Top Middle East Oil Figure Says Saudis Can't Deliver

Credibility of IEA Long Term
Oil Supply Forecasts Under Fire
Top Middle East Oil Figure Says
Saudis Can't Deliver
www.btinternet.com/~nlpwessex/Documents/SaudiOilAdmission.htm
Channel 4 Interview Heralds
Global Energy Crisis Ahead
As Central Bankers and G7 Finance Ministers Start To Sweat
October 2004

"I think in total the [International Energy Agency] outlook is much too high for production and it’s unrealistic for the world to be expecting such high numbers from all of the producers, including Saudi Arabia. They’re not only overestimating the Middle East, but they overestimate non-Opec, they overestimate Russia, they overestimate the whole global resource base. And I think this is a rather dangerous situation for the US government policy to be based on."
Sadad al-Husseini, former vice-president of Saudi Arabia's national oil company Aramco
Channel 4, 26 October 2004

"Soaring global energy demand will leave the West increasingly in thrall to the Middle East, the world’s energy watchdog said yesterday. The International Energy Agency (IEA) forecast that the world’s daily burn rate for oil will rise by almost half over the next 25 years, to 121 million barrels a day, as global energy consumption rises inexorably. The IEA predicts that demand of energy of all types will soar by 59 per cent by 2030... The IEA expects the Middle East Opec states to be pumping 52 million barrels a day by 2030, up from 20 million today. However, Sadad Husseini, a former vice-president in charge of production at Saudi Arabia’s state-owned Aramco oil group, told Channel 4 News that hopes of doubling Saudi production to 22 million barrels a day over two decades to help to meet demand were 'unrealistic' and a dangerous basis for policy."
Oil thirst 'makes Middle East crucial'
London Times, 27 October 2004

"Channel 4 News has been told by a top Saudi oil industry insider that the American government's forecast for future oil supplies are a 'dangerous over-estimate'. Sadad Al Husseini has just retired as vice-president of the Saudi oil company Aramco.... The Saudis very rarely speak publicly about future oil capacity but there are signs the Kingdom is worried their fields are being pushed too hard. Al-Husseini has just retired as Head of Exploration at Aramco and he told us in a rare interview, that estimates of future global supplies from the EIA, the US government's energy think tank, are simply too high.... Al-Husseini's opinion is a view that is growing in the oil markets, but which no-one wants to admit ..... It's also a view articulated by Matthew Simmons, one of the industry's leading financiers, and a former energy advisor to America's Vice President Dick Cheney. He says the main reason the markets won't wake up to permanently high oil prices is what he calls 'group think'... "
Oil supplies 'over-estimated'
Channel 4 News, 26 October 2004

"A recently retired Saudi oil executive has told Channel 4 News in London that he thinks the U.S. government's forecast for future oil supplies is a 'dangerous over-estimate.' Sadad al-Husseini, former vice-president of the national oil company Aramco, said, 'in total the outlook is much too high for production and it’s unrealistic for the world to be expecting such high numbers from all of the producers, including Saudi Arabia.' The news report cites a U.S. government forecast that by 2025 global oil demand will grow by 50 percent to 120 million barrels a day. Saudi Arabia, with current daily production of 9 million barrels, will by then supply 22 million barrels a day. 'They’re not only overestimating the Middle East,' al-Husseini said, 'but they overestimate non-Opec, they overestimate Russia, they overestimate the whole global resource base. I think this is a rather dangerous situation for the US government policy to be based on.' American energy investment banker Matthew Simmons, who has analysed hundreds of Saudi technical reports and repeatedly warns of potential limitations to its future oil supplies, was also interviewed for the report. 'I would actually say that the probability of me living on the moon is higher odds than Saudi Arabia producing 22 million barrels a day,' he said."

"Worried soaring oil prices could hurt the best global prospects in years, finance chiefs from wealthy nations met on Friday to try to work out what lay behind the surge and how to buffer the economic expansion. Group of Seven finance ministers and central bankers met at the tightly guarded U.S. Treasury building over lunch and were to work through the afternoon before a dinner with Chinese counterparts that has currency reform on the menu. The officials will set out their world-view at about 5:45 p.m. EDT (2145 GMT) in a communique sources said would include a call to bolster oil-market monitoring to make it easier to discern if scarce supply, hefty demand or market speculation lay behind crude's drive to record levels. The answer to this question is critical. It could affect policy responses big oil consumers must adopt -- higher interest rates to stem inflation or a renewed focus on finding new energy sources -- and may offer key information on how long the price rise will last. On Friday, U.S. crude oil futures topped $50 a barrel. …. Ministers are seeking energy market transparency to discover if world oil supplies may be scantier than they thought in May when they urged producers to open the spigots. Middle East oil producers generally maintain they are pumping near capacity and, like oil consumers, are interested in smoothing out current volatility. Britain and Germany are leading a drive for more data on energy supply and demand and on inventory levels to try to ward off possible speculative bubbles in markets. ‘More transparency in the market and less speculation,’ one G7 source said when asked what ministers wanted. Another G7 official suggested the rise in oil costs was rooted in such fundamental factors as over-estimated supplies and was not solely due to speculation. There is ‘a recognition that oil resources are scarcer than was thought a few years ago,’ the official said. ‘We agree there is a need for more transparency on the potential supply of various areas.’ If scarcity is the chief culprit, the oil price shock may not prove as temporary as hoped, the official said."
WRAPUP 1-G7 finance chiefs mull oil before China meeting
Reuters, 1 October 2004

Economy

Published: 26-Oct-2004
By: Liam Halligan

Channel 4 News has been told by a top Saudi oil industry insider that the American government's forecast for future oil supplies are a "dangerous over-estimate".

Sadad Al Husseini has just retired as vice-president of the Saudi oil company Aramco.

His comments could have a significant impact on a jittery oil market which has seen the price of a barrel of crude rocket to record levels over recent weeks. Global oil markets are incredibly stretched. The price of a barrel is around $55 dollars and rices have risen by around 80% over the last year.

The key supplier is Saudi Arabia and the markets are highly sensitive to any news regarding the Desert Kingdom.

We've obtained sensitive US government estimates of how much oil the global economy will need over the coming years.

At the moment, the world uses 80m barrels of oil a day, with Saudi supplying around 9 million, around 11%.

By 2025, given huge demand rises from China, India and so on, global demand will rocket to 120m barrels a day.

And, the US government says, Saudi will supply 22m barrels a day, around 19 per cent.

The Saudis very rarely speak publicly about future oil capacity but there are signs the Kingdom is worried their fields are being pushed too hard.

Al-Husseini has just retired as Head of Exploration at Aramco and he told us in a rare interview, that estimates of future global supplies from the EIA, the US government's energy think tank, are simply too high.

He also said he didn't see a price move below $50 a barrel any time soon.

Al-Husseini's opinion is a view that is growing in the oil markets, but which no-one wants to admit, that population growth and the emergence of China and India means oil prices are now going to be structurally higher than they have been.

It's also a view articulated by Matthew Simmons, one of the industry's leading financiers, and a former energy advisor to America's Vice President Dick Cheney.

He says the main reason the markets won't wake up to permanently high oil prices is what he calls "group think" and "conventional wisdom". He's told us in an exclusive interview that the only way for oil demand, and thus prices to fall, is a global recession.

Al-Husseini and Simmons are two of the most senior figures in the global oil industry.

Channel 4 News Special Report: Oil Supplies

Now the West’s reliance on future Saudi oil supplies are dangerously overestimated. That’s the worrying claim Channel 4 News has been told by a senior Saudi oil insider. And all the more so given the traditional reliance on Saudi production to ease high prices. It was a message echoed today by another senior oil industry figure, a former energy adviser to George Bush. Such comments could have a significant impact on an already jittery oil market, which has seen the price of a barrel of crude rocket to record levels over $50 a barrel in recent weeks. The news comes as senior oil insiders began a two-day oil conference in London. Our Economics Correspondent, Liam Halligan, reports.

With a quarter of global oil reserves, Saudi Arabia is the world’s energy linchpin. And with oil prices up at $50, having risen 80% over the last year, most people are relying on the Desert Kingdom to pump more oil and bring prices down.

At the two-day Oil & Money Conference in central London this morning, that was certainly the conventional wisdom. But delegates at this, the annual pow-wow of the industry’s movers and shakers, could be in for a shock. Tomorrow, two key oil insiders from very different backgrounds will warn that we cannot rely on seemingly limitless Saudi oil.

Matthew Simmons has been at the top of the oil industry for 30 years. A former energy adviser to George Bush, he’s overseen $60 billion worth of oil investments. In a sneak preview of tomorrow’s speech, he says we should be worried about Saudi’s reserves.

And the reality is that they basically have a handful of very old fields that I think - there’s a lot of evidence mounting up - are starting towards the endgame of their daily production. And we should be preparing for the day when Saudi Arabia’s oil production starts into a relatively consistent decline that could be steep decline.

Channel 4 News has obtained the US government’s highly sensitive energy forecasts. Currently the world consumes 80 million barrels of oil every single day. Saudi supplies 9 million barrels daily, around 11% of total world production. By 2025 global oil demand is set to reach 120 million barrels a day Ð a 50% rise. By then, says the US government, Saudi will pump 22 million barrels daily, a sharp rise in our reliance on Saudi oil.

Simmons refers to these US government estimates as the energy roadmap of the global economy. He spent years studying them, along with numerous Saudi geological surveys. When asked whether the Kingdom could produce 22 million barrels a day by 2025, he doesn’t mince his words.

I wouldn’t put a one percent. If it turned out that some miracle happened and we discovered some phenomenal fields that have defied discovery for the last 40 years, it’s Ð you can’t, you can never take a forecast and say that’s an impossibility. 2020 I could be living on the moon; I don’t think I’m going to. I would actually say that the probability of me living on the moon is higher odds than Saudi Arabia producing 22 million barrels a day.

Most conference delegates will politely applaud Simmons’ speech tomorrow, then dismiss him as a contrarian. Saudi Arabia’s fine, many of them told us. The Kingdom has enough oil if it chooses to sell it.

We are not worried about the Saudi oil supply in the long term. We know that Saudi Arabia has huge reserves in terms of oil. But we are worried is that whether or not Saudi Arabia is going to put these reserves in the markets.

But in this rare interview, a senior Saudi insider reveals his fears. Sadad al-Husseini has just retired as board member of Aramco, the state-owned giant which pumps nearly all the Kingdom’s oil. The Saudis have previously refuted Simmons’ analysis, but al-Husseini says the West is relying too heavily on Saudi reserves.

I think in total the outlook is much too high for production and it’s unrealistic for the world to be expecting such high numbers from all of the producers, including Saudi Arabia.

Al-Husseini will tomorrow tell the western oil establishment it may have to face up to higher oil prices. Demand from China and India is escalating, with little extra supply. This reality isn’t reflected, he says, in US estimates of future production.

They’re not only overestimating the Middle East, but they overestimate non-Opec, they overestimate Russia, they overestimate the whole global resource base. And I think this is a rather dangerous situation for the US government policy to be based on.

But Saudi oil is still crucial, which is why global markets will heed al-Husseini’s words. And even among oil traders unconcerned about Saudi, a consensus is emerging. Don’t expect significant falls in oil prices anytime soon.

"The United States cannot afford to wait for the next energy crisis to marshal its intellectual and industrial resources.... Our growing dependence on increasingly scarce Middle Eastern oil is a fool's game—there is no way for the rest of the world to win. Our losses may come suddenly through war, steadily through price increases, agonizingly through developing-nation poverty, relentlessly through climate change—or through all of the above."
James Woolsey, US Director of Central Intelligence, 1993 - 1995
Bush II Administration Adviser and Envoy, 2001 - Present

James Woolsey - Ex-CIA Chief Predicted 'Peak' Oil Crisis In 1999 CFR Paper - 23 May 2004

"Our industry can certainly be proud of its past achievements. Yet the challenges we will face in the coming years will be every bit as great as those encountered in the past, due in part to ever-increasing global energy use. For example, we estimate that world oil and gas production from existing fields is declining at an average rate of about 4 to 6 percent a year. To meet projected demand in 2015, the industry will have to add about 100 million oil-equivalent barrels a day of new production. That's equal to about 80 percent of today's production level. In other words, by 2015, we will need to find, develop and produce a volume of new oil and gas that is equal to eight out of every 10 barrels being produced today."
John Thompson, President of ExxonMobil, the world's largest oil company
The Lamp (published for ExxonMobil shareholders), 2003, Vol. 85 No.1

Graph from ExxonMobil report 4 February 2004, p4 (2004 marker added for illustration)
'A Report on Energy Trends, Greenhouse Gas Emissions, and Alternative Energy'

"We must not be prisoners of our own time. The horrific terrorist attack in Bali, the attack on the French tanker off Yemen the other week - these threats are coming at the world from all directions....And you can't continue.... to just keep erecting security and defence barriers all around you..... We have a way of life, a set of [energy] consumption patterns, that are going to have to change - all of us. We have to recognise that without a major shift in the whole way we organise ourselves, our pattern of life is simply not sustainable."
Peter Hain, UK Minister for Europe
Mid-East oil 'too costly' for Europe
BBC Online, 17 Oct 2002