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Saudi Arabia Can It Deliver ?

Saudi Arabia Can It Deliver ?. by Jack Zagar MHA Petroleum Consultants ASPO Conference – Lisbon, Portugal – May 19-20, 2005. Explanatory text is the Notes section of each slide. Three Key Factors. Political Will and Economic Incentive 10 MM/d capacity for last 30 years

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Saudi Arabia Can It Deliver ?

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  1. Saudi ArabiaCan It Deliver ? by Jack Zagar MHA Petroleum Consultants ASPO Conference – Lisbon, Portugal – May 19-20, 2005 Explanatory text is the Notes section of each slide

  2. Three Key Factors • Political Will and Economic Incentive • 10 MM/d capacity for last 30 years • Internal needs supersede rest of the World • Complex market • Security and Access to Technical People • “Easy oil” already developed • Serious internal problems threaten stability • Anti-Western sentiments • Valid Reserves ???

  3. OIIP – Oil Initially In Place ARAMCO OIIP Growth CICS 2/04 65 Static Fields – 17% of OIIP 16 Produced Fields – 83% of OIIP 10 Producing Fields – 64% OIIP

  4. source: Saudi Aramco 2/2004

  5. Abqaiq FieldOil Recovery 12 Gb Ultimate Recovery 20 Gb OIIP

  6. Abqaiq and Ain Dar / Shedgum better than 97% ~35 J. Laherrere, 1997

  7. source: Saudi Aramco 2/2004

  8. Depletion TimingStatfjord Field - North Sea “First 70% produced quicker and easier than last 30%” Forecast

  9. Exploration Wells in Saudi Arabia source: Saudi Aramco 2/2004

  10. source: Saudi Aramco 2/2004

  11. OIIP Hyperbolic Creaming CurveSaudi Arabia 2000 1974

  12. Saudi Arabia Oil Reserves 455 90 255 70 35 30 30 30 165 260 105 105 AramcoPerception ??? Most Likely ???

  13. 2042 2025 5 Gb of Prob. & Pos. Reserves 48 Gb of Prob. & Pos. Reserves 10 Million Barrels / Day Capacity50-Year ScenarioProved Reserve Decline Point

  14. 2033 2020 12 Million Barrels / Day Capacity50-Year ScenarioProved Reserve Decline Point 2014 19 Gb of Prob. & Pos. 73 Gb of Prob. & Pos. & Disc.

  15. Saudi Spare Capacity • Govt policy goal of maintaining 2 MM/d of spare capacity • (only country to do so) • Now repeatedly stretched and used • March 14, 2005 stated prepared to meet increased demand forecast for late 2005 which would use all spare capacity • Twice in last two years • March 2003 to compensate for loss of Iraq oil • 2004 to offset USA hurricane losses

  16. Saudi’s Ability to Increase Production . . .Does it Matter?

  17. Meeting the Challenge Industry Outlook - Oil & Gas Demand/Supply MOEBD 200 World Demand 160 Required New Production 120 80 Existing Field Decline ~ 4 - 6% 40 Existing Production 0 ‘80 ‘85 ‘90 ‘95 ‘00 ‘05 ‘10 ‘15 ‘20

  18. Real Discovery Trend

  19. World Liquids Production Outlook

  20. Conclusions • Published critical data is sparse. • Many uncertainties abound • Best in class in terms of quality of fields and operation of field • If successful will have the highest reserves and highest recovery efficiency of any oil producing country on the planet • It is prudent to be skeptical • Saudi Aramco has no obligation to try and meet wildly optimistic forecasts by the EIA and IEA of Saudi production increases • Verifiable production forecasts from exporters would allow for orderly transition to alternative energy forms with fewer oil shocks

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