Wednesday, February 16, 2011

What's the real story with Saudi Arabia's oil reserves?

A very good question. It's recently been reported (via Wikileaks, once again) that there are serious concerns about this:
The US fears that Saudi Arabia, the world's largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show.

The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom's crude oil reserves may have been overstated by as much as 300bn barrels – nearly 40%.
Interesting. On the other hand, others argue that this is a faulty interpretation:
Asked by the American diplomats what he thought of Mr. al-Saif’s statements, he made what appeared an extraordinary statement: that the reserves figure was inflated by 300 billion barrels. Deducting that figure from the 716 billion barrels created the idea that Saudi reserves were 40% less than it officially said.

As it turns out, however, Mr. al-Husseini’s memory of that conversation is rather different.

He says he has no dispute with Aramco’s official reserves data, but disagrees with Mr. al-Saif’s projection for the future and with the diplomats’ characterization of its existing 716 billion barrels as “reserves”.

In fact, he says, that figure refers to “oil in place” which includes both recoverable and non-recoverable oil.

The kingdom’s “proven reserves”, the oil Saudi Aramco believes it can extract, are officially given as 260 billion barrels (Mr. al-Saif said the actual figure was probably more like 51% of the “oil in place” –- around 358 billion barrels).

So it seems this particular report may have been overstated. However, before one gets too complacent, it's worth considering the bigger picture, which is precisely what Gail the Actuary is attempting to do in this post at The Oil Drum. It sure looks like the overall trend for Saudi is downwards...

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