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BUSINESS: Can Saudi Arabia meet future oil demands?

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posted on Feb, 24 2004 @ 11:12 AM
Saudi Arabia’s oil fields are tiring and it is getting more difficult and expensive to keep production at current levels. Most of the world’s excess production is from Saudi and as demand increases, they are expected to produce more and more. Can they keep up?

The New York Times
Saudi Arabia, the leading exporter for three decades, is not running out of oil. Industry officials are finding, however, that it is becoming more difficult or expensive to extract it. Today, the country produces about eight million barrels a day, roughly one-tenth of the world's needs. It is the top foreign supplier to the United States, the world's leading energy consumer.

Matthew Simmons, the chief executive of a Houston-based investment-banking firm called Simmons & Co. International, says “The prevailing view has been that the Saudi oil fields are great big caverns of oil, and that recovery is so easy they will basically last forever.” Simmons believes that this vision of Saudi Arabia is wrong.

To maintain production at current levels, Saudi Arabia has been using a method called “water injection” to prop up the pressure of the wells. Water injection is based on the fact that salt water is heavier than oil. Basically, they pump seawater into the oil wells to cause more oil to rise to the surface. Saudi Arabia has been using this method since 1970 (which worried the CIA and started an investigation), and currently they are injecting about 7 million barrels a day of seawater through three big pipelines. "Water injection gives the appearance of eternal youth," Simmons says. "That's why the Saudi fields look so robust." He argues that injection can damage the fields and cause unpredictable flows of water that prevents full recovery of the field.

Saudi Arabia has the world’s only “surge” capacity and can increase their output from the current 8.5 million barrels a day (mbd), to about 10 mbd. The use of this extra capacity is what has been keeping the oil prices stable when problems occurred in Venezuela, Nigeria and Iraq. The world has taken for granted that cheap Saudi oil will always be there to buffer the market, But if Simmons is right, there may not be quite so much Saudi oil, at quite so cheap a cost, as the world imagined.

Additional Sources:
Simmons & Company International
Beginner's Guide to Oil Depletion
Hubbert Peak of Oil

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[Edited on 24-2-2004 by dbates]

[Edited on 24-2-2004 by dbates]

[Edited on 24-2-2004 by Kano]


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