Ghawar - what is it good for?

I'm a flusterbutt today. I can't comprehend anything. Maybe it was Chomsky, maybe its those silly calls, or maybe its Boulder. i don't know. I think I have a variable IQ. And its at a trough

So tonight I will instead, for something completely different, steal from my evil twin...

I believe these to be three important quotes:

This is from an article commenting on OPEC's sudden ambivalence to keeping to their $22-$28/bbl price collar: 

"Ali Naimi, Saudi Arabian oil minister, said he believed oil prices were fair [at $35.00 per barrel] and saw no reason either to raise or lower production from current 9.1 m [million] barrels a day" - Financial Times And this is from the chief economist of the International Energy Agency, actually its an off the record remark he made after giving a speech at a conference:

"If Saudi does not increase supply by 3 million barrels a day by the end of the year we will face, how can I say this, it will be very difficult. We will have difficult times. They must invest." - Faith Birol, IEA Chief Economist
 
According to Matt Simmons of Simmons and Co., a Houston based investment bank, "No third-party inspector has examined the world's most important [energy] insurance policy for years."

Its true that no one really knows how much oil is under the sand. Its kept very secret. The Saudi's make El Paso's and Royal-Dutch Shell's disclosure policies look positively transparent.

There is a lot of uncertainty as to what oil reserves exist in Saudi Arabia, how close they are to their peak production, and what the costs of incremental production will be.  I don't know the answers to any of these, and my gut feel, from what I've read, is that nobody does.
 
I do know that the Saudi fields are aging with every year.
 
I do know that Ghawar's reserves (the largest field in Saudi Arabia) were estimated at 60B bbls by Exxon, Mobile, Texaco and Chevron back in the 70s and that it has produced 55B bbls since then. 
I have heard from some reports that Ghawar is pumping 30-50% water.
 
I do know that China keeps on growing.  'World oil consumption by 2020 is estimated to be around 115mmbbl/d.  Today it is 80mmbbls/d.' - Business Week

I do know that a 3mmbbls/d is a 30% increase over the current estimated production of 9.1mmbbls/d 

The reality is that the world, save Saudi Arabia, is producing oil at capacity.  Any incremental production has to come from Saudi Arabia.  There is no back-up plan.  If Saudi Arabia can handle the rising demand, then fine.  If they can't, then oil prices are going to go higher.

Should be fun.

- posted by Sigurd7/23/2004 08:37:00 PM