Maureen Lorenzetti
Washington Editor
WASHINGTON, DC, Feb. 25 -- Saudi Aramco Tuesday said it is well-positioned to remain the world's leading oil supplier now and far into the future. Company officials sought to refute claims that Saudi Arabia's oil fields may be declining faster than previously thought and therefore may not be able to meet the world's long-term demand.
"We have the potential to add more oil than anyone else," said Mahmoud Abdul-Baqi, vice-president, exploration, for the state-owned oil company. "We will continue to deliver for another 70 years at least."
The company estimates that world oil demand is expected to increase at 1-2%/year over the next 15 years, reaching 107 million b/d by 2020. Officials said that worldwide oil reserves at yearend 2002 stood at 1.05 trillion bbl, of which 65% was in the Middle East.
Aramco said it is able to sustain production levels at 10-15 million b/d easily through 2054, "commensurate with world energy market needs and conditions."
A 15 million b/d production level for example, could be maintained through 2054, if the company were to use 68% of its probable and possible reserves.
"In all three scenarios, prudent reservoir management practices, oil-focused exploration efforts, and continual emphasis on cutting-edge technologies certainly can extend the plateau period well beyond 2054," Aramco said.
Aramco's current production capacity is 10 million b/d. Company officials say they could comfortably add 1 million b/d of capacity within 2 years, if market conditions warrant; they also can boost production levels by at least 1 million b/d within 72 hr to react to international supply shocks.
Baqi's comments were made at an energy policy symposium sponsored by the nonpartisan think tank Center for Strategic and International Studies in Washington, DC.
CSIS Energy Program Chairman Robert Ebel noted that as the world's largest oil exporter, Saudi Arabia's ability to maintain or increase its supply is a key factor in providing balance to the global oil market.
"Can that leadership be retained for the benefit of consumers everywhere? It is an important question that must be asked, because there is no substitute for Saudi oil."
Energy anxieties
Aramco was responding to a CSIS presentation made by Houston-based investment banker Matthew Simmons, president of Simmons & Co. International.
Simmons said that Saudi Arabia's great oil fields may be aging much faster than conventionally thought. Citing Society of Petroleum Engineers technical papers authored by Aramco engineers, Simmons said there is evidence to suggest the Saudis may be relying too much on technology to get the last "easy oil."
"The sweep of easy conventional oil flow is ending," Simmons told a panel of Aramco executives.
Simmons said Saudi Arabia's next generation of oil production to replace planned declines is not risk-free, and he listed three oil fields as examples of which there are "complex" production histories: Qatif, Abu Sa'fah, and Khurais.
"Each has its own set of challenges. If they work, great. But if they do not, the world has likely seen peak oil. The answer should be known by 2006-07," Simmons said.
Simmons also called on the Saudis to help usher in "a new era of energy transparency" to ward off what he said he fears could be a "nasty" energy surprise that could happen in the not-too-distant future. A step in the right direction would be for Saudi Aramco to provide monthly production level and depletion rate data on its oil wells and fields.
He also urged other key players in world energy markets to work together to avoid a future energy crisis. Simmons said the International Energy Agency should improve its own demand and cost data. One weak area within the IEA reporting system continues to be non-OPEC (Organization of Petroleum Exporting Companies) decline data, he said.
Meanwhile, OPEC should make public timely field-by-field production and well-by-well data, budget details, and third-party engineering reports. He also called on oil-producing countries to work on getting wild price volatility under control. This would include creating more-realistic models for how oil and natural gas need to be priced.
US energy policy implications
Simmons' work has not fallen on deaf ears. A few hours after the panel discussion, US Senate Energy and Natural Resources Chairman Pete Domenici (R-NM) issued a statement saying that concerns over "tired" Saudi supplies illustrated the need to continue research on hydrogen cars and to pass a stalled energy bill before Congress.
"President Bush had the vision to see past oil imports, OPEC quotas, and carbon emissions to a future of hydrogen-powered cars, clean air, and energy self-reliance for this great country," Domenici said.
"Last year, President Bush asked Congress for $1.8 billion for hydrogen research. Senate Republicans put in authorization for $2.1 billion—nearly $400 million more than requested—in our energy bill. S2095, the energy bill pending in the Senate, puts that investment, along with American ingenuity and innovation, to work to make a hydrogen future an American reality.
"If we pass S2095, we can put affordable, reliable hydrogen-powered cars on the road by the time the Saudi oil fields are tapped out, whenever that may be. Let's stop looking to foreign countries to solve our energy problems while we play politics with solutions here at home. I urge the swift passage of S2095."
Domenici noted that the US Energy Information Agency says Saudi Arabia needs to produce 13.6 million b/d by 2010 and 19.5 million b/d by 2020 to meet world oil demands. But he then cited a New York Times report that quoted an internal Saudi Aramco plan that estimates production in 2011 will be 10.15 million b/d.
Aramco dismisses claims
At CSIS and later at a briefing for reporters, senior Aramco officials strenuously denied Simmons assertions that fields may be declining at an alarming rate.
"He is asking all the right questions, but giving all the wrong answers," said Nansen Saleri, manager, reservoir management, for Aramco.
Aramco officials said that the SPE papers that Simmons cites addressed very specific technical issues that just represent a snapshot, not a full picture, of the company's oil fields.
"These papers discussed very specific problems that our engineers wanted to explain how they solved. They did not talk about everyday operations," said Baqi. "You don't write papers about all the good news."
Aramco officials also disputed charges that they are secretive about the way they manage their oil fields. Saleri said Aramco "opens its doors" about its operations and has invited scholars, scientists, and analysts, including Simmons, to their offices. Aramco officials acknowledged that there is certain information that their company does not disclose for competitive reasons. But Saleri and Baqi argued that Saudi Aramco has been far more transparent with its data compared with the foreign firms that used to run the country's oil fields.
They also sharply criticized Simmons for not trying to contact them or other company managers before the analyst went public with his conclusions.
"We didn't even get an e-mail about this," Saleri said.
