Simmons: Saudi Oil Shock Imminent

Simmons also suggests that Saudi production is very near its peak.  But the feedback he has received from technical people who have read the book, leads him now to believe that Saudi Arabia has actually exceeded sustainable peak production already.

And I think at the current rates they are producing these old fields, each of the fields risks entering into a rapid production collapse, he said.

And when that drops, you could basically see Ghawar go from 5 million down to 2 million bpd in a very short period of time.

Meanwhile, as the world's thirst for oil grows, Saudi Arabia and other oil-producing countries will be unable to keep pace. Some analysts say Saudi Arabia is capable of producing 20 million to 25 million bpd, but Simmons says that level of production is "impossible."

and then if we get through the summer we have a fabulous respite from Labor Day to Thanksgiving, until we hunker to try to figure out how the world gets through the Winter of 2005 and 2006 because oil demand globally could easily go to 86-88 million bpd during the winter, and that could easily exceed supply by 2 million to 5 million bpd.

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Sadad Al Husseini disagrees with Simmons' assessment:
Although Matthew Simmons says it is unlikely that the Saudis will be able to produce 12.5 million barrels a day or sustain output at that level for a significant period of time, Husseini says the target is realistic; he says that Simmons is wrong to state that Saudi Arabia has reached its peak. But 12.5 million is just an interim marker, as far as consuming nations are concerned, on the way to 15 million barrels a day and beyond -- and that is the point at which Husseini says problems will arise.

Who is Sadad Al Husseini?

It can be argued that in a nation devoted to oil, Husseini knows more about it than anyone else. Born in Syria, Husseini was raised in Saudi Arabia, where his father was a government official whose family took on Saudi citizenship. Husseini earned a Ph.D. in geological sciences from Brown University in 1973 and went to work in Aramco's exploration department, eventually rising to the highest position. Until his retirement last year -- said to have been caused by a top-level dispute, the nature of which is the source of many rumors -- Husseini was a member of the company's board and its management committee. He is one of the most respected and accomplished oilmen in the world.


Perhaps Sadad knows, but is he telling the whole truth?  Would he risk his head for a NY Times reporter?
Personally, I doubt it.

I get the impression from reading "Twilight in the Desert" by Simmons that Saudi Arabia will be lucky to maintain the 9.5 - 11 mbpd level of output they currently have for much very longer. They will need to discover some significant new fields in order to raise production by 4 to 5 mpbd (to get to 15 mpdb), esp. once depletion becomes evident in Ghawar and their other large-but-aging fields.

Also today, reference to Simmons in the NY Times, via the International Herald Tribune (no reg required):  

Is the world running out of oil? Yes and no

'We're halfway through the hydrocarbon era," my old friend Boone Pickens has been saying for the last couple of years. A folksy line like that, it sticks with you. But I hadn't realized until I began poking around the world of oil forecasting in the wake of Hurricane Katrina that it also meant Pickens had taken sides in a surprisingly heated debate. He subscribes to what is sometimes called the "peak oil hypothesis," which holds that there simply isn't very much new oil left to be found in the world. And, as a result, we are currently in the gradual process of draining the more than 1.2 trillion barrels of proven reserves that are still in the ground. And when it's gone, it's gone.

What this does not say, and elides over, is the fact that as you slip down the other side of the peak oil curve, the energy cost of extraction increases dramatically, and you would be lucky to be able to extract half the 1.2 trillion barrels left
-I have to address the looming doom in these articles-

There is no threat of collapse, danger, recession,
depression or panic from a high economic demand spike.

rich and poor people are trying to buy a small amount
of food and the rich people pay the highest price
and feed their families.

rich and poor countries are tyring to buy a small amount
of oil and the rich countries pay the highest price
and feed their economies.

This is the same old story. Rich countries have the deepest
pockets to last through the 'hard times'.  While the 'developing'
countries are never going to 'develop'.

But the only panic, depression, recession, collapse could
come from a physical supply shortage

America the Vulnerable: How Our Government Is Failing to Protect
Us from Terrorism (Hardcover) by Stephen Flynn

The book above describes 3 dirty bombs going off in Miami,
New York and Long Beach.  The 3 biggest ports of trade. (I
think the author also blows up some bridge connecting us
to Canada but I can't remember.)

Only this kind of huge human caused supply shortage or some
other political or nature caused physical supply shortage could
make a SHOCK or depression or recession or panic.

A physical supply shortage (1973 embargo, katrina, iraq-iran war)
is totally differnt from an economic demand spike (2004-2005).

Because I  care about poor people I want lots of
physical supply shortages to break down world trade.  But
I don't want economic demand spikes because I want poor
countries to develop.

You want poor countries to develop so they can collapse later? The larger the population and the more energy-intensive the economy of the world, the more glorious will be the Peak of the Age? Even though that means that the decline will be more like the fall off a cliff and less plausibly survivable for anyone? What a humanitarian you are! Can I help you pull people into the lifeboat? It'll swamp quicker that way!
the future i want is for the poor countries to
use some of the hydrocarbons as overhead for building
a sustainable and renewable economy independant of
oil and natural gas and most world trade.

i should have given more detail about developing a
hydrocarbon economy or a renewable economy

and rich countries should be using hydrocarbons to
transfer from hydrocarbon to renewable

Anybody find a good list of products that need hydrocarbons
and are acutally essential for a critical sector, like
medical supplies or powerplant parts?

Hmmz interesting, i wonder what kind of timeframe Simmons is thinking about. A few months probably. That would certainly mean Peak Oil (and a second peak maybe later).
Yes - if you look at where increased production has come from in the last four years, the lion's share is from just two sources: Saudia Arabia and Russia. If both were to begin depleting with any speed, I think it would be very hard for any other production to make up for that.
But I thought we were going to drill ANWR?


That would be my guess.  My recollection from his book was that overproducing tended to cause damage on the timescale of a few months or so.  No guarantees this time, of course.
So if we're OK in a year can we stop paying attention to Simmons any more? In other words, are any of these predictions falsifiable?
Probably not that quickly. If we're ok in a year and then Saudi production goes in the toilet in 2007, I think people would say Simmons was mostly right. If you look at what he actually says, he is relatively nuanced in his statements (speaking of the probability of this and the chances of that).
Honest folks, I don't see any new revelation from Matt Simmons in the lead article for this thread. I would agree that if there's no downturn in Saudi production from Ghawar by this time next year, Simmons will appear to be "crying wolf" and so will not be doing the peak oil community any favors. On the other hand, Stuart is also right that if there's a decline in 2007, Simmons' is mostly right. I sometimes wish he would be more temperate in his statements.

The only thing new is the suggestion that the Saudis are overproducing.
No, they are not falsifiable. That's the beauty of these predictions. If the Saudis don't go off a cliff, that just means we're in even more danger, and need to listen to Simmons even more. It is impossible for facts to damage his authority or credibility.
Here I completely disagree. If the Saudis were to allow a third party audit of their reserves and the results to be published in detail, we would all know the truth. Matt Simmons would be a hero or an idiot. The reason there are few useful facts is because of official government policy on the part of the government of Saudi Arabia and in no way is the fault of Matt Simmons.
Let me rephrase: It is impossible for facts to damage his authority or credibility, unless you let him call the shots.

Maybe Simmons should start with a more modest, intermediate goal -- such as opening up the ASPO database to a third party audit.

For those who are interested, a contrarian analysis of Matt Simmons is located here.

Well, that link doesn't work for me, but I had already found your site through AltEng. From what I have read, you believe in Peak Oil, but the rest of us are not worthy. article #97 refers to Simmons

I don't think much of your analysis. Calling someone names and pointing out that they don't agree with other people is useless as a form of analysis. You need to actually read his book and criticize the logic of his position if you are to make a useful contribution to the debate.

Personally, the striking things about Matt Simmons are 1) that I couldn't find major logical holes in his book when I read it, and 2) he has a track record of calling the situation right, rather than wrong. Here he is in 2000 pointing out the problems with North American natural gas supply before they were widely accepted, and the problems with electricity supply before the California electricity crisis.

And here is is correctly calling the peak in North Sea oilin 1999, at a time when very few agreed with him.

To me that's a track record that makes me listen very hard to what he has to say.

Stuart, the issue isn't Simmons' forecast of Saudi production. That point has already been addressed by Husseini. The issue is whether we should drill ANWR to prop up the status quo. I don't need to read any "analysis" by Simmons to weigh in on that question. It's not an analytical issue; it's political.
Will there be enough oil/bitumen produced to prop up the status quo?  Will it get here soon enough?  Correct me if I'm wrong, but I gather it will be ten years until we see anything from ANWR, and even with Sadad al-Husseini's assurances, that seems to be be too little, too late for any propping up of the status quo.
I was referring to the post on your blog that you linked where you referred to Simmons as "speaking out of his ass". I didn't think you justified such a strong statement at all well.
Simmons is calling for sever price spikes near the end of the fourth quarter 2005-2006:

MATT:   Let me give you some really interesting déjà vu numbers that I pulled out earlier this morning while I was thinking about the irony of the 15th anniversary of Kuwait's invasion by Iraq. I had just produced a paper called the Coming Domestic Oil Embargo -  and it got enough notoriety that Forbes magazine was in preparation for doing a major article that came out a week after Saddam's invasion, called the Coming Domestic Oil Embargo, and they had a fabulous illustration of Uncle Sam filling up his car at a gas station and accidentally stepping on the hose - and what the story was all about was my concern that unless we started a totally different energy policy of using less energy, or a policy of expanding our oil supply through removing the drilling bans in the inner Continental Shelf, and finding a way to jumpstart creating more drilling rigs, and bringing more people back in, we'd wake up some day - and I never thought it would be that day, or anytime in the 90s, but I knew it would take 10 years to make this happen - we would find we had actually embargoed ourselves.

Let me tell you what the numbers were all about, because I had not thought about this until yesterday and today. In 1990 the United States was still producing 7.3 million bpd of crude oil, today it's 5.1; the 7.3 was after a drop over the previous 5 years of 1.6 million bpd; our refineries only needed to run at 13 ½ million bpd; and we only needed to import 5.8 million bpd of crude oil imports to balance our system. Today we have to run our refineries at 100% or we have major product shocks; today, we have to import 10-11 million bpd, or we lose crude oil stocks; we have to basically create almost 3 million bpd of finished product imports; we have to run the system on a 24-7, all Summer long. And we still liquidate stocks.

So we have actually now created a pending domestic embargo, and we're going to be lucky to get through the Summer without some periodic shortages. We probably will, but the odds are probably as high we will have some shortages, and then if we get through the Summer we have a fabulous respite from Labor Day to Thanksgiving, until we hunker to try to figure out how the world gets through the Winter of 2005 and 2006 because oil demand globally could easily go to 86-88 million bpd during the Winter, and that could easily exceed supply by 2-5 million bpd.[38:53]

JIM:   If that was to happen we would almost be looking at $75-80 oil, I suspect.

MATT:   No, no, no. Oil prices could easily go up 5-10 times.

That's not the most striking part of that interview. What really astounded me was the following statement:

"But by 2030 we could easily have a world that can only produce 10 or 15 or 20 million barrels per day, and the shortfall from what we thought we were going to produce is only a modest 100 million barrels per day."

But then there seems to be some kind of disconnect in his mind because a few minutes later he's telling the interviewer that he's optimistic that we'll find solutions and that the economy will be better and we'll all have a better quality of life. Maybe he knows something about his Plan C energy miracle that he's not divulging publicly, but I sure as hell don't see how we could adapt that quickly to a 100 mbd deficit.

"But by 2030 we could easily have a world that can only produce 10 or 15 or 20 million barrels per day, and the shortfall from what we thought we were going to produce is only a modest 100 million barrels per day"

I think a prediction like that melds very nicely into Duncan's timeline:

I think Matt being a member of the CFR and such must end on a happy note so the common folk still have some hope.  Sort of like the FX movie "Oil Storm".  Show the chaos that will ensue but leave the chumps with some sort of hope in the end.  I think he is a peak oil "extremist" but he tries to cover that fact for public consumption.  He knows things are going to be catastrophic...


I agree.  I had the same reaction when I read his book.  There is a kind of leap from the dire to the optimistic without connecting any dots.  
I think also he just hasn't thought about the demand side nearly as much as the supply side, and he's hoping if we take the problem of developing novel energy technology really seriously, we'll pull something out of the hat (which can't be excluded as a logical possibility).
I haven't dug out his book yet.  His logic is that "we", the American people, have been through tough times before and we can do it again. I don't think it is any more sophisticated than that.
Lets just hope that isnt his way of saying that dieoff resulting from energy shortages will wipe out enough people on the planet to make 20 million barrels a day plenty for those who remain.