I know this is dated, but I think it bears repeating. What if ARAMCO is right and Simmons is wrong?
According to ARAMCO
"They also sharply criticized Simmons for not trying to contact them or
other company managers before the analyst went public with his
conclusions.
"We didn't even get an e-mail about this," Saleri said."
Saudis refute claims that global oil supplies are in danger
Maureen Lorenzetti
Washington Editor, Oil and Gas Journal
WASHINGTON, DC, Feb. 25 -- Saudi Aramco Tuesday said it is well-
positioned to remain the world's leading oil supplier now and far into the
future. Company officials sought to refute claims that Saudi Arabia's oil
fields may be declining faster than previously thought and therefore may
not be able to meet the world's long-term demand.
"We have the potential to add more oil than anyone else," said Mahmoud
Abdul-Baqi, vice-president, exploration, for the state-owned oil company.
"We will continue to deliver for another 70 years at least."
The company estimates that world oil demand is expected to increase at
1-2%/year over the next 15 years, reaching 107 million b/d by 2020.
Officials said that worldwide oil reserves at yearend 2002 stood at 1.05
trillion bbl, of which 65% was in the Middle East.
Aramco said it is able to sustain production levels at 10-15 million b/d
easily through 2054, "commensurate with world energy market needs and
conditions."
A 15 million b/d production level for example, could be maintained through
2054, if the company were to use 68% of its probable and possible
reserves.
"In all three scenarios, prudent reservoir management practices, oil-
focused exploration efforts, and continual emphasis on cutting-edge
technologies certainly can extend the plateau period well beyond 2054,"
Aramco said.
Aramco's current production capacity is 10 million b/d. Company officials
say they could comfortably add 1 million b/d of capacity within 2 years, if
market conditions warrant; they also can boost production levels by at
least 1 million b/d within 72 hr to react to international supply shocks.
Baqi's comments were made at an energy policy symposium sponsored
by the nonpartisan think tank Center for Strategic and International
Studies in Washington, DC.
CSIS Energy Program Chairman Robert Ebel noted that as the world's
largest oil exporter, Saudi Arabia's ability to maintain or increase its supply
is a key factor in providing balance to the global oil market.
"Can that leadership be retained for the benefit of consumers everywhere?
It is an important question that must be asked, because there is no
substitute for Saudi oil."
Energy anxieties
Aramco was responding to a CSIS presentation made by Houston-based
investment banker Matthew Simmons, president of Simmons & Co.
International.
Simmons said that Saudi Arabia's great oil fields may be aging much
faster than conventionally thought. Citing Society of Petroleum Engineers
technical papers authored by Aramco engineers, Simmons said there is
evidence to suggest the Saudis may be relying too much on technology to
get the last "easy oil."
"The sweep of easy conventional oil flow is ending," Simmons told a panel
of Aramco executives.
Simmons said Saudi Arabia's next generation of oil production to replace
planned declines is not risk-free, and he listed three oil fields as examples
of which there are "complex" production histories: Qatif, Abu Sa'fah, and
Khurais.
"Each has its own set of challenges. If they work, great. But if they do not,
the world has likely seen peak oil. The answer should be known by 2006-
07," Simmons said.
Simmons also called on the Saudis to help usher in "a new era of energy
transparency" to ward off what he said he fears could be a "nasty" energy
surprise that could happen in the not-too-distant future. A step in the right
direction would be for Saudi Aramco to provide monthly production level
and depletion rate data on its oil wells and fields.
He also urged other key players in world energy markets to work together
to avoid a future energy crisis. Simmons said the International Energy
Agency should improve its own demand and cost data. One weak area
within the IEA reporting system continues to be non-OPEC (Organization
of Petroleum Exporting Companies) decline data, he said.
Meanwhile, OPEC should make public timely field-by-field production and
well-by-well data, budget details, and third-party engineering reports. He
also called on oil-producing countries to work on getting wild price volatility
under control. This would include creating more-realistic models for how
oil and natural gas need to be priced.
US energy policy implications
Simmons' work has not fallen on deaf ears. A few hours after the panel
discussion, US Senate Energy and Natural Resources Chairman Pete
Domenici (R-NM) issued a statement saying that concerns over "tired"
Saudi supplies illustrated the need to continue research on hydrogen cars
and to pass a stalled energy bill before Congress.
"President Bush had the vision to see past oil imports, OPEC quotas, and
carbon emissions to a future of hydrogen-powered cars, clean air, and
energy self-reliance for this great country," Domenici said.
"Last year, President Bush asked Congress for $1.8 billion for hydrogen
research. Senate Republicans put in authorization for $2.1 billion—nearly
$400 million more than requested—in our energy bill. S2095, the energy
bill pending in the Senate, puts that investment, along with American
ingenuity and innovation, to work to make a hydrogen future an American
reality.
"If we pass S2095, we can put affordable, reliable hydrogen-powered cars
on the road by the time the Saudi oil fields are tapped out, whenever that
may be. Let's stop looking to foreign countries to solve our energy
problems while we play politics with solutions here at home. I urge the
swift passage of S2095."
Domenici noted that the US Energy Information Agency says Saudi Arabia
needs to produce 13.6 million b/d by 2010 and 19.5 million b/d by 2020 to
meet world oil demands. But he then cited a New York Times report that
quoted an internal Saudi Aramco plan that estimates production in 2011
will be 10.15 million b/d.
Aramco dismisses claims
At CSIS and later at a briefing for reporters, senior Aramco officials
strenuously denied Simmons assertions that fields may be declining at an
alarming rate.
"He is asking all the right questions, but giving all the wrong answers,"
said Nansen Saleri, manager, reservoir management, for Aramco.
Aramco officials said that the SPE papers that Simmons cites addressed
very specific technical issues that just represent a snapshot, not a full
picture, of the company's oil fields.
"These papers discussed very specific problems that our engineers
wanted to explain how they solved. They did not talk about everyday
operations," said Baqi. "You don't write papers about all the good news."
Aramco officials also disputed charges that they are secretive about the
way they manage their oil fields. Saleri said Aramco "opens its doors"
about its operations and has invited scholars, scientists, and analysts,
including Simmons, to their offices. Aramco officials acknowledged that
there is certain information that their company does not disclose for
competitive reasons. But Saleri and Baqi argued that Saudi Aramco has
been far more transparent with its data compared with the foreign firms
that used to run the country's oil fields.
They also sharply criticized Simmons for not trying to contact them or
other company managers before the analyst went public with his
conclusions.
"We didn't even get an e-mail about this," Saleri said.
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