"Saudi oil reserves may be overstated by up to 40%", US cables reveal  

Posted by Big Gav in , ,

The latest Wikileaks energy related revelation (US embassy cables: Saudi oil company oversold ability to increase production, embassy told) has prompted some slightly exaggerated reports about the views of ex-Aramco exploration head Sadad al-Husseini, most of which should have been familiar to peak oil observers for some time - Saudi oil reserves may be overstated by up to 40%, US cables reveal.

The US fears that Saudi Arabia, the world's largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show.

The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom's crude oil reserves may have been overstated by as much as 300 billion barrels - nearly 40 per cent.

The price of oil has soared in recent weeks to more than $US100 a barrel due to global demand and tensions in the Middle East. Many analysts expect the Saudis and others in the Organisation of Petroleum Exporting Countries would pump more oil if rising prices threatened to choke off demand.

However, Sadad al-Husseini, a geologist and former head of exploration at the Saudi oil monopoly Aramco, told the US consul-general in Riyadh in November 2007 that Aramco's 12.5 million barrel-a-day capacity, needed to keep a lid on prices, could not be reached.

According to the cables, which date between 2007 and 2009, Mr Husseini said Saudi Arabia might reach an output of 12 million barrels a day in 10 years but before then, possibly as early as 2012, global oil production would have hit its highest point. This crunch point is known as ''peak oil''.

Mr Husseini said at that point Aramco would not be able to stop the rise of global oil prices because the Saudi energy industry had overstated its recoverable reserves to spur foreign investment. He argued that Aramco had badly underestimated the time needed to bring new oil on tap.

One cable said: ''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 and energy optimists would like to portray.'' It went on: ''Abdallah al-Saif, current Aramco senior vice-president for exploration, reported that Aramco has 716 billion barrels of total reserves, of which 51 per cent are recoverable, and that in 20 years Aramco will have 900 billion barrels.

''Al-Husseini disagrees with this analysis, believing Aramco's reserves are overstated by as much as 300 billion barrels. In his view once 50 per cent of original proven reserves has been reached … a steady output in decline will ensue and no amount of effort will be able to stop it. He believes that what will result is a plateau in total output that will last approximately 15 years followed by decreasing output.''

Joules Burns at Satellite O'er The Desert thinks the fuss is largely unfounded - Much Ado About Wikileaks.
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. ...

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. ...

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.

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