A Closer Look at Saudi Arabia

A press release from The Carbon Capture and Sequestration Technologies Program at MIT,  December 6, 2013, Bold mine.

Uthmaniyah Fact Sheet: Commercial EOR using Anthropogenic Carbon Dioxide
Company/Alliance: Saudi Aramco
Location: Saudi Arabia
Start Date: 2013/2014
Size: 0.8 Mt/yr
CO2 Source: Hawiyah gas plant
Transportation: 70 Km onshore pipeline
Oil Field EOR Storage Site: Ghawar field
Reservoir Type: Jurassic Carbonate limestones
Comments:

The objectives of the project are determination of incremental oil recovery (beyond water flooding), estimation of sequestered CO2, addressing the risks and uncertainties involved (including migration of CO2 within the reservoir), and identifying operational concerns. Specific CO2 monitoring objectives include developing a clear assessment of the CO2 potential (for both EOR and overall storage) and testing new technologies for CO2 monitoring.

Approximately 60–65% of all Saudi oil produced between 1948 and 2000 came from Ghawar. Cumulative production until April 2010 has exceeded 65 billion barrels. It was estimated that Ghawar produced about 5 million barrels of oil a day (6.25% of global production) in 2009. Ghawar also produces approximately 2 billion cubic feet of natural gas per day.

After 60 years of production, the field is depleted and Saudi Aramco is going to start CO2-EOR. The project will consist of 4 injection wells, 2 observation wells and 4 productions wells.

Is there any doubt anymore whether or not Ghawar is depleted? 2009 is likely the year when production began to fall fast in Ghawar. But it was already falling prior to that.

A bit of history. Three oil fields, discovered decades ago, were held offline because of economic and and other problems.

Shaybah: Discovered in 1968 but due to its remote location was not brought online until 1998 at 500,000 bpd. It was upgraded in 2009 and increased production to 750,000 bpd.

Khurais: Discovered in 1957 and brought online in 1959 and shut down in 1961 due to low production and remote location. It was brought back on line in the early 1970s. Khurais produced 144,000 bpd in 1981 but dropped off dramatically in 1982. Gas re-injection attempts to increase production failed and the field was shut down a short time later due to almost no natural pressure. In 2009 a new massive water injection program began with the injection of over 4 million barrels of water per day brought the field up to 1.2 million barrels of crude oil per day.

Manifa: Discovered in 1957 but shut down almost immediately because the oil was extra heavy and contaminated with vanadium. But Aramco built their own refineries to handle the oil. The field was put on line in April 2013 and was producing 500,000 bpd and will be producing 900,000 bpd in 2014.

It is these three fields that has kept Saudi production near 10 million barrels per day. But there are no more old fields to be brought on line. From here on out Saudi must rely on the fields it has.

Saudi Arabia

Okay, we know that Ghawar is depleted and in serious decline. But so is Safaniya, Abqaiq, Berri, Abu-Safah, Qatif, Zuluf, Marjan, and all the smaller fields in Saudi Arabia.

Saudi has three fields with a combined production of 2.8 to 2.9 million barrels per day that are not in decline. Everything else is seriously depleted and in serious decline. Matt Simmons, Twilight in the Desert Stuart Staniford, A Nosedive Toward the Desert and Chip Haynes Ghawar is Dying, were all absolutely correct… they were just all premature with their prognostications. They had not counted on Khurais and Manifa.

Saudi is diversifying, making preparations to increase their finished product income when oil production declines: Change is coming to Saudi Aramco, the state oil company

Time was when Saudi Aramco didn’t need to worry much about its ability to deliver all the oil needed to maintain Saudi Arabia’s share of the global market…

A quick glance at Aramco’s 2013 Annual Review, published last week, is enough to convince anyone that change is in the wind for the flagship Saudi state-owned enterprise.

“We have embarked on ambitious corporate transformation guided by our Strategic Intent, our overall vision for Saudi Aramco through 2020,” the review states.

 “These advancements will not only ensure that Saudi Aramco remains a global leader in crude oil and NGL production and exports, but will also propel us into the top tier of chemicals companies worldwide and reaffirm our commitment to the Kingdom’s future in a rapidly changing world.”

The IMF seems to be getting overly concerned about current stocks and future crude production: Looking into two Saudi IMF reports

And for that OPEC is expected to furnish the market with additional 800,000 bpd from what it used to produce in April, which was the lowest level of production in five years.
That could be attributed to three factors: the diminishing non-OPEC supplies, which will rise by 100,000 bpd only and the growing worry about the level of inventories, which remained ‘tight.’
IEA estimated that there is a ‘wide’ deficit of 110 million barrels to their five-year seasonal average, according to the report, which puts stockpiles in the 34 IEA members were at 2.57 billion barrels in March, down 2.5 million from the previous month.

Ghawar is Dying

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201 Responses to A Closer Look at Saudi Arabia

  1. Frugal says:

    The sum up the last few posts:
    (1) US tight oil may be peaking within a few years
    (2) Russia may be peaking right now
    (3) Saudi Arabia may be peaking right now

    These are the three biggest oil producers in the world at the moment. Who’s going to make up for the short fall:
    (1) Canada and Irak? probably not enough t make up for the decline of the top three
    (2) Brazil? not likely
    (3) Kazakhstan? this ones questionable
    (4) Venezuela, Nigeria, Angola? no
    (5) The rest of the middle east? not a chance

    • Well it’s not just making up for these three countries, it’s all the other countries that are in decline. Below is a graph of all the world’s geographical areas except North America and the Middle East. The combined production of Eurasia, Central and South America, Asia & Oceania, Europe and Africa peaked in January of 2011 and are down 2.4 million barrels per day since then.

      Of course Russia is included in this chart, Eurasia which is basically the Former Soviet Union. But even with the slight increase in Russia the group as a whole are in decline and will now decline much faster now that Russia has peaked. I don’t think there is any doubt about it, we are sitting on the peak of world oil production right now.

      • Doug Leighton says:

        Ron,

        Of course, while production declines (or remains stable) internal consumption keep increasing: Especially in Saudi Arabia and Russia. This is an important point in Jeff’s commentary but not always present in other discussions. The last time I looked the Saudis were using about 25% of their production internally.

        Doug

        • Jeffrey J. Brown says:

          The observed 2005 to 2012 rates of change in (2005) Top 33 Net Exporters’ ECI Ratios (Ratio of production to consumption). Here’s out global net export supply base, by country. 26 of the (2005) Top 33 net exporters are trending toward zero net exports (when their ECI Ratio would be 1.0, i.e., production = consumption).

      • Coolreit says:

        Great chart and excellent point. I agree we are on the cusp of peak oil also!

    • Dennis Coyne says:

      Hi Frugal,

      All of these peaks may be just around the corner. How quickly will output decline?

      There are many who think it will be dramatic, if that is not the case the decline in Russian and Saudi Arabian oil output may be offset by rising production from Brazil, US, Canada, Iran, Libya, or Iraq. A plateau might be maintained or the decline in World output might be gradual at first, it would be better if it were more dramatic so we would get off our collective butts and try to work on a plan B, unfortunately the gradual World decline is the more likely scenario.

      If I am correct there may still be an increase in oil prices which may get thing moving in the right direction (greater energy efficiency and investment in alternatives to fossil fuel).

      • wadosy says:

        nobody’s willing ot admit that the so-called Pland A response to peak oil was a military response

        why is that?

        .
        well, maybe that’s pretty easy to figure out, too… if peak oil was the reason the boys and girls at PNAC needed a new pearl harbor, and was the reason their new pearl harbor happened after they got powerful enough tot make it happen

      • wadosy says:

        i mean, if you committed the worst terrorist false flag in memory in response to peak oil, you’re probably gonna deny the existence of peak oil, arent you?

      • wadosy says:

        what we need here is a gentleman’s agreement with ladies’ auxiliary…

        “we will rigorously persue the truth and examine every jot and tittle of oil production statistics… we will be fanatically honest and painstaking in our rpeorting and we will use the most reliable information to make our predictions, and we will make predictions and projections til they’re coming out our goddamned ears,..

        “but we will not, on pain of excommunication,, face the basic truth”

        “iwe swear to god… or whatever passes for it”

        “amen and pass the ammunition”

    • Coolreit says:

      Excellent points and note that the largest oil producer in the world, Russia has had declining oil production for 4 straight months now. In addition, over the weekend, Russia’s largest oil company Rosneft signed an agreement with Seadrill’s NADL to intensify the search for oil by exploring the Arctic. Until this point, Rosneft had focused nearly exclusively for oil resources on land. Why the switch to the most expensive, difficult and dangerous oil exploration in the Arctic?

      Also, note the true nature of shale:

      US Shale Debt Increases as Drillers Push to Maintain Gains
      by Robin Dupre|Rigzone Staff|Wednesday, May 28, 2014
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      Article title
      Companies are spending more money and drilling more wells causing shale debt to double over the past four years.
      Shale debt has reportedly doubled over the past four years, according to a Bloomberg News analysis of 61 shale drillers, while revenue has increased just 5.6 percent. Many are spending at least 10 percent of their sales on interest compared with Exxon Mobil Corp.’s .1 percent, the news agency reported.

      As the struggle to keep pace with the increased spending is needed to unearth these resources, some investors are selling their assets at a loss. Loews Corp. subsidiary, HighMount Exploration & Production, announced May 23 that it is pursuing strategic alternatives, including a potential sale of the business. HighMount, primarily comprised of natural gas and oil reserves, has assets in the Sonora field within the Permian Basin in West Texas. The company reportedly lost $20 million in the first three months of 2014 and was not profitably successful over the past two years.

      “The list of companies that are financially stressed is considerable,” told Benjamin Dell, managing partner of Kimmeridge Energy, a New York-based alternative asset manager focused on energy, to Bloomberg. “Not everyone is going to survive. We’ve seen it before.”

      Financial problems might stagnate production growth, according to Ivan Sandrea, an Oxford Institute for Energy Studies (OIES) research associate and senior partner of Ernst & Young London. Fifteen of the main operators have wrote off $35 billion worth of assets since the shale boom started.

      “What is not clear from higher-level company data is if the industry (both large players and independents) can run a cash flow-positive business in both top-quality and in more marginal plays and whether the positive cash flow could be maintained when the industry scales up its operations,” he noted.

      “While most of the companies that have made write-downs are not quitting, many players in this industry have already noted that the revolution is not as technically and financially attractive as they expected,” the analyst writes. “However, to deem the [business] model flawed due to the investment write-downs of some large companies would be misleading and too early in the evolution of the business for some players.”

      Furthermore, independent producers will spend $1.50 on drilling this year for every dollar in return, Bloomberg noted in February. Producers will have to drill 2,500 new wells a year just to sustain output of 1 million barrels per day in the Bakken, according to International Energy Agency.

      Recent analysis by Energy Aspects show 6 years of progressively worsening financial performance by 35 independent companies focused on shale gas and tight oil plays in the United States.

      “This is despite showing production growth and shifting a large portion of their activity to oil since 2010, presumably to chase a higher-margin business,” he added. Oil and gas production by the companies represented 40 percent of output in unconventional plays in last year’s third quarter.

      - See more at: http://www.rigzone.com/news/oil_gas/a/133303/US_Shale_Debt_Increases_as_Drillers_Push_to_Maintain_Gains/?all=HG2#sthash.MVLASmWt.dpuf

    • Anon says:

      1. Canada, maybe another million over a decade if they expand production aggressively. Iraq is a huge question mark between the security issues and what their reserves actually are.

      http://www.businessweek.com/news/2014-05-27/iraq-oil-revival-stalls-again-as-violence-pinches-growth-energy

      2. Brazil can’t produce what they could on paper because of real world problems. Both geologic/tech and political:

      http://www.csmonitor.com/Environment/Energy-Voices/2014/0507/How-Brazil-s-oil-boom-went-bust

      3. Kazakhstan? Forget about it. Kashagan just got delayed another two years. It might not get up and running at 1m+ bpd until 2020 at this rate.

      4 &5. Yeah, all of those are in serious decline and/or too small to matter when we’re talking millions of barrels of legacy “cheap” oil being replaced with US shale and Canadian tar sands. No one has spare capacity. Venezuela shouldn’t be in decline, but their political problems are unsolvable.

  2. Political Economist says:

    Now let’s look at Russia again. The HL analysis using EIA monthly data of crude oil and leased condensate for the period Jan 2004-Dec 2013 indicates an ultimately recoverable amount of 497 billion barrels (R-square 0.477).

    I assume that Russia’s cumulative production of crude oil up to the end of 1991 was 102 billion barrels (based on Aleklett’s estimate that Russia’s cumulative production up to 2010 was 155 billion barrels). Given the assumption, the cumulative production up to the end of 1999 was 120 billion barrels and up to the end of 2013 was 166 billion barrels.

  3. Political Economist says:

    The current trend indicates that Russia’s crude oil production will grom from 10.1 million barrels per day in December 2013 to 10.8 million barrels per day in December 2020. The theoretical peak will be in October 2034.

    I am sure Ron will again disagree with me. But I am just reporting what the current trend shows.

    Dennis, do you think this is an overestimate of Russia’s recoverable amount of oil? It might be. But if that’s the case, it would suggest HL does not always underestimate ultimately recoverable amount and it could overestimate as well. In that case, it might give us greater confidence when we add up many individual regions as positive errors might be offset by negative errors.

    The HL analysis uses EIA data so the last observed data point is in December 2013. Ron used JODI data showing that Russia oil production might have declined over the first four months of 2014. If that is confirmed by EIA, the trend may be changed. But it will probably take many adjustments for the HL-indicated peak to move from 2034 to 2014. We will see.

    • I corrected your typo. Yes I did use JODI to make that determination but I also used Russia’s own data from CDU TEK” to show that Russia declined the first five months, though it has slightly leveled off in May, only slightly below April. And I will guarantee you that will be confirmed by the EIA because the EIA gets their data directly from CDU TEK, though the EIA can get the monthly data I can only get the daily data.

      Below is the CDU TEK daily chart. I only have data from the last date in 2013.

      The label is wrong, it should be Thousand Tons per Day.

    • Anon says:

      The problem with doing trend lines with Russia is WHAT they have been doing to get the reported production in the past five years. They have an enormous infill drilling spend; you can see it with Samotlor on Google maps. They also have been bringing their last big Soviet era field online and ramping it to full production.

      Neither of those two tactics are sustainable. Once you run out of good real estate, you’re done. Same problem as the massive drilling effort needed to keep shale oil increasing in the US in the face of first year bpd declines of over 60%.

    • Dennis Coyne says:

      Hi PE,

      I think this HL shows that the method is flawed, I think a method that allows one to pick the results one is looking for is not a particularly good method.

      We could easily imagine two different people with different agendas arriving at very different conclusions using HL.

      If we are going to claim that the method is not that reliable, but when we apply it to the World as a whole that the positive and negative errors balance out at the World level, we still have the obvious problem that Deffeyes was using HL to estimate a World URR of 2000 Gb and a peak of 2006 back in 2005. Currently HL points to 2600 Gb for C+C (using EIA annual data and Deffeyes cumulative estimate of 982 Gb at the end of 2004), so my earlier statement about Hubbert linearization underestimating URR refers to the tendency for the World URR estimate to increase over time (in this case by 30% in 8 years.

      • Doug Leighton says:

        Hi Dennis,

        “I think this HL shows that the method is flawed.”

        I might have said: I think this PROVES HL is flawed (Russian case). Of course not mathematically proven but it’s certainly “demonstrated” as being flawed. My wife would freak out if I didn’t qualify my statement. [I suppose I'm supposed to insert one of those yellow faces here.]

        Doug

      • Political Economist says:

        Dennis, every statistical method is flawed to some degree.

        I don’t think it’s particularly useful for someone to use HL to pick a result simply to be disproved a few months later. Certainly that’s not my interest. In fact, I believe with your model, it is also possible to produce a range of results based on different assumptions.

        HL is just one of many ways to present the data. So long as the method/assumptions are stated clearly, I don’t see the method to be particularly flawed.

        Deffeyes failed to predict correctly the world URR. That’s because he only had the data up to 2005 available to him. Now it’s 2014. So arguably we’re one step closer to truth.

        You’re absolutely correct that in the past, there was a tendency for HL exercises to predict increasingly higher URRs. But that by itself could be a useful piece of information (by observing how the predicted URRs have increased over time). The failure of HL was at least partly due to the US shale oil boom. If you take away the US, HL predictions for the rest of the world may have been relatively stable. (I’ll later take a look at the rest of the world)

        And of course, the predicted URR will not increase forever as the true URR must be finite. Thus, as more data are accumulated, we can at least have some assurance that we will move closer to truth step by step. Of course, if any large-scale unexpected development (like shale oil) happens, be ready to reassess the whole analysis based on alternative information.

        On the other hand, in the Russian case, we might actualy see declining predicted URRs as more data become available. If that turns out to be true, it would demonstrate that HL does not simply have a one-sided bias to underestimate.

  4. Jeffrey J. Brown says:

    (Odd that this thread was shifted.)

    In any case, I was not asserting that 2005 was the global C+C peak. I simply pointed out that after increasing from 67 mbpd to 2002 to 74 mbpd in 2005, global C+C production has averaged 74 mbpd for the next 8 years. It’s true that Deffeyes was wrong about the absolute C+C peak, but this was one hell of an accurate prediction in regard to global C+C supplies, especially when one considers the likelihood that virtually all of the actual post-2005 increase in C+C was from a byproduct of rising natural gas production, i.e., condensate. Circa 2005, Yergin was predicting a continued 3%/year rate of increase in production, which would have put global C+C production at about 94 mbpd in 2013. Who most accurately predicted post-2005 global C+C production?

    In an similar fashion, and using the same HL approach, it’s interesting that after increasing from 7.6 mbpd in 2002 to 9.6 mbpd in 2005, Saudi C+C production has averaged 9.1 mbpd for the next 8 years.

    • Jeffrey J. Brown says:

      Test post, in reply to my 1:30 PM comment.

    • Dennis Coyne says:

      Hi Jeff,

      Saudi Arabia has indeed remained on a plateau (roughly speaking since 2005) and they have adjusted their output up and down as they see fit over time (or maybe they have been producing flat out, I don’t really know). It was expected that output would decline and it has not.

      You are correct that the optimistic projections were wrong, it is also correct that the pessimistic predictions were also wrong. Deffeyes hubbert curve from 2006 would have current output at 66 million b/d, which is clearly not correct. Yergin seems to miss the mark by a much wider margin, but keep in mind that Yergin talks in terms of all liquids (at about 87 MMb/d in 2010) and productive capacity which is usually higher by 5 MMb/d (based on IEA figures) so that would be 92 MMb/d of capacity in 2010 in Yergin-speak, which is not that far from his 2005 prediction of 101 MMb/d of capacity in 2010. Basically both predictions were wrong by about 10 MMb/d.

      • Saudi Arabia has indeed remained on a plateau (roughly speaking since 2005) and they have adjusted their output up and down as they see fit over time.

        No they have not done that at all. They have gone from flat out to cutting production, then back to flat out to cutting again, and now back to flat out. They have adjusted production down when they saw fit but they have never adjusted production up from flat out, or when they were producing between 9.5 and 10 million bpd.

        It was expected that output would decline and it has not.

        Now just a cotton picking minute here. Did you not even bother to read my post. No, I would not have expected production to decline after they put Shaybah on line. No, I would not have expected production to decline after Khurais was put on line. No, I would not have expected production to decline after they put Manifa on line.

        They have done exactly as I would have expected them to do. They brought on line, one by one, old mothballed fields, and kept their production at or around 9.5 million barrels per day.

        Now they don’t have any more old mothballed fields to bring on line. Now they are drilling in two kilometers of water, through 7,000 feet of salt in a desperate attempt to find some more oil. Now they are injecting CO2 into Ghawar in an attempt to squeeze a few more barrels out of that tired old super giant.

        Now I do expect them to decline. Maybe not this year but by sometime next year they will start to decline.

        • Saudi Arabia actually declined in the critical phase 2005 – mid 2007. Your graph above shows it. It contributed to rising oil prices and the US recession which started end 2007. At the time I wrote this article in the oildrum with Gail the Actuary

          9/10/2007
          Did Katrina hide the real peak in world oil production?
          http://www.theoildrum.com/node/3052

          22/7/2013
          US oil demand peak was in 2007
          http://crudeoilpeak.info/us-oil-demand-peak-was-in-2007

          In 2008 there was an oil demand shock (extra demand for Chinese Olympic Games). Saudi production increase was NOT enough to keep oil prices down.

          In 2007 it was totally irrelevant that US shale production went up later. What matters is that at all times, the oil supply must be sufficient.

          So 2007 was the prelude for the financial crisis while the economy had a pre-condition of accumulated debt.

          Matt Simmons’ warning “The coming Saudi oil shock and the world economy” was spot on.

    • Coolreit says:

      and, as I recall Deffeyes said nat gas peak was a long distance AFTER peak oil.

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  6. Ed says:

    I very much like Enno’s suggestion. An (easy!) way to measure this is to divide the total oil consumption of all the oil importing Nations by their total population size and plot over time. I strongly suspect this graph points strongly downwards, because, as Enno has already pointed out, we are already effectively living in post peak oil world.

    • Enno says:

      Thanks Ed. In 2 weeks the BP Statistical Review is out, and with that updated data I plan to do such an exercise. Should be easy indeed.

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