Saudi Production & Consumption: To Infinity & Beyond?

I have previously compared a HL plot (showing a steady linear progression with a plausible P/Q intercept) to an airplane on final approach for landing. If the plane falls below the glideslope, the pilot (hopefully) pulls the nose up until the plane is back on the glideslope. If the plane rises above the glideslope, the pilot pushes the nose down until the plane is back on the glideslope, on track for a landing (see an example in the article linked below).

I have frequently posted the Texas & North Sea production graphs, with their respective peaks lined up with each other. My point is that peaks happen, even in the best of circumstances:

http://www.theoildrum.com/files/TexasAndNorthSea.png

The pre-peak Texas HL plot is quite noisy, but the overall plot shows a steady linear progression. The North Sea pre-peak plot is quite consistent, as are the post-peak data.

I have previously described how the post-1970 and post-1984 cumulative Lower 48 and Russian production numbers are basically what the HL models predicted, using only data through 1970 and 1984 to respectively construct the models.

Last year, in March, one of the objection to the Saudi HL plot was that the observed production decline was sharper than what the HL model predicted. I responded that I therefore expected to see a production increase.

This year, one of the objections to the Saudi HL plot is that we are seeing increasing production. I have responded that I expect to see a resumption of the production decline, probably in 2009.

We can say that is quite likely that Saudi Arabia will have shown three straight years of annual production below their 2005 rate, at about the same stage of depletion at which the prior swing producer, Texas, peaked.

Which brings us to consumption.

The revised 2006 and 2007 data show an annual rate of increase of about +7.2%/year, which makes extrapolating future consumption pretty easy (at this rate, it doubles every 10 years). Extrapolated out, it would like look this, on 10 year intervals (total liquids production from Saudi Arabia in 2005 was 11.1 mbpd, EIA):

2005: 2 mbpd
2015: 4 mbpd
2025: 8 mbpd
2035: 16 mbpd

You see the problem. Of course, it’s usually a mistake to extrapolate an exponential increase forever (especially when one resides in a finite world), but there are some powerful forces driving the increase in Saudi consumption, at least for quite some time.

In any case, for the sake of argument, from 2005 to 2015, the Saudis would have to add about 200,000 bpd per year, just to meet domestic consumption.

Subsequent decades would look like this:

From 2015 to 2025, 400,000 bpd per year.

From 2025 to 2035, 800,000 bpd per year.

From 2035 to 2045, 1.6 mbpd per year.

The Saudi HL plot is showing a steady linear progression, with a plausible P/Q intercept. After 2008, Saudi Arabia will show lower production, flat production, or increasing production. My bet is on lower production, but time will tell.

But any way you look at it, I think that it is hard to make a case for a steady increase in net oil exports from Saudi Arabia.

In Defense of the Hubbert Linearization Method (June, 2007)
http://graphoilogy.blogspot.com/2007/06/in-defense-of-hubbert-linearizat...

Agree with you that current oil prices are a significant deterrent to a military strike against Iran and the net result is short term stabilty. However I think there is significant potential for further regional conflict.


A year ago King Abdullah was quoted referring to the "illegal US invasion of Iraq."


If foreign oil companies enter Iraq and develop the fields (and this appears to be likely) then the additional supply will put downward pressure on prices. KSA cannot be happy about foreign occupiers of Muslim lands having the potential to adversely impact the sole source of KSA national income. The potential for significant conflict between KSA and the US appears high.


If the US acts in its own interests and expands Iraqi supply it can be expected that this will reduce the market price of oil. If the US respects KSA interests then it acts to support a higher price and essentially collaborates with OPEC in maintaining a "managed" price. To put it bluntly, what is good for the US is economic disaster for KSA and OPEC, and what it good for KSA is economic disaster for the US.


Not sure how this will play out.
I do suspect that the public in the land of free enterprise will react negatively to evidence of their own government acting in collusion with a Muslim cartel. The solution to this is to make sure the evidence never gets out and the US mainstream media have lots of experience in this.


If KSA does feel threatened I can see them acting to provide covert support to a resumption of the Sunni insurgency in Iraq. They did it in Afghanistan and that threat was far more distant; in the present case a hand is closing around their jugular.