07-28-2004, 07:43 AM
Is Saudi Arabia running out of oil?
by Jon Markham
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Simmons says it's worse than that: Much like the biggest problem in the Enron fiasco was that analysts always trusted Enron managersâ declarations about the strength of its financial assets, he says that the world has always taken Saudi Arabia at its word for its oil assets. He now believes that it cannot be trusted.
He notes that the six major oil fields in Saudi Arabia, all discovered between 1940 and 1967, produce about 95% of Saudi oil. The Saudis produce 10% of the worldâs oil from them at the worldâs lowest prices, and the Saudis are the only serious provider of âspareâ capacity on the planet. A single field, Ghawar, which is the worldâs largest, was discovered in 1948 and produces up to 60% of the kingdomâs total.
He believes that production at these mature fields has peaked. While that doesn't mean they'll run out tomorrow, they're becoming much harder and more expensive to exploit efficiently. Itâs much like a person getting older and suffering from arterial sclerosis: They slow down and become increasingly less capable. The Saudis are now using intense water-injection techniques to improve production, he says, a technique that can ultimately lead to catastrophic pressure failure.
Aramco disputes his claim, but Simmons notes correctly that its principal answer comes down to an Enron-like, âTrust me.â There's no solid independent data source of Saudi oil production. âA lack of verified data leaves the world in the dark,â he told the Hudson Institute.
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by Jon Markham
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Simmons says it's worse than that: Much like the biggest problem in the Enron fiasco was that analysts always trusted Enron managersâ declarations about the strength of its financial assets, he says that the world has always taken Saudi Arabia at its word for its oil assets. He now believes that it cannot be trusted.
He notes that the six major oil fields in Saudi Arabia, all discovered between 1940 and 1967, produce about 95% of Saudi oil. The Saudis produce 10% of the worldâs oil from them at the worldâs lowest prices, and the Saudis are the only serious provider of âspareâ capacity on the planet. A single field, Ghawar, which is the worldâs largest, was discovered in 1948 and produces up to 60% of the kingdomâs total.
He believes that production at these mature fields has peaked. While that doesn't mean they'll run out tomorrow, they're becoming much harder and more expensive to exploit efficiently. Itâs much like a person getting older and suffering from arterial sclerosis: They slow down and become increasingly less capable. The Saudis are now using intense water-injection techniques to improve production, he says, a technique that can ultimately lead to catastrophic pressure failure.
Aramco disputes his claim, but Simmons notes correctly that its principal answer comes down to an Enron-like, âTrust me.â There's no solid independent data source of Saudi oil production. âA lack of verified data leaves the world in the dark,â he told the Hudson Institute.
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