saunafool (97.43)

Peak Oil in Saudi Arabia?

July 16, 2008 – Comments (4) | RELATED TICKERS: USO , PBR , XOM

When we talk about Peak Oil, Saudi Arabia is the elephant in the room. They typically produce and export more oil than any other nation on earth (albeit with some periods where the Russians have produced more).

Ever Since Matthew Simmons published Twilight in the Desert, people have been questioning whether Saudi has peaked.

According to recently leaked documents, it is quite likely they have. 

The detailed document, obtained from a person with access to Saudi oil officials, suggests that Saudi Aramco will be limited to sustained production of just 12 million barrels a day in 2010, and will be able to maintain that volume only for short, temporary periods such as emergencies. Then it will scale back to a sustainable production level of about 10.4 million barrels a day, according to the data.

....One dramatic part of the data concerns a site called Ghawar, which has been the kingdom's workhorse field for decades. It shows the field producing 5.4 million barrels a day next year, but the volume then falling off rapidly, to 4.475 million daily barrels in 2013.

That last bit is the most important. Basically, what we've seen from other countries is that if the major field has peaked (i.e. Cantarrel in Mexico) the country has peaked. In Saudi, we are talking about Ghawar, which is the largest field ever found, has the highest production rate of any field, anywhere, any time. Plus, the decline rates for these huge fields often tend to be wrong, which means it could actually be worse than the document shows.

To put Ghawar in perspective, the Tupi field recently discovered in Brazil is very large--one of the biggest finds in the past 30 years. Tupi is supposed to produce a peak capacity of 500,000 bpd in 2020. Ghawar produces more than 10 times that volume! 

Let's compare this to the EIA projections. In their International Energy Outlook 2008, they actually have pretty limited growth in conventional liquids projected for Saudi (from the spreadsheet on the link titled "World Conventional Liquids Production by Region and Country, Reference Case").

Year    2010    2015    2020    2025    2030

Mbpd    10.5    11.9    12.6    13.1    13.7

At a bare minimum, the EIA is not expecting oil production in Saudi to dramatically increase in the next few years. However, if Ghawar is peaking, I doubt we will see any production growth. (Side note: I'm actually surprised because the EIA is usually overly optimistic in their projections of production growth. These numbers may end up being high, but they aren't projecting 15 Mbpd anytime soon.)

Furthermore, with demand for oil growing rapidly within Saudi, I will bet due to the export land model that exports will fall quite rapidly.

Of course, the Saudis deny all of this and say they can pump whatever the world needs. Of course, they won't share any geological or production data to support their claims. We just have to trust them.

Feeling lucky or feeling like buying a plug-in hybrid and some solar panels?