Saturday, March 5, 2011

Peak Oil: New information that Saudis have overstated their oil reserves

John Vidal's report on US diplomatic cables from Saudi Arabia raises the spectre of premature peak oil: an unexpected deline in global oil production in an oil-dependent world. The US government is among many administrations that routinely reassure the public that supplies of oil can go on growing far into the future. But in private, top diplomats have been telling Washington that they hold deep concerns about supplies from the world's number one supplier. This is an issue that has far-reaching consequences for an oil-importing nation like the UK, and for the global economy.

The latest batch of leaked cables report the views of Sadad al-Husseini, a former board member of the national oil company Saudi Aramco and a geologist who headed exploration and production for the company from 1986 to 2004. He and the US consul-general met in November 2007, when Saudi Aramco were halfway through a $50bn investment programme aiming to lift Saudi maximum daily production capacity from 9.5 million barrels a day to 12.5m by 2009.

Al-Husseini told the Americans he believed that the 12.5m barrel a day target would prove impossible. The kingdom might get to 12m barrels a day given 10 years, but before then – perhaps as early as 2012 – global production would have hit the highest level it ever will, and given that demand won't be abating by then given levels of economic growth in China and India, the oil price will soar. He told the Americans plainly that the Saudis will not be able to ride to the rescue: the Saudi oil industry was overstating its recoverable reserves so as to spur foreign investment, he alleged, at the same time as it was badly underestimating the time needed for bringing new oil on tap. (read more)