Why Simmons Is Wrong about Saudi Oil
http://www.worldenergysource.com/wemr/letterB_0905.cfm
by Ali Daneshy
Matthew Simmons’ arguments in Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy are providing more ammunition to the proponents of peak oil. I’m not the first one to disagree with Simmons on his thesis about Saudi oil. Michael Lynch, a leading critic of the peak oil theory, has also criticized Simmons’ approach. In his book, Simmons warns that Saudi Arabia cannot boost its production to "10, 12, or even 15 million barrels of oil a day for the next 10 or 20 years, let alone 50 years" and that "nothing in the data supports the claim that Saudi Arabia can maintain production at current levels for more than five to 10 years."
Simmons means well in this and other writings and should be commended for it. He fully recognizes the importance that energy plays in our standard of living and the welfare of the world, and he is obviously worried. But he is quite wrong on Saudi Arabian oil production potential.
Saudi Arabia’s high oil production is not a recent or momentary event. Saudi Arabia has been producing at more than 9 million barrels per day for the last 13 years, and at around 10 million barrels per day for the last three. When natural gas condensates are included, daily production now equals nearly 12 million barrels of liquids.
The fluctuations in Saudi production have come mainly in response to demand changes and the Saudis’ desire to be the dominant player in the energy world. When needed, they have shown the capacity and ability to increase their production. And the speed of these changes has been in line with what experts would consider reasonable, albeit slower than the layman’s expectations.
Part of the fear about supply shortage comes from the very thin margins between supply and demand. These margins leave the market vulnerable to minor global supply disruptions. The Saudis and other OPEC countries appreciate this situation and will continue current practices.
I’d like to single out two of Simmons’ main themes: production in water fields and the fact that pressure in some of them has fallen below the bubble point.
Regarding water production, this is a natural and unavoidable aspect of oil and gas production and often intentionally induced by water flooding. Water injection helps boost production by sweeping the oil out of the reservoir and maintaining its pressure. We are doing this in Texas every day, producing more than 1 million barrels of oil with a water-oil ratio over 12! In Prudhoe Bay this ratio is more than 3. By comparison, the estimated water-oil ratio for Saudi Arabia is slightly over 1. When considered with the long-term high oil production, this low ratio is a strong testimony to the thickness and size of Saudi oil zones and their ability to sustain this production for some time. Depending on specific location, each barrel of produced water may cost the operator $0.10-$2.00. At today’s prices, one can produce 20 barrels of water for each barrel of oil and still maintain a profitable operation. And the Saudis are a long way from it!
As for pressures falling below the bubble point, many reservoirs are intentionally produced below this pressure to improve primary recovery. It all depends on the type of reservoir and its drive mechanism. Solution gas drive production is one of the most powerful recovery mechanisms, and by definition it has to be below the bubble-point pressure.
Saudi recoverable oil reserves are estimated at more than 260 billion barrels. If anything, new technology is likely to increase this number, just as it did for much of the North Sea. Application of new technology will sustain production and can readily increase it if the Saudis so desire. For example, in the South Shaybah field, where conventional horizontal holes were producing 3,000 barrels per day, they are now producing more than 10,000 barrels per day by employing horizontal, multilateral and intelligent completions.
I am not at all worried about Saudi production capacity for decades to come. Simmons’ book is way off base.
Ali Daneshy is the director of petroleum engineering at the University of Houston and retired vice president of Halliburton. He has more than 35 years of experience in the oil and gas industry covering much of the energy-producing world. He has authored numerous papers on technology and management in the oil and gas industry.
by Ali Daneshy
Matthew Simmons’ arguments in Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy are providing more ammunition to the proponents of peak oil. I’m not the first one to disagree with Simmons on his thesis about Saudi oil. Michael Lynch, a leading critic of the peak oil theory, has also criticized Simmons’ approach. In his book, Simmons warns that Saudi Arabia cannot boost its production to "10, 12, or even 15 million barrels of oil a day for the next 10 or 20 years, let alone 50 years" and that "nothing in the data supports the claim that Saudi Arabia can maintain production at current levels for more than five to 10 years."
Simmons means well in this and other writings and should be commended for it. He fully recognizes the importance that energy plays in our standard of living and the welfare of the world, and he is obviously worried. But he is quite wrong on Saudi Arabian oil production potential.
Saudi Arabia’s high oil production is not a recent or momentary event. Saudi Arabia has been producing at more than 9 million barrels per day for the last 13 years, and at around 10 million barrels per day for the last three. When natural gas condensates are included, daily production now equals nearly 12 million barrels of liquids.
The fluctuations in Saudi production have come mainly in response to demand changes and the Saudis’ desire to be the dominant player in the energy world. When needed, they have shown the capacity and ability to increase their production. And the speed of these changes has been in line with what experts would consider reasonable, albeit slower than the layman’s expectations.
Part of the fear about supply shortage comes from the very thin margins between supply and demand. These margins leave the market vulnerable to minor global supply disruptions. The Saudis and other OPEC countries appreciate this situation and will continue current practices.
I’d like to single out two of Simmons’ main themes: production in water fields and the fact that pressure in some of them has fallen below the bubble point.
Regarding water production, this is a natural and unavoidable aspect of oil and gas production and often intentionally induced by water flooding. Water injection helps boost production by sweeping the oil out of the reservoir and maintaining its pressure. We are doing this in Texas every day, producing more than 1 million barrels of oil with a water-oil ratio over 12! In Prudhoe Bay this ratio is more than 3. By comparison, the estimated water-oil ratio for Saudi Arabia is slightly over 1. When considered with the long-term high oil production, this low ratio is a strong testimony to the thickness and size of Saudi oil zones and their ability to sustain this production for some time. Depending on specific location, each barrel of produced water may cost the operator $0.10-$2.00. At today’s prices, one can produce 20 barrels of water for each barrel of oil and still maintain a profitable operation. And the Saudis are a long way from it!
As for pressures falling below the bubble point, many reservoirs are intentionally produced below this pressure to improve primary recovery. It all depends on the type of reservoir and its drive mechanism. Solution gas drive production is one of the most powerful recovery mechanisms, and by definition it has to be below the bubble-point pressure.
Saudi recoverable oil reserves are estimated at more than 260 billion barrels. If anything, new technology is likely to increase this number, just as it did for much of the North Sea. Application of new technology will sustain production and can readily increase it if the Saudis so desire. For example, in the South Shaybah field, where conventional horizontal holes were producing 3,000 barrels per day, they are now producing more than 10,000 barrels per day by employing horizontal, multilateral and intelligent completions.
I am not at all worried about Saudi production capacity for decades to come. Simmons’ book is way off base.
Ali Daneshy is the director of petroleum engineering at the University of Houston and retired vice president of Halliburton. He has more than 35 years of experience in the oil and gas industry covering much of the energy-producing world. He has authored numerous papers on technology and management in the oil and gas industry.
posted by Marcel at 4:00 PM
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