Have Saudi Arabia's oil reserves peaked through a combination of natural depletion and reservoir mismanagement? As noted earlier here and here, oil industry veteran and investment banker Matthew Simmons says "Yes" or at least "Maybe."
His controversial new book is finally out and the debate was featured in the Houston Chronicle.
Saudi Arabia says it has enough oil to keep the world happy for at least another 70 years.Posted by Alan at June 18, 2005 10:07 AMBut the closely guarded Saudi Aramco numbers that would back up that claim aren't available to outsiders. That worries Houston investment banker Matthew Simmons.
Simply put, Simmons doesn't think energy-intensive countries like the United States should take Saudi Arabia at its word. He contends that the country's official oil reserve count could be overstated and the kingdom's oil production could decline, throwing the world's supply-and-demand balance off-kilter and jacking up prices for years to come.
After parsing 235 technical papers from the Society of Petroleum Engineers written by state-owned Saudi Aramco's employees, Simmons says the kingdom's ability to produce ever-increasing amounts of oil looks bleak.
It's a theory he's been expounding on for more than a year. In an industry rife with double talk, Simmons' bold pronouncements that world oil production is peaking have earned him fans and foes alike.
His critics say Saudi Arabia has been a dependable oil source for the United States for decades, consistently stepping up as the world's swing producer to help calm energy markets and stabilize prices.
Even if state oil company Saudi Aramco has had a policy of withholding technical information, the math is there to back up the kingdom's claims, according to Sadad Al-Husseini, Aramco's recently retired head of exploration and production.
"We drilled, cored and logged numerous key wells in every active field and reservoir and surveyed the most significant oil fields with complete 3-D seismic coverage," wrote Al-Husseini, in a column for Oil & Gas Journal. "Over the years, these models have been updated annually and have confirmed our predictions of reservoir performance and our calculations of reserve and oil recoveries."
Simmons believes it could all add up to big trouble, although he's quick to call his book "a warning, not a certainty."