<DrumBeat: November 18, 2008 The Oil Drum Streets: Utilitarian Corridors or Livable Public Space>

91 comments on IEA WEO 2008 - Fuzzy Focus on Saudi Arabia

Comments can no longer be added to this story.

| Show without comments | PDF version

westexas on November 18, 2008 - 2:32pm Permalink | Subthread | Comments top

I thought that perhaps the most interesting comment at ASPO-USA was the offhand comment by the IHS guy that North Ghawar would be effectively watered out in two years.

And since it appears that Saudi Arabia's 2008 annual production rate will be below their 2005 annual production rate, it remains to be seen if they will ever again exceed, on an annual basis, their 2005 rate.

In any case, as a continuing example of world energy agencies ignoring the net export situation, at Saudi Arabia's current rate of increase in consumption, in 2030 they would be consuming about 12 mbpd, versus 2 mbpd in 2005 (total liquids). I estimate that their 2008 net export rate will be about 700,000 bpd below their 2005 net export rate.

Comments can no longer be added to this story.
Gail the Actuary on November 18, 2008 - 3:28pm Permalink | Subthread | Parent | Comments top

After thinking about it, your reference is probably to a statement at the ASPO-USA conference by Peter Wells. He is not from IHS himself, but analyzed IHS data and came up with a peak date of 2020. His presentation can be found here. I didn't take all that good notes, so don't remember that comment specifically.

When I first read your comment, I thought you were referring to the paper by Aage Figenschou, with Matt Simmons, that is up on the APSO-USA web site now. It says:

Saudi Arabia is being assumed to produce 15.7 mbpd although they have never promised to do so. Sadad al Husseini, former head of E&P in Saudi Aramco, has said the Saudis should not produce more than 12 mbpd if they want to avoid damaging their reservoirs. He has also said that Middle East OPEC will never produce more than 25 mbpd. Yet IEA projects that these countries will produce 37.1 mbpd by 2030. There is clearly a downside risk of some magnitude.

Comments can no longer be added to this story.
westexas on November 18, 2008 - 4:13pm Permalink | Subthread | Parent | Comments top

I didn't take notes either, and my apparently incorrect recollection was that Peter Wells was formerly with IHS, but it does appear that he predominantly used the IHS data base.

His comment about North Ghawar was during the Q&A, probably in response to a question that Alan Drake asked.

Comments can no longer be added to this story.
Heading Out on November 19, 2008 - 12:23am Permalink | Subthread | Parent | Comments top

I seem to remember the guy sitting next to me saying "Did he really say that?", when he said that.

Comments can no longer be added to this story.
drillo on November 19, 2008 - 6:18am Permalink | Subthread | Parent | Comments top

"at Saudi Arabia's current rate of increase in consumption, in 2030 they would be consuming about 12 mbpd, versus 2 mbpd in 2005 (total liquids)"

I appreciate very much the export land model. But I don't think that there will be a purely linear consumption trend:
1st: Even if the Saudis get (even more) extremely rich there will be an upper limit of oil consumption. As soon as each Saudi has his set of gold-plated luxury cars they will spend their remaining money elsewhere (e.g. state funds).
2nd: I am not sure if the petro dollars will trickle down to all of the KSA's population. In history this was not so, and many stayed rather poor.
3rd and most importantly: It would be illusory to think that KSA (and other OPEC countries) become increasingly rich whereas the rest of the world suffers a terrible crisis due to peak oil. As soon as oil prices rise and global economy goes down also the OPEC countries will have a restricted inflow of money - just like what is happening now.

So I expect that in the lower part of the export land curve the decline will decrease, as internal consumption goes down.

Comments can no longer be added to this story.
westexas on November 19, 2008 - 2:08pm Permalink | Subthread | Parent | Comments top

I agree that Saudi Arabia is unlikely to show a +7.2% rate of increase in consumption for 25 years, but my point is that the IEA and other agencies are basically just ignoring the net export issue.

Here is a "What if" scenario, assuming a +5.7%/year rate of increase in consumption, with a flat total liquids production rate of 11 mbpd for Saudi Arabia. A key point to keep in mind regarding Saudi consumption is that the average Saudi family has something like six kids.

http://graphoilogy.blogspot.com/2008/01/quantitative-assessment-of-futur...

If we go back to the original ELM, with a -5%/year rate of decline in production and a +2.5%/year rate of increase in consumption, net exports from Export Land go to zero in 9 years. With no increase in consumption, net exports go to zero in 14 years. In any case, I estimate that the cumulative shortfall between what Saudi Arabia would have (net) exported at their 2005 rate and what they actually exported will exceed a billion barrels of oil next year.

Regarding relative wealth, consider the increase in oil prices from 1972, through 1986. The big drop in oil prices did not occur until Saudi Arabia boosted production in 1986, even with the recession in the US in the early Eighties.

Comments can no longer be added to this story.
drillo on November 20, 2008 - 2:45pm Permalink | Subthread | Parent | Comments top

I just read an article in The Economist, which makes myself doubt about the 3rd point of my above statement. Among others it says:

"Saudi Arabia plans to turn itself into an industrial powerhouse. It is building no fewer than six new “economic cities” and a giant industrial zone, at a combined cost of some $150 billion, which will incorporate aluminium smelters, refineries and car-assembly plants. For its part, Kuwait plans to spend half that sum on just one new town, Silk City, which is meant to be a free-trade zone linking Asia and Europe, with a projected population of 700,000 people by 2030."

If these projects come true and give them more self-sufficiency then their economy could grow more with less dependence from the world economy, somewhat similar to the situation in China.
A strategic alliance between China (or East Asia) and the OPEC countries would be a logical consequence.

Comments can no longer be added to this story.

91 comments on IEA WEO 2008 - Fuzzy Focus on Saudi Arabia

Comments can no longer be added to this story.

| Show without comments | PDF version