Thanks to alert reader Richard G., who has sent two erudite e-mails explaining how my early response to a forthcoming book about the Saudi oil reserves was wrongheaded.
Let's learn more.
Part one:
I'm a regular reader of your blog and generally agree with you but you are really off the mark with your posting about Matt Simmon's book and research. From your statement, it seems clear that you have neither read the book or any of his papers / presentations (see [here]).Simmons never claims that we are running out of oil --simply that 1) we are globally reaching a peak (e.g. think of a bell curve representing toal oil production per year over a 300 year period; peak is the point at the top of the curve where roughly 50% of all oil is extracted with 50% left and where annual worldwide production begins to decline), 2) the technical behavior (e.g. water cuts; requirements for massive water or steam injection; depletion behavior) of major Saudi fields (particularly the 5 million barrel per day Ghanwar field) is that of fields that are in decline, 3) the Saudi (and OPEC) reserve increases in the 1980's and 1990's were entirely based on politics (OPEC quotas) with no technical or discoveries to back them up, and 4) that if Saudi Arabia has or is about to peak, the world has peaked leading to a variety of problems, including real limits to growth due to demand for energy exceeding the supply (2nd law of thermodynamics is generally ignored or not understood by economists). Simmon's biggest point is that we don't have a plan B (or plan C) to deal with oil depletion and that we need to start now investing in R&D and alternative capacity (nuclear, clean coal technologies; fusion research, wind, solar etc.).
Another point he makes is that technology has not changed the amount of oil in the ground, but has changed essentially the productivity of extraction (e.g. accelerating the depletion curves and significantly reducing the number of test wells (e.g. why there are 2 million wells in the US) needed to determine the size of a field).
Saudi Arabia was extensively explored by Western big oil companies prior to the date in the early 1970's when the Saudi's nationalized the foreign owned oil companies. By 1970, geologists had largely found every large field in the world, virtually all of the new fields discovered are relatively small (e.g. hundreds of millions of barrels scale) and in places where the costs to exploit the reserves (both $$$ and political) are high and often prohibitive. Note that there is some additional potential for a few large finds but all of these are in places very hard and expensive to work such as the artic or very deep sea or very politically unstable and will effectively only partially replace depleted existing fields.
Part two:
Actually, part of the problem with communicating the ramifications of peak oil is that the issue has been tarnished by too many incorrect statements, often backed by bad data and/or spinned for various political purposes, and the vast majority of the public (especially the political community) doesn't want to deal with the consequences. BTW - another way to look at this is to match supply (current fields including their depletion rates + new projects coming on line over the next 5-8 years) with rapidly rising demand. Chris Skrebowski, the editor of Petroleum Review, recently completed a study looking at every project in the pipeline over the next decade and concluded that we are going to have supply problems as early as 2007. See [here].At a minimum, prices are going to be a lot higher and a lot of new projects and capacity that require long lead time (assuming of course no additional "political" delays) is needed.
Virtually all of the geologist estimates used in various peak oil studies for total world "undiscovered" oil reserves range from a low of about 150 billion barrels to a high of about 650-750 billion barrels, with much of the range depending on assumptions about non-conventional sources such as tar sands, heavy oil, etc. Again, the main point here is not that we are running out or that there is no more, but that we are hitting the point of the curve where it gets a lot harder and more expensive to extract, significantly higher sustained prices are needed to justify some of these mega projects, and that a lot of things will change as a result (particularly stupid and wasteful uses).
Finally, there is a national security aspect to all of this. The U.S. currently consumes roughly 25% of all world production but our domestic production peaked in 1970/1971 and has been in decline for over 30 years. We have gone from being the "Saudi Arabia" of the world to importing more than 60% of our demand, with the percentage increasing every year as we produce less and consume more). When 60% of the remaining reserves are in what is roughly a triangle with 1000 mile sides in the persian gulf and much of the rest in places that are politically unstable, potential competitors or enemies, or very difficult to access, we have an extremely high risk of a geopolitical shock. Even cutting 10%-20% (e.g 2-4 million barrels a day) of consumption in the US would create a major shock to the economy, consumers, commuting, SUV's, etc.
I haven't read the book (I don't think it's out yet) and Simmons may be entirely on the money. My point wasn't to disagree per se, although I may not have expressed myself all that well, so....
It was just to say that well-informed people have stated categorically before that the big fields are all depleting, no more will be found, and so a crisis is looming. It's very true that there won't likely be such large resources in one place again. But the industry has been very adept at getting better and better at exploitation, which has made a huge difference. The timeline of crisis has been extended significantly (even though it's still coming).
The other thing that seems intriguing is to wonder how much potential might be available in countries where political structures prevent the E&P pros from doing what they do best. Even here we don't know what's really available in ANWR, for example, because of politics. Geology is often surprising -- for good or bad. My company participated in the infamous Mukluk prospect off northern Alaska, rated by the USGS as having a 90% probability of very large reserves. As I recall, the well yielded hundreds of feet of oil-stained rock, but no deposits -- the oil had been there once but leaked away over geologic time.
If Saudi geology is really very well understood and very well picked over, then that's that. But maybe it's not -- petroleum technology has changed a lot since 1970. Have the Saudis really managed things that well? I dunno.
It'll be interesting to read Simmons' book when it's available, and see in full what he presents.