Eight oil industry experts give their views on King Abdullah's 'keep 'em capped' announcement
Open Access Article Originally Published: April 21, 2008
Reprinted from the April 21, 2008 edition of Peak Oil Review, the weekly newsletter of the Association for the Study of Peak Oil, USA. Given the historic record price of oil last week touching near $117 and the admission by Russia that its own oil fields have peaked, the decision by the Saudi's and other Middle East producers to essentially cap production at its current level for future generations should have been important news. As the authors point out, it went largely ignored by the media. Here is what a number of oil industry experts think.
On April 13, Reuters reported the following from Riyadh:
Saudi Arabia's King Abdullah said he had ordered some new oil discoveries left untapped to preserve oil wealth in the world's top exporter for future generations…
"When there were some new finds, I told them, 'no, leave it in the ground, with grace from god, our children need it'," King Abdullah said…
Saudi production capacity stands at around 11.3 million bpd, and is scheduled to rise to 12.5 million bpd next year.
The King's remarks seem to confirm a statement made last year by Saudi oil minister Ali al-Naimi who, when asked "How high can your production go?" replied, "We'll get to 12.5 million barrels a day and then we'll see."
If the Saudi announcement was a bombshell, American nearly newspapers ignored it. We decided to canvass experts we respect to see what they thought. Excerpts follow:
Tom Petrie, vice president, Merrill Lynch:
"King Abdullah's quote speaks to the fast-emerging reality of what I call ‘practical peak oil.' The Saudis and other exporters are placing a new emphasis on elongating the petroleum exploitation and depletion cycle. This stems from a growing awareness of the challenges of conventional resource maturity, as well as rising resource nationalism. This is likely to result in an earlier occurrence of global peak oil output than many consumers yet recognize."
Charles T. Maxwell, senior energy analyst, Weeden & Co:
"If Saudi Arabia's oil reserves are not going to be made available to the world in future years, beyond the expansion they have already signaled (to 12.5 million barrels/day), then the geologic oil supply constraints that we are feeling in many other parts of the world are going to close in on us earlier and more severely than we previously thought. It's a major change in policy. It's a powerful message. It makes the geologic message that much more decisive."
Chris Skrebowski, editor of Petroleum Review:
"King Abdullah's statement represents the final seal of approval on an emerging Saudi policy of restricting output to save oil for future generations. In recent years the Saudis have been managing expectations of future capacity steadily downwards. No one now talks of their reaching 15mn b/d. If they reach 12.5mn b/d, while maintaining 1-2mn b/d of ‘spare' capacity, we should plan for Saudi production to be 9-11mn b/d for the foreseeable future.
"High oil prices and bulging treasuries are giving producing countries the option of maximizing plateau production. We may never know if these decisions are being dictated by geology or driven by a political imperative of ‘saving oil for later generations.' I suspect it's a mixture of the two.
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Reader Comments
11 comments so far...
21-Apr-2008
61279
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Thank you EVWorld for bringing this information to us. The mainstream media seems completely oblivious to the significance of this, and we can't blame it on a left-wing or right-wing conspiracy, just an utter failure to look for the root causes of the increase in gasoline prices.
Posted by: Rob Neff
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21-Apr-2008
61282
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Such a simple thing to report, yet so important. Why can't the MSM report this ? Good grief, it's a presidential election year, what do the candidates think of this ? Really, energy is at the root of so many of the issues that are discussed - economy, Iraq, etc it really should be the main part of any discussion. Thanks for the report.
Posted by: Dino Pello
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21-Apr-2008
61283
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I think the choice of the word "Bombshell" in the title is quite ironic. This is the first volley in what is sure to be a worldwide resource war. The only question is whether the war will be strictly economic, or whether it will escalate to an actual armed conflict. Unfortunately for us in the US, we have mismanaged our resource wealth to the point that we are going to be beggars for oil and fertilizer to be able to plant and harvest the only reliable export we have - food.
The scary thing is that I don't think any of the three mainstream presidential candidates have anything better than shit for brains when it comes to energy issues. Certainly McCain proved last week he is totally clueless when he proposed the gas tax vacation.
We're screwed.
Posted by: Mel O'Creme
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21-Apr-2008
61284
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You want to thank Steve Andrews and Randy Udall for their diligent efforts on tracking this and following up with the experts. If you'd yet subscribe to the Peak Oil Review, I encourage you to do so. It's free... best deal in town on this topic.
Posted by: Bill Moore
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11-May-2008
61613
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Whether by choice or not OPEC would be wise to optimize production time-wise. We're "lucky" they sell as much as they do.
Posted by: buzz saw
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22-Apr-2008
61302
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ONE reason I see for this NOT making mainstream media is from a well worn line in a movie...You can't handle the truth!! I see the media spinning the rising gas prices everyday. I see the people groaning about how much it's costing to drive my SUV. Don't you think mainstream wants to paint the average US consumer as a victim??? Not one person in those reports likely realizes what peak oil means. If they do, it gets edited out. NOt about the price of oil thar kids, it's about the price of lifestyle!! If you really think about it, the Saudi's are in position to control the world ecomony. The rest of the world provided them that right.
Posted by: Scotty s
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22-Apr-2008
61305
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It appears obvious that the only way we are going to be free of the control that having others control the energy is to work around them. Our government does not work for us. The oil companies certainly don't.
Converting our cars to electric, putting solar and wind generators on our houses is going to be the way to avoid this control. It is expensive, but the alternative is to hope the powers that be will violate their duties to control their monopolies on industry, and government. Good luck on that!
Posted by: Martin Kinnaman
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24-Apr-2008
61330
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The King's statements are reinforced by the fact that both Bush and Cheney have independently visited there in the last month and have since stated publicly (e.g. on nightline) that it is not reasonable to ask (beg?) the Saudis to increase their output since they can't.
We need to develop natural gas conversions for our existing transportation fleet and complete the Alaska gas pipeline ASAP. For new car purchases, there is the Honda GX and the Phyll which will allow you to refill your CNG tank from your home gas line (if you are fortunate to have one).
There are already CNG conversion kits selling in Brazil for $1500 which allow you to switch back to gasoline when the CNG is exhausted. These would of course not meet US regulations.
We should also develop ways to conserve natural gas such as washing machines that spin faster (e.g. Fischer Paykel), eliminate gas lights, gas pool heaters and minimize the use of natural gas for power generation.
Posted by: Bob Goldschmidt
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28-Apr-2008
61379
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I am not sure why every one is ignoring the fact that since the first war on Iraq. Saudi's and all Arab oil exporting countries had waken up after 50 years and decided to take control of there own oil. Slowly but surely most of the big oil companies are phased out of the region, all conventional big project are going to local companies like Aramco, Qatar gas and so on. These countries not only want to benefit from the pushing the prices up but they also want to increase there margins by fuelling the competition between the big players to reduce the return of investments down and maximise there profits. The questions is where is all that excess money going!
1. They are trying to invade the world, by spreading the Islam ideology. They are financing news stations, hundreds of preaching TV channels ...etc.
2. Fianicially, Trillions are spent on buying European/ American companies directly through government originated fund copmanies, or at a personal level through private equity companies and rich individuals. A small example Saudi nationals controls more that 10% of the US economy and they will be controlling much more after picking up good deals on troubled banks.
Finally I believe there is a lot of politics behind the oil prices and normal individuals know a fraction of the truth. The only way we can combat this is by individual/ small private companies initiatives, the risk is high but the return on investment is uncapped as well. We have to hope that these companies are not boughts befor they even see the light.
Posted by: alex k
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02-May-2008
61472
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The Kingdom has probably peaked, and the King has no other choice than to fake a "voluntary" production decline. If Ghawar has peaked, then Saudi has peaked, and the world has peaked.
The next months will tell us! More info on peak oil in french here: peak oil.
Posted by: Yanik Dery
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02-May-2008
61487
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Hmm, still no mention of deep mantle oil.
Posted by: Patrick DonEgan
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