PEAK OIL WATCH….Over at the Oil Drum, Stuart Staniford is looking at the recent declines in Saudi Arabian oil production (see chart on right), coupled with their massive investment in new drilling rigs, and coming to an uncomfortable conclusion:
Saudi Arabian oil production is now in decline.
The decline rate during the first year is very high (8%), akin to decline rates in other places developed with modern horizontal drilling techniques such as the North Sea.
Declines are rather unlikely to be arrested, and may well accelerate.
Matt Simmons appears to be right in Twilight in the Desert, but the warning did not come until after declines had actually begun.
I’m not quite convinced yet, since global oil demand flattened in 2005 in response to the price runup of the past few years and has declined a bit since then thanks to a warmer than usual winter. The Saudis may simply be responding to this lower demand and using it as an opportunity to build up their spare capacity.
Or maybe not. In any case, it’s well worth keeping an eye on, since as the Saudis go, so goes the world. Read Stuart’s full post for more details. And since I’m highlighting old magazine articles this week, you can find out more about Matt Simmons and his pessimistic outlook on Saudi oil production in “Crude Awakening,” a story for our June 2005 issue by some dude named Kevin Drum.