10 ms·

The Biggest Saudi Oil Field Is Fading Faster Than Anyone Guessed

98 points by jonbaer 8y ago

mnm1 8y ago
Good. The quicker it fades, the quicker the US can stop supporting this brutal, vile regime and its disgusting human rights practices and culture. Also, the more pressure there will be to switch to a non fossile fuel energy source. It can't happen quickly enough.
- doctorpangloss 8y ago
  The US was a net exporter of crude oil as recently as December, 2018. Indeed, only an idiosyncrasy of the law, reversed in 2015, prevented the comparably colossal, richest country in the world from being a net exporter until very recently.
  - tqkxzugoaupvwqr 8y ago
    Putting my tinfoil hat on: From a geopolitical standpoint, the USA’s longterm strategy likely was to deplete the oil reserves of foreign nations while keeping a large domestic reserve until the end. This has the advantage of being able to force those nations into submission once their oil runs out. When that is the case, domestic production is ramped up to cover domestic needs and the needs of foreign nations … as long as they back the interests of the US. This decades-long strategy could have worked brilliantly until the end if it wasn’t for clean energy. Now that it’s clear that clean energy sources will replace fossil fuels sooner than later, all the domestic oil sitting in the ground needs to be extracted and sold as fast as possible before it becomes worthless. Since the US and foreign nations won’t depend on oil in the future, the US won’t need its oil reserve and floods the global market with all they’ve got for that sweet, sweet money.
    - ppf 8y ago
      I think you're overstating the position of clean energy. The US currently gets 11% of its power from "renewables". 45% of that is from burning biofuels, wood, and a very small amount of bio waste.
  - D_Alex 8y ago
    This is complete and utter rubbish. I do not know where you got this from, care to share? The US used to be the worlds largest net importer of crude oil since at least the 1950s, and only recently (2016 or 2017) got overtaken by China. The US is by far the largest consumer of oil, using circa 20 million barrels per day, while producing around 12.5 million. Besides China, no other country even uses as much oil as the US imports.
    - nostrademons 8y ago
      I went digging. I found his claim repeated in a CNN article [1], but also found your claim backed up by government statistics [2][3]. His point was also backed up by a forward-looking government report, though [4]. Basically, the main differences were in products counted (CNN's headline includes natural gas and refined petroleum products as "oil exports", categories where the US is a heavy exporter) and in timescale. The production stats you cite are rising very rapidly - for reference, in 2018 alone U.S. production increased by 3 million barrels/day, almost 30% yearly. That's growing faster than the tech industry. So the government predicts that by 2021, the import/export shortfall will be completely erased and we'll be a net exporter of petroleum. [1] https://www.cnn.com/2019/03/08/business/us-oil-exports-saudi-arabia/index.html https://www.cnn.com/2019/03/08/business/us-oil-exports-saudi... [2] https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=W... [3] https://www.eia.gov/tools/faqs/faq.php?id=33&t=6 https://www.eia.gov/tools/faqs/faq.php?id=33&t=6 [4] https://www.eia.gov/outlooks/aeo/pdf/aeo2019.pdf https://www.eia.gov/outlooks/aeo/pdf/aeo2019.pdf
      - D_Alex 8y ago
        Good job on doing the research - let me comment as follows: EIA publishes crude import and export figures directly, see here: https://www.eia.gov/dnav/pet/pet_sum_snd_d_nus_mbblpd_m_cur.htm https://www.eia.gov/dnav/pet/pet_sum_snd_d_nus_mbblpd_m_cur.... The second line of the above reference shows crude imports at 7.25 million bbls/d and crude exports at 2.57 million, so net imports of crude oil are circa 4.7 million bbls/day. Even this surpasses India (4.5mmbbls/d) and Japan's (3.9mmbbls/d) total usage, and only China and the US itself use more. And of course the original claim that the US is a net exporter of crude oil is completely wrong. The rest of the statistics needs to be read with caution - what EIA calls "petroleum products" is an odd bunch, ranging from ethane (gas) to petcoke (solid). Such products are not counted in production numbers of Russia and Saudi Arabia, for example, and are also, pound-for-pound, of much lesser value than crude oil. They have a disproportionate share in the US exports. High value products such as gasoline, diesel and jetfuel are consumed "at home".
- readyoubestbook 8y ago
  What is the value of having principles, or in this case _supporting a brutal, vile regime and its disgusting human rights practices and culture_ if there is a clear upper limit to them?
- Al-Khwarizmi 8y ago
  I agree with everything except for the word can. The US already very much can support stopping that regime. They prefer not to.
- kbergqt 8y ago
  Well the US supports another vile regime and its disgusting human rights practices and culture, namely Israel. The U.S. House of Representatives passed a measure that would codify into law a $38 billion aid package to Israel. Clearly the US is about many things but ethics and human rights are only fringe concerns, let’s not pretend that Saudi Arabia is their only shady ally.
  - isatty 8y ago
    He didn't say they were the _only_ shady ally. Why are you derailing a discussion on Saudi Arabia with Israel?
  - saagarjha 8y ago
    > the US supports another vile regime and its disgusting human rights practices and culture It’s possible to come up with examples of this for every country, including the United States. That being said, this is whataboutism.
    - Tepix 8y ago
      Few countries have meddled in the affairs of other states like the US.
      - saagarjha 8y ago
        That's true, but I'm not sure how to interpret your response into the context of mine.
  - mschuster91 8y ago
    > Well the US supports another vile regime and its disgusting human rights practices and culture, namely Israel. Oh hello there, a nice example of anti-semitism. > let’s not pretend that Saudi Arabia is their only shady ally. Believe it or not, Israel is the only democracy in the area (aside from Kurdish Rojava but that one unfortunately isn't recognized as an independent state).
  - rat87 8y ago
6nf 8y ago
Less CO2 released into the atmosphere I guess? I always wonder about news like this. Is it wrong to assume that the company knew about this years ago already and made the rational decision not to tell everyone until the last minute? And how long have they known?
- 0815test 8y ago
  The speculation on whether Ghawar can yield a lot less oil than most people think has been around for more than a decade. People used to worry about this stuff a lot more, back when it wasn't clear whether heavy oil and shale would be able to fill the gap (not to mention renewables).
- KorematsuFred 8y ago
  When I started studying economics the most baffling thing I learned was that the total amount of Oil we had was increasing and not decreasing. That weird fact kind of made me learn the basic concepts better and I think I have learned not to read too much into these sort of news items. Journalist often lack this outlook. The world is not going to run out of Oil ever. The world is more likely to run out of "need for oil" sooner than the oil running our scenario. A particular oil field is fading means really nothing because Saudi has far too many unproven oil fields which it has not even bothered to explore yet. Now that this field might be running out very soon they will explore that oil and soon their production will grow up. The capital investment of discovery would reflect in slightly higher oil prices may be. Coming back to the CO2 emissions point you raised, even if the Oil in that Oil field goes to zero in 1 year, it wont matter. There will be more supply available soon enough. CO2 emissions will probably go down unrelated to Oil production as developed countries move to electric cars and better power plants fired by nuclear, solar and wind energy.
  - saagarjha 8y ago
    > The world is not going to run out of Oil ever This is technically true but not really a great way to look at the issue. We will always have oil; it will just get progressively more difficult to extract it. The point where we “run out” is when it is no longer economical to extract it from whatever deposit it’s in.
benj111 8y ago
Interesting to consider the politics of this. On the one hand Saudi Arabia and others want to give the illusion of the wealth lasting for ever. On the other hand, lower reserves would lead to higher prices, which is something they'd want to maximise.
- Someone 8y ago
  No, they want to maximize the amount of money they get out of their oil, with money they get now being worth more than money they will get next year, with that being worth more than money they get a decade from now, etc. Also, the house of Saud isn’t playing only that game. They also want to stay in power. They’re not universally popular in the region, so that means listening to their faraway supporters, who want to keep oil prices low.
  - benj111 8y ago
    I don't get what you're disagreeing with me about?
    - Someone 8y ago
      ”higher prices, which is something they'd want to maximise.”
      - benj111 8y ago
        Yes... You maximise money, by maximising prices (for some value of maximise). I'm not saying they should be aiming for $1 million / barrel. But clearly $60 is better than $50, assuming that doesn't lower volume. We seem to agree on that?
- ppf 8y ago
  Not really - they are relying on keeping output high to depress prices. Otherwise, other sources of oil (eg, US shale, South American oil sands) that are more expensive to extract become worthwhile, sending oil revenues to those other countries.
senectus1 8y ago
so when the Saudi start realising their spigot of unlimited money is starting to run out, i wonder how they'll behave. My bet is, invasion forces. I can hope though that they'll push for space industry
- fooker 8y ago
  See: Yemen
- adamnemecek 8y ago
  Their army is not in a good shape.
- stanley 8y ago
  They're investing in solar, who knows if it'll pan out. Throwing money at a problem works to a certain degree, and there's no question they have a sizable reserve to throw around.
- kgc 8y ago
  They might IPO their oil industry and diversify.
  - jeanlucas 8y ago
    They are doing this, but using private investments. From solar to wave they're investing in energy, but also in lots of other investments.
- hliyan 8y ago
  They are rapidly becoming investors.
lefstathiou 8y ago
So 52 years worth of reserves assuming maximum capacity of 12mm barrels harvested a day. Now I am no mathematician but given a 1-2mm per day average and what will likely become a declining demand for oil over next 20-30 years, they have half a millennia worth of oil lying around. This well seems like a non issue to me.
- max_wen 8y ago
  "what will likely become a declining demand for oil over next 20-30 years" based on what?
  - hanniabu 8y ago
    Just going off of memory, I believe I read that gasoline consumption has plateaued, meaning we're weaning off of it and it's being supplemented by alternative sources. I think it's a fair assumption that this indicates a shift that will lead to declining numbers in the next 20-30 years, if not sooner.
    - max_wen 8y ago
      Plateaued where? In California and Europe maybe but not in the rest of the world.
      - Arnt 8y ago
        It's more complicated than that. Some things keep growing (air traffic for instance), some not (power plants planning/construction for instance) and some seem in decline (ICE cars). If you can read .de-ese: https://www.sueddeutsche.de/wirtschaft/1.4371221 https://www.sueddeutsche.de/wirtschaft/1.4371221 You can add the apples and oranges up and get different results, depending on your judgment. And you get to choose what to assume: You may assume that what happens in California in 2019 definitely won't happen in the rest of the US in the coming years, or that it will. Et cetera.
        8y ago
aliswe 8y ago
I don't get it. The article states that the Ghawar is "the world’s largest conventional oil field", and "can produce a lot less than almost anyone believed", and is in fact "able to pump a maximum of 3.8 million barrels a day -- well below the more than 5 million that had become conventional wisdom in the market" The saudi "12 million b/d capacity" was known from before, I assume, so isn't the surprise that other fields make up a larger percentage than "guessed"? Then how can it be "fading faster than almost anyone believed"? And, isn't slower fading of their biggest reserve a good thing?
- foota 8y ago
  Maybe the issue is the production fading, rather than the reserves? Any amount of oil in the ground doesn't do much for you if you can only extract it very slowly.
  - 0815test 8y ago
    Generally extracting oil slowly is a good thing, it increases the total amount you're able to pull out of the ground. Increasing immediate flow means having to do things like pumping water into the field to increase pressure, and getting an increasingly watered-down mixture back out. Things that involve a pretty huge increase in complexity.
- benj111 8y ago
  Pumping rate tails off as the extractable oil drops, so the fact that it's dropping off faster than expected in their biggest oil field is notable.
- JamesBarney 8y ago
  Look up oil and gas decline curves and you'll see that a faster declining oil production means you'll get a lot less oil out of the ground over the next 10 and 20 years. And given a reasonable discount rate of 6% mean oil in 10 years is worth half of oil today and oil in 20 years is worth a quarter. You also run into efficiency issues. Running a high volume rig much more expensive than running a low volume rig.
browsercoin2019 8y ago
wow this is quite shocking! this means that we have reached peak oil quite possibly some time ago....OR for the cynical, the Saudi might be trying to pull a fast one by inflating the prices through scarcity...but that seems unlikely here. What's more curious is that the US reported it as 5.7million barrels in 2004!
benj111 8y ago
So this is the bond prospectus that's replacing the planned float of Aramco? Wasn't the plan basically to divest/diversify away from oil. This doesn't seem to be doing that, so what's the point?
deleted 8y ago
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deleted 8y ago
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98 points by jonbaer 8y ago

mnm1 8y ago

Good. The quicker it fades, the quicker the US can stop supporting this brutal, vile regime and its disgusting human rights practices and culture. Also, the more pressure there will be to switch to a non fossile fuel energy source. It can't happen quickly enough.

doctorpangloss 8y ago
The US was a net exporter of crude oil as recently as December, 2018. Indeed, only an idiosyncrasy of the law, reversed in 2015, prevented the comparably colossal, richest country in the world from being a net exporter until very recently.
- tqkxzugoaupvwqr 8y ago
  Putting my tinfoil hat on: From a geopolitical standpoint, the USA’s longterm strategy likely was to deplete the oil reserves of foreign nations while keeping a large domestic reserve until the end. This has the advantage of being able to force those nations into submission once their oil runs out. When that is the case, domestic production is ramped up to cover domestic needs and the needs of foreign nations … as long as they back the interests of the US. This decades-long strategy could have worked brilliantly until the end if it wasn’t for clean energy. Now that it’s clear that clean energy sources will replace fossil fuels sooner than later, all the domestic oil sitting in the ground needs to be extracted and sold as fast as possible before it becomes worthless. Since the US and foreign nations won’t depend on oil in the future, the US won’t need its oil reserve and floods the global market with all they’ve got for that sweet, sweet money.
  - ppf 8y ago
    I think you're overstating the position of clean energy. The US currently gets 11% of its power from "renewables". 45% of that is from burning biofuels, wood, and a very small amount of bio waste.
- D_Alex 8y ago
  This is complete and utter rubbish. I do not know where you got this from, care to share? The US used to be the worlds largest net importer of crude oil since at least the 1950s, and only recently (2016 or 2017) got overtaken by China. The US is by far the largest consumer of oil, using circa 20 million barrels per day, while producing around 12.5 million. Besides China, no other country even uses as much oil as the US imports.
  - nostrademons 8y ago
    I went digging. I found his claim repeated in a CNN article [1], but also found your claim backed up by government statistics [2][3]. His point was also backed up by a forward-looking government report, though [4]. Basically, the main differences were in products counted (CNN's headline includes natural gas and refined petroleum products as "oil exports", categories where the US is a heavy exporter) and in timescale. The production stats you cite are rising very rapidly - for reference, in 2018 alone U.S. production increased by 3 million barrels/day, almost 30% yearly. That's growing faster than the tech industry. So the government predicts that by 2021, the import/export shortfall will be completely erased and we'll be a net exporter of petroleum. [1] https://www.cnn.com/2019/03/08/business/us-oil-exports-saudi-arabia/index.html https://www.cnn.com/2019/03/08/business/us-oil-exports-saudi... [2] https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=W... [3] https://www.eia.gov/tools/faqs/faq.php?id=33&t=6 https://www.eia.gov/tools/faqs/faq.php?id=33&t=6 [4] https://www.eia.gov/outlooks/aeo/pdf/aeo2019.pdf https://www.eia.gov/outlooks/aeo/pdf/aeo2019.pdf
    - D_Alex 8y ago
      Good job on doing the research - let me comment as follows: EIA publishes crude import and export figures directly, see here: https://www.eia.gov/dnav/pet/pet_sum_snd_d_nus_mbblpd_m_cur.htm https://www.eia.gov/dnav/pet/pet_sum_snd_d_nus_mbblpd_m_cur.... The second line of the above reference shows crude imports at 7.25 million bbls/d and crude exports at 2.57 million, so net imports of crude oil are circa 4.7 million bbls/day. Even this surpasses India (4.5mmbbls/d) and Japan's (3.9mmbbls/d) total usage, and only China and the US itself use more. And of course the original claim that the US is a net exporter of crude oil is completely wrong. The rest of the statistics needs to be read with caution - what EIA calls "petroleum products" is an odd bunch, ranging from ethane (gas) to petcoke (solid). Such products are not counted in production numbers of Russia and Saudi Arabia, for example, and are also, pound-for-pound, of much lesser value than crude oil. They have a disproportionate share in the US exports. High value products such as gasoline, diesel and jetfuel are consumed "at home".
readyoubestbook 8y ago
What is the value of having principles, or in this case _supporting a brutal, vile regime and its disgusting human rights practices and culture_ if there is a clear upper limit to them?
Al-Khwarizmi 8y ago
I agree with everything except for the word can. The US already very much can support stopping that regime. They prefer not to.
kbergqt 8y ago
Well the US supports another vile regime and its disgusting human rights practices and culture, namely Israel. The U.S. House of Representatives passed a measure that would codify into law a $38 billion aid package to Israel. Clearly the US is about many things but ethics and human rights are only fringe concerns, let’s not pretend that Saudi Arabia is their only shady ally.
- isatty 8y ago
  He didn't say they were the _only_ shady ally. Why are you derailing a discussion on Saudi Arabia with Israel?
- saagarjha 8y ago
  > the US supports another vile regime and its disgusting human rights practices and culture It’s possible to come up with examples of this for every country, including the United States. That being said, this is whataboutism.
  - Tepix 8y ago
    Few countries have meddled in the affairs of other states like the US.
    - saagarjha 8y ago
      That's true, but I'm not sure how to interpret your response into the context of mine.
- mschuster91 8y ago
  > Well the US supports another vile regime and its disgusting human rights practices and culture, namely Israel. Oh hello there, a nice example of anti-semitism. > let’s not pretend that Saudi Arabia is their only shady ally. Believe it or not, Israel is the only democracy in the area (aside from Kurdish Rojava but that one unfortunately isn't recognized as an independent state).
- rat87 8y ago

6nf 8y ago

Less CO2 released into the atmosphere I guess? I always wonder about news like this. Is it wrong to assume that the company knew about this years ago already and made the rational decision not to tell everyone until the last minute? And how long have they known?

0815test 8y ago
The speculation on whether Ghawar can yield a lot less oil than most people think has been around for more than a decade. People used to worry about this stuff a lot more, back when it wasn't clear whether heavy oil and shale would be able to fill the gap (not to mention renewables).
KorematsuFred 8y ago
When I started studying economics the most baffling thing I learned was that the total amount of Oil we had was increasing and not decreasing. That weird fact kind of made me learn the basic concepts better and I think I have learned not to read too much into these sort of news items. Journalist often lack this outlook. The world is not going to run out of Oil ever. The world is more likely to run out of "need for oil" sooner than the oil running our scenario. A particular oil field is fading means really nothing because Saudi has far too many unproven oil fields which it has not even bothered to explore yet. Now that this field might be running out very soon they will explore that oil and soon their production will grow up. The capital investment of discovery would reflect in slightly higher oil prices may be. Coming back to the CO2 emissions point you raised, even if the Oil in that Oil field goes to zero in 1 year, it wont matter. There will be more supply available soon enough. CO2 emissions will probably go down unrelated to Oil production as developed countries move to electric cars and better power plants fired by nuclear, solar and wind energy.
- saagarjha 8y ago
  > The world is not going to run out of Oil ever This is technically true but not really a great way to look at the issue. We will always have oil; it will just get progressively more difficult to extract it. The point where we “run out” is when it is no longer economical to extract it from whatever deposit it’s in.

benj111 8y ago

Interesting to consider the politics of this. On the one hand Saudi Arabia and others want to give the illusion of the wealth lasting for ever. On the other hand, lower reserves would lead to higher prices, which is something they'd want to maximise.

Someone 8y ago
No, they want to maximize the amount of money they get out of their oil, with money they get now being worth more than money they will get next year, with that being worth more than money they get a decade from now, etc. Also, the house of Saud isn’t playing only that game. They also want to stay in power. They’re not universally popular in the region, so that means listening to their faraway supporters, who want to keep oil prices low.
- benj111 8y ago
  I don't get what you're disagreeing with me about?
  - Someone 8y ago
    ”higher prices, which is something they'd want to maximise.”
    - benj111 8y ago
      Yes... You maximise money, by maximising prices (for some value of maximise). I'm not saying they should be aiming for $1 million / barrel. But clearly $60 is better than $50, assuming that doesn't lower volume. We seem to agree on that?
ppf 8y ago
Not really - they are relying on keeping output high to depress prices. Otherwise, other sources of oil (eg, US shale, South American oil sands) that are more expensive to extract become worthwhile, sending oil revenues to those other countries.

senectus1 8y ago

so when the Saudi start realising their spigot of unlimited money is starting to run out, i wonder how they'll behave. My bet is, invasion forces. I can hope though that they'll push for space industry

fooker 8y ago
See: Yemen
adamnemecek 8y ago
Their army is not in a good shape.
stanley 8y ago
They're investing in solar, who knows if it'll pan out. Throwing money at a problem works to a certain degree, and there's no question they have a sizable reserve to throw around.
kgc 8y ago
They might IPO their oil industry and diversify.
- jeanlucas 8y ago
  They are doing this, but using private investments. From solar to wave they're investing in energy, but also in lots of other investments.
hliyan 8y ago
They are rapidly becoming investors.

lefstathiou 8y ago

So 52 years worth of reserves assuming maximum capacity of 12mm barrels harvested a day. Now I am no mathematician but given a 1-2mm per day average and what will likely become a declining demand for oil over next 20-30 years, they have half a millennia worth of oil lying around. This well seems like a non issue to me.

max_wen 8y ago
"what will likely become a declining demand for oil over next 20-30 years" based on what?
- hanniabu 8y ago
  Just going off of memory, I believe I read that gasoline consumption has plateaued, meaning we're weaning off of it and it's being supplemented by alternative sources. I think it's a fair assumption that this indicates a shift that will lead to declining numbers in the next 20-30 years, if not sooner.
  - max_wen 8y ago
    Plateaued where? In California and Europe maybe but not in the rest of the world.
    - Arnt 8y ago
      It's more complicated than that. Some things keep growing (air traffic for instance), some not (power plants planning/construction for instance) and some seem in decline (ICE cars). If you can read .de-ese: https://www.sueddeutsche.de/wirtschaft/1.4371221 https://www.sueddeutsche.de/wirtschaft/1.4371221 You can add the apples and oranges up and get different results, depending on your judgment. And you get to choose what to assume: You may assume that what happens in California in 2019 definitely won't happen in the rest of the US in the coming years, or that it will. Et cetera.
      - 8y ago

aliswe 8y ago

I don't get it. The article states that the Ghawar is "the world’s largest conventional oil field", and "can produce a lot less than almost anyone believed", and is in fact "able to pump a maximum of 3.8 million barrels a day -- well below the more than 5 million that had become conventional wisdom in the market" The saudi "12 million b/d capacity" was known from before, I assume, so isn't the surprise that other fields make up a larger percentage than "guessed"? Then how can it be "fading faster than almost anyone believed"? And, isn't slower fading of their biggest reserve a good thing?

foota 8y ago
Maybe the issue is the production fading, rather than the reserves? Any amount of oil in the ground doesn't do much for you if you can only extract it very slowly.
- 0815test 8y ago
  Generally extracting oil slowly is a good thing, it increases the total amount you're able to pull out of the ground. Increasing immediate flow means having to do things like pumping water into the field to increase pressure, and getting an increasingly watered-down mixture back out. Things that involve a pretty huge increase in complexity.
benj111 8y ago
Pumping rate tails off as the extractable oil drops, so the fact that it's dropping off faster than expected in their biggest oil field is notable.
JamesBarney 8y ago
Look up oil and gas decline curves and you'll see that a faster declining oil production means you'll get a lot less oil out of the ground over the next 10 and 20 years. And given a reasonable discount rate of 6% mean oil in 10 years is worth half of oil today and oil in 20 years is worth a quarter. You also run into efficiency issues. Running a high volume rig much more expensive than running a low volume rig.

browsercoin2019 8y ago

wow this is quite shocking! this means that we have reached peak oil quite possibly some time ago....OR for the cynical, the Saudi might be trying to pull a fast one by inflating the prices through scarcity...but that seems unlikely here. What's more curious is that the US reported it as 5.7million barrels in 2004!

benj111 8y ago

So this is the bond prospectus that's replacing the planned float of Aramco? Wasn't the plan basically to divest/diversify away from oil. This doesn't seem to be doing that, so what's the point?

deleted 8y ago

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deleted 8y ago

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