A satellite-enabled peek at Saudi oil.

Wednesday, February 9, 2011

Much Ado About a Wikileak

It seems some Saudi diplomatic missives have turned up in the trove of documents that is Wikileaks, and there are claims that Sadad al-Husseini, a former Vice President of Saudi Aramco, was heard dissing the prospects of his former employer. But if you actually read the relevant wikileak, it becomes clear that the Guardian journalist misinterpreted the wikileaked cable -- which perhaps misquoted Al-Husseini.
Al-Husseini disagrees with this analysis, as he believes that Aramco's reserves are overstated by as much as 300 billion bbls of "speculative resources." He instead focuses on original proven reserves, oil that has already been produced or which is available for exploitation based on current technology. All parties estimate this amount to be approximately 360 billion bbls. In al-Husseini's view, once 50 percent depletion of original proven reserves has been reached and the 180 billion bbls threshold crossed, a slow but steady output decline will ensue and no amount of effort will be able to stop it. By al-Husseini's calculations, approximately 116 billion barrels of oil have been produced by Saudi Arabia, meaning only 64 billion barrels remain before reaching this crucial point of inflection. At 12 million b/d production, this inflection point will arrive in 14 years. Thus, while Aramco will likely be able to surpass 12 million b/d in the next decade, soon after reaching that threshold the company will have to expend maximum effort to simply fend off impending output declines. Al-Husseini believes that what will result is a plateau in total output that will last approximately 15 years, followed by decreasing output.

It's clear to me that he is just disputing the notion that Saudi has 700+ billion barrels of "reserves" claimed by the other SA talking head:

Abdallah al-Saif, current Aramco Senior Vice President for Exploration and Production, reported that Aramco has 716 billion barrels (bbls) of total reserves, of which 51 percent are recoverable.

The only thing of real interest here is that Al-Husseini distanced himself from "peak oil" while seeming to agree with it. But is was only a matter of time before someone would ask al-Husseini to confirm his views on this, and he indeed claims that he was misinterpreted.
He says he has no dispute with Aramco’s official reserves data, but disagrees with Mr. al-Saif’s projection for the future and with the diplomats’ characterization of its existing 716 billion barrels as “reserves”.

In fact, he says, that figure refers to “oil in place” which includes both recoverable and non-recoverable oil.

The kingdom’s “proven reserves”, the oil Saudi Aramco believes it can extract, are officially given as 260 billion barrels (Mr. al-Saif said the actual figure was probably more like 51% of the “oil in place” –- around 358 billion barrels).

Mr. al-Husseini says he has no problem with either Saudi Aramco’s official figures on current proven reserves or Mr. al-Saif’s estimate, but was simply making the point that to describe “oil in place” as reserves was to inflate the kingdom’s figures by several hundred billion barrels.

There is still much to be skeptical about with regards to the proven reserves of Saudi Arabia, and I am one of many who have questioned the claims of Saudi Aramco in light of their actions. For example, they always magically seem to "discover" as much oil as they produce each year such that their reserves never decrease. However, there is no bombshell in this particular wikileak in terms of how much oil they have left.

13 comments:

Stuart Staniford said...

Joules:

I think the 716 and the 900 are OOIP. So the dispute is between al-Saif claiming that Saudi URR will be 70% of 900 = 630, and al-Husseini claiming it will be 51% of 716 = 365.

JoulesBurn said...

Stuart,

Where do you get the 70% figure? He was the one claiming a 51% recovery factor.

JB

JoulesBurn said...

Al-Saif, that is.

Luís de Sousa said...

Hey Joules, there's indeed nothing new here for those that have been following al-Husseini's remarks over the years. But the fact that US diplomats are taking it seriously is relevant, IMHO. One wonders if anyone believes in political reserves...

JoulesBurn said...

Luis,

They are perhaps taking it seriously. But I am curious about why this is classified. At the top of the pertinent WL on the Guardian site, there is this:

"Classified By: Consul General John Kincannon for reasons 1.4 b, d and e ."

These apparently reference some protocol for classifying information. Here is something on the apparent classification of trivia:

http://www.publicintegrity.org/articles/entry/2782/

JoulesBurn said...

Ah, I found something on that:

http://en.wikisource.org/wiki/Executive_Order_13526#Part_1

which has under Sec 1.4

(b) foreign government information;

(d) foreign relations or foreign activities of the United States, including confidential sources;

(e) scientific, technological, or economic matters relating to the national security;

Stuart Staniford said...

Joules:

The al-Husseini cable paraphrases al-Saif as having said "He then offered the promising forecast - based on historical trends - that in 20 years, Aramco will have over 900 billion barrels of total reserves, and future technology will allow for 70 percent recovery."

This is reminiscent of Nansen Saleri's slide for Ain'Dar/Shedgum claiming they'd get 75% recovery.

JoulesBurn said...

Stuart,

True, but it's not clear what al-Saif numbers Husseini was referring to. More importantly, though, he doesn't appear to be questioning the types of reserves numbers that Saudi Aramco actually publishes in their annual report.

Stuart Staniford said...

The context is:

3. (C) According to al-Husseini, the crux of the issue is twofold. First, it is possible that Saudi reserves are not as bountiful as sometimes described and the timeline for their production not as unrestrained as Aramco executives and energy optimists would like to portray. In a December 1 presentation at an Aramco Drilling Symposium, Abdallah al-Saif, current Aramco Senior Vice President for Exploration and Production, reported that Aramco has 716 billion barrels (bbls) of total reserves, of which 51 percent are recoverable. He then offered the promising forecast - based on historical trends - that in 20 years, Aramco will have over 900 billion barrels of total reserves, and future technology will allow for 70 percent recovery.

4. (C) Al-Husseini disagrees with this analysis, as he believes that Aramco's reserves are overstated by as much as 300 billion bbls of "speculative resources." He instead focuses on original proven reserves, oil that has already been produced or which is available for exploitation based on current technology. All parties estimate this amount to be approximately 360 billion bbls.


I think it's pretty clear that what Al-Husseini is disagreeing with is the 70% of 900. I agree with you he doesn't seem to be questioning the standard "260gb left" (He would have had to be heavily involved in propagating that, since it was during his tenure at Aramco that the big jump occurred).

But he is questioning the more optimistic stuff Aramco has put out, like the Baqi/Saleri presentation, which claimed Saudi Arabia could produce "Sustained Production Levels at 10, 12, and 15 Million Barrels per Day, Well Beyond 2054"

Saleri is saying he's not buying that. He's saying, no more than 12, and that with difficulty and not for that long.

JoulesBurn said...

Stuart,

Agree, except on your last paragraph I think you meant al-Husseini and not Saleri.

Al-Husseini clearly had disagreements with Saleri (Neil King's WSJ article on that was good), and Saleri's optimism probably influenced the royal choice of not moving the pessimist (al-H) to the top job.

farm land investment said...

I have read all about that. It may be that they are counting on the Saudis to increase capacity to 15 milliom b/ds, and its just not possible.

Subing said...

The al-Husseini cable television paraphrases al-Saif as owning mentioned "He then provided the promising forecast - centered on historical trends

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