Businessweek reveals Saudis have nearly reached Peak Oil

28 July 2008

Photo: Oil Pipelines in Saudi Arabia by Saudi Aramco

A remarkable document has been leaked to US magazine Businessweek this month. In it “a person with access to Saudi oil officials” reveals that Saudi Arabia will have reached the peak of its oil production by 2013. Peak Oil is when around half of an oil field's production has been reached – all the easy to extract oil has been sucked out – and the lower grade, harder, more expensive oil is left. The oil has not run out, but the good days are over.

Saudia Arabia, the world's largest oil producer, is extremely secretive about its oilfields, which are run by the nationalised corporation Saudi Aramco, not western oil majors. Revealing information about Saudi production is treason, punishable by death, so it is very significant that this “field by field” analysis has reached western analysts. Businessweek says:

"The Saudis say they can ramp up production to 12.5 million barrels a day. But a field-by-field breakdown obtained by BusinessWeek shows that's not likely”

Photo: Oil workers at Ras Tanura pumping station by Saudi Aramco

Saudi officials have often claimed they would increase production capacity to 12.5 million barrels a day next year, from the current 10 million barrels a day, and could even push up to as much as 15 million barrels a day if the market demanded it. Note that production capacity is not production. For practical reasons, no oilfield can reach its full capacity, so actual oil production is less than that, for example Saudi Arabia actually produces around 9m barrels a day.

Businessweek says:

“But the detailed document, obtained from a person with access to Saudi oil officials, suggests that Saudi Aramco will be limited to sustained production of just 12 million barrels a day in 2010, and will be able to maintain that volume only for short, temporary periods such as emergencies. Then it will scale back to a sustainable production level of about 10.4 million barrels a day, according to the data. BusinessWeek obtained a field-by-field breakdown of estimated Saudi oil production from 2009 through 2013. It was provided by an oil industry executive who said he had confirmed it with a ranking Saudi energy official who has access to the field data. The executive, who has proven reliable over several years of reporting interaction, provided the data on condition of anonymity to protect his access to the kingdom and the identity of the inside contact who confirmed the information.”

The analysis was examined by three oil industry experts, who found it credible. Thus the world's most important oil producing nation is not going to be able to increase production to meet demand in the timeframe to 2013, and according to the report, depletion in the world's greatest oilfield Ghawar will set in, falling from 5.4 million barrels a day to 4.475 million barrels in 2013, and this decline will not be counteracted by new projects coming online. This looks like it will set the seal on high oil prices, which even a serious recession will not dent, as demand from Asia is sure to remain high.


Business Week article

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