Re: Saudi Fields

From: Al Koop <koopa@gvsu.edu>
Date: Mon Apr 19 2004 - 15:01:02 EDT

Glenn provided a report that Saudi Oil reserves may be overstated. There
is increasing evidence that the amount of oil remaining in the entire
world may be overstated.

The oil companies seem to want to make sure that no alternative energy
sources come online now that will reduce the oil demand before they sell
all of their crude. They have no incentive to say anything that will
lead to the development of new energy sources that will compete with oil
before it becomes necessary.

Here is another article about possible overstatement of oil reserves.

http://www.dailystar.com.lb/article.asp?edition_id=10&categ_id=3&article_id=2387

Shell scandal points to exaggerated estimates of oil reserves

By Ed Blanche
Special to The Daily Star
Saturday, April 17, 2004

BEIRUT: The oil industry has been gripped by scandal since Royal
Dutch/Shell, one of the giants, twice this year downgraded its proven
oil
reserves by 20 percent, or nearly 4 billion barrels. There is
considerable
concern that Shell may not be alone and that other companies and even
governments have hyped up their estimates of how much oil they have, a
vital
factor in gauging their economic health. If that proves to be the case,
it
would have an immense impact on the Middle East, whose economic weight
is
almost totally dependent on oil and natural gas.

A growing number of geologists and analysts in the energy industry have
been
saying for some time that global oil reserves may be dangerously
exaggerated. With oil prices currently at around $37 a barrel, the
highest
for nearly 15 years, and the threat of diminishing supply or terrorist
attacks on the energy industry, the question of reserves has assumed a
greater importance than ever.

The March 31 decision by the Organization of Petroleum Exporting
Countries
(OPEC) to cut oil production by 1 million barrels per day (mbpd) signals
a
new era of higher oil prices, particularly as demand has increased
sharply,
especially in Asia. This threatens to heighten strained relations
between
the US and Saudi Arabia at a time of rising hostility toward the
Americans
in the region.

Earlier this month, The New York Times reported that internal Shell
documents and other data indicated that Shell had overestimated its
proven
oil reserves in Oman by as much as 40 percent. But that seems to have
been
done because the expectation was that technological advances in drilling
techniques could extract more crude from mature fields than had
previously
been possible.

The Oman estimates were based on assessments made in May 2000 by Philip
Watts, then Shell's head of exploration and development. Watts was
sacked in
March over the reserves scandal after it became known that he and other
senior executives had known in 2002 that the company's reserves were too
high, but did nothing to correct that.

The Oman episode is important because if the advanced techniques,
including
what is known as "horizontal drilling" - drilling outward at an angle,
rather than simply boring down vertically - are not as effective as they
have been made out to be, then the amount of oil that is deemed
recoverable
will have to be lowered. That's bad news for Oman, which is heavily
dependent on oil and gas exports. But it's also bad news for the world
as a
whole.

With the end of the Cold War, during which divisions were created and
alliances formed along ideological lines, economic competition now
determines international relations. And as the world's natural resources
-
oil, water, timber, minerals - disappear and global warming drastically
alters the environment, competition for ownership or access to such
important economic assets has intensified. About four-fifths of the
world's
known oil reserves lie in politically unstable or contested regions.

According to international security expert Michael T. Klare, professor
of
peace and security at Hampshire College, Massachusetts: "We are entering
an
era of resource war." Klare, author of Resource Wars: The New Landscape
of
Global Conflict, writes: "The pressure on global petroleum supplies is
likely to prove especially severe. The production of petroleum products
is
not likely to keep pace with soaring demand; periodic shortages will
occur
more and more often."

Oil companies and the governments of oil-producing states have every
incentive to boost their reserves; the more oil they can claim, the more
influence they have on the energy market. In the mid-1980s, OPEC decided
to
factor in member states' reserves when determining their market share.

The figures for global oil reserves soared. As cartel members such as
Algeria, Libya and Nigeria compete for bigger production quotas within
OPEC's overall output ceilings to reflect growth in capacity, countries
are
keener than ever to emphasize the scale of their resources. But the
methods
used to determine the size of their reserves are a closely guarded
secret,
and while companies are subject to some degree of examination by
regulatory
bodies such as the US Securities and Exchange Commission, a country's
estimates of how much oil it holds is virtually unchecked.

Saudi Arabia, one of the most secretive countries in the world, recently
defended its resource base when it was challenged by Matthew Simmons, a
US
investment banker who specializes in energy. He questioned whether Saudi
Arabia's stated oil reserves of 261 billion barrels, the world's
largest,
were as big as Riyadh claimed. Aramco, the kingdom's state-owned oil
giant,
insisted that it had enough oil to double its output to 15 mbpd and
sustain
that for 50 years.

But energy analysts have long questioned the reserves claimed by other
OPEC
producers. Veteran British geologist Colin Campbell, chairman of the
Association for the Study of Peak Oil and Gas and a trustee of the Oil
Depletion Analysis Center in London, believes that Gulf producers' known
reserves are really considerably lower than they claim - 210 billion
barrels
for Saudi Arabia, not the official tally of 261 billion; 90 billion for
Iraq
rather than 112 billion; Kuwait, 55 billion instead of 94 billion; the
United Arab Emirates, 60 billion instead of 98 billion.

According to Alejandro Eggers Moreno of the Strategic Assessments
Institute,
a Los Angeles-based consultancy: "All major players in the oil business
-
private and public - insist that there will be enough oil to last well
through the 21st century. But given their incentive to inflate reserve
totals, it would be irresponsible not to question their estimates. The
official figures - that is, those cited by oil companies to prove their
product is secure - are notoriously unreliable."

The result of all this is that there may be considerably less oil left
in
the world than the producers and the energy corporations would have us
believe. Skeptics like Campbell believe there are few major oil deposits
left to discover. "There's only so much crude in the world and 90
percent of
it has been found," he told The Daily Star.

Campbell believes that with the demand for oil currently rising at more
than
2 percent a year, global production will peak by 2010. What that means
is
that oil will cease to be abundant and that prices will stay high.
Skeptics
like Campbell may be wrong, of course, and the world may develop
alternative
energy sources before any severe shortage occurs. But since those
responsible for estimating oil reserves have a vested interest in
keeping
them high, their figures should not be taken for granted.

All this makes control of oil and natural gas a strategic objective for
major powers. The US-led war against terrorism and the pressing need for
America, the world's most profligate oil consumer, to secure oil
supplies as
its own production shrinks while demand increases, are likely to become
heavily interconnected, more than they are already.

US foreign policy has been proceeding along these lines for some time,
and
has been accelerated by the administration of George W. Bush. But
others,
such as China, desperate for oil and gas to fuel its burgeoning economy,
Japan and the major European powers, will need the same natural
resources
the Americans are seeking to ensure for themselves. There may not be
enough
to go around.

Ed Blanche, a member of the International Institute for Strategic
Studies in
London, is a Beirut-based journalist who has covered Middle East affairs
for
three decades. He is a regular contributor to The Daily Star

 

>>> "Glenn Morton" <glennmorton@entouch.net> 04/19/04 6:49 AM >>>
Here is a tidbit from the Aberdeen Scotland Newspaper of a couple of
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.

        "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
**
Received on Mon Apr 19 15:02:00 2004

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