How Much Oil Can Saudi Arabia Really Produce? – .

How Much Oil Can Saudi Arabia Really Produce? – .

For decades, the real numbers for Saudi Arabia’s crude oil reserves and production levels have been the subject of much debate and confusion, unaided by the Saudis’ obscuring of exactly what those numbers are. . The reason for the obfuscation is that Saudi Arabia’s only real energy source in the world begins and ends with its oil reserves and production, so the higher these numbers, the higher the power, and the lower the number, the lower the power. In recent weeks, this debate has become even more pronounced in the preparation of Saudi Arabia’s latest bond offer and in the debate over excess supply and demand in the oil market for the remainder of the year and beyond. As detailed below, much of what Saudi Arabia has said about its oil reserves, current production, and likely future production is an exaggeration made for self-glorification purposes, but despite this, numbers have increased somewhat from 10 years ago. since. To begin with, the figures for the claimed crude oil reserves: they have been a work of astonishing bravado and almost complete fiction since 1990, when the Kingdom suddenly increased the official number from 170 billion barrels to 257 billion barrels, despite absolutely no new oil discoveries or improved recovery rates being made, as outlined in my latest book on oil markets. Soon after, Saudi Arabia again increased its official crude oil reserves, to 266.4 billion barrels, a level that persisted until a slight increase in 2017, to 268.5 billion barrels. During the same period – in fact, from 1973 to last month – Saudi Arabia pumped an average of 8.162 million barrels per day (bpd). Taking only the 30-year period from 1990 to 2020, this means that Saudi Arabia has continuously withdrawn 2,979,130,000 (about 2.98 billion) barrels of oil each year from its fields, a total of that. 30-year period of: 89,373,900,000 (approximately 89.4 billion) barrels. Using the original number of crude oil reserves would have meant that Saudi Arabia’s reserves would now stand at around 81 billion barrels, placing it around eighth on the list of countries according to the ranking of crude oil reserves. Instead, due to the unusually lucky – and equally mystifying – one-sided increase in the number of reservations by Saudi Arabia itself in 1990 (the numbers were not created or corroborated by an independent source, notice), Saudi Arabia was simultaneously able to remove 89.4 billion barrels of oil permanently from its fields while increasing its crude oil reserves by over 87 billion barrels. Given, as mentioned, that during this period no new discoveries of oil were made – indeed, production declined during this period in many key fields in Saudi Arabia, including Ghawar – it is a mathematical impossibility.

So for the actual crude oil production numbers: As pointed out above, the average amount of crude oil Saudi Arabia was able to pump from 1973 to last month was 8.162 million barrels per day. That is to say, there is no equivocation about this number, and no account is taken in this number of the unverifiable claims of any other “oil equivalent” that Saudi Arabia likes to throw in any remittance. question this number in order to further obscure the problem. If this – correct – number is used as a basis for discussion, then all of Saudi Arabia’s subsequent activities make sense. More revealing in this regard, the question often asked at the time of the first Oil price war started by the Saudis from 2014 to 2016 that aimed to destroy the burgeoning threat of US shale oil to Saudi Arabia was: “Why didn’t the Saudis pump more oil to lower prices further?” After all, the Saudi strategy was for him and all other OPEC members to pump out as much crude oil as possible to bring oil prices down as low as possible and cause as many bankruptcies as possible in the US industry. shale oil. The point is, the Saudis did all they could at that time. He pumped his usual 8.1 and a little million bpd, in addition he pumped to the maximum on all his other fields, in addition he used his oil in storage but despite all this he could not produce more than ‘about 10 million barrels a day of oil at any time for more than a few months or so (essentially until its storage runs out and it has to rely on real production from the wellheads). Since the stake in the 2014-2016 oil price war was Saudi Arabia’s long-term future as a major power in the Middle East and the world, if it had been able to pump a drop more oil during this period she would have.

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This leads to Saudi Arabia’s absurd claims about its reserve capacity. These claims are based on the fact that its base crude oil production is around 10 million bpd instead of the 8.162 million bpd which is factually correct. It did indeed, as mentioned, produced barely around 10 million barrels per day during its existential oil price war of 2014-2016, but it was running at full speed and included storage volumes. The point here is that reserve capacity is precisely that: basically, the additional amount that a country can produce in an emergency if and when it is needed in addition to the amount that can be easily produced each day. The Energy Information Administration specifically defines standby capacity as production that can be brought online within 30 days and maintained for at least 90 days, while even Saudi Arabia said it would take at least 90 days to move platforms to drill new wells and increase production. at the mythical level of 12 million bpd or 12.5 million bpd. Under this rule, Saudi Arabia’s true reserve capacity until at least the end of 2016 was at most around 2 million barrels per day using 8 million barrels per day as the base number, i.e. about 10 million barrels per day in total, which is precisely what it produced when it needed peak production the most (i.e. during the 2014-2016 oil price war ). The Saudis are instead using the correct reserve capacity of 2 million b / d, but adding it to the false benchmark production figure of 10 million b / d for years, giving a figure it continues to mention a total capacity of 12 to 13 million bpd. Indeed, during its ill-fated oil price war in 2020, the Saudi Ministry of Energy said it increase its maximum sustained capacity at 13 million bpd. This Saudi figure is so fundamentally wrong that he was forced to say so in the prospectus of his latest bond. Saudi Aramco said it has yet to begin work to expand its maximum sustained capacity to that level of 13 million bpd.

Regarding the current situation, there has been a slight shift in favor of Saudi Arabia. To begin with, the restart of the partitioned neutral zone (PNZ) will bring back to the market 500,000 to 600,000 b / d to be divided equally between Saudi Arabia and Kuwait, or up to 300,000 b / d additional for Saudi Arabia, which does not hold water. account of recent expansions. “Average crude oil production since the start of 2012 – when the Saudis increased production to make up for Libya’s loss – until April 2020, we estimate it at 10.0 million barrels per day, and for for much of that time the PNZ has been closed and for 2015 and 2016 the annual averages we have are 10.2 million bpd and 10.6 million bpd, which has been a pretty sustained run ” Richard Bronze, analyst at Energy Aspects, London, told exclusively. “It is difficult to validate official production capacity figures for any country unless we see it producing at this level for an extended period, at least three months, and Saudi Arabia has briefly increased its production capacity. production last april [2020], but I suspect that took him to a level that was not sustainable, ”he said. “I estimate that Saudi Arabia can sustainably produce around 11.3 million b / d of crude, well below official figures of 12 million b / d or even 12.5 million b / d Including PNZ, ”he added. “Saudi Arabia has announced several upstream projects that are expected to go live around the middle of the decade, but these are largely needed to compensate for natural declines in existing fields and if the Kingdom is serious about increasing its production capacity. , this will require significant additional capital investments over several years, ”he concluded.

By Simon Watkins for Oil chauffage

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