February 09, 2011
Wikileaks: Saudi Arabia Oil Reserves Much Lower
The US government secretly takes seriously former Saudi Aramco exploration chief Sadad al-Husseini's belief that Saudi Arabia has far less oil than its official claimed reserves. Saudi Arabia's oil production might already be past peak.
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 300bn barrels – nearly 40%.
The cable even betrays a thorough understanding of why peak oil exports precedes peak oil production. The Saudis have to use more oil domestically to meet rising demand for electric power (generated by burning oil - which is rare outside of Saudi Arabia) and gasoline.
If Saudi production stays flat then its exports will decline by about 5% per year.
The average local consumption of gas and oil grew 5.9 percent in the past five years, the official news service reported, citing the kingdom’s central bank governor Muhammad al-Jasser. “Domestic consumption of oil and gas is posting continuing growth and at high rates,” the report said. “This requires looking into the reasons behind the increase in oil and gas consumption and working on rationing it.”
Saudi domestic demand is already over 3.4 million and rising. In the face of oil prices the Saudis are engaging in their regular game of pretending there's no need to boost production because demand is weak. Yet China alone is building roads and cars at a rate that assures fast continued oil demand growth. So oil prices will go up until high prices cause another recession.
Also see the New York Times coverage on this story.
The price of oil sure did ramp up circa 1977-81. It just about doubled in a year circa '77. Why no impact on the US economy?
Oops, some of those dates might be a couple years off.
I do not see the relevance of this message in view of the recent shale oil and shale gas boom. The US has just become a net exporter of gas instead of an importer. And also re oil there is en enormous optimism. See: http://www.ctv.ca/generic/generated/static/business/article1898055.html
The International Ebnergy Agency has said that the world has enough gas for the coming 250 years. There is plenty of oil, there are also methanehydrates being explored, there is a tremendous amount of coal, a tremendous amount of uranium and thorium. There is no energyproblem whatsoever. The problem are the people that say we cannot use that energy.
I agree there is plenty of energy just that we are being told we can't use it. We could be making synthetic diesel and jet fuel from coal for ~$0.9 a gallon but Nooo Coal is EVIL. We could be getting almost all our electricity from nuclear but Nooo Nuclear is EVIL. Think of how much more money would stay in country and how much less would be going to despots around the world. Many of these anti-energy people are really Watermelons Green on the outside Red on the inside (For those who don't know the reference this refers to outwardly being an Environmentalist but really being a hidden Communist) and just seek redistribution of our so called ill gotten gains.
Since Saudi money funds global Muslim terrorism, the less we depend on these parasites, the better.
One extra bonus from the Shale Gas boom is that NG works well as a feedstock for the plastic industry. The jobs in that industry that have left the US may come back since NG is so cheap. It will also displace oil use in those industries.
"But for the moment, natural gas has economics on its side. In the United States today, oil is three times as costly as natural gas for a given amount of energy ($12 per million BTUs, compared with $4 per million BTUs), and that is almost double the ratio that has prevailed over the past 20 years. Such a differential is a powerful economic incentive to develop new technology to substitute natural gas for gasoline used in the transportation sector. It could also spur development of new processes in the chemical sector, where natural gas could replace oil in the production of polymers, plastics, and other petrochemicals."
Don't panic. The US has lots of new oil coming:
"A new drilling technique is opening up vast fields of previously out-of-reach oil in the western United States, helping reverse a two-decade decline in domestic production of crude.
Companies are investing billions of dollars to get at oil deposits scattered across North Dakota, Colorado, Texas and California. By 2015, oil executives and analysts say, the new fields could yield as much as 2 million barrels of oil a day — more than the entire Gulf of Mexico produces now.
This new drilling is expected to raise U.S. production by at least 20 percent over the next five years. And within 10 years, it could help reduce oil imports by more than half, advancing a goal that has long eluded policymakers.
Petroleum engineers first used the method in 2007 to unlock oil from a 25,000-square-mile formation under North Dakota and Montana known as the Bakken. Production there rose 50 percent in just the past year, to 458,000 barrels a day, according to Bentek Energy, an energy analysis firm.
It was first thought that the Bakken was unique. Then drillers tapped oil in a shale formation under South Texas called the Eagle Ford. Drilling permits in the region grew 11-fold last year.
Now newer fields are showing promise, including the Niobrara, which stretches under Wyoming, Colorado, Nebraska and Kansas; the Leonard, in New Mexico and Texas; and the Monterey, in California."
"A narrowing gap between coal prices and cleaner natural gas is accomplishing in the short-term what U.S. regulators hope to achieve in the long-term -- forcing more power plants to burn gas instead of coal.
Coal prices hit a 26-month high last month as natural gas struggled to break $5 per million British thermal units, putting the two fuels at cost parity for U.S. Southeast power plants -- an unprecedented incentive to burn gas in the middle of the winter, when frigid weather normally makes coal the clear choice."
It appears the other problem with gas is storage. There isn't enough of it to keep up with demand for cheap plentiful NG:
"Even considering lower Canadian imports and minimal imports of liquefied natural gas, the U.S. will be awash in natural gas by the beginning of the next winter heating season, McBee said.
"We're expecting that gas prices remain suppressed due to physical storage limitations," he said. "The market will already be flooded and we'll still be running out of room to put it in the ground."
This is a very interesting statement especially in the context of the current situation in the Middle East region when the Saudi Arabian leaders have threatened the US not to humiliate the Egyptian president. In a short time we may become fully dependent on the oil reserves of Iraq.
Julie, the green movement WANTS the US to be dependant on Saudia Arabia as they fight hard to keep oil from Canada out of the US by attacking the Keystone XL pipeline.
The people of US will soon regret the green movements attempts to destroy the energy industry when the House of Saud falls and Israel has to nuke a few middle easter countries to survive.
Quoth Theo Richel:
The US has just become a net exporter of gas instead of an importer.
Britain became a net exporter of oil after development of the North Sea. Now it's an importer again. Is that your model?
By 2015, oil executives and analysts say, the new fields could yield as much as 2 million barrels of oil a day — more than the entire Gulf of Mexico produces now.
Wow, 2 mmBBL/d, compared to net US imports of 9.7 mmBBL/d
. That's all of 20% of the problem "solved"! We're saved! </sarcasm>
Meanwhile, the decline in production of existing fields continues apace, and production which depends on widespread fraccing may be shut down by environmental concerns (see the trailer for "Gasland").
Gen IV nuclear is our best bet. Factory-built modular reactors are long overdue.
As far as I am concerned it is all to little to late. Cheap energy is what the global economy is built on. We are already at peak oil! Do you really think that drilling 30,000 ft for oil is cheap while yielding an inferior product? Do you really think that digging up sand and heating it up is gonna get us out of this? Do you think we would be doing these crazy things if the energy was easy to get at? Do you really think that never ending growth that keeps our economy is possible without cheap energy? I for one don't buy it for a second, these half cooked solutions might by us time meanwhile $6 plus a gallon is going to sink this already wounded titanic. None of the above are the future we should have had the foresight over the last twenty years to start looking elsewhere. The universe is full of energy for uck sake the atoms that I am made out of are energy. Why is everyone blind to see this for what it is? Is everyone sitting there listening to the band play?