Crude Awakening

CRUDE AWAKENING….Three years ago, in a piece called “Crude Awakening,” I reviewed Twilight in the Desert, a book by Matthew Simmons which argued that Saudi Arabia had a lot less oil than they claimed. Simmons believed that their existing fields, including the freakishly productive supergiant Ghawar field, were barely able to sustain their existing production rates, and that new fields were few and far between. As a result, he estimated that although Saudi production might increase a bit in coming years, it would never hit their stated goal of 15 million barrels a day or anything close to it.

This week, in a piece called — you guessed it — “Crude Awakening,” Business Week claims to have gotten access to a super-secret internal Saudi document with a field-by-field breakdown of estimated Saudi oil production from 2009 through 2013. Its conclusion? 15 million barrels is a pipe dream:

The detailed document, obtained from a person with access to Saudi oil officials, suggests that Saudi Aramco will be limited to sustained production of just 12 million barrels a day in 2010, and will be able to maintain that volume only for short, temporary periods such as emergencies. Then it will scale back to a sustainable production level of about 10.4 million barrels a day, according to the data.

….One dramatic part of the data concerns a site called Ghawar, which has been the kingdom’s workhorse field for decades. It shows the field producing 5.4 million barrels a day next year, but the volume then falling off rapidly, to 4.475 million daily barrels in 2013.

Italics mine. If this document is accurate, it means that Simmons was right on the money. What’s worse, the details are even more discouraging: as the chart on the right shows, what little production increase the Saudis can sustain is all in medium and heavy crudes. Production of light crude, preferred by most refineries, actually decreases by 200,000 barrels per day between now and 2013.

For what it’s worth, Saudi authorities say Business Week is wrong. From Reuters: “Top oil exporter Saudi Arabia will be able to pump at 12.5 million barrels per day for as long as the market needs when new capacity comes online next year, a Saudi oil official told Reuters on Tuesday….’This is sustainable for as long as the market needs it,’ he said. ‘We are on track to reach production capacity of 12.5 million bpd by the middle of next year and we will do it.'” Personally, I’m inclined to believe Simmons and Business Week, but time will tell. Stay tuned.

Via FuturePundit.

NOTE: I should mention that I’m not accusing Business Week of ripping off the title of my 2005 piece. We weren’t the first to use it, and as near as I can tell just about everyone who writes about oil supply shocks eventually uses “crude awakening” in a headline. This won’t be the last time you see it.