· PDF fileDr Mamdouh G. Salameh ... Table 1 Saudi Oil Reserves & Production, ... • After Saudi Aramco tells the truth, the other OPEC members should do

Saudi Proven Crude OilReserves: The Myth & the Reality Revisited

The 10th IAEE European Conference“Energy, Policies & Technologies

For Sustainable Economies”7-10 September 2009, Hofburg Congress Center

Vienna, Austria----------------------------------------------------------------------------------------------------------------------------------------------

ByDr Mamdouh G. Salameh

DirectorInternational Oil Economist / World Bank Consultant

UNIDO Technical Expert

Oil Market Consultancy ServiceSpring Croft, Sturt Avenue

HaslemereSurrey GU27 3SJUnited Kingdom

Tel: (01428) - 644137Fax: (01428) – 656262

e-mail: [email protected]

mailto:[email protected]

Dr Mamdouh G. SalamehOil Market Consultancy Service – UK

Contents

• Introduction• Saudi Proven Oil Reserves• Ever Increasing Oil Initially in Place (OIIP)• Recovery Factor (RF) & Remaining Recoverable

Reserves• Failing Propaganda• Conclusions


Introduction

• In a paper entitled: ”Saudi Arabia’s Proven Crude Oil Reserves & Production Capacity: The Myth & the Reality” I gave at the 28th Annual IAEE International Conference on June 3-6,2005 in Taipei and also in my latest book entitled:” Over a Barrel” published in the UK on June 2004, I questioned the size of Saudi Arabia’s proven oil reserves. My research then showed that Saudi reserves are no more than 181 billion barrels (bb) of oil and not the 264 bb claimed by the Saudis andparroted by the BP Statistical Review of World Energy and the Oil & Gas Journal (OGJ) year after year.

• In this new paper, I revisit the topic of Saudi reserves in view of the outlandish claims that the Saudis have been making about their oil reserves, their oil recovery factor (RF) and the oil initially in place (OIIP) they claim to have.

• This paper will argue that far from having 264 bb of remaining oil reserves, Saudi reserves actually range from 90 bb -125 bb. The paper will prove that Saudi Arabia’s RF could not be 52% when the average global RF ranges from 30%-35%. It will contend that Saudi OIIP should be realistically estimated at 580 bb and not 700 bb as the Saudis claim.


Saudi Proven Oil Reserves

• Saudi Arabia’s proven reserves stood at 264.10 bb at the beginning 2009 according to the 2009 BP Statistical Review of World Energy.

• Saudi reserves had remained remarkably stable between 1980 and 1987 before suddenly and dramatically jumping from 169.59 bb in 1987 to 254.99 bb in 1988 and then to 264.10 bb in 2009 (see Table 1).


Table 1Saudi Oil Reserves & Production, 1982-2009

Year Proven Production Net ReservesReserves Daily Average Annual Cumulative Additions

(bb) (mbd) (bb) (bb) (bb)----------------------------------------------------------------------------------------------------------------------------------------1980 164.16 9.90 3.61 42.31 - 2.241987 169.59 3.98 1.45 55.76 0.591988 254.99 5.09 1 .86 57.62 85.40 1989 260.05 5.06 1.85 59.47 5.061992 261.20 8.33 3.04 67.82 0.261999 262.78 7.56 2.76 88.29 1.242000 261.70 8.32 3.04 91.33 - 1.082003 262.70 9.82 3.58 101.01 0.902004 262.70 10.58 3.86 104.87 0.00 2005 264.20 11.04 4.03 108.90 1.50 2006 264.30 10.86 3.96 112.86 0.102007 264.20 10.41 3.80 116.66 - 0.102008 264.20 10.85 3.96 120.62 0.002009 264.10 8.01 2.92 123.54 -0.10----------------------------------------------------------------------------------------------------------------------------------------Sources: BP Statistical Review of World Energy, 1983-2009 / OPEC Annual Statistical Bulletins,

1983-2009 / Platts, www.platts.com / Middle East Economic Survey (MEES), Vol. XLVIIINo 3./ Author’s estimates.

http://www.platts.com


Saudi Oil Reserves(Continued)

-------------------------------------------------------------------------------• During the period 1980-87, net Saudi reserve additions amounted to

a mere 3.19 bb. Between 1989-2009, the additions have been far more modest amounting to 9.11bb. This makes the addition of 85.40 bb between 1987 and 1988 suspicious to say the least.

• The Saudis say that the constant remaining recoverable reserves of 264 bb since 1993 have been due to increased discoveries and improved technology in exploiting existing fields. This is unbelievable and has probably been created by artificially increasing their OIIP every year by an amount to exactly offset production. Oil discoveries since 1993 have been minimal, at most about 10 bb addition to OIIP.

• Independent experts and analysts have disputed the Saudi reserveclaims. Their estimates of Saudi reserves range from 90 bb-148 bb (see Table 2).


Table 2Various Estimates of Saudi Proven Oil Reserve

in 2009 (bb)--------------------------------------------------------------------------------------------------------------------------------------------------------------

Oil & Gas BP Statistical Colin Samsan MamdouhJournal Review Campbell Bakhtiari Salameh

--------------------------------------------------------------------------------------------------------------------------------------------------------------

264.10* 264.10* 148.00* 109 -129* 90 -125*--------------------------------------------------------------------------------------------------------------------------------------------------------------

Sources: BP Statistical Review of World Energy, 2009 / Oil & GasJournal (O&J), 2009 / ASPO USA Newsletter, February 20, 2006 / Author’s Estimates.

* At the end of 2008.


Saudi Oil in Place (OIIP)• Saudi Arabia stated that its OIIP has been growing steadily since

1982. There is considerable doubt about the validity of this increase given the lack of new oil discoveries and the unusual nature of its steady continuous increase. The Saudis claimed that their OIIP was 700 bb at year end 2003. They are projecting that their OIIP will grow to 900 bb by 2025. Figure 1 below shows Saudi OIIP growth between 1982 and 2003.

• Only one significant discovery has been made since 1975, the Hawtah Trend, a collection of about six fields during 1989-91 with about 2 bb addition to reserves and 6 bb to OIIP.

• However, from 1982 to 2004 there was a total change of 110 bb inOIIP which leaves a very large unaccounted 104 bb. A study by the Association for the Study of Peak Oil (ASPO) shows an increase in discovered reserves of about 5 bb from 1982 to 2004, representing about 15 bb addition to OIIP, which still leaves an unaccounted 95 bb.


Figure 1


Saudi OIIP(Continued)

----------------------------------------------------------------------------

Given the lack of significant new discoveries, the 2005 ASPO study estimates that in 2003 the OIIP was a more realistic 580 bb instead of Saudi Aramco’s claimed 700 bb (see Figure 2).


Figure 2


Discovered & Undiscovered OIIP in Saudi Arabia by 2025

-----------------------------------------------------------• Saudi Aramco is projecting that new oil discoveries

between 2004 and 2025 would add 200 bb to their OIIP raising them from 700 bb now to 900 bb by 2025 (see Figure 3). This is partly based upon their reliance on US Geological Survey’s World Assessment stating that there is an estimated 87 bb undiscovered recoverable oil in Saudi Arabia.

• The forecast of 200 bb yet-to-find could provide a weak basis to a continued increase in the OIIP. The future estimated OIIP increase of 200 bb suggests an average discovery rate of about 10 bb (OIIP)/year from 2004. It's now 2009 and there have been no discoveries announced which could comprise 10 bb/year.


Figure 3


Recovery Factors and Remaining Recoverable Reserves

----------------------------------------------------------• Saudi Arabia may have some high recovery factor fields such as the

Shaybah field, but an average RF of 52% could be easily discounted.

• ASPO estimates the average global RF at about 30%-35%. This is based on data from the IHS Energy database on 9,000 fields worldwide containing 1,400 bb of reserves. The RF bands are shown in figure 4 below.

• According to the International Exploration company, Schlumberger, the average global RF is about 35%. However, it is recognized that recovery factors for sandstone reservoirs are higher than for carbonates”. Given that the majority of Saudi Arabia’s key reservoirs are carbonate, it would seem appropriate that 35% is assumed as a reasonable upper limit for the average RF of all Saudi fields based on Schlumberger’s statements.


Figure 4


Recovery Factors and Remaining Recoverable Reserves (Continued)

------------------------------------------------------------------• Part of Dr Mamdouh Salameh’s expert comment to the Oil Depletion &

Analysis Centre (ODAC) made on May 7, 2007 discussed Saudi Arabia’s recovery factors.

• “And despite the great technological strides by the oil industry, the average global oil recovery rate has been stuck at 32% of the oil in place since the early 1990s. However, rates of 50% and even 55% have been achieved in the North Sea and also in the most recently-developed, state-of-the-art “Shaybah oilfield” in Saudi Arabia respectively. But I hasten to add that 90% of Saudi oil production comes from four giant oilfields (Ghawar, Safaniya, Hanifa and Khafji), all of which are more than 50 years old and are being kept flowing by a huge injection of water. Oil recovery rate from these four oilfields ranges between 25% and 30%.”

• Based on Dr Salameh’s statement, 30% is assumed as a reasonable lower limit for the average recovery factor of all Saudi Arabian fields (see Figure 5).


Figure 5


Recovery Factors & Remaining Reserves-----------------------------------------------------------------------------------------------

• Applying the previously assumed lower and upper global RF limits of 30% to 35% to the more realistic estimate of 580 bb Saudi OIIP gives a range of 174 bb to 203 bb of recoverable reserves. Given that Aramco has cumulative production of 120 bb to the year end 2008, this gives a range of remaining recoverable crude oil reserves from 54 bb to 83 bb not Aramco’s propaganda claim of 264 bb. Even if we accept the Saudi OIIP figure of 700 bb, we come to estimated reserves of 90 bb to125 bb.

• What about the effects of Aramco’s improved technology in exploiting existing fields? Surely multilateral horizontal wells and smart wells should increase RF even just by a couple of percent since 1998. However, Fig 5 shows a constant 52% RF starting in 1988. This is odd. Perhaps the real answer is that Aramco was unable to increase RFbecause 52% has been unrealistically high since 1988.

• Figure 6 from the Norwegian oil company, Statoil, shows possibleincreases in RF due to enhanced oil recovery (EOR) methods. Statoil calculated how the average RF goes up from 29% to 38% by applying EOR methods. The Statoil data provides enough support to increase Saudi Arabia’s RF upper limit of 35% to 37%.


Figure 6


Failing Propaganda• Overall, Saudi Aramco’s propaganda methods have been successful.

Many governments, corporations and individuals accept Aramco’s statements and also accept Aramco’s repeated statement of 264 billion barrels remaining recoverable crude oil reserves.

• Ali Naimi, the Saudi oil minister, made further unsubstantiated and false statements raising Aramco’s propaganda to a new peak. He said that Saudi Arabia planned to add another 200 bb of oil to its proven reserves, which is equivalent to an absurd increase of over 75%, from 260 bb to 460 bb. No sources were given for this planned reserveincrease of 200 bb.

• After Saudi Aramco tells the truth, the other OPEC members should do the same as it is highly likely that they have also artificially inflated their remaining recoverable crude oil reserves. The two charts in figure 7 show the years from 1980 to 1990 shaded in grey. The chart on the right shows that OPEC discovered most of its oil prior to 1980, as shown by the green area, and only about 20 to 30 bb from 1980 to 1990. However, over the same decade, the chart on the left shows that OPEC reserves increased by over 300 bb, which is ten times greater than these discoveries.


Figure 7


Conclusions-----------------------------------------------------------• Saudi Arabia claims that its remaining proven oil reserves amount to

264 bb based on an RF of 52% and an OIIP of 700 bb. However, farfrom having 264 bb of recoverable reserves, Saudi reserves actually range from 90 bb-125 bb while Saudi OIIP should be realistically estimated at 580 bb and not 700 bb as the Saudis claim.

• Moreover, Saudi Arabia’s RF could not be 52% when the average global RF ranges from 30%-35% according to the most authoritative sources in the field. Even with enhanced oil recovery systems, the upper limit of Saudi RF could not exceed 37%.

• It is high time for the Saudis to come clean about their oil reserves to enable the world to take precautions against an impending global oil disaster before it is too late.

Thank You

Dr Mamdouh G. SalamehDirector

International Oil Economist /World Bank ConsultantUNIDO Technical Expert

Oil Market Consultancy ServiceSpring Croft, Sturt Avenue

HaslemereSurrey GU27 3SJUnited Kingdom

Tel: (01428) - 644137Fax: (01428) – 656262

e-mail: [email protected]

mailto:[email protected]

· PDF fileDr Mamdouh G. Salameh ... Table 1 Saudi Oil Reserves & Production, ... • After Saudi Aramco tells the truth, the other OPEC members should do

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