Bloomberg reports that Matt Simmons may have been right after all - according to data released by Saudi Aramco the Ghawar field appears to have substantial production declines in recent years - The Biggest Saudi Oil Field Is Fading Faster Than Anyone Guessed.

When Saudi Aramco on Monday published its first ever profit figures since its nationalization nearly 40 years ago, it also lifted the veil of secrecy around its mega oil fields. The company’s bond prospectus revealed that Ghawar is able to pump a maximum of 3.8 million barrels a day -- well below the more than 5 million that had become conventional wisdom in the market.

The Energy Information Administration, a U.S. government body that provides statistical information and often is used as a benchmark by the oil market, listed Ghawar’s production capacity at 5.8 million barrels a day in 2017. Aramco, in a presentation in Washington in 2004 when it tried to debunk the “peak oil” supply theories of the late U.S. oil banker Matt Simmons, also said the field was pumping more than 5 million barrels a day, and had been doing so since at least the previous decade.

In his book “Twilight in the Desert,” Simmons argued that Saudi Arabia would struggle to boost production due to the imminent depletion of Ghawar, among other factors. “Field-by-field production reports disappeared behind a wall of secrecy over two decades ago,” he wrote in his book in reference to Aramco’s nationalization.

The new details about Ghawar prove one of Simmons’s points but he missed other changes in technology that allowed Saudi Arabia -- and, more importantly, U.S. shale producers -- to boost output significantly, with global oil production yet to peak.

The prospectus offered no information about why Ghawar can produce today a quarter less than 15 years ago -- a significant reduction for any oil field. The report also didn’t say whether capacity would continue to decline at a similar rate in the future.

JoulesBurn has another of his "satellite o'er the desert" posts at The Oil Drum, this one taking a look at Ghawar - Five Easy Leases: Ghawar's Discovery Wells. These posts seem to get plenty of attention in the mainstream financial press - in this case, the FT picked it up.

A few months back, Saudi Aramco commissioned a story about the first wells in the Ghawar oil field in Saudi Arabia, the world's largest. With the title "Ghawar's Magnificent Five", it was published first on the Saudi Aramco website but has subsequently appeared elsewhere. Saudi Aramco later published the same article along with the companion piece "Still Going Strong" (subtitled "57-year-old super-giant Ghawar oil field productive as ever") in the Fall 2008 issue of SA Dimensions magazine, also available on their website1. "Magnificent Five" is the newly minted moniker2 for the group of discovery wells, one for each of the five major production areas of Ghawar: 'Ain Dar, Shedgum, Uthmaniyah, Hawiyah, and Haradh. These articles are remarkable in that Saudi Aramco rarely reveals production details for specific wells in Ghawar, but something in this myth-building exercise is amiss -- both in the consistency of the numbers provided and their use as indicators for the state of the wells and the overall field. In this article, I will examine the data provided for these wells and cross check with other available information including satellite imagery available within Google Earth. There is definitely more to the story, and this uncut version is actually more interesting than what Saudi Aramco has released to theaters.

First Things First
The first, (or discovery) well is certainly critical to the success of an oil field in that, well, there has to be one. Its story can also be one of drama, as is the case for the first (successful) well in Saudi Arabia, Damman #7 (aptly named "Prosperity Well"), located a short walk from Saudi Aramco's headquarters in Dhahran. Here are some excerpts from an account of the drilling:

By May, 1937, everybody around Dammam admitted that the well was in bad shape and was going to be slow. There was a spurt in July that took them down to 2,400 feet, then delays again. On October 6 they had reached 3,300 feet. Tests then, as well as on the 11th and 13th at slighly greater depths, produced the same report: "No oil, no water." At 3,600 feet, on October 16, they got their first showing of oil—about two gallons, in a flow of thin gas-cut mud. On the last day of 1937, with the hole drilled to 4,535 feet, the well blew out when the control equipment failed. After contact was reestablished, measurements showed the well making 30 million cubic feet of gas a day against 1,600 pounds back pressure. Because of the high pressure they let it blow for seven hours while mixing mud to kill it with, and then killed it without difficulty. There was no oil in the gas it blew. ... While he was selling them, Ohliger's crew was drilling past the "fish" that it had been unable to pick up, and on March 4, 1938, San Francisco got the word that blew it back again into the euphoria of the summer of 1936. Tested on that day, No.7 flowed at the rate of 1,585 barrels a day. Tested three days later, it flowed at the rate of 3,690 barrels. The drilling party stuck the tester in the hole and couldn't get it out, and the well, flowing as nearly open as possible through the stuck pipe, went on producing at a rate that made them cheer.

Pretty gripping stuff, and probably worth the well being immortalized with a nickname and by mounting the original wellhead at Saudi Aramco headquarters. Anyway, back to the "Magnificant Five".

Given its size, Ghawar warrants five discovery wells (Fazran's well didn't make the team). Disappointingly, the tale related for each of these discoveries is not as gripping as that for Damman #7. Also, these are likely not the most productive wells in each of the areas, and lauding the achievement of any particular well in Ghawar seems somewhat akin to giving the straw credit for the margarita. So why tell their story? As shown in the excerpts below, it seems to be a case of wanting to cement the legacy while reassuring the world that the "Glory Days" are not gone.

Since the discovery of the Ghawar field in 1948, Saudi Aramco has implemented best-in-class reservoir management practices and leading technologies that have evolved over the years. As a result, the Magnificent Five have demonstrated extraordinary performance with extended lifecycles and outstanding oil recovery.

and in conclusion:

Altogether, the Magnificent Five have produced nearly 350 million barrels of oil. There’s no telling how much more they will produce — as the end of their story is not yet in sight.

Unless you go looking for it. ...

Neil King at the WSJ has an article on the spurt of drilling activity at Ghawar and the conflicting analyses by Bernstein research and TOD blogger JoulesBurn - Tracking Saudi Oil From Space (for the record "hobbyist" JoulesBurn is actually a scientist - assuming pseudoynmous bloggers are just cranks sitting there typing away in their underwear with nothing better to do with their spare time isn't always an accurate caricature).

See this post for more background, and the blog Satellite O'er The Desert.

At a time of high anxiety over soaring fuel prices and scarce supplies, oil analysts are resorting to satellite imagery to crack one of the industry's biggest unknowns -- whether Saudi Arabia's massive Ghawar field is slipping into depleted old age.

Saudi Arabia has long contended that its famed Ghawar field, responsible for around 7% of global supply, remains in fine shape and will continue to churn out around five million barrels a day for years.

But Saudi Arabia doesn't publish data to back that up. Skeptical analysts in the West insist the field is in decline, an event they say presages a peak in world oil production.

Analysts at Sanford C. Bernstein Ltd., a New York-based investment research firm, just spent months trying to resolve the debate. Their tools? Cameras fixed to satellites that hover miles above the Saudi desert.

Combing through dozens of high-resolution satellite images of Ghawar going back to 2001, the Bernstein team has concluded in a study sent to clients at the end of April that only part of the vast field "is suffering signs of old age." On the whole, Bernstein says, the field "is being properly managed" and is experiencing only "mild production-decline rates at worst."

Critics of the study, including some who have crunched their own overhead imagery, say the Bernstein study is insufficient and the debate over Ghawar's health is far from over.

"This is junk science," says Houston investment banker Matthew Simmons, who insists that only detailed, on-the-ground records can speak to the field's real condition. Mr. Simmons's 2005 book, "Twilight in the Desert," cited technical papers to argue that Ghawar and Saudi Arabia's other giant fields were showing signs of increasing stress and would soon slip into decline. Mr. Simmons is a well-known proponent of the theory that world-wide oil production may already have hit its all-time peak.

This latest tiff over Ghawar comes as alarm grows on Wall Street and in Washington over whether the world's big crude producers can keep pace with the growing demand for oil in Asia and the Middle East. ...

"The problem is that silence leads to speculation," says Neil McMahon, who led the Bernstein study as the firm's senior analyst. The motivation, he says, "was to confront the whole peak-oil thing with some real data."

Bernstein has used satellites to probe other mysteries. It dug through overhead images of urbanization patterns in China last year to predict that demand for steel and other metals would hold strong before ebbing slightly around 2010. In 2005, it studied China's ports for evidence -- which it didn't find -- of whether the country was dramatically expanding its fuel-tank farms to hoard oil.

The Saudi study, Mr. McMahon says, was a lot more daunting. Theories of Ghawar's travails were fueled recently by reports that the number of drilling rigs in the kingdom tripled between 2004 and 2007. The spike led to speculation on peak-oil blogs that Aramco was conducting a wave of new drilling not just to add fresh capacity, but to stem rapid output declines in Ghawar and other fields.

Using images of Ghawar from 2004, Bernstein pinpointed more than 2,000 drilling or production sites, many of them old and abandoned. Satellite shots from 2007 found around 10% more drilling sites, mainly concentrated in areas of the field where Aramco was engaged in multibillion-dollar projects to bring on fresh production.

The satellite work also used overhead radar technology to determine whether the field showed any signs of surface collapse -- called "subsidence" in the industry -- that could indicate heavy depletion rates underground. Some of the world's most heavily produced fields in the North Sea and in Venezuela have shown sharp subsidence rates.

Instead, Mr. McMahon says, the radar found the northernmost part of the field, known as Shedgum, "was actually slightly uplifted." Bernstein attributed this rise to heavy water injection and what it surmised was Aramco's use of enhanced oil-recovery techniques, which boosted underground pressure enough to lift the ground level. Companies often turn to such elaborate extraction methods to nurse along fields in sharp decline.

Bernstein concluded that Shedgum, one of the oldest sections of Ghawar, was the only area facing serious challenges.

Aramco declined to comment. The company's former head of reservoir management, Nansen Saleri, said he agreed with the overall conclusion that Ghawar remains largely healthy. But Mr. Saleri, who left Aramco last fall, disputed that Aramco was doing any enhanced recovery work at Ghawar. He said he was also skeptical that Bernstein "can really tell what is going on at Ghawar from overhead imagery."

One skeptical sleuth doing similar work is a hobbyist in Seattle who keeps a Web site called Satellite O'er The Desert and works under the pseudonym of Joules Burn. Using detailed images from Google Earth, the Web site has chronicled what it calls a "remarkable" uptick in drilling across large swaths of Ghawar.

The Web site's assessment so far is that Aramco is engaged in a massive redrilling of Ghawaras part of a "constant struggle to maintain the field's current production level."