Agence France-Presse — Getty Images The sprawling Khurais refinery in the Saudi desert east of Riyadh.
Saudi Arabia’s ability to boost oil production much above current levels is questionable and the country’s overall crude reserves may have been overstated by up to 40 percent, American diplomats in Riyadh warned in confidential cables written between 2007 and 2009. The dispatches were released by Wikileaks and published on Tuesday by The Guardian newspaper in Britain.
One cable written during the 2008 oil shock, when crude prices spiked to nearly $150 per barrel, warned that Saudi Aramco, the Saudi state oil company, no longer appeared to have the ability to raise production sufficiently to affect global oil prices.
“Our mission now questions how much the Saudis can now substantively influence the crude markets over the long term,” the cable says. “Clearly they can drive prices up, but we question whether they
any longer have the power to drive prices down for a prolonged period.”
“A series of major project delays and accidents over the last couple of years is evidence that Saudi Aramco is having to run harder to stay in place — to replace the decline in existing production,” it continues.
A 2007 cable relayed warnings from Sadad al-Husseini, a former top exploration engineer and long-serving board member at Aramco, that the company’s long-term reserves were likely overstated by as much as 40 percent and that Saudi Arabia and other OPEC countries would not be able to satisfy an anticipated sharp growth in global oil demand in coming decades.
Dr. al-Husseini did not dispute the size of Saudi Arabia’s known reserves, some 260 billion barrels that largely reside in the country’s aging “super-giant” fields. Rather, he disputed a projection by Aramco officials that future discoveries would boost the country’s total reserves to 900 billion barrels, of which 70 percent could be recovered through new technologies.
This analysis probably overstates ultimately recoverable reserves by as much as 300 billion barrels, he said.
More important, according to Dr. al-Husseini’s calculations, the kingdom likely has the ability to pump only about 64 billion barrels before it reaches an inflection point known as “peak oil,” when new production is unable to offset declines from existing fields.
At the country’s current production rate of about 10.5 million barrels per day, it would reach this threshold in roughly 17 years.
“Soon after reaching that threshold the company will have to expend maximum effort to simply fend off impending output declines,” an American diplomat noted.
The world as a whole will likely have reached “peak oil” long before that time, however, Dr. al-Husseini predicted.
Such an outlook contradicts the position of current Aramco officials, who have dismissed fears of “peak oil” as alarmist and stated that current production levels can be maintained for nearly a century.
But American diplomats noted that Dr. Al-Husseini’s intimate knowledge of Saudi oil operations meant his perspective should be taken seriously.
“While al-Husseini fundamentally contradicts the Aramco company line, he is no doomsday theorist. His pedigree, experience and outlook demand that his predictions be thoughtfully considered,” one cable states.
Dr. al-Husseini has voiced similar thoughts on peak oil and Saudi reserves on previous occasions, and the leaked cables did not move oil markets, signaling that their contents were unsurprising to oil traders.