The Saudi Arabian Oil Miracle The Saudi Arabian Oil Miracle

60 Pages·2004·2.27 MB·English

TThhee SSaauuddii AArraabbiiaann
OOiill MMiirraaccllee
The Center for Strategic & International Studies
Washington, D.C.
February 24, 2003
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IMMONS OMPANY
Presented By:
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Matthew R. Simmons
TThhee WWoorrlldd’’ss BBiiggggeesstt EEnneerrggyy QQuueessttiioonnss
Can this miracle continue to grow?
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Will it at least stay flat?
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Could it start to fade?
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If so, when?
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MMyy PPeerrssoonnaall BBiiaass SShhaappeedd TThhiiss RReesseeaarrcchh
Saudi Arabia’s Oil Miracle: A great economic gift to the
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world.
Saudi Arabia: A stalwart steward of global oil for three
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decades.
Saudi ARAMCO: Performs “Best in Class” reservoir
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practices.
Oil (and natural gas) is the world’s most precious
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resource.
Everyone’s “plug” factor for future energy growth is
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Saudi Arabia’s ability to increase its oil flow.
If this premise is wrong, the world is in for a “nasty
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shock”.
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MMoorree BBiiaass:: II AAmm AA CChhrroonniicc EEnneerrggyy WWoorrrriieerr
My entire career has been shaped by bad energy
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surprises.
– 1973: oil shock.
– 1979: second oil shock.
– 1982 - 1992: coping with a decade
oil depression.
– 1991 - 2003: violent oil and gas volatility.
Energy is both beneficial and destructive.
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1% to 3% too much is a glut.
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Even 1% too little is an enormous crisis.
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The world’s energy data and crystal ball is flawed.
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(cid:132) Could we now be “flying blind”? SIMMONS & COMPANY
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WWhhyy WWee SShhoouulldd WWoorrrryy AAbboouutt
EEnneerrggyy AAddeeqquuaaccyy
Energy is world’s most precious resource.
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Oil (and natural gas) is top of the energy food chain.
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Neither are renewable.
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Both will (or have?) peaked.
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Neither will ever run out.
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But daily supply will drop.
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Predicting the timing is hard or impossible.
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Scoffing at the notion is naïve.
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RReecceenntt EEnneerrggyy SSuurrpprriisseess AArree TToooo FFrreeqquueenntt
U.S./Canada natural gas peaked: Nobody noticed.
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All E&P companies were supposed to grow oil and
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gas production.
Most were flat while E&P capex soared.
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Russia’s recent supply rebound was total surprise.
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Rest of non-OPEC supply was supposed to surge.
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Instead it flattened out.
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The North Sea peaked (unannounced).
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Rash of reserve write downs: Tip of an iceberg?
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IItt IIss TTiimmee TToo RRee--EExxaammiinnee OOuurr
EEnneerrggyy ““HHoollee CCaarrddss””
For decades, world’s giant oilfields were still “young”.
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Now all super giant oilfields
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are extremely mature.
20% of world’s oil supply comes
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from 14 fields averaging almost
60 years since discovery.
New giant oilfield discoveries ended in late 1960s/early 1970s.
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Oil demand is still gaining steam (IEA 2030 = 120 million b/d).
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Shut-in spare capacity is either tiny or gone.
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Observable oil inventories are now “just in time supply”.
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(cid:132) No recent energy surprise has been good news. SIMMONS & COMPANY
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MMyy GGiiaanntt OOiillffiieelldd SSttuuddyy
The Oil Pyramid
Average
Production
000Bbls/Day
(% Of
World Total)
9,000 36,200 4,000 +
(53%) Other Fields
61 Fields Between
7,900
130,000 100,000 –200,000 B/D
(12%)
29 Fields Between
6,400 200,000 –300,000 B/D
221,000 (9%)
12 Fields Between
4,100
342,000 (6%) 300,000 –500,000 B/D
13,900 14 Fields In Excess Of SIMMONS & COMPANY
993,000 (20%) 500,000 B/D
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IInn EErraa OOff PPoooorr EEnneerrggyy DDaattaa::
OOPPEECC IIss TToottaall VVaaccuuuumm
IEA and EIA data systems are proving to have many holes.
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Their predictive track record has been awful.
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In the land of the blind, reliable OPEC data is either
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untrusted or non-existent.
Tanker traffic consultants now guess at OPEC output.
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In 2002, Saudi ARAMCO reported crude oil output of 6.79
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million b/d. IEA’s outlook is 7.38 million b/d. Most media
estimates were far higher.
Reported OECD Saudi imports were flat from 2000 to 2002.
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Which report was right? How does anyone know?
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CCoonnvveennttiioonnaall WWiissddoomm AAssssuummeess
MMiiddddllee EEaasstt OOiill IIss AAbbuunnddaanntt
All long-term supply forecasts assume Middle
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East oil will meet any level of non-OPEC supply
gap.
Saudi Arabia is the ultimate “plug” for any unmet
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demand.
IEA/EIA assume Saudi oil output will double over
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next 15 to 20 years.
Most oil observers think future oil prices will fall
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(due to cheap and abundant Middle East oil).
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