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Saturday, December 16, 2017

Saudi oil reserves - abundant or played-out?

There has been a great deal of focus around PEAK oil and it has been questioned whether Saudi Arabia's oil reserves are  big enough to meeting the world's growing oil demand.

According to an article in Petroleum Intelligence Weekly (PIW), both history and theory provide ample evidence of Saudi resources. All of the major estimates of Saudi reserves and resources show that they are still abundant, confirming the Saudi claims that their reserve data is conservative, while the keen desire of foreign firms to enter the Saudi upstream does not suggest played-out reserves.

Other data supports the idea that the Saudi resource is underexploited, continues PIW. The country's well density is a fraction of what the US had when production peaked in 1970 (see table). And the Saudis are still drilling relatively few wells. In the past two years, the number of Saudi rigs has doubled to just 60 compared to 1,500 in the US. Moreover they plan 550 wells in 2006 compared to 45,000 in the US  - and in terms of land area with petroleum potential, Saudi Arabia is one-fifth the size of the US.

These statistics are hardly indicative of a nation that is intensively explored, suggests PIW, nor would an increase to 90 operating rigs require an enormous effort, as some have suggested. In fact, Saudi Aramco's decision to scale back exploration, given the huge backlog of unexploited reserves claimed by the producer, is a rational business decision.

US and Saudi Arabia: Relative Resource Bases

 

US

Saudi Arabia

Discovered Oil (billion bbl)

279

284

Undiscovered Oil (billion bbl)

83

87

Discovered (%)

77.1

76.5

 

 

 

Prospective Area ('000 sq. miles)

2,534

560

Wells Drilled (US 1970)

2,270,000

8,000

Drilling Density (Wells/100 sq. miles)

896

14

 

 

 

Rigs Active (2005)

1,383

37

Wells Drilled (2005)

40,824

373

Production/Well (b/d)

11

5,680

Sources: Oil resources USGS 2000; prospective area Grossling (1976);wells drilled Grossling and API (1997); for Saudi Arabia, Grossling, API and World Oil; some data estimated or interpolated for Saudi Arabia.

Per-well production in Saudi Arabia averages around 5,700 b/d, which is down only marginally from 7,000 b/d in 1963 during the period when data first became available. An analysis of Saudi expansion plans shows that per-barrel full-cycle production costs are about $2.90.

Pessimists argue that the costs of expansion would be impossible to meet, states PIW. But Saudi investment is large because the capacity additions are large. An expansion cost of $11.2 billion may bring about the addition of a gross 4.5 million b/d of capacity (2.5 million b/d net).

Contact: Erik Ranheim