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170 comments on GHAWAR: an estimate of remaining oil reserves and production decline (Part 2 - results)
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Euan - Congratulations and thank you for this fine piece of work. As I attempt to process all this information a question came to mind - given the sharp production fall that occurs in either of your two scenarios, and given Saudi Aramco's careful management of the field, do you think it is possible that the most recent 'OPEC quota'-driven (supposedly) drop in S.A. production is actually aimed at prolonging the life of what is left and replacing a sharp drop with a gentle decline?
Thanks again for your great work.
I think this is a quite likely scenario. With no substitute for crude oil on the horizon, medium term oil prices can only go up, and so IMO it must make sense to the Saudis, and other OPEC producers to produce more slowly, for longer at higher price.
That does make the most sense, drawing a higher number of dollars out of the global economy over a longer period. It's good oil field management. Now let's hope that the House of Saud can manage the political side of the kingdom as well as their engineers are managing the oil field side.
However, this still leaves us globally in quite a bit of a pinch, doesn't it? OPEC is not going to grow to 40-50 mbpd as envisioned in the fantasies of CERA and non-OPEC is very flat and beginning to fall so who fills in the gap? Nobody!
I see huge political mileage for the person who can come up with and successfully push programs like those from Alan Drake or Engineer-Poet.
Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett
I have to say I have no idea of what you are talking about with this. Is this some reference to the bogeyman of Islamic fundamentalism? Saudi Arabia is already the greatest bastion of Islamic fundamentalism on the face of the planet. Christianity is illegal, no alcohol, stoning of adulterers... So you must mean anti-Americanism, right? Well, excuse mme if I say the rest of us don't care. You reap what you sow. You supported these dicks in the first place, and are responsible for the rise of fundamentalism throughout the rest of the Islamic world as well (the CIA and the madrassas to make cannon fodder for the war in Afghanistan, anyone?) So, if by 'political side' you mean 'The place might end up with people who won't sell to the USA!', well bad luck. What else would you expect? I'm sure they will still be quite happy to sell to the Germans, the French, the Japanese, and the Chinese.
Franz - Speaking that kind of truth to the biggest bully on the block will earn the retribution you do not deserve, but remember, God made us the biggest bully so we can protect God's chosen people, so Jesus can come back. OY Vey!
He may mean 'can't sell to anyone', due to internal turmoil like that in Iraq or (to a lesser extent) Nigeria.
The House of Saud isn't the most progressive group of people, but if they fail to contain internal tensions in KSA and substantial unrest breaks out, the skillful management of the engineers won't prevent oil production from (probably) dropping substantially.
If it ends up with a group in charge that is producing well but just won't sell to the US, that won't really make any difference - oil is (mostly) fungible.
"Non-OPEC growth in 2007 is unchanged at 1.1 mb/d, versus 0.4 mb/d in 2006, extending the sharp recovery evident since mid-2006."
IEA Oil Market Report, page 1.
It is certainly possible that they are wrong, however, so I would be very interested to see your evidence that non-OPEC oil production is beginning to fall.