Satellite Images Contradict Saudi Peak Oil Theory
Satellite images may scuttle theories that the world's biggest oil field in Saudi Arabia is in decline, Bernstein Research said on Wednesday.
A jump in drilling activity in recent years at the giant Ghawar oil field has raised concerns Saudi Arabia is struggling to maintain oil output and has fueled "peak oil" theories that global production is poised for a collapse.
But satellite images show that much of the rise in drilling activity has centered on two major expansion developments by state oil firm Saudi Aramco, instead of on keeping older parts of the field producing with enhanced recovery techniques, Bernstein said in a research note.
"The majority of the increased activity in the Ghawar field can be explained by the Haradh-III, and the Hawiyah natural gas liquids recovery mega-projects which were not designed as a quick fix to Ghawar's supposed rapid decline," the note said.
Bernstein said the report was an initial analysis of satellite data from 2004-2007, with a final conclusion expected in the coming months.
Theories that Ghawar will soon fall into decline may be based on little or incomplete data from the OPEC nation on the state of its oil sector, the report said.
"Without accurate and detailed data on what Saudi Aramco is undertaking, or with a poor understanding of current Ghawar decline rates, many conspiracy theories have arisen, which argue that we are on the cusp of global peak oil production," the research note said.
The report comes in the midst of a drive by the kingdom to expand oil output capacity -- including production from the neutral zone -- to 12.5 million barrels per day (bpd) in 2009 from 11.3 million bpd now.
Experts backing peak oil theories, such as Matthew Simmons of Simmons and Co, have warned that sharp global declines could happen at any time, and that under best case scenarios, Saudi Arabia will be able to keep production flat for several years but not increase output to keep up with growing demand.
Bernstein acknowledge heightened drilling in older sections of Ghawar may point to some efforts to halt some declines, but adds this did not point to a sudden field output drop.
"(Data shows) the mature areas of the north of the Ghawar field, Shedgum and 'Uthmaniyah, have undergone intensive drilling as well, likely indicating Enhanced Oil Recovery techniques being employed to slow declines," the report said.
"The conclusion is that there is life in this old field yet, as its demise has been overly anticipated."
On the other side of the argument Matthew Simmons, Chairman of Simmons & Co International believes Saudi Aramco, the world's largest state oil company, probably isn't on target to meet its oil production goals.
"I'm dubious they can hit their targets," Simmons said in October at a Houston conference sponsored by the Association for the Study of Peak Oil & Gas, a non-profit think tank. "If they had hit their targets, they would be more forthcoming."
Simmons is the author of 2005's 'Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy', which argues that global oil production has already peaked and Middle East reserves estimates are overstated.
Aramco is boosting spending on projects to raise the Kingdom's daily output capacity from 11.3 million barrels to 12.5 million barrels by 2009. Simmons has called on national oil companies and other producers to disclose field output figures.
"Amid all these long-term projections of demand, Saudi Arabia's output has to grow or other supply has to come out of the air to replace it,'' Simmons said.
Simmons who has predicted crude will exceed US$200 a barrel or more, reiterated he believes today's prices are cheap.