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Saudi Arabia’s biggest oil field is fading faster than anyone guessed

Production

Ghawar is able to pump a maximum of 3.8 million barrels a day — well below the more than 5 million that had become conventional wisdom in the market

An oil field in Saudi Arabia. The Saudis say some of its reserves — about a fifth of the total — have been drilled so systematically over nearly a century that more than 40 per cent of their oil has been already extracted.

It was a state secret and the source of a kingdom’s riches. It was so important that U.S. military planners once debated how to seize it by force. For oil traders, it was a source of endless speculation.

Now the market finally knows: Ghawar in Saudi Arabia, the world’s largest conventional oil field, can produce a lot less than almost anyone believed.

When Saudi Aramco on Monday published its first ever profit figures since its nationalization nearly 40 years ago, it also lifted the veil of secrecy around its mega oil fields. The company’s bond prospectus revealed that Ghawar is able to pump a maximum of 3.8 million barrels a day — well below the more than 5 million that had become conventional wisdom in the market.

“As Saudi’s largest field, a surprisingly low production capacity figure from Ghawar is the stand-out of the report,” said Virendra Chauhan, head of upstream at consultant Energy Aspects Ltd. in Singapore.

The Energy Information Administration, a U.S. government body that provides statistical information and often is used as a benchmark by the oil market, listed Ghawar’s production capacity at 5.8 million barrels a day in 2017. Aramco, in a presentation in Washington in 2004 when it tried to debunk the “peak oil” supply theories of the late U.S. oil banker Matt Simmons, also said the field was pumping more than 5 million barrels a day, and had been doing so since at least the previous decade.

In his book “Twilight in the Desert,” Simmons argued that Saudi Arabia would struggle to boost production due to the imminent depletion of Ghawar, among other factors. “Field-by-field production reports disappeared behind a wall of secrecy over two decades ago,” he wrote in his book in reference to Aramco’s nationalization.

The new details about Ghawar prove one of Simmons’s points but he missed other changes in technology that allowed Saudi Arabia — and, more importantly, U.S. shale producers — to boost output significantly, with global oil production yet to peak.

The prospectus offered no information about why Ghawar can produce today a quarter less than 15 years ago — a significant reduction for any oil field. The report also didn’t say whether capacity would continue to decline at a similar rate in the future.

Aramco wasn’t immediately able to comment.

Lost Crown

The new maximum production rate for Ghawar means that the Permian in the U.S., which pumped 4.1 million barrels a day last month according to government data, is already the largest oil production basin. The comparison isn’t exact — the Saudi field is a conventional reservoir, while the Permian is an unconventional shale formation — yet it shows the shifting balance of power in the market.

Ghawar, which measures about 174 miles long — or about the distance from New York to Baltimore — is so important for Saudi Arabia because the field has “accounted for more than half of the total cumulative crude oil production in the kingdom,” according to the bond prospectus. The country has been pumping since the discovery of the Dammam No. 7 well in 1938.

On top of Ghawar, which was found in 1948 by an American geologist, Saudi Arabia relies heavily on two other mega-fields: Khurais, which was discovered in 1957, and can pump 1.45 million barrels a day, and Safaniyah, found in 1951 and still today the world’s largest offshore oil field with capacity of 1.3 million barrels a day. In total, Aramco operates 101 oil fields.

The 470-page bond prospectus confirms that Saudi Aramco is able to pump a maximum of 12 million barrels a day — as Riyadh has said for several years. The kingdom has access to another 500,000 barrels a day of output capacity in the so-called neutral zone shared with Kuwait. That area isn’t producing anything now due a political dispute with its neighbour.

While the prospectus confirmed the overall maximum production capacity, the split among fields is different to what the market had assumed. As a policy, Saudi Arabia keeps about 1 million to 2 million barrels a day of its capacity in reserve, using it only during wars, disruptions elsewhere or unusually strong demand. Saudi Arabia briefly pumped a record of more than 11 million barrels a day in late 2018.

“The company also uses this spare capacity as an alternative supply option in case of unplanned production outages at any field and to maintain its production levels during routine field maintenance,” Aramco said in its prospectus.

Costly Strategy

For Aramco, that’s a significant cost, as it has invested billions of dollars into facilities that aren’t regularly used. However, the company said the ability to tap its spare capacity also allows it to profit handsomely at times of market tightness, providing an extra US$35.5 billion in revenue from 2013 to 2018. Last year, Saudi Energy Minister Khalid Al-Falih said maintaining this supply buffer costs about US$2 billion a year.

Aramco also disclosed reserves at its top-five fields, revealing that some of them have shorter lifespans than previously thought. Ghawar, for example, has 48.2 billion barrels of oil left, which would last another 34 years at the maximum rate of production. Nonetheless, companies are often able to boost the reserves over time by deploying new techniques or technology.

In total, the kingdom has 226 billion barrels of reserves, enough for another 52 years of production at the maximum capacity of 12 million barrels a day.

The Saudis also told the world that their fields are aging better than expected, with “low depletion rates of 1 per cent to 2 per cent per year,” slower than the 5 per cent decline some analysts suspected.

Yet, it also said that some of its reserves — about a fifth of the total — had been drilled so systematically over nearly a century that more than 40 per cent of their oil has been already extracted, a considerable figure for an industry that usually struggles to recover more than half the barrels in place underground.

Financial Post



21 Comments on "Saudi Arabia’s biggest oil field is fading faster than anyone guessed"

  1. Pee Wee Herman on Tue, 2nd Apr 2019 10:25 pm 

    But they still have around 52 yrs of oil left. We’ll all be dead by the time they run out.

  2. Cloggie on Tue, 2nd Apr 2019 11:38 pm 

    In March, 58% of all new cars in Norway were e-vehicles.

    http://www.spiegel.de/video/norwegen-elektroautos-beliebter-als-verbrenner-video-99026209.html

  3. Cloggie on Wed, 3rd Apr 2019 1:09 am 

    Can we please finally have higher oil prices?

    This message was offered to you by the CEOs of Vestas Windturbines and ITM electrolysers.

  4. makati1 on Wed, 3rd Apr 2019 2:16 am 

    $100/bbl would be just fine with me. FP and all the oily majors are nothing but lies. Price is going to kill oil long before it runs out.

  5. I AM THE MOB on Wed, 3rd Apr 2019 3:52 am 

    Its twilight in the dessert!

    As goes Saudi Arabia goes the world..

    -Matthew Simmons

  6. I AM THE MOB on Wed, 3rd Apr 2019 3:56 am 

    Joe Biden has been Metooed out of the race!

    HAHA!

    Bernie for the win!

  7. shortonoil on Wed, 3rd Apr 2019 4:05 am 

    The Saudi have been lying for 70 years, and now we are expected to believe them? The world is extracting oil 58 times faster than it is finding it.

  8. Shortend on Wed, 3rd Apr 2019 6:46 am 

    It’s obvious what they should do….pump faster to increase back up again…
    What’s the problem?…right Rockman…rocdick…sorry, rocdoc

  9. Darrell Cloud on Wed, 3rd Apr 2019 7:26 am 

    Russia, China and the U.S. are trying to secure Venezuelan oil. The central planners have seen the trajectory of depletion for a long time. Nobody is willing to go quietly into the dark. So, at some point this blows up.

    The question is: How will it blow up? Will the world economies roll over like they did in 08 and not rebound? Will some unknown source decide to end American oil consumption with a couple of container ships off the east and west coasts? Will the deep state players successfully ignite a civil war ending the American Empire?

    God only knows but the future is pregnant with possibilities.

  10. Hello on Wed, 3rd Apr 2019 7:31 am 

    >>>> future is pregnant with possibilities

    nice expression. Need to remember that one. 🙂

  11. Dredd on Wed, 3rd Apr 2019 7:37 am 

    Will they do a live autopsy on the field?

    That is a culture which has created a prince who envisioned a new form of the art, called “a live Awe Topsy” (US senators plan to condemn Saudi crown prince for world’s first live autopsy of journalist Jamal Khashoggi).” (Awe Topsy – 4).

    They are close to Presnit Dump in more ways that one. He inflates this whatever to steal whatever.

  12. I AM THE MOB on Wed, 3rd Apr 2019 9:18 am 

    JOKER – Teaser Trailer – In Theaters October 4

    https://www.youtube.com/watch?v=t433PEQGErc

    Put on a happy face clogg!

    HAHAH!

  13. Robert Inget on Wed, 3rd Apr 2019 9:33 am 

    Summary of Weekly Petroleum Data for the week ending March 29, 2019

    U.S. crude oil refinery inputs averaged 15.8 million barrels per day during the week
    ending March 29, 2019, which was 18,000 barrels per day more than the previous week’s
    average. Refineries operated at 86.4% of their operable capacity last week. Gasoline
    production increased last week, averaging 9.8 million barrels per day. Distillate fuel
    production decreased last week, averaging 4.9 million barrels per day.

    U.S. crude oil imports averaged 6.8 million barrels per day last week, up by 223,000
    barrels per day from the previous week. Over the past four weeks, crude oil imports
    averaged about 6.7 million barrels per day, 12.1% less than the same four-week period
    last year. Total motor gasoline imports (including both finished gasoline and gasoline
    blending components) last week averaged 746,000 barrels per day, and distillate fuel
    imports averaged 144,000 barrels per day.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum
    Reserve) increased by 7.2 million barrels from the previous week. At 449.5 million
    barrels, U.S. crude oil inventories are at the five year average for this time of year.
    Total
    motor gasoline inventories decreased by 1.8 million barrels last week and are about 2%
    above the five year average for this time of year. Finished gasoline inventories increased
    while blending components inventories decreased last week. Distillate fuel inventories
    decreased by 2.0 million barrels last week and are about 6% below the five year average
    for this time of year. Propane/propylene inventories increased by 1.6 million barrels last
    week and are about 17% above the five year average for this time of year. Total
    commercial petroleum inventories increased last week by 7.2 million barrels last week.

    Total products supplied over the last four-week period averaged 20.6 million barrels per
    day, down by 1.6% from the same period last year. Over the past four weeks, motor
    gasoline product supplied averaged 9.2 million barrels per day, down by 1.5% from the
    same period last year. Distillate fuel product supplied averaged 4.3 million barrels per
    day over the past four weeks, up by 6.4% from the same period last year. Jet fuel product
    supplied was up 3.7% compared with the same four-week period last year.

  14. peakyeast on Wed, 3rd Apr 2019 9:34 am 

    With 50 years worth of 12mb/day.

    How long until they 6 mb/day? 25years?

  15. Robert Inget on Wed, 3rd Apr 2019 9:47 am 

    Inventories increased, according to EIA 7.2 MB.
    (we expected a drop in inventories)
    Builds like this are expected during this period between spring and summer, (driving season)

    Exports were hampered by a terrible fire near the Houston Ship channel. (could be a reason for build) What we don’t know are percentages of
    liquids to heaver crudes.

    CONSUMPTION hasn’t budged from levels seen for three week’s running.
    I like to watch diesel and jet fuel. These two fuels
    are genuine economic indicators.

  16. Robert Inget on Wed, 3rd Apr 2019 9:57 am 

    Note, third week in a row, zero imports from Venezuela.

    Mexico up slightly, again masking the fact that
    most Mexican crude is returned as finished product. Mexico is also our biggest Natural Gas
    buyer. FYI: pipelines are key here, coming and going.

    link below will tell ya exactly how much from where:

    https://www.investorvillage.com/groups.asp?mb=19168&mn=196242&pt=msg&mid=19304975

  17. Robert Inget on Wed, 3rd Apr 2019 10:12 am 

    https://gcaptain.com/singapore-imo-2020-low-sulphur-fuel-penalties/?utm_campaign=twitter&utm_medium=twitter&utm_source=twitter

    The title of world’s largest container ship is actually held by eight identical ships owned by Danish shipping line Mærsk. All eight ships are 1300ft (397.7m) long and can carry 15,200 shipping containers around the globe at a steady 25.5 knots (47.2 km/h, 29.3 mph) . The only thing limiting the size of these ships is the Suezmax standard, which is the term used to define the the largest ships capable of transiting the Suez Canal fully loaded. These ships far surpass the Panamax standard (ships that can fit through the Panama Canal), which is limited to ships capable of carrying 5,000 shipping containers.

    Not only are shipbuilders resetting the world record for size on a regular basis but so are the diesel engines that propel them. One of the eight longest container ships in the world, the 1,300 ft Emma Mærsk also has the world’s largest reciprocating engine. At five storeys tall and weighing 2300 tonnes, this 14 cylinder turbocharged two-stroke monster puts out 84.4 MW (114,800 hp) – up to 90MW when the motor’s waste heat recovery system is taken into account. These mammoth engines consume approx 16 tons of fuel per hour or 380 tons per day while at sea.

    Unregulated emissions

    In international waters ship emissions remains one of the least regulated parts of our global transportation system. The fuel used in ships is waste oil, basically what is left over after the crude oil refining process. It is the same as asphalt and is so thick that when cold it can be walked upon . It’s the cheapest and most polluting fuel available and the world’s 90,000 ships chew through an astonishing 7.29 million barrels of it each day, or more than 84% of all exported oil production from Saudi Arabia, the worlds largest oil exporter.

    Shipping is by far the biggest transport polluter in the world. There are 760 million cars in the world today emitting approx 78,599 tons of Sulphur Oxides (SOx) annually. The world’s 90,000 vessels burn approx 370 million tons of fuel per year emitting 20 million tons of Sulphur Oxides. That equates to 260 times more Sulphur Oxides being emitted by ships than the worlds entire car fleet. One large ship alone can generate approx 5,200 tonnes of sulphur oxide pollution in a year, meaning that 15 of the largest ships now emit as much SOx as the worlds 760 million cars.

    South Korea’s STX shipyard says it has designed a ship to carry 22,000 shipping containers that would be 450 meters long and there are already 3,693 new ship builds on the books for ocean going vessels over 150 meters in length due over the next three years. The amount of air pollution just these new ships will put out when launched is equal to having another 29 billion cars on the roads.

    The UN’s International Maritime Organisation (IMO) released a report in 2007 saying a 10% reduction in fuel burning was possible on existing ships and 30-40% possible for new ships but the technology is largely unused, as the regulations are largely voluntary.

    Nuclear future?

    Oddly enough there is never any mention of alternative power sources such as nuclear power. Nuclear marine propulsion has been in widespread naval use for over 50 years starting in 1955. There are 150 ships in operation that use nuclear propulsion with most being submarines, although they range from ice breakers to aircraft carriers. A Nimitz class supercarrier has more than twice as much power (240,000 hp, 208 MW) as the largest container ship diesel engines ever built and is capable of continuously operating for 20 years without refueling (some French Rubis-class submarines can go 30 years between refueling). The U.S. Navy has accumulated over 5,400 “reactor years” of accident-free experience, and operates more than 80 nuclear-powered ships.

    Airborne pollution from these giant diesel engines has been linked to sickness in coastal residents near busy shipping lanes. Up to 60,000 premature deaths a year worldwide are said to be as a result of particulate matter emissions from ocean-going ship engines. The IMO, which regulates shipping for 168 member nations, last October enacted new mandatory standards for phasing in cleaner engine fuel. By 2020, sulphur in marine fuel must be reduced by 90% although this new distilled fuel may be double the price of current low grade fuels.

    Paul Evans

    Via: Guardian.co.uk.

    See this link for an informative overview of global shipping emissions from Glenn klith Andersen.

    Backed by 15 years experience covering science and new technology, New Atlas Plus delivers cleaner, faster, ad free reading.
    Subscribe now for just US$19 a year.

  18. Robert Inget on Wed, 3rd Apr 2019 11:07 am 

    https://www.bbc.com/news/science-environment-47638586

    CO/2 remove/reuse

  19. Chrome Mags on Wed, 3rd Apr 2019 12:30 pm 

    “Russia, China and the U.S. are trying to secure Venezuelan oil.”

    Two super powers engaging in an attempt to grab heavy oil with a low return on energy invested – that really ought to raise a red flag; the oil age is on its heels.

  20. Davy on Wed, 3rd Apr 2019 12:39 pm 

    I don’t think it is about the oil really. It is now about power and the pride involved with sunk investments. Nobody like to lose their asses and Russia and China are facing a haircut with or without Maduro.

  21. Davy on Wed, 3rd Apr 2019 1:38 pm 

    Oops, sorry everyone. What I really meant to say was, I don’t think.

    “John Bolton admits it’s all about oil in Venezuela”
    http://tinyurl.com/yxfw3q5x

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