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A Study of the Reporting of Saudi Arabia’s Reserves

Recent presentations by Saudi Aramco Representatives and a review of the technical literature allow the construction of the following table showing the evolution of Saudi Aramco reserves, Oil Initially in Place (OIIP), and recovery factors.

Saudi Aramco often compares the proved reserve estimates for 1975 with the current claimed proved estimate of 260 Gb. This is misleading as, by the definition of Probable and with the passage of time and production experience, surely most of the 1975 Probable would by today be expected to be re-classed as Proved. One should compare Proved plus Probable (2P) reserves and recovery factors. On this basis, the claimed 2P recovery factor has been increased by about 50 % (from 38% in 1980 to 56%).

Some elementary maths and petroleum engineering knowledge are sufficient to demonstrate that new discoveries cannot be important in this increased recovery factor. It must pertain almost totally to the pre-1975 reserve base.

The amount of technical data available on Ghawar allows one to construct both an independent view of its reserves and a very good estimate of current Saudi Aramco claims. Estimated cumulative production from Ghawar is 54 Gb, and the remaining proved reserves are about 60 Gb (a total of 114 Gb) with another circa 10 Gb as Probable, giving just over 200 Gb Initial Oil-in-Place. (These numbers are fully consistent with the comments of Dr. Afiffi of Saudi Aramco during his recent AAPG lecture tour.)

A 1975 Proved & Probable (2P) estimate for Ghawar is not in the public record, but one can make an educated guess. If Ghawar had the same percentage of the 1975 Probable of 67.7 Gb as it had of Proved (46%), then the Aramco 2P Reserve estimate would be 91 Gb. In fact, this is likely a conservative estimate. Inspection of the table above, knowledge of the Saudi field size distribution, and the history of Ghawar Proved Reserve bookings (disclosed by Dr. Saleri of Saudi Aramco for the northern part of the field) all constitute powerful circumstantial evidence that this assumption is approximately correct.

On this basis, Ghawar could have accounted for at most 35 Gb of the roughly 200 Gb in 2P Reserve additions since 1975. (Of further interest is that a similar exercise can be done for Abqaiq which suggests that its 2P Reserves have expanded by about 4 Gb from 1975 to 2003, or about 30%.) This implies that the recovery factors in the other large fields in the reserve base have been increased substantially more than for Ghawar, and that the 2P Reserve estimate for Ghawar was reasonably accurate, given the modest production history and zero water cut up to that time. This raises further questions about Saudi Aramco claims that the original 1975 reserves estimates were ridiculously conservative.

Based upon the conclusions of this analysis, Ghawar can be excluded from the current OIIP and Proved Reserve numbers. Exclusive of Ghawar, Saudi claimed OIIP is 500 Gb and remaining proved reserves of about 200 Gb. Surprisingly, excluding Ghawar does not have a significant effect on the aggregate recovery factor. Proved (ex Ghawar) – 49% ; Proved & Probable (2P) (ex Ghawar) – 54% Excluding Ghawar, the 200 Gb of Remaining Proved Reserves are 18 % depleted. After removing the estimated remaining Ghawar Reserves from the 131 Gb Proved Developed number, only about 70 Gb, or 35 %, is developed. Of this 18 % depletion, about half is accounted for by only two fields (Abqaiq and Safaniyah, which have produced over 20 Gb). Of the entire 85 or so recognized Saudi fields, only about a dozen have ever been produced, and only 5-6 have produced significant quantities.

We may ask if a 50 % Recovery Factor, combined with such a high proportion of Proved and low proportion of Probable (roughly 90/10) is credible, either in the abstract or with reference both to the low state of depletion and the high percentage of undeveloped reserves. The Association for the Study of Peak Oil, Wood Mackenzie, and PFC Energy consultants, all estimate remaining Saudi reserves in an order-of-magnitude of 150 Gb.

The U.S. Geological Survey (USGS) estimates about 180 Gb in its study of 2000 based on IHS data. While reserve estimates are properly based upon technical factors and production history, the conclusions must make sense when compared with historical experience. The above analysis is much more consistent with these lower estimates than Saudi Aramco claims.

The thrust of above analysis seems to be confirmed by the following press report from Dow Jones. The former head of Saudi Arabian Oil Co's oil exploration Wednesday sharply criticized U.S. government oil supply projections. "The whole industry laughs at it," said Sadad Al-Husseini, former executive vice president of exploration at Aramco, the world's biggest oil company.

The EIA, statistical arm of the U.S. Department of Energy, projects crude from the Organization of Petroleum Exporting Countries oil will increase 90% in 20 years and that demand for Saudi oil will jump 137%, to about 22mbpd. Saudi Arabia's own models, forecast top production for the same time at a much lower 15mbpd. Saudi Arabia now produces some 9.5mbpd.

"They are perhaps unaware of how unrealistic these numbers are," Al-Husseini said. OPEC supplies half of the world's oi exports. The EIA's predictions assume very low oil prices. Al-Husseini said oil will be much more expensive, encouraging greater fuel economy and the development of alternative fuels that will shrink reliance on oil.

He also questioned U.S. projections on future oil finds and said declining production in existing will INCREASE (emphasis mine). "Should we be worried? Yes," he said. Billions of barrels of oil calculated to be part of world reserves by the US government include nearly unusable pitch, he said. Al-Husseini said he wanted to call their figures to task because they shape major government policy decision more than any other agency's data.

Editorial Notes: See link for table mentioned (in ASPO's December newsletter, pg4 of the .doc & pg of .pdf). -LJ

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