Saudi Arabia’s Crude Oil Reserves: Particulars or Propaganda?

This post originally ran 4 MAR 08, but it seems with the recent discussions about Saudi Arabia and OPEC (for example these pieces by Jad Mouawad and Fatih Birol) that the information in this post, in addition to the over 20 very important and related posts by TOD researchers linked at the bottom of this post in summary, is quite important to the recent discourse.

Furthermore, on 22 JUN 08, Saudi Arabia's Oil Minister Ali Al-Naimi will "convene a meeting of representatives of producer and consumer nations and firms operating in the production, export and trading of oil to discuss the jump in prices, its causes and how to deal with it objectively". Kuwaiti oil analyst Kamel Al-Harami added that this meeting "is an opportunity for a transparent and clear dialogue between producers and consumers to collectively explore solutions to the world's energy crisis, now and in the future". Perhaps there is a chance that Saudi Arabia and other OPEC members will offer some transparency about their oil reserves to the world at this important meeting in one week's time.

Executive Summary

  1. 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.

  2. 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.

  3. 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.

  4. 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.


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), in 2007 (9.44 mbd vs 8.72 mbd), and in the first 3 months of 2008 (9.35 mbd vs 9.20 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 indicates that Al-Husseini was disclosing total, not remaining, URR of 165 billion barrels (Gb) for 2003. Adding his 17 Gb gives a potential total URR of 182 Gb which represents a plausible average recovery factor of 33%, based on OIIP of 550 Gb. 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 Gb 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 of 17 Gb to give a total 182 Gb gives a possible average RF range of 31% to 33%, which is within the 30% to 37% previously assumed RF range. Thus, Husseini’s reference to reserves of 165 Gb is most likely total 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, well 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.

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 215 Gb. Given that Aramco has cumulative production of 115 Gb to the end of June 2008, 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

by Euan Mearns

by Gail the Actuary

by Jerome a Paris

by JoulesBurn

by Heading Out

by Khebab

by Ace

The EIA shows that Saudi Arabia's average annual production rate in 2005 was 9.6 mbpd (C+C). In order to match this rate in 2008, I estimate that the Saudis would have to average about 10 mbpd for the second half of the year. While it's certainly possible, I doubt that we will see it. Also, we don't know to what extent that they may be curtailing domestic refinery runs, and importing more refined product, in order to show more crude oil exports. We do know that there have been news reports of large increases in the import of refined products.

And speaking of consumption, they are on track to show an increase of about 500,000 bpd in total liquids consumption in only three years, from 2005 to 2008. Even if the Saudis could match their 2005 total liquids rate of 11.1 mbpd, this would probably still be a net export decline of a total of -5.5% since 2005, an annual decline rate of -1.9%/year (assuming 2.5 mbpd consumption in 2008).

By all rights, this thread should go straight into the garbage can due to Godwin's Law. However, since we're lecturing people about "being honest", I'll point out a few things for new people who might not know the whole history of this topic.

Westexas, you yourself have been predicting an imminent decline in Saudi Production for years now. Meanwhile, Saudi production has been steadily rising. Here's the stats from the EIA:

Aug: 8.6mbd
Sept: 8.8
Oct: 8.8
Nov: 9.0
Dec: 9.1
Jan: 9.2
Feb: 9.2
March: 9.2

They are currently pumping 9.45mbd, and plan to raise that to 10mbd Source. In fact, they are discounting their physical product to make it move Source. How is that even possible, considering your claims that they have already consumed 70% of their URR? The reality is that your predictions for the Saudis have been totally discredited. So how about a little honesty and self-reflection from your side of the fence?

Ace, calling the Saudis nazis may be cathartic, but the record clearly shows that their claims about their productive abilities have been proven true, and your predictions of their decline have been proven false.


Here's Stuart, a little over a year ago:

Overall, I feel this data is clear enough that I'm willing to go out on a limb and conclude the following:

* Saudi Arabian oil production is now in decline.
* The decline rate during the first year is very high (8%), akin to decline rates in other places developed with modern horizontal drilling techniques such as the North Sea.
* Declines are rather unlikely to be arrested, and may well accelerate.
* Matt Simmons appears to be right in Twilight in the Desert, but the warning did not come until after declines had actually begun. Source

Here's Memmel in May 2007:

KSA will make a charade of increasing production for a few months. But 60 days is about all they have IMHO.

These predictions too have been totally discredited.

In the archives of TOD, you can read this sort of material by the yard if you are so inclined. But the bottom line is that, with regard to Saudi production capabilities, the word of the Saudis has been far more trustworthy than the word of their critics. You people all owe the Saudis, and Robert Rapier, an apology.

First, what's your forecast?

Second, Godwin's Law has not been violated.

Third, your source for 9.45 mbd is a journalist - hardly credible. 9.45 mbd might have been for one day only, not the whole month. The EIA is usually optimistic. Have you read OPEC OMR June 2008?
Saudi prod numbers
Mar 08, 9.03 mbd
Apr 08, 8.98 mbd
May 08, 9.13 mbd

Fourth, you said "the word of the Saudis has been far more trustworthy than the word of their critics". On 28 Sep 2005, trustworthy Naimi said that "Saudi Arabia would soon add another 200 billion barrels to its current reserves of 264 billion barrels".
That means Naimi is saying there could be 464 billion barrels remaining. Cumulative production to end of 2003 was about 103 Gb.

Naimi is saying that total URR for Saudi Arabia will soon be 567 Gb. That's equivalent to a recovery factor of 95% based on OIIP of 600 Gb. Do you honestly think that Naimi's statements implying a recovery factor of 95% are trustworthy?

Making predictions and forecasts is not a requirement for being credible.

Being correct is a requirement for credibility when constantly making predictions.

this link is posted below but just in case you have selective reading, you can tell me which part of the graphs you don't understand: - right click open in new window OR// - click on 4 year overlay


That's got to be one of the more fanciful statements I've ever read on TOD. I visited JD's site a few times. He is so far off on so much it was a bit like trying to have a discussion with a schizophrenic. (I've worked with such people as a counselor, so have some insight.) I didn't spend much time there.

Now, how was that for using your fine example of the straw man with zero supporting evidence?

STAFF: what is with the epidemic of insulting naysayers of late?


It's interesting you would think that someone who runs a "Peak Oil Debunked" website would have much credibility on TOD (JD runs for those who don't know).

Latest statement from JD

Yup, NIMBYs and global warming activists are jacking up the price of oil. "Not enough oil" is just the cover story. LOL.
-- by JD

"But the pipers piped on why oil prices should fall
And led the world to the edge of a vast abyss
-Matt Simmons

That's equivalent to a recovery factor of 95% based on OIIP of 600 Gb.

Or they know more about their oil in place than you do. Attacking them based on how well their statements fit your assumptions doesn't do your argument any favours.

To present an analysis that's going to be useful to external observers, you've got to be honest about where your analysis might be wrong, and this is one of those places. Instead of immediately leaping to the conclusion that any discrepancy between your model and their statements is a lie on their part, it would be much more helpful for your analysis to consider the possibility that they're not blatantly lying, that they really do have more oil than you think, and why that might be.

As it is, it sounds like you've made up your mind already, and you're just berating the Saudis for not agreeing with you.

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.

British fields found an average of 20-25% growth in estimated reserves as they aged (slide 13), but your graph appears to not include any similar growth for Saudi fields.

It's worth noting that 580Gb + 20% = 696Gb, suggesting that the claimed Saudi increases could have come predominately from the types of known-field growth that British fields saw.

If you want to argue that Saudi fields have not seem similar reserve growth, you've got to explain what makes them so different from British (and, IIRC, American) fields, or at least show evidence that it's common for large oil provinces to show no reserve growth. As it is, you're making a huge assumption (no reserve growth) that is (a) contradicted by the statements of the owners of the fields, and (b) runs counter to available evidence about other fields. That kind of assumption is not a good basis for an argument.

However, Aramco’s statement that it is the world’s leading oil producer is now false as it now second after Russia since 2006.

Two points:

  1. "Leading" is not necessarily synonymous with "largest". If they're the most influential - and, as largest exporter and dominant partner in OPEC, they probably are - then it's not entirely unreasonable to call them "leading".
  2. EIA data gives Saudi oil production as 10.6Mb/d, vs. 9.8Mb/d for Russia (C+C+NGL). You might not want to include NGL as "oil", but both EIA and IEA include it in their "oil supply" number, so it doesn't actually matter what you want.

You fixate on C+C, but the rest of the world doesn't care about that number. They care about "oil supply", for which Saudi Arabia has not dipped below 10Mb/d in more than two years, while Russia has not climbed above it (EIA data, C+C+NGL).

Perhaps NGLs should be discounted by their energy content; that would be quite reasonable if we're trying to make a fair comparison. That would put Saudi production below Russia for 2007, but well above for what we've seen of 2008.

Godwin's Law has not been violated.

Irrelevant, really. Breathlessly comparing Saudi statements about their own oil production with Nazi propaganda makes you look like a raving nutjob to anyone who's the least bit of an "outsider", and taints everyone you're associated with.

It's utterly unhelpful.

Probably the easiest way to strengthen your argument is by removing all of your ranting about propaganda and Nazis. It serves no purpose other than making whatever you write easy to dismiss by anyone who wants to.

Well said (yikes, I thought I was harsh).

And let us know when Saudi Arabia exceeds 9.6 mbpd (C+C) for a calendar year. I highly doubt that it will be in 2008, which would mean three straight years of production below their 2005 rate.

There is a good chance that Saudi with exceed 9.6 in a calendar year in 2009. But what difference does it make? You will simply cherry-pick another metric.

I would have thought that your recent run-in would have given you pause, but you obviously don't care.

A calendar year? You mean 12 months, January to December? Who cares. What does that have to do with anything?

There is also an extremely good chance World Total C+C will excede 2005 totals in 2008. But so what (other than you being wrong?) - use a 12-month moving average, or something, but for god's sake, choose something and stick with it. You are making a fool of yourself and killing the peak-oil movement.

World C&C is forecast to come off a 74 mbd peak plateau in early 2009. For more info see

click to enlarge

You are making a fool of yourself and killing the peak-oil movement.

Wow, I never knew that I had such power.

As I said up the thread, get back to me when Saudi Arabia exceeds 9.6 mbpd for a given calendar year (average production January to December). IMO, 2005 was their final peak, but as you said, we shall see what happens in 2009; it is unlikely that they will exceed 9.6 in 2008.

BTW, since Ace and I have similar views regarding Saudi Arabia, shouldn't we get joint credit for killing the Peak Oil movement?

In any case, you guys need to show me more respect--since I have the power of life and death over entire movements. If I am not accorded sufficient respect, I shall smite thy movement.

You didn't answer all my points. Why is a calendar year relevant? Why do you cherry-pick and swing back and forth between points to try to win arguments? Why not use a 12-month moving average?

More: Where is your "quantitative" analysis? The only thing I've seen is yearly subtraction of consumption from production direct from the EIA's website with 2-year old numbers. They even did the math for you.

IMO, IMO, IMO ! How many times can you say this in a day? Tell us what you really think.

The 5% of the time you happen to guess an outcome, it's "I predicted this, I predicted that." You never advertise the 90% of the time you were flat wrong. No. You never hear about that do you? we need Robert Rapier to remind us once a year.

And whenever they do - what is your response - "Oh, well, I can't get everything right all the time."

You, Sir, are a fraud.

P.S. - Let me know when your accurate guess-rate jumps above 20%. I'm "guessing" Saudi oil production will pass 10.7 mbpd before that ... Oh! don't quote me on that, that's just IMO.

Our historical analogues are based on annual data, and peaks are defined based on annual data, e.g., the Lower 48 peaked in 1970, Texas peaked in 1972.

You can find most of the Brown/Khebab articles by doing a Google Search for Jeffrey Brown + Net Oil Exports. When the Energy Bulletin is back up, you can find most of the rest by searching authors for Jeffrey Brown.

It seems to be a recurring pattern around these parts that people are suddenly launching personal attacks, with no documentation, especially against yours truly. I am curious as to why I am suddenly such a mortal threat to the "Peak Oil Movement."

Since you, posting anonymously, are accusing me, and presumably by extension, Khebab, of fraud, could you be just a tad more specific?

It's pretty obvios why a calendar year is MORE relevant than a particular record day,week or month; here it is spelled out - Allowing that average BPD over the year gives a better indication of their total production levels. Transients that pip up and last only a few days, weeks or months do not significantly tick up total production so to trumpet a transient production increase as proof that we were all wrong and they COULD produce higher is irelivant if the total amount of oil they produced over the year has not significantly increased. Is this simple enough for you to understand?

Like Geoffrey says, it is unlikely that their total 2008 will be significantly higher than 2005.

Not to put too much weight to conspiracy theory, but many are wondering what that IRAQ-SAUIDI oil pipeline is doing;-).


Mmm. "pretty obvious" - or as you say,"pretty obvios" ?

When I said 12 months I meant Jan thru Dec. The question was aimed at "westexas," not you, my poor boy. I understand your difficulties with the language.

You failed to understand my point about a 12-month average. So did westexas.

2008 will probably beat 2005. If you can't see this you are clearly blind or can't read or can't do numbers or all three. or something. some combination of those.

His name is Jeffrey. Please stay out of this conversation, Marco, you are extremely annoying.

Sorry, Jeffrey, I was obviously using the wrong spelling.

I understand averages/moving averages fine, would YOU prefer to use july-Jun then or moving average? Which would suit you better. What YOU dod not understand is that it does not really matter which you use. It does not change their production.

More importantly it's net exports that count, a point that you are conveniently ignoring.

I am not required to stay out of the conversation. I do not find you annoying; I find no debate annoying. Debate is not about bludgeoning ones opponent into sumbission with verbal abuse. you sound reallllly angry!


Yes, so maybe you should reference some numbers.

I suggest these:

I don't think Pitt the Elder or myself cares a bit about your "bludgeoning."

We also don't care if you want to talk about production, consumption, or exports. We are quite acquainted with the topics.

We care about the truth. We care about people. We care about the earth.

And we are sick and fucking tired of your bullshit.

Are you tired of the price of WTI?, cause right now that seems to be the only tangible data we have. We would't all be arguing these point if KSA/OPEC were more open.

Furthermore our "bullshit" does not change productionm levels. You think there is no shortage of oil? We'll maybe you forgot to unplug yourself from the BBC or CNN news.

You care about the people? - we go tell your master of puppets to stop their blatant "no oil problem here" propaganda.


I notice you have been a member for 9 weeks only. If you wanted to make a worthwhile contribution and to make a difference here i would suggest you stop swearing at people. i am NOT a moderator, just telling you that that kind of verbal abuse is likely to get you kicked off he forum.

I think this would be sad as you seem to have the intelligence to make a really good contribution if directed in a more appropriate and constructive manner.



Methinks this is an older banned users logging in under a new name.

Perhaps OilCEO?

Probably a more likely suspect is Hothgar, or one of his cousins. As I pointed out to PG when Hothgar first appeared on the scene, I was his tactical target, but his strategic goal, IMO, was to drive people away from The Oil Drum. Read through this thread from the point of view of a first time reader, and what impression would you have?

You have shown that you have poor manners but as yet have not presented your arguments, if you have any.
If you don't like their analysis, where is yours?
Not impressive.

these are the IEA YOY comparitve graphs for Saudi, much easier presented in this format: - right click open in new window OR// - click on 4 year overlay

it is quite clear it is going to be difficult to break 05 in terms of total production.


Would you care to explain your petty concern with whether a forecast was off or not? Every forecast and every "prediction" is based on best available data at the time. And it matters exactly nothing if it is off when it is off by statistically inconsequential amounts. That you and JD are focused on the exact accuracy of the date or number of barrels rather than the underlying dynamics and trends makes your ranting beyond ridiculous.

I, and I am certain virtually every other person coming to this site with a scintilla of intelligence, takes nobody's posts, guesses, "predictions" or, more accurately, scenarios as anything other than what they are: guesses. I don't think I have ever read a single post by any of the main contributors here that said their analyses were absolute. They are always qualified, which is all we can ask. We see them as attempts to quantify what is happening and understand it int he hopes we can deal with it better. Only a fool would consider any of these analyses as hard and fast predictions. But you do. And Cohen. And JD. Like Cohen, you are arguing your egos, nothing more.

Anybody claiming to be knowledgeable about Peak Oil who thinks the difference in peak by five, or even ten, years is important when that peak is within a few million barrels on a long plateau is demonstrating lack of basic logic and insight - if not outright, ego-driven stupidity.

As for Saudi Oil, you act as if the book is written. It is not. it is being written. What they do and don't have is not known and is not likely to be any time soon. And, you absolutely must understand that reserves are irrelevant if they are not reflected in flow rates. We have good information from al Husseini that the KSA will never go above 12.5 mb/d - EVER - because doing so would damage their fields. We have the king saying they will husband their resources for future generations. Logically, it matters not whit what they have if they refuse to produce it.

But you keep swinging away with your penis and ruler in hand, friend.

We're all very impressed.



They are crawling out of the woodwork to attack you recently. And with such vitriol.

Your professionalism in juxtaposition to your attackers reflects well on you.

Note the lack of any specifics--just general allegations that I am approaching something close to child molester status. Funny how a simple quantitative logistic (HL) analysis seems to be perceived as such a threat by so many people all of the sudden. Kind of makes one wonder what their agenda is.

In any case, here are links to my first and most recent work on top net oil exporters:
Hubbert Linearization Analysis of the Top Three Net Oil Exporters
Brown (January, 2006)
A Quantitative Assessment of Future Net Oil Exports by the Top Five Net Oil Exporters
Brown & Khebab (January, 2008)

Perhaps I am biased, but while I can certainly be accused of being repetitive, it seems to me that it is hard to make a case that I have not been reasonably consistent regarding my views of the top net oil exporters.

And by the way, the top five have collectively shown two straight years of declining net oil exports, and their net export decline rate accelerated in 2007.

Lack of any specifics? You have been wrong every time you made a prediction.

Child Molester (are you?) Straw Dog.

The evidence is here on this site. JD started with it tonight.

Since you don't want to play, why don't you at least try to give us a list of your correct predictions?

Can you not find them? You can find everything else. Give us a list of your correct predictions. Then we will give you a counter-list with all your wrong ones.

You have a huge number of fans here. What annoys most of your detractors is your inability to be honest. Nobody has any confidence in your sanity.

Yes, Sir, you do serious damage to the peak-oil movement. GW people don't want nutbags carrying the message. They don't want an image of tin-foil-hatters.

We don't want you. Take a break.


At what point does this crap cross the line?

Your comment is an unjustified "ad hominem." You just crossed the line. Good job.

Heh. This coming from someone who tells another poster "we are sick and fucking tired of your bullshit".

I really don't know why I am wasting my time with this but why are you so worked up? It's not a crystal ball gazing competition where he with the most correct predictions wins. The only thing that I absolutely know for sure is that the cost of petrol at the retail pump has gone up dramatically in the last 12 months. Thats is the sole and total proof that I have that something has happend which has caused the price of oil to go up. Do I know if westexas has got it right? Not really. How am I going to prove anything, take a dip stick to Suadi Arabia and ask them if can check their oil levels?

If you wnat to be taken seriously, perhaps you should present the same body of work as westexas putting forward your own arguments and disclosing down to the last drop of assumption and bias that you bring with it.

Ultimately science is advanced by putting forward a theory and then testing its validity. If you have a better theory, lets hear it.

"The only thing that I absolutely know for sure is that the cost of petrol at the retail pump has gone up dramatically in the last 12 months. Thats is the sole and total proof that I have that something has happend which has caused the price of oil to go up."

The price of oil has doubled in the year since the credit crunch, which began in August 2007. Neither supply nor demand have changed more than incrementally in that time, so I am quite certain that this latest price doubling is due to money fleeing from the debt bubble into commodities, even if the exact cause and effect is not clear. The question is whether the price will ever significantly fall again, or whether this is the new baseline.

It has increased 10 fold (1000%)since 1998. From 1998 to your point at the "start" of the credit crunch it had already increased by around 5 fold (500%) - so what do you think this 5 fold increrase was due to? more to the point what do you thnik the overall 10 fold increase was due to.


1998 $12
2007 $60
2008 $125$ average?? who knows.

I would take the price at any time to reflect long-term supply and demand factors, short-term supply and demand factors, and financial factors. The past ten years have seen a boom in global demand, a plateau in global production, the return of war to the Middle East, a movement of speculative capital into commodities, and a weakening in the American financial position. That's where your tenfold increase comes from. But as far as I'm concerned the most distinctive event of the past year, and thus during the latest doubling, has been the financial crisis. Investors, having been denied the returns they were getting on corporate and asset-based securities, are piling into commodities and creating a bubble. As I said, this could become the new baseline if people make it so. But in theory some recessionary or deflationary event could drive prices down again. The prices have become extremely political now and it remains to be seen what responses will be engineered.

When speculators rush to commodities, the commodity price rises, but the futures market (what they expect to pay months or years from now) is unchanged. Speculators know about speculation, that it leaps up and then declines. So if the current oil spot price were based mostly on speculation, we'd expect to see that oil futures were cheaper than the spot price.

But oil futures are more expensive than oil's spot prices. This tells us that speculators expect that oil is going to be more expensive a year or two from now than today.

Now, you may say that the speculators are wrong and have no idea where the price of, supply and demand for oil are going, but then you'd be changing your mind.

It may be more apt to say that it's investors simply trying to preserve their capital from negative real interest rates, then (nominal interest rates being lower than price inflation). Investors are moving to commodities because yields are negative everywhere else. I'm still working out the forces at play here.

On a different note, I have noticed Matt Simmons making what seems to be an elementary error. I would appreciate it if anyone could provide an alternative explanation of his statements.

The annual EIA data show two years of net export declines, and the latest EIA data, for March, 2008, show some extremely rapid declines in oil exports from Venezuela and Mexico to the US (annualized decline rate of -32%/year). In October, 2007, they accounted for more than 20% of total US petroleum imports. Contrary to what most (not all) media sources would have you believe, I think that we are seeing fundamental supply and demand factors at work--importers bidding for declining net oil exports. The WSJ had a story on this a couple of weeks ago that was not exactly subtle: "Net oil exporters unable to keep up with demand."

I won't argue with the trend but think it is being amplified beyond all reason by the financial factors, which means that it is vulnerable to a short-term collapse.

On his blog JD once gave a list of financial factors: "dollar weakness, inflation hedging, speculation, hoarding". Combine that with the fundamentals and you might have a truly powerful model of price movements.


This is a bit bizarre - if you click on the 4 year graph, Russia is filled in until Nov 08!?!
data to Apr 04 is declining then "projected" seems to be flat all the way up. Strange.


We DO want him. Who are you?

I believe that JD posted evidence of a rebound in production, to a level below the Saudis (so far) final peak of 9.6 mbpd in 2005. Rebounds in production following peaks are not unusual, e.g. Texas & the Lower 48, but the key question is whether Saudi Arabia will ever again match their 2005 average annual rate of 9.6 mbpd (C+C). Mathematically, it appears very unlikely Saudi Arabia will match or exceed their 2005 average annual rate in 2008, so they will have shown three straight years of lower production relative to their 2005 rate, at about the same stage of depletion at which the prior swing producer, Texas, started declining in the Seventies.

You are alleging that Khebab and/or I are frauds, but you continue to offer no specifics, and you basically then want me to defend ourselves against unspecified charges of fraud made by an anonymous poster, who has been on The Oil Drum for 9 weeks. Do I have this right so far?Again, what is your basis for alleging fraud?

The main point is that there is no substantial increase in production, and whether it is just below, the same or just above 2005 is wholly irrelevant.

The criticisms I have read, with the possible exception of Pitt the Elder's, are nitpicking which do not change the basic picture of static production with rising internal demand in the oil exporting nations leading to less available for export at all.

In the past the trend was for rising exports to meet rising demand, and the burden of proof was on those who thought this would not continue to show when and why.

Now we have static production and falling exports in spite of rapidly rising prices, and have done for 3 years, so the onus is on those who say this will change to prove when and why.

Unconventional resources have ramped very slowly in spite of high prices, so why should this change?

Pitt's comment about ultimately recoverable reserves, even if correct, will have very little effect on the overall picture, although they might provide some very welcome 'wriggle room'.

Major trends like this are hard to reverse.

Note that regardless of changes in reported reserves, the North Sea has declined at about -4.5%/year since peaking in 1999, and it peaked when it was about 50% depleted, based on HL.

Copy of my post over the European thread:

Some historical perspective. The initial two year Lower 48 decline was pretty low, -0.8%/year. The initial two year world decline, relative to 2005, was -0.3%/year (EIA, crude + condensate). While we have some monthly EIA numbers above the 5/05 rate, we don't yet have the annual 2008 data, and worldwide we now are getting some unconventional production that the Lower 48 did not have.

Deffeyes modeled conventional crude oil production when he predicted a worldwide peak between 2004 and 2008, most likely in 2005. We don't yet know what the 2008 annual data will show, but it does appear that conventional crude oil production, even on a monthly basis, is probably below the 5/05 rate.

ExxonMobil put the decline rate worldwide from existing wells at between -4%/year and -6%/year, and some sources put it higher, e.g., -8%/year. If we take the middle case, -6%/year, and simply use the Rule of 72, from 2005 we would have to find about 37 mbpd of new crude oil production by 2017, just to maintain flat production.

And then we have the Export Land Model (ELM). My guess is that total net oil exports worldwide in 2031 will be down by at least 75% from their 2005 rate. Europe, like the US, has emerging problems with fast declines from Proximal Petroleum Producers, Norway & Russia for Europe, Venezuela & Mexico for the US. Our middle case has Norway & Russia approaching zero net oil exports in about 17 years.

Consumption has to fall--as importers bid for declining net oil exports.

The very mainstream Todd Benjamin on CNN was talking today about the oil price, and he said that there had indeed been movement of monies into commodities, but that is based on expectations leading to different weighting of portfolios not speculation.
He notes that the most desirable light crudes were trading at a substantial premium, which would not be expected if prices were due to speculation.

Furthermore he said that it was not clear if the Saudi production increase was just the 500,000 barrels a day which were due to come on line anyway, and that producers had lost the power to control the market (presumably on the downside - it would not be too difficult to see how thy could make prices rise!)

If the ploy of the latest statement from Saudi does not work, he can't see what is stopping prices going to $150 or $200.

If you wish to comment, he runs a blog:

So if this is not peak oil, or very close to it, the price signals are showing something remarkably similar to it! If it quacks like a duck....

Its likely that this sort doesn't like the reality that is emerging and is attacking the messenger. It's the viciousness that gives it away. If he really thought that you were an incompetent fool, he would stop reading your stuff. He doesn't like the unpleasantness of the truth that you are trying to bring out through the data.

You might want to remind him that he is free to ignore what you say. The rest of us are just as free to ignore you if we think you are idiotic or to provide supporting data if we think you're wrong. Personal attacks are not warranted.

You might also want to inform him that the futures market does not fully believe KSA's "plan" to increase output in July. WTI was up $1.60 and is trading at $136.46.


WTI was up $1.60 and is trading at $136.46.

It's $139 now! Intraday peak so far $139.89 - a new record.

WT I guess you have gotten too much mainstream credibility lately to suit some people.

You people all owe the Saudis, and Robert Rapier, an apology

ALL? I think not.

There are thousands of disparate commenters and analysts on this site. Many have been spot on. Remember that we are potentially dealing with a civilization changing paradigm. Our inputs are the stated reserves of OPEC countries, and past production- e.g. the data is extremely limited - there is no finite mathematical 'answer' ahead of time. Those that make predictions and are wrong, should own up to that fact, and move forward. But at least these people went out on a limb and admitted they were doing so. And who is 'memmel' by the way? And who is "JD"? Many post using their own names - much more convenient to post under a pseudonym. The greater issue here is not how much spare capacity Saudi has, but how to match our demand system with the best efforts analysis at quantifying our future energy supply system. In the big picture of higher oil prices, higher food prices, larger environmental externalities, fragility to the system, increasing geopolitical tensions, lower net energy, flows vs. resources, etc. this site has been in the fairway for years. Your own analyses have many large misses, the first one I looked at showed no relationship between higher oil and higher corn prices, now 3 years old and looking a bit 'discredited'.

None of us have crystal balls but the hope is that collectively we get closer to what the truth really is, so that collectively we can make better decisions. I welcome your viewpoints and feedback even though I disagree with you. Just wanted to make sure you aren't unfairly lumping all of TOD work under a few previous KSA production predictions. I am not a Saudi expert, but I do feel strongly that the 50% Qt (URR) level will be passed well before peak flow rates from KSA, due to all the water injection, etc. and the steeper decline rates that will engender. Whether that is now, or 2012 I am not sure. But the main point JD is that we can't wait for that to happen before making policy and infrastructure changes. Stakes are too high.

And it's not like a rebound in Saudi production was not discussed. We will have to wait and see how big the rebound was in 2008, but as I said up the thread, I expect that the average annual production in 2008 will be below the 2005 rate. If this is the case, we will have seen three years of production below their average annual 2005 rate, at about the same stage of depletion at which the prior swing producer, Texas, started declining.

From Stuart's March 2, 2007 post, emphasis added, on Saudi Arabia (Saudi Arabian Oil Declines 8% in 2006):
Stuart Staniford on March 2, 2007 - 2:37pm

I agree that the hubbert linearization supports the idea that the Saudi's are post peak, but tends to argue for a much smaller decline rate than the 2006 data suggest. However, I'm a bit wary of this linearization since there's such a large deliberate throttling back in the 80s. Also, I am inclined (without certainty since we've never managed to substantiate this theory) to the view that when HL works its because of being a robust estimator for an approximately Gaussian process that arises out of a large number of fields being combined together (since the logistic is clearly a lousy model of individual field profiles). So I'm wary of it again in KSA because Ghawar is so dominant.

A way to reconcile the two views might be to argue that the Saudis have been badly overproducing their fields in recent years, which is why the trend has been above the logistic, and we are now paying the price in a rapid dropoff.

My response:
westexas on March 2, 2007 - 3:45pm

This is why I have been speculating for a while about a future rebound in Saudi production, albeit to a level much lower than their peak.

What we may see is a very sharp decline, because of a crash at Ghawar, followed by a rebound as some smaller fields come on line.

Most of my friends are pretty intelligent and "get" peak oil. In addition, I work in the nuclear industry of the majority of us understand the problem as well. But for every one of us that gets it there's ten thousand that don't, or refuse to admit the possibility that the earth's resources are finite. I live in the redneck south so you can imagine the attitudes. The way I approach things now is that instead of trying in vain to explain peak oil I just tell these folks that oil prices will fall back down soon because of new oil fields coming online, new refineries, bio-fuel, more drilling, new discoveries, Saudi Arabia increasing production again, the powerful oil lobby conspiracy, oil futures, if only they would allow to drill in Alaska...pick an excuse. So they shouldn't worry, keep driving that big SUV, drive everywhere, etc. Heck, if they're not driving an SUV, now is the best time to get one, because they're cheap now. That way, the sooner we use up this resource, the sooner we'll actually have to face the problem and find a real solution. Prolonging our addiction to oil will only make things worse in the end.

Fear not, Sir Bikes Alot. There is a "price point" where everyone will "get it" whether they want to or not!!

Care to elaborateon where you think the price point is? Memmel had an intersting theory that it is around $175 a barrel which on current trends is not too far away.

Even after shortages set in, there will be about 20% of Americans who still will not "get it." Denial will persist.


On that vein there is in my mind the thought that TOD will only rouse the populous to a conciousness which produces many half-assed solutions, aggravating and extending rather than alleviating. Take ethanol ... please! :)

Is it a choice choice between quick and deadly or long and dirty?


Dragonfly, just read yours, does it mean you are in the camp of the quick and deadly?

I live in the redneck south

LOL ! I live in the redneck north - Nebraska.

More than once I have thought how surreal it is to live here after digesting what I read on TOD.

Awwghh ... That's not very nice! Poor rednecks.

Ace - I gather the natives were restless yesterday. Here's my base case Saudi conceptual forecast produced in August last year that built upon the work that Stuart and I did on Ghawar, then integrating what we know about megaprojects (you already posted all the links in your article).

Forecast numbers are production capacity. Actual production may be lower depending upon demand. Click all charts to enlarge

The recent Saudi increases are I believe within the scope of the range for this forecast - so I don't see anything unusual about recent Saudi pronouncements - that is if they do indeed raise production. In essence new production may come from the Khurasniyah complex coming on stream - do you know if that is ready to go?

The bottom line is that Saudi still may have a sufficient stream of second tier fields to come on to compensate for decline for a few years yet.

The worrying thing for me about the timing of these announcements is that the world at large may get the impression that Saudi can bring on new capacity at will - which I don't think they can do. Throwing all new production into the mix will mean that Saudi is not building spare capacity and therefore will have no swing capacity - apart from deciding to cease flat out production in which case their production might fall.

There is much uncertainty here - much riding on the age of the famous Linux saturation map for Ghawar. If that map was a few years older than I assumed then we may be looking at this somewhat more alarming prognosis.

I'd also like to note that Richard Duncan and Walter Youngquist forecast Saudi peak in 2011 in their wonderful paper titled "Encircling the peak of World Oil Production" that was published in 1999.

Oil not exported

It's interesting to consider the volume of oil that was not exported from Saudi Arabia in 2006 and 2007, relative to 2005. The difference between what Saudi Arabia would have exported at the 2005 rate and what they actually exported in 2006 and 2007 was about 657 mb (EIA, Total Liquids). IMO, it is a near certainty that this cumulative shortfall will increase in 2008, relative to 2005, although they will show a rebound over 2007.

So, for whatever reason, IMO it is a near certainty that Saudi Arabia will show three straight years of declines, relative to the 2005, in the only metric that really counts--net exported total liquids. Assuming that I am right, we will then be looking forward to 2009, to see if they can turn it around then, while their consumption grows at a furious rate.

I haven't been keeping up with TOD in recent months, so forgive me if this is a redundant question...

Regarding ELM, if the production plateau we currently find ourselves on (2005 to present day, give or take) is in fact THE plateau, what happens to net exports when we drop off the far side of the plateau?

Intuitively, it seems like the rate of decline of global net exports would jump enormously.

We have seen two years of declining net exports, with an accelerating rate of decline, which I believe is continuing in 2008, especially from Venezuela & Mexico.

I expect the top five, accounting for about half of total net exports, to approach zero net oil exports by 2031.

My guess is that total net exports in 2031 will be down by at least 75% from the 2005 peak.

Key point is that I expect to see a continuation of an accelerating decline rate in net exports.

I believe the folks in KSA would like us to believe the back half of their production curve will mirror the 1st half of their production curve instead of the near vertical line down (perhaps I exaggerate somewhat). What are the chances the bell curve is somewhat skewed to the right with a steeper slope on the backside? If there has been extended and enhanced recoveries going on for years, I would believe the chances are fairly high.

But hey...just a gut feeling.

ace...nice article and thanks for gathering all the various information on the topic from TOD. You have an excellent grasp of the "big picture" in my opinion.

Thanks for the key post Ace. Figure #9 is particularly telling. Euan (and Ace), considering the price strength of crude, what are the odds that your second Saudi conceptual graph is the more accurate one? Thanks.



I think that the second Saudi conceptual graph is the more accurate one because I am assuming only 185 Gb total URR for Saudi crude and condensate. This assumption is based upon the analysis in section 5 of

In addition to that analysis, the HL annual and monthly charts have been updated below. The annual chart below indicates a total URR of only 160 Gb if the years from 1991 to 2002 are used. This 160 Gb appears low but this is prior to the more prolific use of high tech wells by Aramco. (According to Saudi Aramco's press kit there were only 2 smart well installations in 2004 which increased to 24 in 2005.) Assuming that Aramco will be able to increase production to 9.3 mbd in 2008 above that of 8.7 mbd in 2007, the years from 2005 to 2008 indicate an HL URR of 185 Gb. The OPEC OMR June 2008 is indicating a year to date average of only 9.06 mbd to May 08.

click to enlarge

Below is the updated montly HL which also indicates a URR of 185 Gb.

click to enlarge

Assuming a total URR of 185 Gb implies the following forecast production profile for Saudi Arabia (incl half of Neutral Zone). The depletion rate of remaining reserves was an average of 4.4% from Jan 05 to Dec 07, shown by the dashed green line. This depletion rate is expected to increase to 5.0%, shown by the solid green line. This sudden jump in the depletion rate probably means that Saudi Arabia is producing at close to economic capacity.

click to enlarge

Below is an update of Saudi Arabia's forecast production to 2100. Given that Saudi Arabia has produced an average of 9.06 mbd to end May 2008, production would have to be an average of almost 10 mbd from June to December to exceed Saudi's 2005 peak. I think this is highly unlikely and that Saudi Arabia has passed peak production. (Saudi C&C average production for 2008 is forecast to be 9.3 mbd.)

click to enlarge

I call on Saudi Oil Minister Naimi to provide some transparency about Saudi Arabia's reserves and production at the June 22 meeting. have some cojones. Go get 'em!!

Thanks for your reply ace. And congrats on your production estimates for KSA. They unfortunately have been less optimistic than others but appear to be close to the mark.

I am assuming only 185 Gb total URR for Saudi crude and condensate. This assumption is based upon the analysis in section 5 of

And after reading section 5 in your link and subsequent observations by memmel et al one wonders if even 185 GB total URR is optimistic.

The depletion rate of remaining reserves was an average of 4.4% from Jan 05 to Dec 07, shown by the dashed green line. This depletion rate is expected to increase to 5.0%, shown by the solid green line.

And of course, none of these depletion numbers take into account Jeffrey's ELM i.e. how much oil will actually be exported...
Happy Fathers day! : )



185 Gb might be optimistic but the more important point could be that Aramco have increased the depletion rate from 4.4% to 5.0% suddenly. This sudden increase occurred at about the same time as the the price discount increased, for Saudi Medium and Heavy crudes, from Saudi Light.

Aramco must be concerned about high oil prices and are discounting their heavy and medium crudes so that they can increase production of these crudes.
This has happened in the past as indicated by the grey bands in the chart below.

click to enlarge

When the US invaded Iraq, Aramco discounted their heavy/medium crudes to stimulate demand and raise production. The heavy crude discount was about $3 in Sep 2007, now it's doubled to over $6 per barrel.

This indicates that Aramco has been able to increase production by increases mainly in their discounted heavy and medium crudes. The surplus capacity of Aramco has usually been assumed to be in their medium/heavy crudes.

My question is why should they discount their heavy and medium crudes by such a large amount? As in Jan 05, Jan 06 and Sep 06 the discounts proved to be temporary. What happens when these big discounts end? I think that the depletion rate will drop, by 10%, to about 4.5% from 5.0%. For this to happen the production rate also has to drop by 10% down to about 8.4 mbd. Other factors could also cause the depletion rate to drop such as increasing water cut at Abqaiq or northern Ghawar.

When will these heavy/medium crude discounts end? My guess is that they will probably end, at the latest, just after the US presidential election on November 4, 2008. It is interesting to note that there were substantial heavy/medium crude discounts during the last US election in November 2004 as shown by the Band B2 in the chart above.


what's worrying about this is that IF Ghawar still has some 'juice' left in it (graph1) then its likely KSA can keep producing 'a bit extra' for 3 or 4 years more unlike the 2nd graph -i.e. the signal they give the world is one of there NOT being any major problem. The real problem then becomes the preciptitous decline predicted with no hope of plateau as would be the case in the 2nd graph.

So it seems we either get to ~2012 then 'fall of a cliff' OR we have increasing prices with no 'salvation' from here on out but not so steep a decline till after 2020 (undertsood ELM will of course make both situation worse than they appear from above...)

Regards, Nick.

There is no cliff in the second chart but there is a lot of heavy sour crude and NGL in it.


Khursaniyah production is supposed to start next month and Aramco says the field can produce a maximum of 0.5 mbd.

As the Khursaniya project, including Fadhili and Abu Hadriyah, has already produced about 2 Gb, I think that the Khursaniyah project will produce, at best, 0.35 mbd.
for more info see

Don't know if you fellows have caught this interesting comment from...Friday, June 13:

RIGZONE - Platts: OPEC Production Up 370000 b/d This Month

A senior OPEC delegate said Monday that OPEC ceilings and quotas had become largely irrelevant and that OPEC had a "tacit" understanding that those members capable of boosting crude production should supply as much oil as world oil markets needed.

Which immediately put me in mind of Deffeyes's account of reading the one paragraph comment in a newspaper (ca. 1970) about the Texas Railroad Commission announcing there would be no further production restriction, whereupon Ken announced to his wife that "Old Hubbert was right!"

I'm having trouble accepting what is plainly before me. Saudis are lying. Or perhaps merely prevaricating. But why? The truth will come out in a few years, at the latest. What near term advantage does this lie give them? Advantage in relation to whom? If they collapse suddenly, without warning, there will be no one capable of coming to their rescue. It doesn't make sense.

The advantage to delaying the public admission is the ability to circle the wagons and allow world leaders to make a plan. The upcoming meeting where world leaders are invited smells very much like this is the intention.

...and if someone was standing there with pitchfork in hand wouldn't you say , "lets make it next week"?

BBC tv reported that "the oil price crisis" (think that's what they called it) is thought to be a main topic of discussion between George Bush and Gordon Brown at their meeting in the UK.

BBC tv also reporting that the UK fuel shortage due to strike action has "markedly worsened" today. I hope Air Force 1 brought extra fuel or GWB might be stuck in London for another few days :-)

Yes, note they call it an oil "price" crises...not an "oil crisis". Got to careful how you frame things when it comes to soundbites.

He can dos down with the BA passengers at Heathrow :)

I hope Air Force 1 brought extra fuel...


Doesn't the bit you didn't quote along with the smiley make it obvious?

BBC tv also reporting that the UK fuel shortage due to strike action has "markedly worsened" today.

It was a simple joke about the UK not having enough fuel to fill up Air Force 1. Just to double clarify I am not suggesting anything untoward!!!!

Or maybe you're just joking that you'd rather see him stuck in the UK. Got to be careful with jokes about Air Force 1 ;-)

I WAS joking! Next time I'll smilie back!

If we were certain that the world was on the verge of peaking we'd vigorously invest in alternatives, something which a country like KSA, which exports oil/petroleum products and not much else, doesn't want to see happen. It's only sensible that they cover this up as long as possible. Even after they undeniably decline they'll find customers, until we can wholly do without petroleum, and absolutely divorcing ourselves from it will take decades, if indeed it is possible.

It's been suggested that they may be coming around to the realization that alternatives to oil might not be so simple for consumers to implement, too.

Many believe their production will gently decline, not collapse. Their mainstay fields are onshore and Saudi Aramco is chock full of quite brilliant engineers; they're not exactly short on revenue, too.

I believe we are seeing an identical situation evolving with regard to the US banking industry. It appears the the US Fed Chairman and Treasury Sec'y are actively assisting US banks to conceal the extent of losses in their 'tier 3 capital' and off-ballance-sheet SIVs. IMO they have a couple of motivations:

1. Don't want to lose their prestigeous, well-paying jobs just yet
2. If the investing public knew the whole truth, equity and bond markets would collapse.

Occurrence #2 would not be good for anyone in the long term, so they're just stalling for time and hoping someone will figure something out.

So as JHK says, they 'wish upon a star...'

Errol in Miami

The UK authorities seem to have similar motivations in cracking down on short selling, so that the potential bankruptcy of the banks is not made obvious and more money is pulled into them as they do not reveal their true financial positions and the likelihood that they will need to make further rights issues further diluting existing share capital.

I'm having trouble accepting what is plainly before me. Saudis are lying. Or perhaps merely prevaricating. But why?

Here is what I think Matt Simmons has said about this. When the Americans ran Aramco, we told the Saudis that they had enough oil to last for centuries. So the Saudis told their people that. They have built their whole society with that understanding. Now some parts of the leadership are probably realizing that that is not true. So what can they do? Admit that they have not been telling the truth and that production will soon peak? That well more than half of their precious inheritance has been squandered at very low prices? The regime does not have that much legitimacy and has a lot of internal enemies. They seem to be afraid to admit the truth for fear of what might happen to them at the hands of their own people.

We have the same problem in the US with the idea of gaining energy independence. It is clearly impossible but our political leaders are too fearful of the backlash to suggest that that is the case. They would be condemned as so unpatriotic and voted out of office. People always vote for the most optimistic scenario that can possibly be believed and the experts are very mixed on peak oil.

Energy independence is not clearly impossible. There is enough power in sunlight, wind and deuterium to last 4 billion years. Sand, metal and sea water are plentiful.

I was certainly fooled by the reserve changes during the quota wars of the late 1980's. I had loosely followed peak oil theory for decades, often wondering when the peak would occur. The local library had a subscription to the Oil and Gas J. I regularly read year end reserve data. When I saw the huge increases I had no clue that they were fraudulent and decided that since so much oil was being found, peak oil might not arrive during my lifetime. L.F. (Buz) Ivanhoe soon clarified the situation. Unfortunately there are those who still believe, or claim to believe, the phony data.

How do you know that the claimed reserves before the quota wars were correct? AFAIK they were never independently verified, before or after. Clearly the huge increases in reserves are quite improbable, but the figures from before the increases could be equally bogus.

when aramco was a partner with the seven sisters, their reserve estimates were at least subject to sec guidelines. that dont make them correct, but they were at least subject to public scrutany, a little more transparent than now.

those reserve estimates were probably arrived at by some crew cut sportin, slide rule weilding, pocket protector wearing engineers, i.e. on the conservative side.

i remember the days when texaco's reserves were tallied with a frieden calculator (mid '70's). i exagerate only slightly.

In Simmons' latest PDF presentation he actually advocates military force if necessary to get accurate remaining recoverable reserves figures (otherwise obfuscators delay action till it's too late):

In bankerspeak, he's scared $#!tless:

"Staying 'in the dark' will unleash the last war" and

"Let's not create a 'lights out event'. I am too young!"

I guess we can move Simmons to the Defcon 1 camp...

You completely misread what Simmons is saying.

How? I also read it that way, so wouldn't mind being set right (his statement DID set me back a bit). He also seems to advocate a lot more drilling and a little more conservation, though it would be nice to hear more of what goes on between slides.

I think the troops he is referring to are auditors and geologists. It's an attention grabbing slide which I guess he explains in the talk. Here's the slide in question. Notice the picture of the "troops".

I think he might fear that eventually another type of troop will go in but I don't think that's what he wants.

Got it! Maybe I've become hypersensitive to military adventures :(

How do you know that the claimed reserves before the quota wars were correct? AFAIK they were never independently verified, before or after. Clearly the huge increases in reserves are quite improbable, but the figures from before the increases could be equally bogus.

Lynch pointed out in CROP CIRCLES IN THE DESERT that the truth lies somewhere in between - well, actually Mike is sure it's at the far right side of the scale, but anyway:

Evidence to refute this concern can be inferred from data provided by Simmons. He lauds the estimates of the concession holders in 1975, when Ghawar was estimated to have 46 billion barrels of remaining reserves and having produced 15.5 billion barrels. Yet to this date, Ghawar has produced 55 billion barrels or 90% of the earlier estimate, far past the midpoint when Simmons claims output should decline. And he himself remarks that most of the field has not been drilled. Also, every other reference to Ghawar’s size is substantially above that made by the majors in 1975, which suggests their estimates were conservative relative to the current reserves (table 3).

Probably Lynch is misquoting Matt in re: "lauding."

Michael Lynch is alot like Justice Antonin Scalia. Numerous Scalia rantings come to mind. In these rantings, everyone is accused of logical weakness. Then the ranter provides no solution.

Lynch rails against those making arguments he disagrees with. He asserts logical inconsistencies, failure to understand technical data, and intellecutal herding behaviour. Then, at the very moment in a paper or interview where the listener fully expects Lynch will correct these deviances by offering his own reasoned argument, he goes silent.

Micheal Lynch is a mendacious kook. He is a gas-bag of Straw Man and False Dilemma arguments. I cannot imagine how he survives or who pays him. He is thoroughly dishonest on an intellectual level. Or perhaps his "bandwidth" is simply not that powerful. Lynch's record is very clear: He is a snarky nit-picker who offers nothing of his own. Rather, his project seems to be to dismantle the work of others, and anyone who reads or listens closely will see he's not very good at it. But he has a boatload of attitude--because that's what people bring when they can't bring the goods.


Just a reminder, thanks in advance for clicking the "SHARE THIS" buttons (which are available on all our posts) and vote for our work on various sites like reddit and digg. Those link farms help us get a lot more eyes, which means more ad revenue to support the site--it's worth ten seconds to do it, I hope.

This is YOUR chance to help us counter the rhetoric in the MSM and help people understand these problems and sound a call for transparency, even if it is terribly unlikely. Give it a try.

i dont think you are making any friends in high (aramco) places.

exactly what is meant by production efficiency, as referenced in the stratoil pdf ?

"Oil minister Ali al-Naimi said a meeting of oil exporters and importers to be held in Jeddah later this month would seek a solution to the unprecedented high prices,"

I hope something useful can be achieved and resolved.

Bob. your point is taken. What Ivanhoe actually did in the inaugural edition of The Hubbert Center Newsletter (96-1) was to show that the reported reserves were supplied by government officials for quota purposes and were not necessarily related to geology or reservoir engineering. It is possible that even Saddam Hussain or one of his henchman provided data.

A part of propaganda may be circular referencing. In support of their reserve claims Aramco cites BP and USGS. Then BP and USGS turn around and cite Aramco's claims as the source of their data. The so called journalists of the MSM cite all three sources which just happen to agree with each other. If three sources agree it must be true.

I think we should consider that the Saudis may be more focused internally than we suspect, i.e. they may be less concerned that the world will begin to develop alternatives than that an admission on their part that reserves are limited and are in fact in decline will add to instability within the country.

The Saudis cannot admit to a decades long lie. That will open a whole Pandora's box and could lead to the fall of the regime. The lies have to continue. Therefore, this meeting on 22 June will very likely be a successful attempt to coordinate a curb in oil market speculation. Prices may very well decline soon ... with disasterous consequences a few months down the road.

Bingo! I was trying to figure it out, and now you have provided the key!
They bumped reserves in the first place to maintain a dominant place in OPEC when voting rights were according to reserves, and now they can't admit to their people that the wealth that they thought would go on forever doesn't exist - some might even ask why Crown Prince this and that have been frittering billions.
Bush's recent indications that the Saudi's may not have that much extra they can turn on may not be the result of unaided brilliance - they might have privately briefed their old buddy.

I agree, if it is a facade, they will continue to maintain it. They have no incentive to come clean, and a lot to lose.

They bumped reserves in the first place to maintain a dominant place in OPEC when voting rights were according to reserves, and now they can't admit to their people that the wealth that they thought would go on forever doesn't exist - some might even ask why Crown Prince this and that have been frittering billions.

From that Lynch paper I link to above:

A lot has been made of the unreliability of OPEC reserves in general and Saudi reserves in particular, especially the upward revisions that occurred in the late 1980s—a time when the organization considered employing a standard formula for quota-setting that would use reserves as one factor. (Contrary to the claims of some Hubbert disciples, this was never implemented.)

The clearest indication I get on this is that this is the umpteenth time they (the KSA) have tried to (half-heartedly) talk the oil price down with promises to increase production. In the old days when they wanted to drive down the price they just did it, no talk necessary. The KSA these days reminds me of Ben Bernanke and Hank Paulson talking about a strong dollar. Talk is cheap.

Yep...and the more they talk about something that does not happen, the more people stop believing them. How many times would you buy used car lemons from a dealer that advertises "Just Like New!!!"? Once in my book...

Minor point, but there seems to be a typo in the first point of the executive summary:

Aramco’s statement that it is the world’s leading oil producer is now false as it now second after Russia since 2006.

Should be:

false as it is now second after Russia

OPEC may be controlling information in order to manipulate prices both up and down. For instance, if the market is keeping supply and demand in balance, then they can gradually raise prices and income, and save their reserves, by withholding a relatively small amount from production. But, if the market had hard data on available supply, and that data showed limited reserves, then prices could spike way beyond current levels, causing severe economic problems and a crash in volumes and prices. The only valid reason to control the information is to make it easier to manipulate prices in OPEC's favor without causing a severe economic downturn which would then reduce revenue both in their oil business and also in their other investments.

Aramco: 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.
Ace: 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), in 2007 (9.44 mbd vs 8.72 mbd), and in the first 3 months of 2008 (9.35 mbd vs 9.20 mbd). Thus, Aramco’s 2008 statement (Fig 1) that it is the world’s leading oil producer is now false.

I don't think this is important (except in nyah nyah nyah world), but I would parse that quote as saying that SA was once the World's Biggest Producing Country (having become the WBPC at some point in the past, and maybe ceasing to be the WBPC before 2006), and is still the biggest exporter. Both these statements are true AFAIK.

Is it possible, that they (plus other major OPEC members they are secretly talking to), have indeed concluded that peak oil has been passed. These exporters have a lot of wealth invested in the world economy, so they don't want to see a major worldwide crash either. So perhaps for June 22 they plan on doing two things:
(1) Reasuring the world that things are going to come out alright.
(2) Under some form of nondisclosure, informing the world leaders, that yes the oil age is coming to an end faster than heretofore expected. The goal being to get them to start transitioning away from oil with all due haste, but in a manner that avoids telegraphing the severity of the situation to the markets. Since the transition won't be easy -or complete, OPEC needn't fear that the alternatives will cause the price of oil to drop. Mitigation of peak oil effects on the world economy, might not be something they would consider harmful to their own interests.

Bingo! They don't want to crash their investments just as they run out of oil.

And that means, brothers and sisters, we're running blind towards the cliff, rather than being eased down slow. They've effectively joined the crowd betting the world economy will be saved by a miracle invention. And why not a miracle? After all Allah already showed his love by planting all that oil under His chosen.

KSA also knows that it must minimize Republican losses next November, which requires a near-term bump in production to keep prices from rising more. At least a few high-ranking Democrats regard KSA as among the worst enemies of the West. KSA knows this, right?

In the short term (as in June 16, 2008) it will be interesting to see what all this political/meeting talk-talk does to the markets.

WSJ Story on Saudi Arabia, posted on the Drumbeat thread:

Some analysts have pointed to the country's Khursaniya oil field, which is expected to come onstream next month, as proof that Saudi Arabia can easily bump up its production by 500,000 barrels a day if it wants. But the plan for that field was to ramp up its production slowly, while using the new stream to allow some of the country's older fields to rest.

Would it not be in OPEC's (and KSA particularly) interest to actually come clean? I mean as long as they keep telling everyone how much oil they have are they not setting themselves up as a military target?

Wouldn't the best policy be to now gradually push down the URR, OIIP and RF numbers to make themselves less vulnerable to invasion? I don't think they can afford to do an about face next Tuesday, but it would not surprise me if over time, the propaganda trend reversed direction. Not so much that we will get the actual truth but an exagerated version of the decline.

The world is hooked well enough on oil that they won't be losing any money if they keep it in the ground, and they know that the alternatives are laughable. The wise man does not advertsie the contents of his safe.

Would it be in their interest to report lower reserves? Well, yes and no. It's been reported recently that the Saudis are concerned that the current high prices could lead to economic slumps and lower demand. Knowing that the reserves are lower than previously reported would likely push the price of oil up - perceived scarcity boosts price, as for example during the 1991 Gulf War when oil production increased around the world, but the price went up, too - perceived scarcity.

Already countries are talking about "decarbonising" their economies to avoid catastrophic climate change. An even higher oil price combined with perceived scarcity and climate change concerns could... well... make people look for alternatives. And then in a decade or two the Saudis and the rest of OPEC could find that people just don't want their oil any more.

OPEC really want us all to keep on truckin'. Walkable neighbourhoods, localised production of goods, mass transit - none of that is good for them. And if oil prices get high enough, and it's perceived that the stuff is going to run short soon anyway, well add that in with climate change, and governments may actually pull their fingers out and move towards lower fossil fuel use societies.

That'd leave the Saudis with nothing, they haven't prepared like say Dubai has. That's the thing about oil. The West has alternatives to oil - the Saudis don't.

enemy of state,

With respect to KSA's (and the other OPEC members) assessment of their reserve base, you can be certain that they have as good an estimate as possible. Though SAramco is managed by KSA nationals, they have, for decades, been contracting some of the best (and most expensive) consultants in the business. This is also true of their production and exploration efforts.

There may be another factor pushing KSA to keep the official line on reserve base. I haven't seen recent reports but back in the early 90's KSA had developed a huge debt...into the trillions of dollars. Part of the cause was a big push to get into the refining biz. We'll never know the details of the debt arrangements but, in the oil biz, it's not uncommon for the loan interest to float based on the borrower's net assets. Just a wild guess on my part but KSA could be looking at a huge jump in interest payments/decreased credit line should there be a major rightdown of their reserve base.

" they have, for decades, been contracting some of the best (and most expensive) consultants in the business."

i tend to agree with your overall conclusions, but hiring the most expensive consultants doesnt mean much to me.
aramco has access to,and can afford the very best in technology. if the seven sisters couldn't figure out how to maximize recovery from a field like ghawar, who could ? that part of it, how to maximize recovery, hasnt changed all that much since the '80's, the 50's really.

I don't know what the Saudi's capacity is, or whether they are being honest about it or not. What I do know is that it is "put up or shut up" time. One of the big reasons why the huge investments in renewables and energy efficiency - or even going after more of the hard-to-get, lower EROI FFs - haven't been made at anything close to the level they need to be is due to the fear that the Saudis do have a lot of spare capacity and will open up the spigots, driving down prices and ruining the financials for those investments. Not having the extra capacity, and making the world think they do have the extra capacity, would be the worst of all possible scenarios for the rest of the world, and if true would quite justify the use of normally intemperate invective against the Saudis.

I don't think it's too important, really.

We're on the tracks, and the train's coming at us at 120kph.

Whether the train is 122m or 103m away doesn't really make much difference. It's well beyond time to get off the tracks.

Matt Simmons was on Bloomberg yesterday speaking about the latest pledge from SA to hike production. You can find the video link on the right side of this page:



Simmons Says Raised Saudi Oil Output Is `Drop in Bucket': Video

June 16 (Bloomberg) -- Matthew Simmons, chairman of Simmons & Co., talks with Bloomberg's Kathleen Hays from Houston about Saudi Arabia's plans to increase oil production next month and the outlook for oil and gasoline prices. The kingdom will produce 9.7 million barrels of oil a day next month, an increase of 200,000 barrels from June's level, King Abdullah told United Nations Secretary-General Ban Ki-Moon, according to a UN spokesman. (Source: Bloomberg)

00:00 Saudi oil production and outlook
02:00 Outlook for fuel prices; supply and demand

Running time 07:31

Thanks, ziggy!

Matt Simmons looks very worried in the video.

To put the planned (hoped for) increases in production in perspective, Saudi Arabia probably will have increased their domestic consumption by 500,000 bpd from 2005 to 2008.

Just a note for those that might misunderstand Saudi production figures. Saudi has refused since 1982 to document their oil sales. They may say they produced X barrels of oil last month and will produce an additonal Y amount next month, but they refuse to say to whom and how much each buyer has purchased. And the buyers are strictly prevented from disclosing the same info. That's why you have groups trying to track tanker movement to estimate Saudi exports.

More importantly, their lack disclosure regarding actually production rates is the biggest roadblock to estimating the cuurent decline status, especially for Ghwar Field.