The Oil Drum — Saudi Arabia’s historical crude oil production indicates a peak of 9.6 million barrels/day in 2005. In 2008, crude production was 9.3 mbd. In 2009 it is forecast to be 8.1 mbd followed by an increase in 2010 to 8.5 mbd. Unfortunately, after 2010 a steady decline is forecast.

The forecast production profile assumes that Saudi Arabia’s ultimate recoverable crude oil reserves (URR) are 185 billion barrels (Gb). …

A critical forecasting assumption is that the ultimate recoverable crude reserves (URR) for KSA, including half of the Neutral Zone, are 185 billion barrels (Gb) relating to producing fields. KSA may have an additional 25 Gb reserves from future discoveries and from the 65 static (discovered undeveloped) fields in the chart below giving a higher URR of 210 Gb. As oil production from these additional reserves would not start until at least 2015, the decline rate should decrease but the 2005 peak would not be exceeded. The production from these additional 25 Gb of reserves would have only a very small impact on future world crude production. …

Many readers will question the validity of my URR estimates, shown in Figure 1, thinking that the true KSA URR must be higher. A perceived high URR is in the national interest of KSA because it needs its customers to continue their demand for oil leading to sustainable high oil prices for KSA. If customers thought that KSA had less than 100 Gb of oil left then conservation and switching to alternatives would increase. KSA has been creating this perception of overabundant oil reserves for at least sixteen years because it believes that this will maximize the price of its remaining oil.

Mr. Naimi, pictured above right, has said on many occasions that the KSA can add another 200 Gb of reserves. In December 2004, Naimi said that reserves could be bolstered by another 200 Gb. In an April 2008 speech, Naimi was still talking about adding the same 200 Gb to increase remaining recoverable reserves to 464 Gb. In April 2008, cumulative crude oil production of KSA was 114 Gb which means that the his total potential crude URR is about 578 Gb which represents an impossible recovery factor of 96% based on Zagar’s estimate of oil initially in place of 600 Gb (Fig 4).

It is time for Mr. Naimi to tell the truth about remaining KSA reserves. As the true remaining reserves are probably much lower than Naimi’s claimed 260 Gb, a full disclosure of KSA reserves, by field, would not only allow more effective future oil production and consumption planning but might also help increase short term oil prices which would be favourable to all OPEC members. (03/03/09)
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James Howard Kunstler writes: Isn’t that a question, though….

The Peak Oil story was never about running out of oil. It was about the
collapse of complex systems in a world economy faced by the prospect of
no further oil-fueled growth. It was something of a shock to many that
the first complex system to fail would be banking, but the process is
obvious: no more growth means no more ability to pay interest on
credit… end of story, as Tony Soprano used to say.

There
was
a popular theory among Peak Oilers the last decade that the world would
enter a “bumpy plateau” period when the global economy would get beaten
down by peak oil, would then revive as “demand destruction” drove down
oil prices, and would be beaten down again as oil prices shot up in
response — with serial repetitions of the cycle, each beat-down taking
economies lower — the only imaginable outcome being some sort of quiet
homeostasis. This scenario did not play out as expected. It was
predicated on a mistaken assumption that all systems would retain some
kind of operational resilience while ratcheting down. Anyway, the
banking system was mortally wounded in the first go-round and the
behemoth is dying hard.

The last desperate act of the banking
system in the face of Peak Oil’s no-more-growth equation was to
engineer species of tradable securities that could produce wealth out
of thin air rather than productive activity. This was the alphabet soup
of algorithm-derived frauds with vague and confounding names such as
credit default swaps (CDSs), collateralized debt obligations (CDOs),
structured investment vehicles (SIVs), and, of course, the basic
filler, mortgage backed securities. The banking system is now choking
to death on these delicacies. …

The recent huge drop in oil prices has left the public once again convinced that the world is drowning in oil — if only the scoundrelly oil companies were forced to deliver it at reasonable prices. The public has been consistently deluded about this for decades. What’s missing so far is for the president of the US to lay out the reality of the situation in a dedicated TV address. I know a lot of you think that Jimmy Carter already tried this and failed to make an impression (and ruined his presidency in the process). I guarantee you that Mr. Obama will have to do this sometime in the next few years whether he likes or not, and he’d be well-advised to get it done sooner rather than later. And by this I don’t mean just vague allusions to “energy independence” or “renewables” in speeches devoted to many other issues. I mean telling the public the plain truth that we’ll never offset oil depletion and the intelligent response is to do everything possible to transition to walkable towns and public transit, not to sustain the unsustainable.

The alternatives — i.e. what we’re trying now — is to further delude ourselves into thinking that we can run WalMart and the suburbs by some other means than oil. Despite all our investments in these things, we won’t be able to run them by other means, and the news about this had better get out before enormous disappointment turns into titanic rage. If Americans think they’ve been grifted by Goldman Sachs and Bernie Madoff, wait until they find out what a swindle the so-called “American Dream” of suburban life turns out to be.

On this blizzardy Monday in the power centers of America, attention is fixed on the never-ending fiasco of AIG — a company whose main product turned out to be credit default swaps, and is now choking on them. Kibitzers on the sidelines of finance are forecasting a king-hell bear market suckers’ rally in the stock markets followed by a belly flop to Dow 4000 or lower. I myself called for Dow 4000 two years ago — and was obviously a bit off on my timing. All this is surely trouble enough. But while your attention is focused on Rick Santelli in the Chicago trader’s pit, or Larry Kudlow desperately seeking “mustard seeds” of new growth in financials, try to let one eye stray to the horizon where these other complex systems are working out their next moves. Farming. The oil markets. These are the coming theaters of alarm and distress. (03/03/09)
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