 |
|
EV WORLD EXCLUSIVE ARTICLE |
Saudi Arabian King Abdullah assumes official leadership of the desert kingdom whose power is based on a handful of super giant oil fields. While the exact production numbers are a closely-guarded state secret, various sources estimate the kingdom as producing about 9 million barrels of crude a day. The question is, how long can it sustain this rate in fields that are now half-a-century old?
|
Part one of two-part exclusive interview with Twilight in the Desert author, Matthew Simmons
Open Access Article Originally Published: August 05, 2005
"We've created a gigantic myth over the last thirty-five to forty years", Matthew Simmons told me from his summer home in Maine, "that effectively said the Middle East has unlimited amounts of oil when it wasn't true".
How does he know this? Because he's spent the better part of the last two years carefully combing through a three feet-high stack of Society of Petroleum Engineer technical papers he discovered after attending an industry conference in Saudi Arabia.
"What I didn't realize at the time was I apparently was the first person of any sort of notoriety to ever even raised the issue [of the health of the Saudi oil fields], which now fascinates me. How did we start so glibly assuming that the Middle East has so much oil that they would, basically, never face a peak amount when, in fact, there was no data to support that other than some numbers that didn‘t have any validity behind them".
And therein lies the kernel of the problem. No one -- with the exception of the Saudis -- knows with any certainty how much oil has been extracted. I wanted to say "pumped", but the fields in Saudi Arabia don't use the traditional "donkey" pumps to extract their oil. Instead, they use reservoir pressure schemes to force the oil from underground petroleum traps locked in ancient strata. In fact, no public data has been released on the fields in Saudi Arabia since Saudi Aramco was nationalized around 1982. So, it's been 23 years since the last reliable production numbers were released.
"The proven reserves, which used to be reported on a detailed, field-by-field basis disappeared, rolled up into just country-by-country. Over the period of the first eight years of the 1980s, all of the Middle East oil producers tripled the amount of proven reserves they said they had. And then, effectively, country-by-country, the [proven reserves] number stayed still. It never changed from 1987-88 to 2005; and nobody ever said, What's going on? How do you basically keep producing 15-20 million barrels a day out of the Middle East and the proven reserves never change?"
Tanker Traffic "Consultants" a la Spies
One of the more intriguing stories in "Twilight in the Desert', Simmons' new book on the state of Saudi fields, is paucity of reliable data on Middle East production in general and Saudi production, specifically. Simmons is one of the first people to point out the fact that much of the data underlying "official" production numbers are unreliable, based largely on the findings of Petrologistics, a "powerful" information collecting company located over a supermarket in Geneva, Switzerland.
According to Simmons, this company is usually the first one the media "glums" onto each month when the latest Middle East production numbers are released. This data, he alleges is gathered from a worldwide network of harbor "spies" located in the world's top oil export countries.
"They look through a pair of binoculars and a sort of a gauge in their windows to check [tanker] plumb lines as to how much oil is being loaded into the tankers. And [Conrad Gerber's] story is he can't disclose the names of his harbor spies; he can't even call them at home because when he used to do that, one of them got killed.
GO TO NEXT PAGE >>
|
| Times Article Viewed: 9230 |
|
|
|
Reader Comments
16 comments so far...
12-Aug-2005
8843
| |
The sky is falling."
Posted by: John Adams
|
|
15-Aug-2005
8882
| |
The sky will remain where it always has been, truth be told. Why would the Saudis want to drill new ground if they're getting $65 a barrel from the old fields. I assume the old fields are still producing and will for some time though not at rates for someone else's convenience. I also assume that the Saudis are thinking long term, which is wise and should be emulated. It would seem that water marks on tankers are a good measure of a tanker's load, that the oil quality of the load is no big mystery, nor should it be a mystery where the tanker is going. If we can know where a nuclear aircraft carrier is going, finding the destination of an oil tanker is no great challeng. Also, having a single source of information doesn't make the information wrong. There's more to say about how large oil producers protect their interests from investigators and environmentalists but I must go now. I have to check the sky again."
Posted by: David Park
|
|
15-Aug-2005
8886
| |
Why would anyone expect there would be an everlasting supply of anything anywhere?"
Posted by: Kevin Hidden
|
|
16-Aug-2005
8898
| |
The sky may not be falling, but I have to assume from the remarks made here that some of the more skeptical commentators haven't bothered to read the book. Before talking to Simmons,I made a point to read the entire book including most of the appendices. You simply can't convey all of Simmon's arguments in a 50 minute telephone conversation. You can only hit some of the more salient points. So, before assuming Mr. Simmons is Chicken Little, you might want to spend a few bucks and read Twilight in the Desert.
Posted by: Bill Moore
|
|
22-Aug-2005
8972
| |
I see the future and it work!!
If we are to let go of our dependance on the Middle East,we need an alternative that will make
a difference,we cannot keep our heads in the sand any longer.Global Warming is a fact,no matter how many times we keep telling ourselves,its not happening,we are only dreaming and when we wake up
everything will be ok.It will not get better.
A small group of companies in the Uk has invented a generator that does not use any conventional fuel.Please visit their sites.The companies are Environ Energy and Enencom.www.enencom.biz ,www.environenergy.co.uk and www.the8000group.co.uk.
Posted by: mathew johnson
|
|
25-Aug-2005
9052
| |
I have worked in the Nuclear Energy Generation business for over 30 years and I am quite knowlegeable about Engineering.
Looking at EV site I came across Mathew Johnson comments,on those UK companies.They are Environ Energy and Enencom.He mentioned that they have invented a generator that does not use any conventional fuel to power it.My very first reaction was,let me have a look at this site.I studied those sites for 2 days and I am now convinced that this group of companies have indeed invented a unique Technology.I will be requesting some information from them,with a veiw to investing some money.I am not a very rich person,but I do have some funds that I was looking to invest for about a year.My three sons are all grown up and have their own businesses and my daughter is a school teacher.I will be investing $310,000.I am an ENVIRONMENTALIST.Many will say how could someone working in the Nuclear Sector become an Environmentalist,well growing older,you become wiser and your veiw of the world adapt to those changes,at least mine did.My experience and knowledge together with the power of applying them CRITICALLY and PRACTICALLY allow me to conclude that this invention will work.
Global Warming is here!
I too have seen the future and it work.
The experience and knowledge that I have obtained over the years in Engineering have allowed me to Judiciously concluded that this invention is the FUTURE and I want very much to be a part of it.
Well done Environ and Enencom.
Well done!
Let us pull together in the WEST so we do not have to be dictated to by envents in the MIDDLE EAST.
I would like EV visitors to visit their sites.
www.enencom.biz , www.environenergy.co.uk and www.the8000group.co.uk
Posted by: Harry Hoffman
|
|
07-Aug-2005
8752
| |
Good work,Bill! Have read Twilight in the Desert and find Simmon's well researched conclusions, based upon SPE documents, to be disturbing for their veracity. Thanks for the interview! "
Posted by: Jim O
|
|
08-Aug-2005
8756
| |
"It is that willingness to be the swing oil producer to help keep the world's economy on a stable footing that earned them Simmons respect."
Well, that's because they've invested oil money heavily into stocks be it in NY, London, Frankfurt or Tokio. So any sudden world economy volatillity hurst their portfolio.."
Posted by: Earl Ludowil
|
|
08-Aug-2005
8760
| |
Regarding the statement "Between 1997 and 1999, the Saudis had to "rest" their fields, scaling back production to half its present level, " ... I believe the real reason for the "rest" were super low oil prices at the time that bottomed out at $12 a barrel. They were just scaling back to help reduce the supply that was causing prices to be so low. And a big contributing factor in this was a big drop in demand caused by a big recession that Asia had that started in 1997.
Am I the only person who remembers this?
But aside from this small point, this article is very good. Might consider getting the book.
I doubt it anything in it will scare me though.
As long as I see people commuting by themselves in Suburbans and Excursions, prices still aren't high enough.
As long as I continue to see smog regularly over the Toronto Skyline, prices still aren't high enough.
I sure that other people will be afraid... but they'll just eventually realize that they'll have to do what people like me have done... move closer to work and use a bicycle/moped/scooter/motorcycle as the 'second car'.
And for people/companies who need to travel for a living (like Taxi cab drivers and trucking companies), they'll just have to invest in vehicles that use less fuel. Up until now, they haven't.
If people start doing that, it will be a blessing, not a disaster. It will be a blessing for their health, the air quality and their communities."
Posted by: Peter Stern
|
|
09-Aug-2005
8775
| |
I recently bought a copy of the book, and I'm looking forward to it.
That said, I have to agree with Peter on the Asian meltdown as a reason for the Saudis cutting back. I have to wonder, though, how badly needed that rest was.
One idea that struck me as odd was the analogy to telling the Vatican that there is no God. I've gotten the impression for years that the Saudis have been quietly (very quietly) honest about their inability to keep up with future demand. Saudi Aramco is looking at a 50-year steady production period, and pumping 30 mbpd isn't aprt of the plan:
Summary 50 Year Oil Supply
Abdul Baqi
They repeatedly state that they will continue to be a reliable supplier of crude. They never say that they will be able to keep up with demand. They almost imply that they won't even try. On page 6 they show demand going from 75 mbpd to 105 mbpd from 2000 to 2020 (already somewhat outdated). Then they basically say that if demand warrants, they will be able to produce 10, 12, or 15 million barrels per day. Let's say that we go from 88 million to 108 million over the next 20 years. Where will that 20 million increase come from? The Saudis say they'll take care of 5 million (by growing from 10 to 15 million bpd if needed). No mention of the other 15 million barrels per day. I take that to mean that they have no desire to meet world demand. That leaves us in a demand destruction situation (ie wide scale recession)."
Posted by: Steve Erlsten
|
|
09-Aug-2005
8776
| |
I neglected to mention that while we accomodate a 20 million bpd increase in demand, we also have to replace declining fields (and most countries are already in decline)."
Posted by: Steve Erlsten
|
|
09-Aug-2005
8777
| |
The comment on letting the fields 'rest' between 1997 and 99 stems from the fact that if you cut back on your production demands, reservoir pressures will gradually recover so you don't have to inject as much water. Whether or not the Saudi's profitted through keeping their other investments from depreciating was beyond the scope of the book, which deals much more with the mechanics of reservoir management than investment asset management."
Posted by: Bill Moore
|
|
09-Aug-2005
8778
| |
Another point I wanted to mention is the conflict between the goal of "maximum hydrocarbon extraction" (page 8 of the Saudi Aramco presentation) and neglecting these supposed massive unexplored areas. This might be covered in the book, but it seems to be a neglected point in most discussions.
If they want to maximize total extraction, they need to extract more slowly from each field. If they want to keep total production level while extracting more slowly, they need to develop more fields. They claim to have massive unexplored areas. Why, then, aren’t they exploring those areas and developing more fields? Wouldn't that allow all fields to be depleted more gently, resulting in greater overall long-term extraction? Do they expect such great technological gains over the next twenty years that they don't want to damage these untouched fields with our comparatively primitive technology? The "massive unexplored areas" story sounds like a feel-good smokescreen to me. I have a feeling they don't expect to find anything spectacular in these unexplored areas."
Posted by: Steve Erlsten
|
|
09-Aug-2005
8779
| |
Not to push the comments too far from the topic, but on page 28 of the presentation I linked there's a very telling chart. I've been tossing around the 10, 12, 15 million barrels per day, but this chart points out something very important. If we believe everything Saudi Aramco says, they can produce 12 million barrels per day, but they won't hit that level until 2016. It's interesting that they don't provide the chart for 15 million barrels per day. Maybe it didn't look quite so rosy."
Posted by: Steve Erlsten
|
|
09-Aug-2005
8783
| |
If global warming,due to the burning of hydrocarbons, is the real threat that it is
assumed to be , then why are we worried about
a drop in oil supply? One way or another, the
planet has to decrease, not increase, its dependency on oil and this lack of supply could
ultimately prove to be fortuitous."
Posted by: John Boyd
|
|
10-Aug-2005
8791
| |
Well put, John, but there is one catch. Assuming we don't make drastic changes beforehand, oil production peak will slow the global economy, resulting in less CO2 dumped into the air. On the other hand, I frequently hear it repeated (but I don't have a good source to prove this) that coal puts more CO2 into the air per unit of energy produced than oil does. If we shift to coal as much as possible (Florida and NYC still burn quite a bit of oil for electricity, and there's always the prospect of liquifying coal to burn in ICEs), we'll be increasing CO2 output.
I just got into the book last night, and Simmons points out that there are two groups that have been interested in peak oil for more than the past three years: oilmen and greenies. He points out that the greenies are hoping for peak oil, because it will reduce our CO2 buildup. I see killing off the oceans with high CO2 concentrations as a bigger threat than global warming, but it's really the same issue. Think of it as turning the oceans into a can of coke. The oceans don't seem to be able to handle the stress we're forcing upon them, but I guess we'll find out the dangerous way."
Posted by: Steve Erlsten
|
|
|
|
|
