The 10th IAEE European Conference
“Energy, Policies & Technologies for
Sustainable Economies”
7-10 September 2009
Hofburg Congress Centre Vienna, Austria
---------------------------------------------------------------Saudi Proven Crude Oil Reserves: The Myth
and the Reality Revisited
---------------------------------------------------------------An Abstract
By
Dr Mamdouh G. Salameh
Director
International Oil Economist
World Bank Consultant
UNIDO Technical Expert
Oil Market Consultancy Service
Spring Croft
Sturt Avenue
Haslemere
Surrey GU27 3SJ
United Kingdom
Tel: (01428) – 644137
Fax: (01428) – 656262
e-mail: mgsalameh@btconnect.com
Saudi Proven Crude Oil Reserves: The Myth
and the Reality Revisited
An Abstrat
By
Dr Mamdouh G. Salameh*
Overview
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 claimed proven oil reserves and production capacity. My research then
showed that Saudi proven reserves are no more than 181 billion barrels (bb) of
oil and not the 264 bb claimed by the Saudis and parroted 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 new
outlandish claims that the Saudis have been making about their proven oil
reserves, their oil recovery factor (RF) and the amount of oil they initially have in
place (OIIP).
Saudi Arabia has effectively used propaganda methods for at least the last fifteen
years to convince many governments, corporations and individuals to believe
that their remaining proven oil reserves amount to 264 bb of oil, that they have an
oil recovery factor of 52% and that their OIIP was 700 bb.
Saudi Aramco claimed that they still have 264 bb remaining recoverable oil
reserves as of January 2008. This is unbelievable and has probably been
created by artificially increasing their OIIP every year by an amount to exactly
offset production. Saudi Aramco claims that the constant remaining recoverable
reserves since 1993 has been due to increased discoveries and improved
technology. However, oil discoveries since 1993 have been minimal, at most
adding about 10 bb to OIIP.
Only one significant discovery has been made since 1975, the Hawtah Trend, a
collection of about six fields in 1989-91 with about 2 bb reserves and 6 bb
addition to OIIP. However, between 1982 and 2004 there was a total addition of
110 bb to Saudi OIIP, which leaves a very large unaccounted 104 bb. A 2005
Association of Peak Oil (ASPO) presentation showed 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.
Saudi Aramco has kept remaining recoverable crude oil reserves constant simply
by artificially increasing the OIIP each year since 1982, accompanied by an
unrealistically high average recovery factor of 52% since 1988.
Aramco may have some high recovery factor fields such as Abqaiq and
Shaybah, but an average recovery factor of 52% could be easily discounted,
given 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%. Moreover, the trend of the recovery factor for Saudi Aramco indicates that
there has been no effect on the recovery factor by recent technological advances
in producing wells.
Recovery factors vary according to each field and each part of a field. A recovery
factor is defined as the ratio of recoverable oil to the volume of oil initially in place
(OIIP). According to ASPO, the average global recovery factor is 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 International Exploration company, Schlumberger, discusses recovery
factors in their brochure called Carbonate Reservoirs – Meeting unique
challenges to maximize recovery. This brochure states that “the average
recovery factor is about 35%. However, it is recognized that recovery factors are
higher for sandstone reservoirs 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 recovery factor of all
fields based on Schlumberger’s statements.
An answer can now be offered to the question: What is Aramco’s purpose of
showing a continuous and gradual increase in OIIP without supporting evidence?
All oil companies, including state-owned companies such as Saudi Aramco, are
under great pressure by their owners to demonstrate replacement of reserves
depleted by production. Aramco wanted to continue replacing annual production
with new reserves, while assuming a constant RF. In the absence of sufficient
real oil discoveries to increase OIIP enough to create new reserves, Aramco
decided to artificially increase the OIIP each year to offset annual production.
Aramco’s behaviour is evidenced by an unusually high correlation coefficient of
0.99 between cumulative production and the OIIP from 1982 to 2007.
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
116 bb to the year end 2007, this gives a range of remaining recoverable crude
oil reserves from 58 bb to 87 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
94 bb-129 bb.
Methods
The author will use his own research and collate it with research from other
credible sources such as the International exploration company, Schlumberger,
and the Association of Peak Oil (ASPO) to present a well-balanced analysis of
the Saudi claims and come up with more realistic estimates.
Results
This paper will discuss Saudi claims that their remaining proven oil reserves
amount to 264 bb of oil, that they have an oil recovery factor of 52% and that the
oil initially in place (OIIP) they have amount to 700 bb. It will argue that far from
having 264 bb of recoverable remaining reserves, Saudi reserves are actually
less than 100 bb. The paper will prove that Saudi Arabia’s oil recovery factor
could not be 52% when the average global recovery factor ranges from 30%35% according to the most authoritative sources in the field. It will contend that
Saudi OIIP should be realistically estimated at 580 bb and not 700 bb as the
Saudis claim.
Conclusions
The paper will conclude that Saudi Arabia has effectively used propaganda
methods for at least the last fifteen years to convince many governments,
corporations and individuals to accept their repeated claims about proven
reserves, oil recovery factor and OIIP and also that they are the world’s leading
oil producer. This paper will also conclude that 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.
----------------------------------------------------------------------------------------------------------*Dr Mamdouh G. Salameh is an international oil economist, a consultant to the
World Bank in Washington DC on oil and energy and a technical expert of the
United Nations Industrial Development Organization (UNIDO) in Vienna. Dr
Salameh is Director of the Oil Market Consultancy Service in the UK and a
member of both the International Institute for Strategic Studies (IISS) in London
and the Royal Institute of International Affairs (RIIA). He is also a member of the
Energy Institute in London and an advisor of the Oil Depletion Analysis Centre
(ODAC) in the UK.
A Summarized Curriculum Vitae
Dr Mamdouh G. Salameh is an international oil expert, a consultant for the World
Bank in Washington D.C. on energy and also a technical expert with the United
Nations Industrial Development Organization (UNIDO) in Vienna. He specializes
in the economics and geopolitics of oil and energy.
Dr Salameh has considerable experience and expertise spanning 30 years in the
oil and chemical industries. He has held several senior management posts in the
Middle East, Europe and the UK. He is currently Director of the Oil Market
Consultancy Service in the UK.
Dr Salameh has presented papers to numerous international energy conferences
on the economics and geopolitics of oil and energy and has been frequently
invited to lecture on these topics at universities around the world. He has written
three books on oil: “Is a Third Oil Crisis Inevitable?” (published in London in
April 1990), “ Jordan’s Energy Prospects & Needs to the Year 2010: The
Economic Viability of Extracting Oil from Shale” (published in London in
October 1998) and “ Over a Barrel” (Published in the UK in June 2004) as well
as numerous research papers published in international Oil and Energy Journals.
Dr Salameh has undertaken research assignments for the US Department of
Energy, the World Bank, the Institute of Energy Economics in Japan, the Indian
Government, OPEC, the Canadian Energy Research Institute, Boston University
working on the Encyclopedia of Energy and the University of Jordan amongst
others.
Dr Salameh has appeared frequently on BBC TV (English & Arabic), Aljazeera
TV (English & Arabic), CNN, Jordan TV, CNBC (Dubai) TV, Canadian TV and
Dubal TV discussing oil prices and other developments in the global oil market.
Dr Salameh has a doctorate in Economics specializing in the economics of oil
and energy and a post-graduate Diploma in Industrial Management and
Marketing. He is a member of the following International Institutes and
Associations:
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Member of the Energy Institute, UK.
Member of the British Institute of Energy Economics, London.
Member of the International Association for Energy Economics, USA.
Fellow of the International Energy Foundation, Canada.
Member of the International Institute for Strategic Studies (IISS), London.
Member of the Royal Institute of International Affairs, London.
Fellow of the Chartered Institute of Marketing, UK.
Member of the Institute of Directors, London.
Member of the Chartered Management Institute, UK.
Member of the Council for the Advancement of Arab-British Understanding
(CAABU), London.
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Member of the Strategic & Combat Studies Institute, UK.
Advisor to the Oil Depletion Analysis Centre (ODAC), London.