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Politics : Foreign Affairs Discussion Group
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To: KyrosL who wrote (110290)8/6/2003 10:02:55 PM
From: Brumar89  Read Replies (2) of 281500
 
Does SA's really have spare capacity? Here's an excerpt from something Ed Ajootian posted on another thread:

"With little exploration success since the 1960s and many of its fields showing signs of decline, Saudi Arabia is having an increasingly difficult time keeping production flat. According to energy investment banker, Matt Simmons, head of Simmons and Company International, many of the country's ageing fields are showing increased water cuts. Water cuts, water produced along with crude oil that is later separated, are a sure sign that a field is headed into decline. The country's largest field, Ghawar, now produces over 1 million barrels of water a day along with its nearly 4.5 million barrels of crude. With Ghawar accounting for 60% of the country's 7.5 million barrels per day of crude production, there is little hope Saudi Arabia can keep production flat if Ghawar continues to water out. Since Saudi Arabia cannot invest the billions of dollars needed to maintain current production and develop smaller fields, Ghawar has assured the world high oil prices are here to stay.

Another great myth about Saudi Arabia is that the country has spare production capacity. Many believe that Saudi Arabia's spare production capacity allows them to "turn on the spigots" at times of high oil prices. It is extremely unlikely the country has any spare capacity. There exists little incentive to restrict production at times of high prices and low inventories. Unless human nature has changed substantially in recent months, I doubt that the cash-strapped Saudis are producing much below their production capacity."

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