Could Saudi Arabia, home to the world's largest oil reserves, actually be running out? It seems preposterous. Even the
Association for the Study of Peak Oil and Gas predicts that Saudi Arabia won't hit peak until
2012.
But Matthew Simmons, oil insider, Republican, and energy advisor to both Bill Clinton
and George W. Bush, is warning that things are not what they seem in the Kingdom. In recent speeches and interviews, he's laid out the argument for a Saudi Arabia already in
decline. He's also written a book, Twilight in the Desert: The
Coming Saudi Oil Shock and the World Economy, which is due at the end of the month. It was inspired by an
accidental trip to Saudi Arabia in 2003. What he saw there "didn't pass the smell test."
According to Simmons, Saudi Arabia simply did not look like a country flush with plentiful cheap oil reserves. He observed the sort of infrastructure
that is generally used only on aging oil fields. He was also surprised at the resources the Saudis were putting toward
rehabilitating old wells. Why put that kind of money into old wells, when they supposedly had so many new ones?
Upon returning to the States, Simmons began investigating. And the conclusion he came to is startling: Saudi Arabia's oil
abundance is a myth.
Simmons believes the Saudis have been masking their true capacity by drawing on stored reserves, not by pumping more oil. And he
warns that the high-tech methods the Saudis are using - water and gas injection, fourth-generation superstraws - will massively accelerate
depletion. He argues that contrary to what many believe, these high-tech methods speed the extraction of the oil, but
do not increase the total yield. Indeed, they may actually decrease the total amount extracted.
Perhaps more alarming, when depletion begins, the production falloff is very steep after a field has been exploited using those
high-tech methods. Simmons points to Yibal as an example:
http://healthandenergy.com/images/Yibaldecline.pdf
Those who are predicting we won't hit the peak until 2008 or 2015 or 2020 are assuming Saudi Arabia is not yet at peak, and will decline
slowly, as most American oil wells - exploited with old technology - did.
But if Simmons and other analysts are
correct, then Ghawar, the Saudis' main oilfield, may not only match Yibal's 12% yearly decline, it may exceed it. New projects cannot make up for that kind of depletion.
Simmons is demanding "transparency." He wants the oil companies and the OPEC countries to come clean about their real reserves,
arguing that the fate of the world may depend on it. That is not likely to happen, of course, and I'm not sure how much good it
would do, even if achieved. One thing that strikes me is how wrong the conventional wisdom of experts and analysts has often been when it comes to fossil fuels. As recently as 2000, the experts were still predicting that the U.S. had hundreds of years' worth of natural gas.
They claimed we were the "Saudi Arabia of natural gas"...only to have shortages push prices up 300% almost overnight. They've stayed
high, and the only reason they aren't even higher is that industrial users were forced out of business and overseas. Millions of
dollars worth of natural gas-fired power plants have been cancelled, due to lack of fuel, and the only reason we haven't had rolling
blackouts in the northeast is the cool summers and mild winters we've enjoyed of late. It wasn't a conspiracy; the energy companies
honestly didn't see it coming. They were completely blindsided. Just as no one except M. King Hubbert saw the U.S. oil peak coming.