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| Figure 1. Extent of Proved Reserves Depletion in Select Fields (Baqi and Saleri, 2004) |
Current figures suggest that world liquid fuels production is running at around 90 mbd, of which roughly 74 mbd is crude. A reasonable estimate of the annual decline in existing well production lies at around 5%, so that each year new sources of oil must be brought on line to generate 5% of 74 mbd (3.7 mbd) to cover these declines. In addition to that need, if world oil markets continue to grow as expected, then an additional roughly 1 mbd of new production will have to be added this year to meet the growth in demand. (China imported 5.95 mbd in February, and though this dropped to 5.55 mbd in March, this is still up 8.7% on March last year.) This state of affairs does not include the fall-out from political actions, such as the embargo on Iranian oil, which imposes additional demands on the rest of the global suppliers of crude by taking that production out of the market. As Econbrowser has just noted, the countries that are potentially capable of upping production to meet the size of the total additional demand likely foreseeable this year seem singularly limited to a kingdom whose initials are KSA.
There is no doubt that Saudi Arabia has considerable oil assets, though I have noted in the past that they tend to use the total discovered oil volume as their reserve, without discounting the amount that they have already produced. Rather, the question that will increasingly arise in the future is whether the country can continue to produce at the same rate, or – if they are to meet the claimed 12.5 mbd of achievable production - to be able to achieve a rate that is 25% higher than current levels. Not that the amount available from some older fields is not of some concern. Consider this plot that came from Aramco in 2004, when Mahmound Abdul Baqi and Nansen Saleri debated Matt Simmons at CSIS. And remember that production has continued from those fields in the eight years since.
In the post last week (and my apologies to Glenn Morton for unintentionally confusing him with Greg Croft at the beginning of that piece) I pointed out that there are a significant number of rock layers under the surface in the country that contain oil. Now not all of them do this very consistently, but as the example with Abqaiq showed, as the original oil reservoir becomes depleted, so other rock layers can be tapped to produce in their turn.
However, the story with Abqaiq shows the difficulty in being able to sustain production as fields reach the end of their life, and the increasing costs that must be incurred to do so.
