World Oil Demand Surges
As Doubts About Saudi Oil Capacity Grow
OPEC President Retracts Slip Of The Tongue
But Reality Is Grim
www.btinternet.com/~nlpwessex/Documents/saudidoubts.htm
IEA Predicts 2005 Global Demand At 84 Mbd

August 2004

In the autumn of 1999 Dick Cheney expressed concern that in the coming years
world demand for oil was projected to rise at the rate of 2% per annum

"For the world as a whole, oil companies are expected to keep finding and developing enough oil to offset our seventy one million plus barrel a day of oil depletion, but also to meet new demand. By some estimates there will be an average of two per cent annual growth in global oil demand over the years ahead along with conservatively a three per cent natural decline in production from existing reserves.That means by 2010 we will need on the order of an additional fifty million barrels a day.  So where is the oil going to come from? Governments and the national oil companies are obviously in control of about ninety per cent of the assets. Oil remains fundamentally a government business. While many regions of the world offer great oil opportunities, the Middle East with two thirds of the world's oil and the lowest cost, is still where the prize ultimately lies, even though companies are anxious for greater access there, progress continues to be slow."
Dick Cheney, Chief Executive of Halliburton, now Vice President of the United States
Speech at London Institute of Petroleum, Autumn Lunch 1999

In the summer of 2004 the International Energy Agency revised its figures once again
and confirmed that growth in world oil demand is currently running at over 3%.

"The price of oil went through $46 (U.S.) a barrel yesterday, setting another record high. Many energy experts say $50 -- a figure unthinkable only a couple of years ago -- is likely. At least one oil analyst says $100 is possible. In 1998, the price was about $14. In 2002, it was about $27. How did glut turn into shortage so quickly?... Here's a simple way of making sense of the shortage. Every day, the world guzzles about 80 million barrels. The reservoirs that produce all that oil are depleting by about 7 per cent a year [more than twice the rate predicted by Cheney in 1999], equivalent to 5.6 million barrels a day. That amount is equivalent to the daily production of the North Sea, or two Abu Dhabis or more than two Nigerias. The problem is that discoveries the size of the North Sea are exceedingly rare, and will get rarer still. Each of the various non-OPEC projects coming on stream might add 50,000 to 200,000 b/d of production. Now add in the fact that oil demand is climbing rapidly. The International Energy Agency estimates world demand will rise to 83.2 million b/d next year, up from 78.9 million last year and just under 77 million in 2001. Put natural depletion and rising demand together and you get an oil crunch that won't disappear quickly just because classic economics says supply will rise in tandem with price. The gap is too wide.... Two years ago, the spare capacity was about six million b/d. Today, it is thought to be 1.5 million barrels or less.... Years may pass before the supply-demand balance is restored, that is, if it can be restored. The world consumes almost 30 billion barrels of oil a year, the equivalent to 1½ times the size of Alaska's Prudhoe Bay. Prudhoe, discovered in 1968, is one of the biggest reserves discovered anywhere on the planet. How many more Prudoes are there?"
This oil crisis won't end soon -- if ever
Globe and Mail (Canada), 14 August 2004

'Oh No We Can't'
"Concern about oil supplies was further heightened when the president of Opec, Purnomo Yusgiantoro, gave warning that it was unable to supply more oil to the market."
'Crazy' oil price casts shadow over economy
London Times, 4 August 2004

'Oh Yes We Can'
"Oil prices have pulled back from 21-year highs as fears over threats to supplies eased thanks to good news from Opec... Opec said it had the capacity to ramp up production by up to 1.5 million barrels a day..... Only a day earlier Opec said it could not pump any more to cool prices, and that Saudi Arabia, the world's biggest exporter, had spare production capacity but could not raise output immediately."
Oil slips as supply fears recede
BBC Online, 4 August 2004

'Oh No We Can't'
"The Organization of Petroleum Exporting Countries (OPEC) has reached its maximum production capacity, Venezuelan Energy Minister Rafael Ramirez said  Ramirez said the group's 11 member countries have no immediate way to respond to increased oil demand  'I don't see any possibilities of that situation changing much,' he told reporters here.... Ramirez's statements clashed with those of OPEC president Purnomo Yusgiantoro, who said Monday in Jakarta that the group was capable of beefing up production because of excess capacity."
OPEC has now reached maximum production capacity - Venezuelan energy minister
AFX News Feed, 11 August 2004

OPEC On The Edge
"[Saudi Oil Minister Ali al-Naimi] said Riyadh was pumping 9.3 million barrels a day of crude and was ready to tap surplus capacity of 1.3 million bpd should it be required. Saudi would meet demand for more than 9.3 million bpd in September, Naimi said. A capacity crunch among members of the Organization of the Petroleum Exporting Countries is a leading factor supporting prices. The International Energy Agency, in its monthly oil market report, said OPEC's sustainable spare production capacity shrank to 600,000 barrels a day in July as the cartel raised output to try to contain prices. 'The thin margin of spare capacity held by OPEC producers has contributed to recent price strength,' said the IEA, adviser on energy to 26 industrialised nations. The IEA figures would mean a buffer of less than one percent on the 82-million-bpd world market, compared to about eight percent in 2002 when spare capacity in OPEC was 6-7 million bpd."
Oil holds strong near $45 despite Saudi supply vow
Reuters, 11 August 2004

"Saudi Arabia, the world's largest oil producer, can pump another 1.3 million barrels a day and keep that up 'indefinitely,' Adel Al-Jubeir, foreign affairs adviser to the Saudi crown prince, told U.S. reporters. The Saudis are now pumping about 9.3 million barrels a day, up 1 million from earlier this year. 'We have the capacity and are ready to tap into it immediately,' Al-Jubeir said. He called current prices 'absolutely not justified' and said clients have not suggested they are looking to buy more oil. 'There is no shortage,' he said. Wachovia economist Jason Shenker calls the Saudi announcement 'a lot of smoke and mirrors,' an opinion that was reflected in the markets."
Saudis try to calm prices, deny politics involved
USA Today, 8 August 2004

"With Opec now producing at over 95 per cent of its current capacity, a loss of 1-2 million barrels per day [in Iraq] could, in theory, result in a doubling of the current oil price."
Adam Sieminski, Deutsche Bank analyst
Iraq oil shutdown sends price to record
London Times, 10 August 2004

The Saudi Situation - Is There Worse To Come?
"It seems a growing number of analysts are falling into line with the Simmons & Company International view that Saudi Arabia may be running out of steam and may not be able to perform the role of global swing producer for many more years, despite being credited with oil reserves in the order of 260 billion barrels. The Centre for Global Energy Studies hinted at the beginning of the year that the kingdom appeared to be heading for difficulties. Now one of its analysts has said that having reserves does not equate to production capacity. Citing the Haradh field, he said it required 500,000 barrels per day of water injection to get out 300,000 bpd of oil.
Moreover the problem is even more serious in the Khurais field."
Doubts grow about Saudi As Global Swing Producer
Aberdeen Press & Journal - Energy, April 5, 2004, p. 15

"As OPEC raises oil output by 2 mm bpd as of July 1 and another 500,000 bpd as of August 1 to stop the upward spiral in oil prices on the international market, the reserves claimed by many leading oil producers are being challenged. The lower reserves preclude the possibility of oil dropping below the $ 35-$ 36 range. According to Dr V. Anantha-Nageswaran, director of global economics and asset allocations at financial services conglomerate Credit Suisse, the sudden jump in the reserves announced by several oil-producing countries in the late 1980s is 'puzzling.'  'It was during this period that OPEC introduced the quota system and the same was linked directly to each country's reserves,' Anantha-Nageswaran said.  This should have prompted these countries to inflate their reserves to grab a larger chunk of output quotas, he said. He questions the logic behind oil reserves jumping three to four times between 1988 and 1990. Since new discoveries do not match production, the reserves are unlikely to increase the way these countries have been claiming, he said. Though OPEC succeeded in stopping the price rise, it is going to be a short-term phenomenon, he said. Moreover, the floor price of oil has risen and it is unlikely to fall below the $ 35-$ 36 range."
Oil reserves may be lower than producers claim
Al Nisr Publishing, 2 July 2004

So What Are The Doubts About Saudi's Ability To Deliver?
TWO ARTICLES FROM
Petroleum News And DMD Publishing

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http://www.petroleumnews.com/pnads/238338932.shtml
PETROLEUM NEWS

North America's Source for Oil and Gas News
August 2004
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Vol. 9, No. 31  Week of August 01, 2004
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Simmons hopes he’s wrong

Leading energy analyst believes Saudi Arabia’s crude oil supply near peak; calls for greater global reserve transparency to anticipate ‘cataclysm’

F. Jay Schempf

Petroleum News Contributing Writer (Houston)

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Matt Simmons hopes he is wrong.

But if he’s right in his belief that Saudi Arabia’s giant oil fields might
already have peaked and could start into rapid decline in as few as three
years, somebody better have a “Plan B” ready or there’s no way, he says —
absolutely no way — to avoid a world energy cataclysm.

Pretty strong words. Stronger, perhaps, than any uttered before about
energy. Simmons spoke them, and more, at a July 9 Washington, D.C.,
presentation made at a meeting on Saudi Arabia’s future. The Hudson
Institute sponsored the meeting.

Simmons asked for anybody, including the Saudis themselves, to refute his
claim. But so far, in his view, nobody’s stepped up. He acknowledges,
however, that the Saudis recently have been more forthcoming about their
ability to supply all the extra oil the world will require from Saudi
fields. But still, it appears that nobody is willing to counter his specific
charges.

Simmons knows whereof he speaks. He views the world oil supply picture from
the vantage point of 30 years’ experience as founder of Simmons & Company
International, Houston, which today is one of the world’s largest energy
investment banking groups. Since opening the company’s first office in
Houston back in 1974, Simmons and his group have guided a broad client base
to complete more than 500 oil and gas investment banking projects with a
combined dollar value of some $58 billion. The company now has additional
offices in Boston, London and Aberdeen, Scotland.

A few fields produce almost all Saudi oil

But all the investment capital in the world won’t be much help if, as
Simmons suspects, Saudi Arabia can no longer open the tap wider at its key
oil fields as the world’s “plug” producer in meeting steadily increasing
world oil demand. Contrary to widespread opinion, the “gift” to the world of
Saudi Arabia’s oil, in Simmons’ view at least, is not one that will keep on
giving.
Despite recent comment by Saudi Aramco that it has discovered 85 oil fields
in the country and has so far developed just 23 of them, Simmons says only a
handful of fields account for virtually all Saudi Arabian oil production.
The largest, Ghawar — the world’s single largest oil field — has accounted
for about 60 percent of all the oil the country ever produced, he said.
Today, he added, Ghawar still produces about 5 million barrels per day of
the current Saudi oil output of 7.5 to 8 million bpd. Five other fields
produce the remainder, he said: Abqaiq, Safaniyah, Zuluf, Berri and Shaybah.

But all six of these fields, he noted, are more than 30 years old. Abqaiq
was discovered in 1940, Ghawar in 1948, and Safaniyah in 1951. The last
three were discovered in the mid-1960s.

There’s no Act 2

Normally, Simmons said in a July 23 interview with Petroleum News, Saudi
fields would be subject to the same decline curves as those experienced by
any of the world’s oil fields, once reservoir pressure begins to dwindle.
The difference is, he said, Saudi Aramco doubled up to catch up, almost from
the start, by keeping reservoir pressures — and individual well flow rates —
as high as possible, seemingly for as long as possible.
In simple terms, says Simmons, the Saudis have produced their fields under
simultaneous primary and secondary recovery, having instituted huge
waterflooding programs relatively soon after completing field development.

“All of these fields are old,” he pointed out, “but Saudi Aramco has managed
them in a ‘gold standard’ fashion by instituting careful and rigorous water
injection to maintain very high reservoir pressures. They’re effectively
sweeping the reservoirs until the easily recoverable oil is gone. In so
doing, they have defied the standard decline curves. With water injection,
they’ve maintained reservoir pressures above the bubble point. The trouble
is, once they finally finish the sweep, they’ve done both primary and
secondary depletion. There isn’t any Act 2.”

Apparently, detailed knowledge of this double dipping has not been common.
Saudi production figures and field statistics have been regarded largely as
state secrets since the 1980s. Nevertheless, said Simmons, most world oil
supply studies assume that Saudi production is nearly inexhaustible and can
be increased almost effortlessly by whatever world demand dictates.

No new giant oil fields in Saudi Arabia

But according to Simmons, enough data exists in the public domain today
that, when combined and analyzed, reveals a much different picture.
During the past decade or so, he said, the lack of hard field data from most
producing countries, particularly from OPEC member countries and even more
particularly from Saudi Arabia, made it extremely difficult for his company
to plan various energy investment scenarios for its clients.

So, Simmons instituted a 12-month study of technical presentations on Saudi
Arabian oilfield activity made before various meetings around the world of
the Society of Petroleum Engineers, beginning in 1961 and going through
2003. The study amassed more than 200 such tech papers, he said, delivered
largely by oilfield service companies and dealing with highly technical
aspects in all six of the Saudi giant fields.

“Each individual paper doesn’t tell you a lot,” he said. “But, by going
through this incredible stack and then going back and isolating each by the
specific field they dealt with, chronologically, you could see the history
of what had been going on in Saudi Arabia during that time.”

While the study revealed a “whole litany” of surprises, said Simmons, the
most important one is that while the six Saudi Arabian giant fields have
accounted for everything Saudi Arabia has produced so far, there is
sufficient evidence to argue that once those fields are in decline, the
Saudis won’t have much else in the way of new oil from which to draw.

Saudi Aramco has explored the country thoroughly, Simmons said, and no new
‘giant’ fields have resulted.

“Meanwhile, Saudi Aramco’s senior management are adamant that their existing
oil fields are in great shape and can reliably produce as much as 15 million
bpd for another 50 years,” said Simmons. “They also insist that their proved
reserves are actually conservative and there are still another 200 billion
barrels of oil yet to be found in various unexplored pockets of Saudi
Arabia.” The world has only the company’s word on this, said Simmons.

New technology won’t do it

He added that Saudi Aramco senior managers also believe “with some passion”
that the technological tools they are now employing would contain the rise
of water in existing fields. Such tools, he noted, include horizontal and
extended-reach wells and multi-lateral well completions, among others.
“My worry is that too many other oil companies around the world also
believed these same tools would allow them to steadily grow their production
from a reduced amount of wells drilled,” he said. “Instead, it turned out
that virtually every key oil producer using these same tools sadly ended up
seeing their production growth peter out.”

While the tools did extract more oil per well, he explained, they also
accelerated the recovery of economical oil. In turn, this created decline
rates never seen before in existing production.

Simmons has taken his study’s findings and conclusions and currently is
writing a book, which he plans to self-publish late this coming fall.

Calls for mandatory oil reserves transparency

But regardless of who’s right or who’s wrong, Simmons said, the solution to
determining whether Saudi fields can meet ever-climbing demand is a simple
one: Adopt a far higher standard of petroleum data transparency and begin
reporting timely field-by-field production statistics, supported by the
average number of producing wells in each field, and have it verified by a
reliable third party.
“I’d also like to see them update their estimates, by field, of original oil
in place, by estimated ultimate recovery, and by cumulative production,” he
said. “Once you have those data, any analysts can determine in one day
whether everything’s fine in Saudi Arabia, or whether its ‘Katy, bar the
door! This field is just about to go into very steep decline.”

He noted that a mandatory requirement for greater oil reserves transparency
should be ordered on a global basis. However, so far only the Paris-based
International Energy Agency currently is working to set up such a program.
Though voluntary, the program at least calls for greater transparency from
oil producing nations, he said.

Nevertheless, without such information and without it being handed over
quickly, the world could be in for a huge surprise, said Simmons. In his
opinion, great crises come out of ignoring great problems, and the sooner
the world is aware of a problem, the sooner a solution — “Plan B” — can be
reached. He said that with greater oil supply transparency, the current oil
price probably would not gyrate the way it has in the past. “The increased
knowledge of what’s really going on in the energy business versus the
perception of what we thought was going on will help people understand that
we need to get used to high energy prices and that $40 per barrel oil is not
dangerous,” said Simmons.

What’s dangerous, he said, is $40 per barrel oil being too cheap.

Difference can’t be filled from elsewhere

But the outlook is still extremely grave, he said.
“If I’m correct about my concerns, Saudi Arabia is now producing more than
they should to sustain their oil output,” he deadpanned. “The harder you
pull a field in its production, the faster you bring on the end of its
reservoir pressure. So, I could argue that for the well-being of the world,
Saudi Arabia probably ought to back off and start producing 3 to 4 million
bpd so that their oil might last another 30 to 50 years. However, they may
already have peaked in their ability to grow oil production, and if that’s
so, the world has peaked, as well.”

Could the difference be made up from other world oil-producing areas? Again,
Simmons is dubious. Not from West Africa, he said. Not from Russia, either.
And currently, alternative fuels won’t do it, either. Not natural gas, the
available global supply statistics on which are even murkier than those for
oil. Not hydrogen fuels, since they require a basic energy feedstock. Not
even nuclear power, which he said would take decades to add, with scarcely a
clue as to how much uranium remains throughout the world.

“There isn’t any case you could make, by any stretch of the imagination,
based on anything we know, that you could go elsewhere to make up the
difference,” said Simmons. “This could become the biggest energy issue the
world has ever faced.”

Among all the ramifications of a worldwide energy shortage, Simmons said,
the geopolitical implications are perhaps the most severe, particularly
since the United States imports 25 percent of Saudi Arabia’s total oil
exports, which average about 6 million bpd.

“I have oftentimes said that I would not want to be part of any energy
delegation charged with the responsibility of having to tell the leaders of
either India, or particularly of China, that their exciting emergence into
prosperity is over because we have no spare energy to fuel their great
dreams.”

Meanwhile, Matt Simmons is waiting — and hoping — for someone to prove him
wrong.

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http://energybulletin.net/1269.html
[Go to original URL above to view graphics referred to in article]

Published on Friday, July 30, 2004 by DMD Publishing

Trouble in the World's Largest Oil Field-Ghawar
by Glenn Morton

Copyright 2004 G.R. Morton. This can be freely distributed so long as no
changes are made and no charges are made.

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There are four oil fields in the world which produce over one million
barrels per day. Ghawar, which produces 4.5 million barrels per day,
Cantarell in Mexico, which produces nearly 2 million barrels per day, Burgan
in Kuwait which produces 1 million barrels per day and Da Qing in China
which produces 1 million barrels per day. Ghawar is, therefore, extremely
important to the world's economy and well being. Today the world produces
82.5 million barrels per day which means that Ghawar produces 5.5 percent of
the world's daily production. Should it decline, there would be major
problems. As Ghawar goes, so goes Saudi Arabia.

The field was brought on line in 1951. By 1981 it was producing 5.7 million
barrels per day. Its production was restricted during the 1980s but by 1996
with the addition of two other areas in the southern area of Ghawar brought
on production, Hawiyah and Haradh, the production went back up above 5
million per day. In 2001 it was producing around 4.5 million barrels per
day. There have been 3400 wells drilled into this reservoir

I have noted elsewhere that the data I am being told by engineers who have
actually worked on Ghawar, that this decade will see it's peak. (Morton,
2004 PSCF in press). Others have noted how the percentage of water brought
up with the oil has been growing on Ghawar. There are published reports that
Ghawar has from 30-55% water cut. This means that about half the fluids
brought up the well are water. Today the decline rate is 8%. Thousands of
barrels per day of production must be added each year.

"The big risk in Saudi Arabia is that Ghawar's rate of decline increases to
an alarming point," said Ali Morteza Samsam Bakhtiari, a senior official
with the National Iranian Oil Company. "That will set bells ringing all over
the oil world because Ghawar underpins Saudi output and Saudi undergirds
worldwide production." JEFF GERTH, "Forecast of Rising Oil Demand Challenges
Tired Saudi Fields," February 24, 2004 New York Times, Late Edition - Final
, Section A , Page 1 , Column 3
www.peakoil.net/Newspapers/20040224NYTTiredSaudiFields.doc

Unfortunately for the world, few know the actual state of Ghawar. Cumulative
production from the field is 55 billion barrels. In 1975 Exxon, Mobil,
Chevron and Texaco estimated that the ultimate recovery from the field would
be 60 billion barrels. Without a doubt, new technologies have moved EURs
from that which was possible in the mid 1970s. But the Saudis claim that the
field can recover another 125 billion barrels.(this info come from
www.simmonsco-intl.com/files/IEA-SOM.pdf slide 25 accessed 7-5-04) For
someone like me who has spent a lifetime in the oil industry trebling the
recovery factor is a fantasy we all wish we could do. But no one has ever
figured out how. Thus, I doubt very much their claims, especially in light
of the maps shown below.

But this is what is happening

"Saudi oilmen are usually a taciturn bunch, guarding their data like state
secrets. But this was post September 11 and Riyadh was wooing western
journalists and trying to restore the Saudis' image as dependable, long-term
suppliers of energy--not suicidal fanatics nor terrorist financiers. And it
was working.

"Then the illusion slipped. On a whim I asked my hosts about another , older
oilfield called Ghawar. It is the largest field ever discovered, its deep
sandstone reservoir at one time had held perhaps one-seventh of the world's
known oil reserves, and its well produced roughly one of every 12 barrels of
crude consumed on earth. In the iconography of oi, Ghawar is the mythical
giant that makes most other fields look puny and mortal. . . .

"At Ghawar,' he said, 'they have to inject water into the field to force the
oil out,' by contrast, he continued, Shayba's oil contained only trace
amounts of water. At Ghawar, the engineer said, the 'water cut' was 30%."

"The hairs on the back of my neck stood up. Ghawar's water injections were
hardly news, but a 30% water cut, if true, was startling. Most new oilfields
produce almost pure oil or oil mixed with natural gas--with little water.
Over time, however, as the oil is drawn out, operators must replace it with
water to keep te oil flowing --until eventually what flows is almost pure
water and the field is no longer worth operating."

"Ghawar will not run dry overnight, but the beginning of the end of its oil
is in sight." Paul Roberts, "New Tyrants for Old as the Oil Starts to Run
Out, " Sunday Times (News Review), May 16, 2004, p. 8

But this year at the Offshore Technology Conference some were talking about
a 55% water cut for Ghawar. Part of this is because the Saudi's inject large
quantities of water into the reservoir and much of it comes back to the
producing wells immediately though the system

"Saudi Aramco is injecting a staggering 7 million barrels of sea water per
day back into Ghawar, the world's largest oilfield, in order to prop up
pressure. It accounts for 30% of Saudi oil reserves and up to 70% of daily
output." "Doubts grow about Saudi As Global Swing Producer," Aberdeen Press
& Journal Energy, April 5, 2004, p. 15

But several people are becoming concerned about the ability of the Saudi's
to maintain production. Here is a tidbit from the Aberdeen Scotland
Newspaper of a few weeks ago.

"It seems a growing number of analysts are falling into line with the
Simmons & Company International view that Saudi Arabia may be running out of
steam and may not be able to perform the role of global swing producer for
many more years, despite being credited with oil reserves in the order of
260 billion barrels. The Centre for Global Energy Studies hinted at the
beginning of the year that the kingdom appeared to be heading for
difficulties. Now one of its analysts has said that having reserves does not
equate to production capacity. Citing the Haradh field, he said it required
500,000 barrels per day of water injection to get out 300,000 bpd of oil.
Moreover the problem is even more serious in the Khurais field." "Doubts
grow about Saudi As Global Swing Producer," Aberdeen Press & Journal Energy,
April 5, 2004, p. 15

Since I am more and more working in the area of reservoir management, one of
the things I have learned is that when you have to inject 500k barrels of
water to get 300k barrels of oil, you will cycle water through that field
like crazy. You won't up the pressure so you are probably cycling at least
200,000 barrels per day of water through the field.

For those who don't think there is a problem with the Saudi production, here
are a couple of pictures of Ghawar from a 1996 report which shows the size
of a 3d seismic section on the overall Ghawar field. The next picture is
from the 3D showing the injection wells and the line in 1996 where the water
had encroachd.

See image: Uthmaniyah 3D seismic survey

The Uthmaniyah area is the oldest producing area on Ghawar. But the next
picture shows that to the right of the line the oil is gone and all that is
left is water The solid circles are or were oil producers. the open circles
with arrows through them are where the water is injected to the reservoir to
push the oil towards the producers (On the picture below this is from the
right to the left. You can see that in this area, in 1996 the water had
encroached halfway across Ghawar.The water must have moved further to the
west today, 8 years later.

See image: Ghawar Water Front

the various areas of Ghwar are outlined at a map found at
web.inetba.com/gregcroftinc/images/Ghawar_map.gif

What is the future of Ghawar and Saudi production? It is not good.

"All production comes from 'very old fields', with no major exploration
success since the 1960s, and almost every field has high and rising water
cut.
"Saudi Aramco is injecting a staggering 7 million barrels of sea water per
day back into Ghawar, the world's largest oilfield, in order to prop up
pressure. It accounts for 30% of Saudi oil reserves and up to 70% of daily
output." "Doubts grow about Saudi As Global Swing Producer," Aberdeen Press
& Journal Energy, April 5, 2004, p. 15

and

"The Wocap simulations for Saudi oil are presented in Fig. 5. They clearly
show a long plateau at 8-10 million b/d. Here the main question is: How long
can Saudi Arabia plateau at that level? Or in other words: Will it age
gracefully? Much will depend on Ghawar. “

“With 100 billion bbl of crude oil produced so far, Saudi Arabia should not
be far from the midway point of its proved reserves of 260 billion bbl—that
means just 10 years at the going rate of roughly 3 billion bbl/year. Bearing
in mind the "spurious revision" of 1990 that boosted proved Saudi reserves
to 257. billion bbl from 170 billion bbl, the midway point could happen even
sooner than that. “

“Furthermore, the 35 billion bbl produced during 1990-2002 has not been
accounted for, as Saudi "proved reserves" were still being reported at 260
billion bbl by the close of 2001. “A. M. Samsam Bakhtiari, “Middle East Oil
Production to Peak within next decade.” Oil and Gas Journal, July 7, 2003,
p. 24

One of the interesting things about Ghawar is the nature of its reservoir
which provides an argument against an ideology I fight all the time,
Young-earth Creationism. Ghawar is largely made of dung, which would be hard
pressed to be concentrated during a global flood and thus contradicts the
young-earth creationist claims.

“Most massive and nonporous limestones contain textures made by invertebrate
animals that ingest sediment and turn out fecal pellets. Usually, the
pellets get squished into the mud. Rarely do the fecal pellets themselves
form a porous sedimentary rock. In the 1970s the first native-born Saudi to
earn a doctorate in petroleum geology arrived for a year of work at
Princeton. I used the occasion to twist Aramco’s collective arm for samples
from the supergiant Ghawar field. As soon as the samples were ready, I made
an appointment with our Saudi visitor to examine the samples together using
petrographic microscopes. That morning, I was really excited. Examining the
reservoir rock of the world’s biggest oil field was for me a thrill bigger
than climbing Mount Everest. A small part of the reservoir was dolomite, but
most of it turned out to be a fecal-pellet limestone. I had to go home that
evening and explain to my family that the reservoir rock in the world’s
biggest oil field was made of shit.” Kenneth S. Deffeyes, “Hubbert’s Peak”
(Princeton: Princeton University Press, 2001), p. 57-58

Back to the serious issue of Ghawar, an almost poetic ode to the death of
Ghawar can be found at www.newcolonist.com/ghawar.html. As Ghawar goes, so
goes the world.

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"But the country's [Saudi Arabia] oil fields now are in decline, prompting industry and government officials to raise serious questions about whether the kingdom will be able to satisfy the world's thirst for oil in coming years.Energy forecasts call for Saudi Arabia to almost double its output in the next decade and after. Oil executives and government officials in the United States and Saudi Arabia, however, say capacity will probably stall near current levels, potentially creating a significant gap in the global energy supply.... An internal Saudi Aramco plan, the experts said, estimates total production capacity in 2011 at 10.15 million barrels a day, about the current capacity. But to meet expected world demand, the United States Department of Energy's research arm says Saudi Arabia will need to produce 13.6 million barrels a day by 2010 and 19.5 million barrels a day by 2020.... Edward O. Price Jr., a former top Saudi Aramco and Chevron executive and a leading United States government adviser, says he believes that Saudi Arabia can pump up to 12 million barrels a day 'for a few years.' But 'the world should not expect more from the Saudis,' he said. He expects global oil markets to be in short supply by 2015.'... oil field development requires years of planning and work....  Sadad al-Husseini, Saudi Aramco's second-ranking executive and its leading geologist, warned at an oil conference in Jakarta in 2002 that global 'natural declines in existing capacity are real and must be replaced'....The average decline rate in Saudi Aramco's mature fields — Ghawar and a few others — 'is in the range of 8 percent per year,' without additional remediation, according to the company's statement..... The I.E.A. warned in November that huge investments would be needed to offset the decline rates in mature Middle Eastern oil fields — it put the average at 5 percent — and the increasing costs of oil and gas production. The agency, based in Paris, forecasts that Saudi production will need to reach 20 million barrels a day by 2020. .... In his speech in Jakarta, Dr. al-Husseini noted the need for exploration, pointing out that colleagues at Exxon Mobil predict that more than 50 percent of oil and gas consumption in 2010 must come from new fields and reservoirs. Harry A. Longwell, the executive vice president of Exxon Mobil, says finding new sources of oil is crucial. Mr. Longwell, in an interview, said that increasing demand and declining production were not new problems, but they were 'much larger now because of the world's demand for energy and the magnitude of the numbers now are much larger.'"
Forecast of Rising Oil Demand Challenges Tired Saudi Fields
New York Times, 24 February 2004

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Trouble Looming For The UK
"Britain became a net importer of oil in June for the first time in 11 years, official data showed on Tuesday. News of the shift came as world crude oil prices touched record highs this week of $41.70 for benchmark Brent crude and $45.04 a barrel for West Texas Intermediate. The US government on Tuesday raised its central price forecast for US oil this quarter by $4 a barrel to $41 a barrel and predicted prices close to $40 a barrel next winter and in 2005.  The UK's oil imports were at their highest-ever level in the second quarter, according to data from the Office of National Statistics, a government agency. Meanwhile, oil production peaked in 1999 at 2.8m b/d, and has since been falling as the North Sea's reserves have been depleted. Wood Mackenzie estimates UK oil output at 2.2m b/d, and some forecasters see production declining to about 2m b/d next year. Rhodri Thomas, an energy analysts with Wood Mackenzie, said although the June production figures may be slightly lower than normal because of seasonal maintenance on oil rigs in the North Sea, the trend is steadily down. 'This is no blip, production rates are in decline,' he said. As North Sea output falls, the monthly statistics will more frequently show UK imports exceeding exports until, some time after 2007, it is expected to emerge as a net importer of oil for the year as a whole.... In response to declining oil output, the government has sought to attract oil companies by cutting rental fees on licences. Britain has also begun work on an import infrastructure to prepare for the looming structural shift in the energy industry. As the UK is expected to become a net gas importer as early as next year, it is building liquefied natural gas import terminals."
UK net oil importer for first time in decade
Financial Times, 12 August 2004

"According to industry predictions the UK will import more gas than it produces by 2006. Gas consumption in the UK has continued to rise, having more than doubled over the past 10 years. Mark Clare, managing director of British Gas, said: 'The UK’s energy market is entering a new era, when dwindling North Sea supplies will need to be replaced with gas from as far afield as North Africa, the Middle East, South East Asia and the former Soviet Union.'"
UK to Import Gas as North Sea Stocks Dwindle
PA News, 11 August 2004

"A decline in oil and gas production, which once made up a fifth of exports and now accounts for 8 percent, may threaten as many as 260,000 jobs and put at risk 4.3 billion pounds in tax revenue for the Treasury, said Kemp, who was appointed by Prime Minister Tony Blair to study the history of North Sea oil. The U.K., Europe's second-largest economy, may become a net importer of both oil and gas within three years, Kemp said.... By the end of 2002, the U.K. had produced a total of 32.9 billion barrels of oil equivalent, which includes oil and gas, with remaining reserves possibly as low as 13.6 billion barrels, the latest available government figures show.... The government is also concerned about how the U.K. will meet its energy needs as it relies on imports of fuels. More than two- thirds of the U.K.'s electricity is generated using gas, creating the risk of blackouts should supplies fail. 'We've got used to being an exporter of energy, now we are becoming an importer,'' said U.K. Trade & Industry Secretary Patricia Hewitt, in an interview last month. 'We've got to make sure that we are importing our energy, where we have to, from different countries and different suppliers so we don't have to risk our energy supplies.'''
U.K.'s Waning Oil Output Will Widen Trade Gap, Threaten Jobs
Bloomberg, 11 August 2004

But The Problem Is Global
"Optimists about world oil reserves, such as the Department of Energy, are getting increasingly lonely. The International Energy Agency now says that world production outside the Middle Eastern Organization of Petroleum Exporting Countries (opec) will peak in 1999 and world production overall will peak between 2010 and 2020. This projection is supported by influential recent articles in Science and Scientific American. Some knowledgeable academic and industry voices put the date that world production will peak even sooner—within the next five or six years. The optimists who project large reserve quantities of over one trillion barrels tend to base their numbers on one of three things: inclusion of heavy oil and tar sands, the exploitation of which will entail huge economic and environmental costs; puffery by opec nations lobbying for higher production quotas within the cartel; or assumptions about new drilling technologies that may accelerate production but are unlikely to expand reserves. Once production peaks, even though exhaustion of world reserves will still be many years away, prices will begin to rise sharply. This trend will be exacerbated by increased demand in the developing world..... "
Senator Richard G. Lugar and R. James Woolsey (Former Director of the CIA)
The New Petroleum - Foreign Affairs January/February 1999

  "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'

GLOBAL ENERGY CRISIS LOOMING
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London Times - 26 January 2004 World's Top Ten Oil Companies Unable To Replenish Reserves www.btinternet.com/~nlpwessex/Documents/oilsectorfailstoreplenishreserves.htm Sector Finding Less Oil - Pull Outs Anticipated

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  "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

"The recent report by the President's Committee of Advisers on Science and Technology... concluded  'A plausible argument can be made that the security of the United States is at least as likely to be imperiled in the first half of the next century by the consequences of inadequacies in the energy options available to the world as by inadequacies in the capabilities of U.S. weapons systems.   It is striking that the Federal government spends about 20 times more R&D money on the latter problem than on the former.'... The nearly $70 billion spent annually for imported oil represents about 40 percent of the current U.S. trade deficit.... Research is essential to produce the innovations and technical improvements that will lower the production costs of ethanol and other renewable fuels and let them compete directly with gasoline. At present, the United States is not funding a vigorous program in renewable technologies.... 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."
Senator Richard G. Lugar and R. James Woolsey (Former Director of the CIA)
The New Petroleum - Foreign Affairs January/February 1999

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Selected Energy News Updates From Alexander's Gas And Oil
Germany and China look to the sun for energy answers
UK energy minister warns of North Sea production challenges
Sustained investment crucial to security of UK gas supply
Iran claims number-two position for world oil reserves
Georgia suspends oil pipeline construction
China’s oil imports surge to record 2.8 mm bpd
China sets new record in power consumption
India needs gas pipeline through Pakistan
India’s crude reserve to exhaust in 20 years
West African nations critical to US energy security
Mexico is threatened by energy shortage
Mexico has proven oil reserves for only 11 years
Economist warns US legislators about need for better energy management
It's time for the United States to create a workable energy strategy
Americans should invest in more efficient cars
US gas demand to grow 40 % by 2025
The future of energy: Alternatives ahead
The race to secure energy supplies is very much on
Worldwide demand for oil will continue to grow rapidly
IEA expects oil demand to rise by 2.2 % next year
World oil consumption may rise 2 % in 2005 led by US

Alternative Energy Technology As An Alternative To Permanent War

Wind

Wave

Solar

Geothermal and hydroelectric

'The yet to be used' - Storing renewable energy

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Solar Energy, Agriculture and World Peace - click here

NATURAL LAW PARTY WESSEX
nlpwessex@btinternet.com
www.btinternet.com/~nlpwessex