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30 comments on Shhhh! Maybe they won't notice . . . . . .

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fatbear on September 28, 2005 - 1:12pm Permalink | Subthread | Comments top
al-Naimi's comments may also wind up with an eventual substantial instability in URR

Let's say we accept the new figure - that leads to a decline in oil prices (back to $30?  $25? any guess?) at some point when these new reserves come on line (2008-2010 or so) - then URR goes down (as the lower price now makes these more-expensive-to-extract reserves not viable economically) - eventually (pick a date) the price rises and presto the reserves are economical again!  (And the cycle continues until the now-far-removed Peak moment.)

I know that Big Oil uses a past-average price along with their worst-case (from a price point of view) projections, so these fluctuations in URR would be on a slow curve, but still there nevertheless.

All of this is sideshow, as none of it has anything to do with OOIP - that is the real question.  As pointed out above, could ARAMCO (old version) have been so wrong that there's 3x what they thought?  And, if so, what does this mean about OOIP calcs for every other reservoir?

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Eroie Van Tanstaafl on September 28, 2005 - 2:01pm Permalink | Subthread | Parent | Comments top
Circa 1975, estimates of Saudi OIP were 500 Gb, with "proven" reserves of 160 Gb.  That implies a 32% recovery.

Last year, didn't Aramco announce that their OIP was actually closer to 1200 Gb?  (I may be confused on what that number referred to; this ArabNews story from April 2004 says Al-Naimi meant proven reserves, but that's absurd.)

But maybe that's how it all hangs together.  OIP is 1200, proven reserves now 461, implying 38% recovery.

Hmmm...

Also, check this out:  It's not new - we were warned last year!
Washington Post, Dec 27, 2004:


Saudi Oil Reserves Could Increase by 77%

Associated Press
Monday, December 27, 2004; Page A26

RIYADH, Saudi Arabia, Dec. 26 -- Saudi Arabia's oil reserves, the world's largest, could increase by almost 77 percent to top 461 billion barrels in a few years, the nation's oil minister said Sunday.

"There are big chances to increase the kingdom's produceable oil reserves by 200 billion barrels," Ali Naimi said in a statement issued after he inaugurated new oil fields in eastern Saudi Arabia. "This will come either through new discoveries or through increasing production from known deposits."
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Saudi Arabia, which holds more than 25 percent of the world's proven oil reserves, says its registered reserves amount to 261 billion barrels.

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Eroie Van Tanstaafl on September 28, 2005 - 2:04pm Permalink | Subthread | Parent | Comments top
Sorry 'bout the extra cut-n-paste junk... I gotta preview that stuff more often.
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Typhoon on September 28, 2005 - 7:18pm Permalink | Subthread | Parent | Comments top
In early 2004, Mahmoud Abdul-Baqi and Nansen Saleri gave a presentation to CSIS in Washington.  Simmons also gave a presentation, so you could say it was a "debate".  Saleri and Baqi said that OOIP increased from 580gb in the early 1980s to 700gb as of 1/1/2004.  They claimed this 700gb has the potential to eventually increase to 900gb.  This isn't consistent with Al-Naimi's claim of 1,200gb OOIP right now.  Here was Abdul-Baqi and Saleri's presentation:

www.csis.org/energy/040224_baqiandsaleri.pdf  (Copy this link into the URL bar; it doesn't seem to allow a link to a PDF file.)

I'm more inclined to believe Simmons than the content of this presentation, although it is well-done.  There is no way to verify the data, of course, but nothing apparent is wrong with it to me.  I did find one inconsistency: their "Extent of Proved Reserves Depletion" slide claims that the proven reserves of Ain Dar/Shedgum (North Ghawar) are 60% depleted, as of 1/1/2004. However, if you do the math on their "Resources Depletion State" slide specifically about Ain Dar and Shedgum, you would see that the area is 66% depleted.  The only possibility besides an error is that there is a secondary reservoir for Ain Dar/Shedgum that is believed to contain a significant amount of recoverable oil.

It's also interesting that 60% of the OOIP is proven reserves, and a further 15% is probable and possible.  Saleri claims that Aramco is highly confident that it will recover both the probable and the possible reserves, yielding a 75% recovery.  This seems high.

I am in the Simmons camp, but reading this presentation was interesting, and I am open to opinions from any viewpoint.  The discussion is valuable.

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Stuart Staniford on September 28, 2005 - 7:48pm Permalink | Subthread | Parent | Comments top
Yeah, growth of OOIP to 700gb sounds plausible, and the trend doesn't look obviously bogus - a little too suspiciously smooth perhaps. Much more believable than al-Naimi's 1200gb. I don't buy the 200gb of undiscovered, given their lack of success to date (but maybe there's some deep water - though they seem to expect to mainly find gas there). However, the 1%-4% depletion rates in that presentation are much lower than the EIA quotes Abdullah Saif - 5%-12% Either the depletion rates have increased rapidly since Jan 2004 (in which case Matt Simmons is definitely right), or there's an inconsistency. Hard to believe they're going to get to 75% recovery rates of OOIP when depletion is running at 5%-12% already. And 75% recovery out of pretty tight rocks in Shaybah and Haradh? I believe this would be unprecedented right?
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Typhoon on September 28, 2005 - 10:06pm Permalink | Subthread | Parent | Comments top
I was just talking about North Ghawar, but I agree when talking about Saudi Arabia as a whole.  North Ghawar's proven reserves are 60% of OOIP, but Saudi Arabia's cumulative production added to proven reserves totals 371gb, or 53% of OOIP.  That's a high number to assume.  Even if North Ghawar achieves its objective, you can't assume such high recovery of other areas.  This could mean newer areas like the Hawtah Trend or Shaybah, as well as unproduced fields.  Even Haradh has very different characteristics that would not suggest high recovery.

I want to clarify one thing: "depletion" refers to the extraction of oil out of a field, NOT a decline of production rate.  Depletion happens from day one.  This term seems to be misused in Peak Oil discussions.  If you produce an amount of oil that is equivalent to 5% of proven reserves, that is a 5% depletion rate.  Therefore, Baqi and Saleri are actually talking about depletion, while Saif is talking about decline.

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Stuart Staniford on September 28, 2005 - 11:25pm Permalink | Subthread | Parent | Comments top
53% was before al-Naimi add the 200gb.
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Typhoon on September 29, 2005 - 12:30am Permalink | Subthread | Parent | Comments top
Saleri boldly announced this increase in reserves.  He says it will be made "soon", but does that mean that 460gb or more will be the official 2005 reserves estimate?  Are you sure this is what he means by "soon"?

Yes, 53% becomes 82% recovery with the 200gb reserves addition, and this doesn't include any probable or possible reserves.  Clearly, the new number is absurd if OOIP is 700gb.  Perhaps Aramco has suddenly decided that they can already boost their OOIP to that 900gb "eventual" level?  That's awfully fast, of course, but it still implies 64% recovery, which seems too high, especially considering that these are just reserves that are considered proven right now.  I don't think their ultimate recovery could ever reach such a percentage.  For this new reserve addition to be reasonable, Al-Naimi's figure of 1,200gb must be the supporting OOIP number.  It seems unlikely that Baqi and Saleri would claim 700gb with a potential of 900gb if they could easily declare anywhere near 1,200gb.  Remember, Baqi and Saleri wanted to paint the most optimistic picture of Saudi oil supply that they could.

I still trust the 1970s data far more than even Baqi and Saleri's data.  The 1970s numbers were probably an underestimate, but not by much.  I am convinced that new technology like intelligent MRC wells greatly increases the ability to maintain high flow rates from thinning oil columns and to hide from water channeling, but only increases the amount of recoverable oil to a certain extent.  Once these problems cannot be staved off any longer, production from the key mature fields will plunge.  I see nothing that casts doubt on Simmons' contention that twilight for Saudi Arabian oil is near.  

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Stuart Staniford on September 29, 2005 - 3:18am Permalink | Subthread | Parent | Comments top
You are right that we don't know what he means by "soon". Possibly he is just completely blowing smoke and these reserve additions will never be made. However, since he is saying this to the world and successfully getting covered in the press, and he is the Saudi Arabian minister for oil, it seems it is some kind of official position on their part. Going to 1200gb is sure going to blow away that nice straight line in their claimed OOIP rise graph. I pretty much agree with everything you say.
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30 comments on Shhhh! Maybe they won't notice . . . . . .

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