projections?"
I mentioned the USGS in my story above in relation to Fig 4. I think that there are serious issues with the USGS 2000 Petroleum Assessment and USGS in general being overly optimistic. I met one of their senior people once and he had no problem with Aramco's remaining proved reserves being 260 Gb.
http://www.hubbertpeak.com/US/usgs/USGS2000.htm
Colin Campbell's comments on the misleading USGS report are worth reading.
http://www.hubbertpeak.com/news/article.asp?id=848
The EIA projections have always been optimistic but guess where most of the data comes from for these projections? CERA, a subsidiary of ever optimistic IHS.
You might be interested in this scathing critique of oil supply projections of USGS, EIA and IEA by the Energy Watch Group Oct 2007, page 75-91 of main report.
http://www.energywatchgroup.org/Oil-report.32+M5d637b1e38d.0.html
With respect to the controversy on the amount of oil left, one problem that bothers me is the question of why, if Saudi Arabia has as much oil as they say they do, can't they pump more out in a given year?
I understand with very viscous oil, like the Canadian tar sands, it is not possible to extract much of the resource in one year. I understand that Saudi Arabia does have some oil of this type, and it could affect the calculation.
If one looks at the reserves of other countries, one finds that they pump up large percentages of their reserves in a given year. For example, if we take countries other than OPEC 11, FSU and the oil sands, we find that these countries pump out a little over 7% of their BP stated reserves each year. I expect that the reserves for these countries are somewhat low, because a fair amount of the reserves are on a P1 basis. With adjustment to a P2 reserve basis, the percentage of reserves pumped out by these countries might be perhaps 5% a year.
My question is why Saudi Arabia can't raise its production level more, if it really has huge amounts of reserves remaining? I can understand that in the past, Saudi Arabia may not have needed or wanted to produce as much as they could. It would seem like now, though, they should be able to get a 4% or more out per year, if they really want to. Assuming the OOIP is 580 GB, the remaining reserve is
30% Recovery ___61 Gb
35% Recovery___90 Gb
40% Recovery___119 Gb
44% Recovery___142 Gb
Based on US data, BP reserves and production include both crude oil and natural gas liquids. Saudi crude oil plus natural gas liquids are now about 3.7 Gb per year. If we calculate the ratio of oil and natural gas liquids recovered to reserves, the percentage is
30% Recovery___61 Gb__6.1%
35% Recovery___90 Gb ___4.1%
40% Recovery____119 Gb___3.1%
44% Recovery____142 Gb___2.6%
Based on ratios of other countries, the reserves assuming 30% or 35% ultimate recovery seem a lot more reasonable for Saudi Arabia than the reserves assuming ultimate recovery over 44%.
If we hypothesize that there is 2.5 million production off line, this brings yearly oil+ NGL production up to 4.6 Gb. With this level of production, a 40% recovery factor would seem to be about the top end of the range, since the ratio of production to reserves at a 40% recovery would be 4.6/119 = 3.9%, and I was estimating that the recovery percentage should be at least 4%.
Is there some geological reason that Saudi Arabia can only pump out such a low percentage of its reserves? Other countries with very low production relative to reserves include Iran, Iraq (obvious), Kuwait, Libya, and UAE.
Gail:
These are excellent questions. I don't think there's a geological reason, but it has been long-standing Saudi practice to take a very conservative approach to developing their reserves. The most clear example of this is the use of peripheral water injection in Ghawar, which was imposed on Aramco (then American managed) by the Saudis in an effort to improve the recovery factor at the expense of near-term flow rates. Ghawar probably could have produced far more oil per year if developed with infield irrigation. Similarly, efforts during the nineties to pump as much oil as possible from behind the water front were undertaken to maximize recovery.
It's a big theme of the 1979 Senate report. There are signs now of this approach being less dominant (eg increasing the rate of exploitation of Shaybah). In the short term, last few years, and maybe next few years too, I speculate they are likely constrained by failing to anticipate declines in their existing fields and get new projects in place in time to replace them. In the long term, I don't see how it's in their interests to rush the oil out - better to take it steady, make sure they maximize the recovery factor, and sell every last drop at steadily increasing prices.
Intriguing.
One small question: can we accurately describe bitumen as oil, even very viscous oil?
gail,
the short answer is that gravity displacement occurs at a low rate. exceeding the gravity displacement rate will result in a lower recovery, but possibly a higher economic recovery.
previous discussions herein have mentioned maximum efficient rate(mer). mer has an economic component. as long as we cannot predict the future oil price, most economic forecasts use a constant oil price with discounted present worth. this results in a bias toward higher production rates, without due consideration for recovery.
i spent a good part of my career arguing this point, that and beating my head against the wall got the same results. that is one reason i am no longer directly employed in oil and gas, that plus the fact that i was fired from my last job (i was smarter than the boss, well that and i made comments about his wife' nationality) !
I am reminded of the debate between tactics and logistics in military endeavors, with the military professionals focusing on logistics.
What matters to the world economy is production, and especially net exports. The Saudis have shown two years of annual production declines, despite increased drilling and the highest nominal oil prices in history. Their net export decline rate probably doubled from 2006 to 2007.
Gail,
I don't think that there is any geological reason that Saudi Arabia pumps out a low percentage of its reserves. I think the main reason is that Saudi Arabia's remaining reserves are usually overstated so that the perception of a low percentage is created.
What you have called "ratio of production to reserves", Colin Campbell has called "Depletion Rate, which is annual production as a percentage of Yet-to-Produce".
http://www.feasta.org/documents/feastareview/campbell.htm
On page 7 of his August 2007 newsletter, Kuwait's depletion rates and URR is discussed; page 5 discusses depletion rate as part of his production forecasting methodolgy.
http://www.aspo-ireland.org/index.cfm/page/newsletter
Campbell uses this Depletion Rate as an integral part of his forecasting methodology. After reading how Campbell uses Depletion Rate, I decided to use it in my forecast but I call it Depletion Rate of Remaining Reserves which is discussed further here
http://www.theoildrum.com/node/2716/215418
For the case of Saudi Arabia in my Feb 2008 forecast
http://www.theoildrum.com/node/3623
I have assumed a maximum Depletion Rate of Remaining Reserves of 5%. This is based on a URR of 185 Gb C&C (excluding NGL). In this case the recovery factor is 185/580=32%.
For Kuwait and UAE, I have assumed annual depletion rates of 4.5% and 5.0%, respectively.
The depletion rates of 4.5%-5% which I have used for Saudi Arabia, Kuwait and the UAE are supported by Tariq Shafiq, VP Iraq National Oil Company who said that depletion rates of "4-5%...is well within good reservoir management practice for large fields".
http://www.mees.com/postedarticles/oped/a46n50d02.htm
The large fields in the middle east could be produced at a higher depletion rate than 5% but this could cause irreversible reservoir damage, in turn decreasing the total URR.
http://en.wikipedia.org/wiki/Edward_Bernays
quote
The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. ...We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of. This is a logical result of the way in which our democratic society is organized. Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society. ...In almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking, we are dominated by the relatively small number of persons...who understand the mental processes and social patterns of the masses. It is they who pull the wires which control the public mind.
quote
Hitler learnt from Bernays I should think or was my Mein Kampf written first?
I recall reading that the nazis learnt from US football stadium cheering, etc. how to make mass demonstrations in the case of Nuremburg 1934 for example and in the case of Riefenstahl's film obviously the hollywood propaganda machine was copied. http://en.wikipedia.org/wiki/Triumph_of_the_Will
I think US democratic capitalism was the model for Hitler's propaganda machine. The richness of ideas and flexibility coming from America has always been very enticing and seductive to people everywhere, "The American way of life", for the good or bad effect.
People alway see in nazi Germany some sort of absolute evil like in a harry potter book but they should look inside themselves to find true evil and not soemwhere safe and far away in time and place. America and UK seem to think they are good and omnipotent and unfortunately this allows them to do evil without questioning their true motives(money, power, oil) or the consequenes of their actions(genocide, eventual WWIII). Germans assume a "Heart of Darkness" and so do nothing. Try to get them into Iraq or Southern Afghanistan. Good luck. It won't work. Kurtz' demons won't leave him alone. They torment him from Auschwitz day and night. Better red than dead so to speak. Cowards live longer.
Excellent comments and it's nice to see them. Modern propaganda was in fact invented in the US, not in Nazi Germany. The Nazis ripped their propaganda techniques off from US practitioners.
It is also not generally realized to what extent the US was considered as a model for Nazi practice. All that stuff about Lebensraum was just woolly-headed feel-good Volkish nonsense? Think again. The Nazis thought Germany would need to be large, like the US, to realize economies of scale. And what do you do with the people that used to live in the region in question? Hitler said it: treat them like 'Indianer', i.e. wipe them out just like was done in the US. His was an explicit reference.
The Third Reich intended to be big like the US, and to get that way using US methods, including genocide and modern propaganda.
Nazi propaganda went by the wayside, but US propaganda has simply gotten better and better over the years ... it's one prime reason why Americans are so 'dumb' (anyone would be dumb if they listened to that stuff from cradle to grave ...)
I thank ace for shining a little more light through the misty desert, like others here did before. Step by step the sun will finally evaporate the clouds. I, for one, can't afford to wait for a clear view and will have to assume the beast is behind the next sand dune.
However I think the take on Saudi Aromco comparing its tactics to the Third Reich is weakening your stand, ace, if not plain inappropriate. I do understand the importance of transparency, especially from SA in a PO context. Who knows, they may have been "Iraqized" was it not for their promises.
And let's be honest, if you're comparing the Third Reich with the works of any contemporary entity, that will be the United States of Torture.
Thank you.
And unfortunately your own comparison is equally intemperate, ill-judged and offensive.
"What is Aramco’s purpose of showing a continuous and gradual increase in OIIP...?
Propaganda? Surely. For the purpose of hiding real OIIP? Surely.
But WHY hide that data? Why such a coordinated effort to hide weakening OIIP? You are silent on this.
Take the next step and postulate the WHY of this deceit. Here is a reason...
It is necessary that the main controllers of The Petrogame assure abundant supplies so that the oil of the juniors can be had, and cheaply at $X/bbl. E.g.- Why would Indonesia pump and EXPORT all their "surplus" unless their leaders were made to believe it was "surplus"?...when, in fact, it was NOT surplus to Indonesia, as became obvious only a short EXPORT binge later. Indonesia is now a net importer of oil at $XXXX/bbl.?
KSA leaders are knowing and interested parties to the subterfuge of the majors' gameplan. [Arguably, the majors no longer can dominate risk-free.].
In response to Gail's question about why the KSA doesn't pump more oil, some econo-talk:
If the demand for crude oil is inelastic, then wouldn't the percentage increase in oil quantity pumped be smaller than the percentage fall in price, meaning that revenue would decline?
Izzat right?
In response to Gail's question about why the KSA doesn't pump more oil, I would offer the two obvious alternatives:
(a) they can't; or
(b) they can but have decided not to.
The first alternative is durable (meaning that it won't change). The second alternative may or not be durable depending on whether they change their minds on the policy of not pumping more. So that resolves into three scenarios:
(a) can't pump more (the dominant, and well documented, theme on this site);
(b) can pump more but will not do so for the foreseeable future; and
(c) can pump more and will do so in the foreseeable future.
I believe that the bulk of the probability is within scenarios (a) and (b). (a) because of the data on the point, although shrouded in some mystery, and (b) because (b) would seem to align with KSA's self-interest in the subject matter (it would make no sense to fire-sale a precious, and dwindling, resource which will only grow more valuable over time). (c) strikes me as unlikely since it is inconsistent with the (shrouded) data and would be against self-interest.
As between (b) and (c), (b) also is the more responsible policy for all concerned as it will destroy demand to some extent and thereby elongate the longeviety of the resource, thereby allowing more time for exploration of alternatives.
My guess is somewhere between (a) and (b) and perhaps what is most likely, a bit of both (they can, with effort and expense, pump a little more but are choosing not to do so).
Just my opinion.
Here's a little more fodder for the fire. This is from data available from www.netoilexports.blogspot.com which now has data complete thru 2007. I believe this is EIA data. This is a graph of net oil exports (top 20 exporters) and the difference between that at total production. It helps to make the "2005 peak" to stand out better. Notice that recent production increases have mostly occurred in exports. I hope to add the next two months when the data becomes available.
Notice that if you linearly extrapolate production reserved for domestic use (blue line) the line will intercept total current production (85kbbls) in just about 80 years and there will be nothing left to export!
Wether the Saudis are honest or just "upholding their honor" is irrelevent. Who we should call on the carpet are the American politicians who try to shape policy using such dubious data. So far the veracity of the Arab oil claims hasn't been challenged by any candidate still running. Good policy requires accurate information and that is not what we have access to.
This post by Ace does have some bearing on peak oil, and according many others in the field of reserve analysis tends to discount the claims of Saudi's ARAMCO.
The most important question regarding peak oil and how it will affect economies, especially the US economy, is "what can daily production be raised to?". In early 2004 the US's EIA made a prediction that oil whould rise to $35/barrel by 2025 and that Saudi production would rise to 18 mbpd. Well, the oil rose above $35/barrel in summer 2004 and Saudi production is essentially flat since then at C+C being 9 to 9-1/2 mbpd.
Mr. Al-Husseini, the former ARAMCO vice president of exploration and production in the 1990's, was quoted in an energybulletin.net 2005 article (don't have link any more) saying that KSA production could be raised from 10 mbpd to 12 mbpd only with a huge expenditure of money on existing fields. Al-Husseini was questioned about the ability to raise KSA's oil production to 15 mbpd and his response was "highly unlikely".
Why would Al-Husseini say these things? They would certainly bring shame to those at ARAMCO that claimed reserves and production capacity would grow far beyond expected limits. And why hasn't Saudi oil minister Ali I. Naimi made announcements for a schedule to bring more reserves into productive capacity to meet the EIA goals of 18 mbpd for Saudi ARAMCO?
I have to agree with ACE that the reserves are likely inflated, but maybe not 150% as he assumes, perhaps more like 100%. The recovery factor of 52% claimed by Saudi's is likely also inflated even if Ghawar attains 50%. To achieve the overall goal of 52%many other fields have to be above Ghawar's 50% to average 52%.
The main reason for KSA to lie about their reserves is to keep the general population thinking that the wealth from oil will keep flowing for a century and no need to talk about how the royal family has embezelled the riches of the working classes' labor. If the general populus of KSA was to learn that the oil wealth was largely gone and squandered by those in power, a revolution might be close at hand.
Just added some new text to the story above:
I realise it's more conjecture but any feedback would be welcome.
Here is the text added just before Fig 7.
This story from Saudi Aramco World from May/June 1984 edition was emailed to me on March 5. This is a quote from Sadad al-Husseini, GM Petroleum Engineering at Aramco.
This quote was made in mid 1984. From Fig 2 above, Aramco’s stated OIIP for 1983 was about 595 Gb; Fig 3 gives OIIP of about 550 Gb. 10 percent of 595 Gb is 59 Gb so this means that Husseini was not talking about an absolute increase in the recovery factor (RF) but rather a relative increase. Husseini’s 17 billion barrels is 2.9% of the 595 Gb and 3.1% of the 550 Gb. If it is assumed that Husseini’s RF increase is a relative 10%, this implies that the average RF for Saudi Arabia is between 29% and 31% for 1983. Applying the relative 10% increase gives a possible average RF range of 32% to 34%, which is within the 30% to 37% previously assumed RF range. Furthermore, Husseini’s reference to reserves of 165 billion could be URR. The reasoning is that Fig 6 above shows remaining reserves for 1983 of about 169 Gb but cumulative production of 51 Gb. The total URR is then 220 Gb. 220 Gb divided by 595 Gb gives a 37% RF. A relative 10% increase of 37% is 3.7% which is 22 Gb, above Husseini’s 17 Gb addition. However, the 169 Gb reserves divided by 595 Gb is 28%, coincidentally close to the 29% above.
As a practical matter I assume that the NSA has enough intercepts to tell what is what in Saudi Arabia. I don't think Bush II, Clinton, Bush I, Reagan, and Carter were under any illusions about what was going on.
None of them revealed the true state of affairs. Why, I do not know.
Possibly because Saudis do in fact have huge quantities of oil?
Iraq
Ace, Sadad-al-Husseini's flat peak production curve you referred to above comes from his presentation at the Oil & Money conference in London in October last year.
http://www.energyintel.com/om/speakersNew.asp?Year=2007&filename=SadadIb...
This file also contains a table in which he had reclassified 300 Gb of reserves into "resources", thereby practically confirming what is generally known as "OPEC's paper barrels", also mentioned in your post. He is then down to Colin Campbell's remaining reserves of 900 Gb. But Sadad's production profile is not in line with Colin's despite the same reserve figure. I think it's a well planned warning packaged with good news that production won't fall off soon, a fear Matthew Simmons had expressed in his twilight book. But the world media did not take notice of that reclassification (maybe too technical?). We'll see more warning shots from him if that was not enough.
Matt, thanks for the info and the comment on differing forecast production profiles between Campbell and Husseini.
For the year 2030:
Husseini's production forecast gives about 67 mbd C&C plus 8 mbd NGL for a total C&C and NGL of 73 mbd.
Colin Campbell's latest March newsletter
http://www.aspo-ireland.org/index.cfm/page/newsletter
gives 36 mbd regular oil, 11 mbd heavy, deepwater and polar, and 10 mbd NGL for a total of 57 mbd.(2030)
It is also interesting to note that Colin Campbell in his Mar 2008 newsletter has downgraded, by 30 Gb, the total Middle East Gulf URR regular oil from 693 Gb in Feb 2008 to 663 Gb in Mar 2008.
Robelius March 2007 thesis
http://publications.uu.se/abstract.xsql?dbid=7625
gives a range of about 52-56 mbd of C&C and NGL (excluding processing gains of about 3 mbd) for 2030
My recent Feb 2008 forecast
http://www.theoildrum.com/node/3623
gives C&C of 37 mbd for 2030 and adding an Husseini's 8 mbd NGL gives 45 mbd.
I agree that Husseini's forecast is optimistic but as a former Aramco executive, he probably doesn't want to disagree too much with Aramco's optimistic forecast.