Saudi Arabia, Exxon Say Oil Will Last for Decades
Bloomberg.com: Top Worldwide
Sept. 27 (Bloomberg) -- Leaders from Saudi Arabia's oil industry and Exxon Mobil Corp. said world petroleum reserves are enough to last for decades, seeking to ease concern that supplies are peaking and prices will remain high.
Saudi Arabia, the world's largest oil producer, will soon almost double its proven reserve base, adding 200 billion barrels to the current estimate of 264 billion, said the nation's oil minister, Ali al-Naimi. Exxon Mobil President Rex Tillerson said the world may have more than 3 trillion barrels from conventional oil fields, oil sands deposits and other sources.
``A popular theory receiving much attention in the press these days says that the current tightness in the petroleum supply chain is proof that we are rapidly reaching the limits of our ability to produce petroleum,'' al-Naimi said today in Johannesburg. ``Such talk is not productive because it diverts attention from the real problems ahead. The problem we face is not one of availability, it is a problem of deliverability.''
Crude oil prices have soared during the past two years and reached a record of $70.85 a barrel last month in New York after Hurricane Katrina shut off U.S. Gulf of Mexico supplies and flooded refineries. Gasoline pump prices in the U.S. rose to a record above $3 a gallon, levels similar to those of 1981, after adjusting for inflation.
The Saudi oil minister called for a global effort among producers and consumers to find a way to increase investment to make gasoline and meet demand.
``There is a limit to what we can do'' to lower prices, al- Naimi said. Crude oil prices may stay high ``until the whole supply chain is even, when downstream and upstream is in balance. Today they are out of balance.''
OPEC, Consumers React
No new refineries, called the ``downstream'' part of the business, have been built in the U.S. in about three decades, and the last new plant constructed in Europe was in 1989. More investment is needed in refineries, pipelines and other infrastructure to meet rising demand, al-Naimi said.
Executives and ministers from the world's biggest oil companies and producing countries are among 3,500 delegates attending the World Petroleum Congress in Johannesburg to discuss topics ranging from exploration technology, refinery investments, oil prices, access to reserves and the environmental impact of fossil fuels.
Tillerson said Exxon Mobil doesn't change its investment timetable because of the ``inevitable peaks and troughs'' in oil prices. Oil prices will not stay high forever, he said, without giving a more specific outlook.
The meeting comes during a month when consuming countries released emergency oil and fuel stockpiles under an International Energy Agency accord for only the second time in 30 years. The Organization of Petroleum Exporting Countries offered all its remaining spare production capacity to buyers, if needed.
Skepticism
Saudi Arabia is the only OPEC member able to compensate for supply cuts and is targeting to raise production capacity by 14 percent to 12.5 million barrels a day in five years. Saudi Arabia has a plan to raise capacity to 15 million barrels a day whenever that much is needed, al-Naimi said.
For now, the Saudi oil minister said there are ``no takers'' of additional oil supply.
Crude oil prices in New York have retreated 7.4 percent since reaching their record and were at $65.60 a barrel as of 9:51 a.m. London time. They have doubled in the past two years.
Some critics doubt Saudi Arabia's ability to deliver. The kingdom may have hit its peak oil production and output may start to decline, according to Matthew Simmons, chairman of energy investment bank Simmons & Co.
Simmons wrote in ``Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy'' that about 90 percent of Saudi Arabia's oil output comes from seven fields, including three that have pumped for more than 50 years. An unsustainable pace of water injection may lead some ``war-horse'' fields to rapidly decline with few replacement sources in sight, he said.
Assuring Markets
``The `twilight' of Saudi Arabian oil envisioned in this book is not a remote fantasy,'' Simmons wrote. Saudi Arabia's oil ministry and its state-owned energy company, Saudi Aramco, in May declined to comment on Simmons's book and its assertions.
Al-Naimi, by contrast, has been trying to assure markets that Saudi Arabia can meet increased demand.
Simmons based his findings on more than 200 technological papers written by the Society of Petroleum Engineers and transcripts from closed U.S. Senate subcommittee hearings in 1973 and 1979. He supplemented the findings with a six-day trip to Saudi Arabia in February 2003.
Decades of Oil
Simmons said he tried and failed to get information from current and former members of Saudi Aramco. An energy adviser to U.S. President George W. Bush, Simmons has called on Saudi Arabia to release more data and hire an independent auditor to verify its figures.
Saudi Arabia estimates that it has more than 264 billion barrels of proven oil reserves. That figure hasn't changed much in 17 years even though it has pumped more than 46 billion barrels from that base. Al-Naimi in April had estimated probable and possible reserves at about another 100 billion barrels of reserves.
Nearly all of Saudi Arabia's production comes from a narrow band on the eastern border of the Persian Gulf made up of 17,140 square miles where six of the kingdom's largest eight producing fields are located.
``We will soon be able to boost our proved oil reserves by 200 billion barrels using the latest technology,'' al-Naimi said today. ``We are further encouraged that there are vast areas of the kingdom that have yet to be explored. This leads us to say with confidence that Saudi Arabia's proved reserves will expand significantly in the years and decades ahead.''
Pumped Out?
The biggest of the fields, Ghawar, began producing in 1951 and has pumped more than 55 billion barrels of oil, more than five times the largest field in the U.S., Prudhoe Bay. Al-Naimi today said production from that field will expand in April, without being more specific.
Simmons compares the Saudi fields with those in neighboring Oman and data for four fields that also produced more than a million barrels of oil a day, such as Alaska's Prudhoe Bay, discovered in 1967, and Russia's Samotlor, found in 1963.
Sept. 27 (Bloomberg) -- Leaders from Saudi Arabia's oil industry and Exxon Mobil Corp. said world petroleum reserves are enough to last for decades, seeking to ease concern that supplies are peaking and prices will remain high.
Saudi Arabia, the world's largest oil producer, will soon almost double its proven reserve base, adding 200 billion barrels to the current estimate of 264 billion, said the nation's oil minister, Ali al-Naimi. Exxon Mobil President Rex Tillerson said the world may have more than 3 trillion barrels from conventional oil fields, oil sands deposits and other sources.
``A popular theory receiving much attention in the press these days says that the current tightness in the petroleum supply chain is proof that we are rapidly reaching the limits of our ability to produce petroleum,'' al-Naimi said today in Johannesburg. ``Such talk is not productive because it diverts attention from the real problems ahead. The problem we face is not one of availability, it is a problem of deliverability.''
Crude oil prices have soared during the past two years and reached a record of $70.85 a barrel last month in New York after Hurricane Katrina shut off U.S. Gulf of Mexico supplies and flooded refineries. Gasoline pump prices in the U.S. rose to a record above $3 a gallon, levels similar to those of 1981, after adjusting for inflation.
The Saudi oil minister called for a global effort among producers and consumers to find a way to increase investment to make gasoline and meet demand.
``There is a limit to what we can do'' to lower prices, al- Naimi said. Crude oil prices may stay high ``until the whole supply chain is even, when downstream and upstream is in balance. Today they are out of balance.''
OPEC, Consumers React
No new refineries, called the ``downstream'' part of the business, have been built in the U.S. in about three decades, and the last new plant constructed in Europe was in 1989. More investment is needed in refineries, pipelines and other infrastructure to meet rising demand, al-Naimi said.
Executives and ministers from the world's biggest oil companies and producing countries are among 3,500 delegates attending the World Petroleum Congress in Johannesburg to discuss topics ranging from exploration technology, refinery investments, oil prices, access to reserves and the environmental impact of fossil fuels.
Tillerson said Exxon Mobil doesn't change its investment timetable because of the ``inevitable peaks and troughs'' in oil prices. Oil prices will not stay high forever, he said, without giving a more specific outlook.
The meeting comes during a month when consuming countries released emergency oil and fuel stockpiles under an International Energy Agency accord for only the second time in 30 years. The Organization of Petroleum Exporting Countries offered all its remaining spare production capacity to buyers, if needed.
Skepticism
Saudi Arabia is the only OPEC member able to compensate for supply cuts and is targeting to raise production capacity by 14 percent to 12.5 million barrels a day in five years. Saudi Arabia has a plan to raise capacity to 15 million barrels a day whenever that much is needed, al-Naimi said.
For now, the Saudi oil minister said there are ``no takers'' of additional oil supply.
Crude oil prices in New York have retreated 7.4 percent since reaching their record and were at $65.60 a barrel as of 9:51 a.m. London time. They have doubled in the past two years.
Some critics doubt Saudi Arabia's ability to deliver. The kingdom may have hit its peak oil production and output may start to decline, according to Matthew Simmons, chairman of energy investment bank Simmons & Co.
Simmons wrote in ``Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy'' that about 90 percent of Saudi Arabia's oil output comes from seven fields, including three that have pumped for more than 50 years. An unsustainable pace of water injection may lead some ``war-horse'' fields to rapidly decline with few replacement sources in sight, he said.
Assuring Markets
``The `twilight' of Saudi Arabian oil envisioned in this book is not a remote fantasy,'' Simmons wrote. Saudi Arabia's oil ministry and its state-owned energy company, Saudi Aramco, in May declined to comment on Simmons's book and its assertions.
Al-Naimi, by contrast, has been trying to assure markets that Saudi Arabia can meet increased demand.
Simmons based his findings on more than 200 technological papers written by the Society of Petroleum Engineers and transcripts from closed U.S. Senate subcommittee hearings in 1973 and 1979. He supplemented the findings with a six-day trip to Saudi Arabia in February 2003.
Decades of Oil
Simmons said he tried and failed to get information from current and former members of Saudi Aramco. An energy adviser to U.S. President George W. Bush, Simmons has called on Saudi Arabia to release more data and hire an independent auditor to verify its figures.
Saudi Arabia estimates that it has more than 264 billion barrels of proven oil reserves. That figure hasn't changed much in 17 years even though it has pumped more than 46 billion barrels from that base. Al-Naimi in April had estimated probable and possible reserves at about another 100 billion barrels of reserves.
Nearly all of Saudi Arabia's production comes from a narrow band on the eastern border of the Persian Gulf made up of 17,140 square miles where six of the kingdom's largest eight producing fields are located.
``We will soon be able to boost our proved oil reserves by 200 billion barrels using the latest technology,'' al-Naimi said today. ``We are further encouraged that there are vast areas of the kingdom that have yet to be explored. This leads us to say with confidence that Saudi Arabia's proved reserves will expand significantly in the years and decades ahead.''
Pumped Out?
The biggest of the fields, Ghawar, began producing in 1951 and has pumped more than 55 billion barrels of oil, more than five times the largest field in the U.S., Prudhoe Bay. Al-Naimi today said production from that field will expand in April, without being more specific.
Simmons compares the Saudi fields with those in neighboring Oman and data for four fields that also produced more than a million barrels of oil a day, such as Alaska's Prudhoe Bay, discovered in 1967, and Russia's Samotlor, found in 1963.
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