Saudi Oil Production and Reserves - Reasons Behind Wikileaks Concerns

The UK Guardian published an article yesterday titled WikiLeaks cables: Saudi Arabia cannot pump enough oil to keep a lid on prices, talking about the possibility that as soon as 2012, world oil production may begin to decline because of "peak oil". Saudi Arabia may not be able to raise production as much as claimed, and its reserves may be overstated by 40%. Leanan has put together a post with more about the cables. The Wikileak cables can be found here or here. In this post, we provide a few graphs, plus some links to (and excerpts from) prior posts by Oil Drum staff members about Saudi Arabia's true situation.

Saudi Arabia tells us that they have lots of oil, but if we look at graphs of their historical production, there is nothing that looks like an upward trend. In fact, recent production is lower than it was in the late 1970s and early 1980s. This is a graph of Saudi oil production, consumption, and amount of net exports, from Energy Exports Databrowser.

Exports, in green, are down because Saudi Arabia is consuming more and more of its own oil, so there is less available for others. This graph doesn't fit well with what we have been told.

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The rest of the Middle East claims huge reserves, too, but looking at the Mideast in total doesn't give a much more favorable picture. While production is a bit higher in total now, exports (in green) are down from the 1970s because of rising consumption.

It is almost certain that the Saudis are overstating their capabilities. The reserves for Saudi Arabia and the rest of the Middle East are not audited, nor are their supposed "spare production capacities." They may have some spare capacity, but not the amount stated. When oil prices spiked to $147 barrel in July 2008, Saudi Arabia and others in the Middle East increased their production a bit, did not really come through with a huge surge in production, the way one would expect from their suppose spare capacity.

World oil supply has been roughly flat since 2005. Many are concerned that oil production will actually begin to fall in the next year or two - what is referred to as "peak oil" in the Wikileaks cable.

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Links to a Few Posts Relating to Overstatement of Saudi Reserves and Production Capability

The Oil Drum has published many posts over the years relating to Saudi Arabia and the rest of the Middle East's likely inability to produce as much oil as they claim they can. These are excerpts from (or comments about) a few of them. Click on the titles to access the posts. You can access other posts by the same author by clicking on the person's name.

1. Euan Mearns-- Middle East OPEC Reserves Revisited-- December 3, 2010

Euan explains why Middle East OPEC reserves are likely overstated, and shows this chart of likely reserves at the 2P (that is, expected) level:

Comparison of official ME OPEC reserves with official reserves adjusted for production and pre-nationalistaion reserves figures adjusted for production. The arrow gives the likely range of 2P reserves.

2. ace--Saudi Arabia’s Crude Oil Reserves: Particulars or Propaganda? June 15, 2008

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.

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.

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.

3. Gail the Actuary -- President Bush Questions Saudi's Ability to Raise Oil Supply--January 17, 2008

Last night, on ABC's Nightline, Terry Moran interviewed President Bush in Riyadh, Saudi Arabia, during his trip to the Middle East. When discussing what President Bush might say to the King of Saudi Arabia to lower oil prices, George Bush said:

If they don't have a lot of additional oil to put on the market, it is hard to ask somebody to do something they may not be able to do.

We published a Press Release about this post, also.

4. Euan Mearns - Saudi Arabia - production forecasts and reserves estimates--August 30, 2007

This forecast for is on a broad basis (Crude and Condensate and Natural Gas Liquids) for Saudi Arabia.

Forecast numbers are production capacity. Actual production may be lower depending upon demand.

5. Stuart Staniford -- Water in the Gas Tank--March 26, 2007

Forensic analysis regarding how the oil/water mix that is extracted seems to be changing to more water, less oil in Saudi Oil fields. The red portions of the bands are oil.

Two cross sections of a reservoir simulation of the northern portion of the 'Ain Dar region of Ghawar at various years. Color represents volumetric water saturation in the rock pores. Source: Figure 9 of Alhuthali et al, Society of Petroleum Engineers Paper #93439, March 2005.

6. Stuart Staniford--Depletion Levels in Ghawar--May 15, 2007

An attempt to understand depletion levels in Ghawar.

Modeled distribution of original reserves in 'Ain Dar/Shedgum area of Ghawar (left), oil water contact offset by 511' vertically upward (center) and the same with the effect of gas caps (right).

7. Joules Burn--IEA World Energy Outlook 2008 - Fuzzy Focus on Saudi Arabia--November 18, 2008

Throughout the 2008 WEO, Saudi Arabia is cast in a leading role -- both figuratively:

On present trends, just to replace the oil reserves that will be exhausted and to meet the growth in demand, between now and 2030 we will need 64 mb/d of new oil-production capacity, six times the size of Saudi Arabia’s capacity today.
(from the Forward and Executive Summary)

and literally:

Saudi Arabia remains the world’s largest producer throughout the projection period, its output climbing from 10.2 mb/d in 2007 to 15.6 mb/d in 2030. (Executive Summary, page 40)

Razor blades and the limits of complexity

A friend of mine once remarked that if current trends continue, razor cartridges will have at least 100 blades each by the end of the century. The razor blade wars are among the most visible absurdities illustrating how the limits of complexity clash with our blind faith in the idea that more complexity will always solve our problems or improve our lives.

The race among blade manufacturers has gotten so heated that you can skip right over the now obsolete three-blade models and go directly to one with six blades on each cartridge. And for laughs, you can watch these fake commercials, one for a 7-blade razor and one for an 18-blade razor.

My friend, by the way, uses a single-blade safety razor and says he gets a better shave from it than anything else. He just had to learn how to use it correctly, he explained. And, that may be part of the reason people prefer more complex tools. Using simpler ones requires learning skills that most of us never learned because we never had to learn them. How many people below age 50 even started shaving with an old-style safety razor?

Beyond this there is the historical experience that more complexity does frequently solve problems. Food was being prepared under unsanitary conditions, and so governments began to regulate the way food is made. The air and the water were polluted, so governments added environmental agencies to regulate that pollution.

Think about how much more complex automobiles have become in the last quarter century, so much so that fewer and fewer people are able to fix those automobiles themselves. All those electronics were added to solve problems, for example, to enhance safety and comfort.

Today, the average citizen in wealthy countries is obliged to own or have access to computers and know how to use them or miss out on much of what constitutes modern life. We have access to machines that can calculate millions of times faster than we can ever hope to, that can connect us literally to a world of information, and that can allow us to communicate in an instant with people on the opposite side of the globe. And, yet how many of us even understand how those machines work, let alone how the Internet to which they are connected functions?

Our inability to understand the systems we create puts a limit on the level of complexity that is beneficial to us. Recently established and poorly understood systems can bring unwelcome surprises. Witness the financial meltdown of 2008. Up to that point many economists (who were supposedly able to understand the complex global economy) believed that the world's economic planners had mastered the business cycle and created a "Great Moderation" in its volatility and therefore consequences.

Joseph Tainter, the great historian of collapse theory, explains in his classic study, The Collapse of Complex Societies, that increased complexity incurs costs. As complexity increases, costs usually increase faster resulting in diminishing returns and then finally negative returns. (See Tainter's "Complexity, Problem Solving and Sustainable Societies" for a condensed discussion of these ideas.)

That we are a society of advanced complexity is a given. That our society is now experiencing negative returns from increasing complexity is not often discussed. For example, we use systemic pesticides--which means they flow from the inside of the plant outward--to kill and repel crop pests and thereby protect yields. But this new complexity in our food system may be the cause of Colony Collapse Disorder which is wiping out bees at such a fast rate that crops such as nuts and fruits may soon be compromised because there are not enough bees to pollinate them.

Glyphosate, known commercially as Roundup, is probably the world's most widely used herbicide. It is particularly well-known for its use with Roundup Ready crops, crops genetically-engineered to be unaffected by glyphosate applications. All this highly complex technology has the benefit of enabling a farmer to weed his or her crop chemically and thus save much labor. Now it seems that repeated applications of glyphosate to farm fields can disturb the microbial balance in the soil so much that it leads to Sudden Death Syndrome in crops. Using products to enhance yields which actually undermine the fertility of the soil is a strategy that must be categorized as having negative returns.

On the seas ocean-going factory ships have enhanced our ability to catch and process fish for human consumption. But the efficacy of such technology has led to overfishing and the collapse of many fish species. Wild fish catches have leveled off and don't look like they will turn up soon despite our advanced technology. It's another case of diminishing and probably negative returns if one considers that large predatory fish are now scarce forcing fishing boats to go after species that used to be considered too small to bother with. Genetic diversity and thus survivability among fish species are being threatened as a result.

The alternative to scaling the walls of complexity continuously would be to simplify society when the returns on complexity diminish or turn negative. One of the essential inputs for increased complexity is increased energy input, according to Tainter. Thus, peaks in fossil fuels may force global society to simplify. Why not recognize now that the solution to our problems may not involve higher degrees of complexity? Why not get ready ahead of time and make the transition less painful?

I heard Tainter speak at a recent conference, and he was asked a closely linked question: Is there an historical example of a society that reduced its complexity voluntarily before it absolutely had to? He had a one-word answer: No. Will that be our answer, too?