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Sadad al Husseini sees peak in 2015

Sadad al Husseini, recently retired head of exploration and production for Saudi Aramco, offered very insightful comments during an interview with Peter Maass in Saudi Arabia. Maass reported Husseini’s perspective in his August 21, 2005 piece “The Breaking Point” (posted under “Articles” on this site) in the New York Times Magazine . In a follow-up email exchange with ASPO-USA’s Steve Andrews, Husseini said he would be unable to attend and present at the November 10-11 Denver peak oil conference, but he did offer pointed commentary about peak oil production. While his comments are more optimistic than those of Colin Campbell, Matt Simmons, Chris Skrebowski and a host of others, they certainly strike a vastly more realistic chord than the typical fare from Saudi Aramco press releases and presentations.

Q: My question to you, and I would like to share your answer with attendees at the conference as well as with our state’s Energy Office here in Colorado: Do you have an approximate range when you estimate that world oil production might peak? Given that you won’t be able to join us [at the November 10-11 Denver peak oil conference], your comments on this point would be tremendously appreciated.

A. Thank you for your e-mail. In response to your question, the answer is a little long winded but this is an important matter that needs a clear response.

Oil capacity today is not production limited but rather processing limited. That is to say, the DOE reports the world's refining capacity has leveled at around 83 mmbd for some time and refinery expansions are slow and costly. We have seen new downstream capacity investments average 300 mbd/year over the last several years. Doubling that rate would still put major changes in refinery expansions well into 2010 and beyond. Therefore the refinery capacities are now the effective ceiling for oil production.

The DOE shows oil demand (presumably after refining) is increasing at something like 1.5 - 2.0 % per year. This was doable in the past because of the excess refinery capacity that prevailed until 2003/2004. From here forward, satisfying oil demand will require 1.2 - 1.6 mmbd of new refinery capacity per year or 4 to 5 new world-scale refineries every year. These normally require 4 - 5 years to execute at a cost of no less than $ 2 B per 100,000 b/d of capacity. With deep conversion and petrochemicals, the investments are even higher.

Because of these massive requirements, I believe the production outlook will be gradual production increases over the next ten years limited by slow refining capacity expansions.

Given the current outlook in terms of global exploration and development, the rate of investments in the oil value chain, energy prices, and the prevailing legal and political investment climate, I believe oil production will level off at around the 90 - 95 mmbd by 2015. This plateau can be sustained beyond 2020 at continuously higher oil prices and with rapid improvements in overall energy efficiencies throughout the world.

A rapid global refinery expansion program that eventually matches an increasing oil demand rate of 1.5 - 2.0% per year cannot be achieved before 2015 at the earliest and is highly improbable in any case.

Therefore my answer is: under the current circumstances and outlook, oil is likely to peak at a 95 mmbd plateau by 2015 and can then be sustained well beyond 2020 at increasing real oil prices.

Best wishes with your conference and I hope to read more about it in the forthcoming weeks.

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