[qwanta]

I've read about 50 pages so far, but the thing that struck me the most is the map of the Saudi Oil Fields. Seeing Ghawar and some of the other super-fields - that still account for most of Saudi production - as little slivers in the Arabian peninsula, really brings home the insanity, and fragility, of our current economic system.

[julianj]

Just got it. Skim-read it - so haven't taken it all in. Not a pretty picture, but gave me a better understanding of what's going on in Saudi.

Have you seen this:

# Amazon.com Sales Rank: #95 in Books

[Tuike]

I have just finished reading the book. It looks like all Saudi fields are in some sort of trouble. Peaked or otherwise. The biggest problem is the exessive use of water in the fields. Oil fields collapse quicker when pumped full of water. Simmons couldn't point out any date when Saudi oil production would collapse. It could be anytime.

[Badger]

read it last month very technical but excellent at explaining just what goes into getting an oil field operational and maintaining extraction

perhaps not everyones cup'o'tea but I thoughly enjoyed it learnt alot

[EnviroEngr]

Twilight in the Desert: the coming Saudi oil shock and the world economy
by Matthew R Simmons

Reviewed by John Gray
http://www.newstatesman.com/Bookshop/300000101087

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

During the 1990s it was fashionable to scoff at the notion of limits to growth. A knowledge-based economy was coming into being in which natural resources didn't matter. The future would be driven by a search for new ideas rather than the struggle for control of the planet's assets. We were entering an era defined by information technology, in which rapid economic growth could continue for ever. It was never easy to square this fanciful philosophy with historical reality: the 1990s began with the first Gulf war, which was fought solely to secure oil supplies, and cheap oil was the basis of the prosperity of that feckless decade. Yet somehow or other these facts were forgotten, until Iraq.

With the launching of the second Gulf war, the crucial role of oil in the world economy was exposed. From statements made by a number of its American supporters, it seems clear that the strategic objective of the Iraq war was to enable the United States to withdraw from Saudi Arabia, which had come to be seen as an unreliable ally. According to the game plan, Saddam Hussein would be toppled, Iraq would be pacified in a few months and oil would fall to $10 a barrel. The global economy would then take off in another boom with the US in firm control of the world's second-largest oil reserves.

This was always a far-fetched scenario, and things have not worked out as envisaged. Iraq is a failed state in the grip of an intractable insurgency, and the price of oil is roughly $60 a barrel. The scramble to secure energy supplies is more frenzied than ever. The Great Game has been resumed, not only in central Asia but also in the Gulf. If Iran is attacked by the US in the course of the coming year or so, one reason for this will be to stymie energy supply agreements that Tehran may be planning with America's competitors, notably China and India.

The limits to growth have not gone away. They have re-emerged as classical geopolitics - a condition of continuous rivalry among the great powers for control of the world's most valuable natural resources. In this intensifying struggle, no country is more important than Saudi Arabia. The kingdom is the world's pivotal oil producer. Any disruption in supplies of its oil would be hugely destabilising to global markets. Even more crucially, it is the most important resource base for the oil that will be tapped to meet growing world demand. As emerging countries industrialise, their energy use increases exponentially. Saudi Arabia is the site of the planet's largest low-cost oil reserves, and in effect acts as the energy bank of worldwide industrialisation.

Matthew R Simmons is convinced that Saudi oil production is near its peak, or indeed may have passed it, a development with awesome implications. Simmons, a veteran oil finance insider who has been an important adviser to the Bush administration, has done a huge amount of research and bases his conclusions on carefully sifted evidence, not large theories. Yet his view is consistent with the theory of M King Hubbert, a Shell geophysicist who argued in 1956 that production rates for oil and other fossil fuels exhibit a bell curve: when roughly half the oil has been extracted, production declines. No one took much notice of Hubbert at the time, but he predicted that oil production in the continental United States would peak and start declining in the late 1960s or early 1970s - as it did. Since then a number of large oilfields have also peaked, including the North Sea in 1999. When oil peaks it does not run out - there is usually a slow decline that can be spun out by new technologies - but the unavoidable result is falling production.

Could we be near a global oil peak? Simmons believes that point may already have passed and warns that the idea that technology can arrest the decline may be a delusion. In his view, Saudi oil production has been boosted by the use of technologies which actually reduce the future supply of recoverable oil. The implication is that Saudi production has peaked, and with it global oil production, at a time when demand is rising inexorably.

Twilight in the Desert is not always easy to read. It largely consists of highly technical discussion of the history and condition of Saudi oilfields. Yet its impact is to transform our view of the world. Many in the oil industry - and particularly Aramco, the Saudi oil company - will dispute Simmons's claim that Saudi production is near its peak sustainable volume. For most readers the question will be whether Simmons can be trusted. I am certain that he can. He is not the only oil expert to say that a peak in global production may be near (Dr Colin Campbell of the London-based Oil Depletion Analysis Centre is another) and, unlike many in the oil industry, Simmons has no axe to grind. This is a ground-breaking book by an analyst of unimpeachable authority.

Simmons's analysis suggests that the current phase of worldwide industrialisation is crucially dependent on the uncertain reserves of a single Gulf kingdom facing vast and potentially insuperable challenges. As he shows in a superb digression, the most formidable of these is population growth. The kingdom's current population of roughly 22 million is expected to rise to roughly 50 million by 2030, and unless there is a large and sustained rise in the oil price, living standards are bound to fall steeply - as they have been doing since the early 1980s. The Saudi rentier economy is facing a Malthusian crunch, and against a background of already high unemployment the result so can only be a condition of chronic instability. If the most obvious effect of our dependency on oil is a series of resource wars, another could be an upsurge of revolutionary movements in oil-producing countries. While it would be an error to think that the Saudi regime is on the brink of collapse, in a few decades the kingdom could well be an Islamist republic - or, perhaps more likely given its origin as an artefact of the colonial era, another failed state.

Simmons makes a formidable case for the pivotal importance of Saudi Arabia, but he may actually have understated the impact of peak oil. One reason is the central role of oil in intensive farming. Contemporary agriculture relies heavily on oil-based fertilisers, pesticides and herbicides. At bottom, the green revolution was about the extraction of food from petroleum, and a peak in world oil production could trigger a peak in world food production. A second is climate change. As oil supplies are becoming scarcer and less secure, many countries are looking to other fossil fuels such as coal. New technologies can make coal much cleaner, but a large increase in coal use alongside continuing dependency on oil could magnify the greenhouse effect. In other words, peak oil could accelerate global warming.

The conjunction of peaking global oil production with quickening climate change poses fundamental challenges that no section of opinion has adequately confronted - including the Greens. The energy-intensive lifestyle which is now spreading throughout the world cannot be sustained with non-renewable and polluting fossil fuels, but it is sheer fantasy to imagine that a human population of between six and eight billion can be supported on a combination of windfarms, solar power and organic agriculture. As Simmons notes, we may be approaching the limits of growth that the Club of Rome identified more than 30 years ago, and we are no better prepared to adjust to them now than we were then.


John Gray's latest book is Heresies: Against Progress and Other Illusions (Granta)

[Bas]

Thanks for that Review EnvioEngr.

[PO_TimeCr0ss]

Great review.

I'm currently in the middle (page 182) and must say that if you're technically inclined, this is a great first "PO" book. It does not focus on PO per-say, but it makes very clear the global impact Saudi Arabia's inevitable oil production decline will have.

Funniest line in the book occurs right after Simmons discusses, in great detail, the problems with Ghawar and begins to touch on the other fields:

"It was tempting to simply offer a general statement to the effect that all the other great Saudi oilfields present the same general challenges that the Ghwar oilfield does, and live it at that with at 'Trust me.' "

[yonidass]

Very interesting downloadable interview with Matt Simmons posted today:

http://www.netcastdaily.com/fsnewshour.htm

[aldente]

Great find Yonidas. Thanks for the link!

[PhebaAndThePilgrim]

Good day From Pheba From the Farm:

I just finished reading the book. Checked it out from the library. My own copy is on order and I will pick it up when I go to town.
Mr. Simmons did a wonderful job. The book was a very hard read for me. The first part of the book was history and was easy to read. The second part of the book is very technical and not an easy read, but I got it.
If what he is saying is true, and I do not doubt him, then we are in for a world of hurt.

I only have one complaint about the book. I wish that he would have included a glossary of technical terms. I am technically challenged.
Terms like:
water cut
dew point
bubble point
I know these are probably common knowledge to most folks, but I hd a difficult time understand parts of the book because I did not understand these terms.
I am assuming water cut means the percentage of water removed with the oil.
The other two terms I do not understand at all.
Also, I do not know what a gas cap is. (not the one on your car, the one in the well!)
Pheba

[aldente]

bubble point .I do not know what a gas cap is.

The way I understood it is that gas is part of the oil as long as it stays under pressure. Once the pressure lowers (due to the extraction of oil) the gas "bubbles out" of the crude oil and rises to the top of the field where it forms a cap.

As a measure to keep the pressure up water is injected in the flanks of the fields which eventually is becomming part of the extracted oil, hence the term water cut.

The pumping horses that you see in the old fields of the USA are unknown in Saudi-Arabia since most oil comes from a few gigantic fields and the primary reason for water injection is to keep them under pressure so that the oil flows out by itself.

[spartacus]

Unfortunately, it will appeal to non-technical people because it SEEMS that Simmons knows what he is talking about. To the Professional Petroleum Engineer, who has worked the fields he talks about, it is rubbish.

He should stick to his area of expertize. I got a lot of laughs out of his descriptions, particularly the effect of pressure drop on gas evolution, and the impact on oil.

It's unfortunate that he didn't seem to ask a reservoir engineer to explain what he was reading, and seemed only to discuss things with an ex-Aramco drilling engineer. Anyone working in the oil patch would know that drilling engineers rarely understand more than 'making hole

[aldente]

To the Professional Petroleum Engineer, who has worked the fields he talks about, it is rubbish.

Could you elaborate please?

[spartacus]

Let's see.....Simmons equates water injection with a problem, where the only issue is lack of natural water drive..so producing water is not bad in the strict sense, just anticipated.

Safaniya has NO gravel packed wells, and a substantial part of the field hasn't even been drilled. The field is a swing producer, so just because it hasn't been produced at capacity doesn't mean it can't be. There is no gas in Safaniya, so that section is rubbish.

There is an assumption that all the professional engineering expertise (both expat and saudi) don't know what they are doing. If things were like he said, he could have got current Aramcon's talking to him. Like most companies, employees of Aramco don't tell outsiders the intimate details of what is going on (professional integrity).

Saudi Arabia is a soverign nation, not an oil company. They have no requirement to tell America anything.

Finally, of course the oil will run out. Fields are generally produced at a plateau rate such that you don't destroy the reservoirs, and don't overinvest.

Anyway, if I read 200 Economist articles, I would feel slightly embarrased to then go head-to-head with Greenspan.

End-of-the-day, perhaps he will be right for all the wrong reasons, and I don't have a problem with the issue being raised. I'm all for the oil price rise, makes it easier to get work, and less likely I will get run-off.

[aldente]

End-of-the-day, perhaps he will be right for all the wrong reasons, and I don't have a problem with the issue being raised. I'm all for the oil price rise, makes it easier to get work, and less likely I will get run-off.

Thanks for the post. Sometimes I need some relief from the all-so-tense expectations of some of the fellow posters here "awaiting the end".

[rockdoc123]

Spartacus said

Unfortunately, it will appeal to non-technical people because it SEEMS that Simmons knows what he is talking about. To the Professional Petroleum Engineer, who has worked the fields he talks about, it is rubbish.

I've noted the same. His terminology on much stuff is wrong...his understanding of how reservoirs work is also pretty simplified. Some stuff is right...but the assumption that 30% water cut is the death knell of the reservoir is stupid at best. All you need is extensive water handling capacity...oil is pricey enough now that a few extra water knockout facilities would be worth it and reinjection would probably also be pretty economic. Many reservoirs around the world still produce at 90% water cut. The danger is water bypass and from what I've seen of the production profiles presented by Aramco last year this is not a problem (if you can believe them). I am currently compiling a list of reservoir engineering faux pas that Simmons made in his book...care to help out?

That all being said if you start to put together a bunch of the info that is presented by the Saudis themselves recently these fields are already at 40 - 50% recovery. They predict 70% but if the reservoir is in the least bit anisotropic (I am very familiar with the Arab from a country very close by and indeed it is somewhat anisotropic) and if that is coupled with variable oil viscosity I have my doubts. And I think the smoking gun is the fact that most of the expats have been taken off working on the oil fields and are instead working on the gas (at least that's what my friends in Aramco tell me). You can read that in a number of ways...perhaps as the Saudis say they are merely trying to preserve oil for export rather than using it for fuel locally (desalination plants), or you could be suspicious and think maybe they are keeping the expats from seeing the problems...or perhaps they are actively seeking gas....bringing in foreign companies to look for it simply because they are extremely worried about their oil reserves. Having spent a fair bit of my life in the Middle East I understand the Arab mentality enough to know that they would never admit to a problem...and in terms of them reporting anything...maybe when pigs fly out of my backside...and why would they report? If North American oil companies were not forced to report by SEC and OSC regs they would not either.

[spartacus]

Unfortunately I can't get into details, as I would breach signed agreements. Nevertheless, his comments on Berri, Qatif, Safaniya, Ain Dar (Ghawar) were well shy of the mark. He wrote off entire reservoirs which have huge reserves, noted at least one reservoir has having no potential when it is actually producing 500,000bpd.

The issue of expats working on gas is untrue. There are still many expats on the oil fields.

However, like most oil companies, Aramco has not kept up recruitment and most expats are in their 40s to 50s, and are cashed-up. There are a lot of jobs in the US and elsewhere at the moment, and Aramco is struggling to maintain the head-count of experienced people.

I think the company wll struggle to meet the increased demand due to lack of materials (people, rigs, construction etc).

Be interesting to see the impact on rig count is Saudi and elsewhere if demand keeps rising and prices stay up.

[bruin]

In the end, since the status of the resevoirs are state secrets, nobody knows the exact status of all the fields, even the engineers who have signed NDA's with the Saudi's. Many a company tells their own employees how great everything is to keep the moral up and then WHAMO the chains go on the front doors. I suspect only the Royal Family has the complete picture of all the oil fields.

At least with the Simmons book, one can get an idea of what is going on. The point to take home is that these oil fields have a finite amount of which there is a lot of double talk on. Once you take away some of the mystery of Saudi Arabia away, PO becomes a lot more understandable as a real event.

[rockdoc123]

The issue of expats working on gas is untrue. There are still many expats on the oil fields.

Hmmm...maybe my sources are gilding the lily. They did confine their argument to G&G staff. The expats you refer to are they 1. reservoir engineers, geologists who would have access to logs, reserve numbers etc. 2. topside field crews who might not have as much below ground info but have more knowledge of production figures or 3. consultants who might get lots of info but would be bound tighter by confidentiality? I imagine not anyone expat has access to much more than bits and bobs of the overall information?

I wonder if the Saudis have been all that free with all the information then why someone hasn't gone "rogue" and divulged info? Even given confidentiality agreements you would have thought someone with knowledge either way who is in his retirement years might have sent some info somewhere to support either side of the argument anonamoulsly? Especially since the Saudis are trying to play a bit of damage control on Simmons statements wonder why they haven't called on one of the expat experts to attest to the reserves or produceability?

[spartacus_gst1]

I'm talking about reservoir engineers and geologists. We are the people who work intimately with the fields.

To Bruin: we are the people who estimate the reserves, prepare the development plans, look at the requirements to achieve the targets required, while still making sure the reservoirs don't get destroyed. We are the people who estimate the reserves, and tell management. It doesn't work the other way around.

I will make the point again...Simmons is a Merchant Banker with his own agenda. He is not a technical person, and reading 200 papers will not make him one.