Does S Arabia Have 2 Mln Barrels in Spare Capacity?

[Marina Schwarz + 1,576]

Well, does it? From a recent Oilprice story:

"More recent history shows Saudi has never produced more than 10.6mn b/d on average over a single month. And even in the recent period, we have observed a steep decline in domestic Saudi oil inventories," Bank of America Merrill Lynch wrote in a note, arguing that there is plenty of reason to question the notion that Saudi Arabia has around 2 mb/d of idled capacity. "Thus, it appears the oil market has little confidence that Iran volumes can be easily replaced."

[Justin Hicks + 162]

Yea they did 10.7 Nov of 2016.

They've got reserves and offshore development that can realistically support 11million per day

 

https://tradingeconomics.com/saudi-arabia/crude-oil-production

[Marina Schwarz + 1,576]

So that's what, 400,000 bpd spare capacity from 2016 record highs?

[NickW + 2,714]

8 hours ago, Marina Schwarz said:

Well, does it? From a recent Oilprice story:

"More recent history shows Saudi has never produced more than 10.6mn b/d on average over a single month. And even in the recent period, we have observed a steep decline in domestic Saudi oil inventories," Bank of America Merrill Lynch wrote in a note, arguing that there is plenty of reason to question the notion that Saudi Arabia has around 2 mb/d of idled capacity. "Thus, it appears the oil market has little confidence that Iran volumes can be easily replaced."

If they fire up every semi retired stripper well then then yes but they can only sustain for a few months. 

[Marina Schwarz + 1,576]

Meanwhile at the IEA: Oil rallies as IEA warns of output capacity limits

[jaycee + 348]

if they have why did they not do it when tbey were driving  the oil price down by flooding the market? They are bluffing.

[William Edwards + 708]

On 7/13/2018 at 6:49 AM, jaycee said:

if they have why did they not do it when tbey were driving  the oil price down by flooding the market? They are bluffing.

I am missing something, jaycee. Please tell me how, physically, the Saudis "flooded the market". Where did the crude go that was not purchased by a willing customer? Did they pump it into the Persian Gulf? Did they drink it? Possibly the concept of the Saudis, or anyone else, "overproducing" is pure fiction. 

I suspect that you do not really think that you can put ten gallons of oil in a five gallon bucket. You are smarter than that. I suspect that you are sloppy with your terminology. I suspect that what you really meant to say is that the Saudis were willing to drop their selling price in order to entice some buyers to forego purchases from other suppliers and, indstead, buy Saudi production." Is that what you really meant? If so, why not just tell it like it is, "if the Saudis drop the price, the world price will fall." Production has nothing to do with it.  And a price drop is not a bluff!

[William Edwards + 708]

Marina, your question has about as much significance as the one that asks "How many angels can dance on the head of a pin?" Please put on your thinking cap, then describe for me the significance of "Spare capacity", recognizing that "spare" capacity is "unused" capacity and is therefore not in play. If there is ANY spare capacity, that means that you have enough. Whether you have barely enough or ten times enough, you are covered. Does it really matter when you drive up to the service station, whether you have a half a tank of gasoline, or just a cupful? You had enough. No problem!

But, you protest, spare capacity might be needed if something unexpected happens. That is true. But the real question then becomes "Do I have enough potential capacity to cover an unexpected event?" This brings the element of timing into the picture. Consider the fact that the tight oil industry has little spare capacity, but we are comfortable with our expectation that this segment of the industry can supply an additional one million barrels a day over the next year. No spare capacity, but comfortably assured supplies. Are you worried because there is no spare capacity? No, of course not.

Now apply the same thinking to the Saudi picture. Even an abrupt loss of production of a major supplier of one or two million barrels a day does not require instantaneous replenishment. Available inventories give us some time. So the real question is "How much productive capacity can be added over time?" Thus a more appropriate question than the one you asked is "How much capacity are the Saudis capable of adding over a year-or-two period?" 5 million barrels a day? 10 million barrels a day? After all, they have probably ten times the reserves of the tight oil industry, so if we are comfortable expecting tight oil to ramp up a million barrels a day in a year, why not apply the same expectation that the Saudis could ramp up ten million barrels a day in a year, if justified?

Let us strive to be consistent in our thinking.

Edited July 14, 2018 by William Edwards

[NickW + 2,714]

23 hours ago, William Edwards said:

Marina, your question has about as much significance as the one that asks "How many angels can dance on the head of a pin?" Please put on your thinking cap, then describe for me the significance of "Spare capacity", recognizing that "spare" capacity is "unused" capacity and is therefore not in play. If there is ANY spare capacity, that means that you have enough. Whether you have barely enough or ten times enough, you are covered. Does it really matter when you drive up to the service station, whether you have a half a tank of gasoline, or just a cupful? You had enough. No problem!

But, you protest, spare capacity might be needed if something unexpected happens. That is true. But the real question then becomes "Do I have enough potential capacity to cover an unexpected event?" This brings the element of timing into the picture. Consider the fact that the tight oil industry has little spare capacity, but we are comfortable with our expectation that this segment of the industry can supply an additional one million barrels a day over the next year. No spare capacity, but comfortably assured supplies. Are you worried because there is no spare capacity? No, of course not.

Now apply the same thinking to the Saudi picture. Even an abrupt loss of production of a major supplier of one or two million barrels a day does not require instantaneous replenishment. Available inventories give us some time. So the real question is "How much productive capacity can be added over time?" Thus a more appropriate question than the one you asked is "How much capacity are the Saudis capable of adding over a year-or-two period?" 5 million barrels a day? 10 million barrels a day? After all, they have probably ten times the reserves of the tight oil industry, so if we are comfortable expecting tight oil to ramp up a million barrels a day in a year, why not apply the same expectation that the Saudis could ramp up ten million barrels a day in a year, if justified?

Let us strive to be consistent in our thinking.

During my time at Aramco one of the biggest concerns we would hear about were demands to pump too fast and permanently damage the Oilfields.  

I recall a talented Saudi Manager (One of very few) explaining to some less talented Saudi Managers that you can sustainably give 1-1.5 litres of blood a year for most of your adult life. However attempt to take 4 litres in one go and you'll be dead. Which approach is more productive in the long run?

Much of Saudi's extra capacity is temporary- they have a lot of worn out fields that are still low rate producers. They run the wells, if needed for 2-4 months over the summer to account for the extra oil used in those months for electricity production. They cannot be run like this for longer periods of time. Likewise they can be run like this in the event they need to pump more onto the market to cool prices - the other side to that is that they will have to claw that back sometime later. You can also pump Ghawar harder for a few months but the seawater injection plant is already working flat out and after a few months the water cut on the oil produced will be so high that this will effectively reduce your oil supply  as the wells will have basically become water wells. There is only so much water injection can do - gravity and time also need to do their stuff. 

Interesting article on Quaryah Beach SW injection plant. 

http://www.theoildrum.com/node/9045

 

[William Edwards + 708]

5 minutes ago, NickW said:

During my time at Aramco one of the biggest concerns we would hear about were demands to pump too fast and permanently damage the Oilfields.  

I recall a talented Saudi Manager (One of very few) explaining to some less talented Saudi Managers that you can sustainably give 1-1.5 litres of blood a year for most of your adult life. However attempt to take 4 litres in one go and you'll be dead. Which approach is more productive in the long run?

Much of Saudi's extra capacity is temporary- they have a lot of worn out fields that are still low rate producers. They run the wells, if needed for 2-4 months over the summer to account for the extra oil used in those months for electricity production. They cannot be run like this for longer periods of time. Likewise they can be run like this in the event they need to pump more onto the market to cool prices - the other side to that is that they will have to claw that back sometime later. You can also pump Ghawar harder for a few months but the seawater injection plant is already working flat out and after a few months the water cut on the oil produced will be so high that this will effectively reduce your oil supply  as the wells will have basically become water wells. There is only so much water injection can do - gravity and time also need to do their stuff. 

Interesting article on Quaryah Beach SW injection plant. 

http://www.theoildrum.com/node/9045

 

Thanks, Nick. Now can we address my larger point. If you needed an additional 5 million barrels a day for five years from Saudi Arabia, with sales guaranteed, beginning a couple of years from now, could the Saudis produce it?

[NickW + 2,714]

2 hours ago, William Edwards said:

Thanks, Nick. Now can we address my larger point. If you needed an additional 5 million barrels a day for five years from Saudi Arabia, with sales guaranteed, beginning a couple of years from now, could the Saudis produce it?

The only forseeable way Saudi Arabia could achieve an increase in output as a meaningful fraction of that figure is through a major program of end use efficiency, displacing oil from electricity production as well as a massive expansion on exploration. 

This graph is a bit dated but shows typical oil consumption for electricity production month by month. It peaks in August at around 1 million BPD. Average use is about 600KBPD per month.

https://www.eia.gov/todayinenergy/detail.php?id=18111

This is whats behind their 200GW solar plan. 

Assuming they can install this it would displace about 1.1M BPD equivalent . 50-100GW is more realistic without massive investments in storage capacity

The potential in end use efficiency is massive - switch to LED lighting (most people still use incandescents...) which would cut peak period use directly and indirectly as they only produce a fraction of the heat . The elephant in the room would be switching Saudis to driving vehicles with much better fuel economy. A friend tells me that have actually been promoting Hybrids. 

If they went hell for leather down that route instead of building canals to turn Qatar into an Island in 5 years they might realistically free up 1 MBPD. 

As for exploration there was a quiet panic when I was there in 2010-2012 because they simply were not finding much oil. Gas finds were better but only to the extent they were helping keep production stable. Former colleagues tell me that position hasn't changed since then. 

[William Edwards + 708]

9 hours ago, NickW said:

The only forseeable way Saudi Arabia could achieve an increase in output as a meaningful fraction of that figure is through a major program of end use efficiency, displacing oil from electricity production as well as a massive expansion on exploration. 

This graph is a bit dated but shows typical oil consumption for electricity production month by month. It peaks in August at around 1 million BPD. Average use is about 600KBPD per month.

https://www.eia.gov/todayinenergy/detail.php?id=18111

This is whats behind their 200GW solar plan. 

Assuming they can install this it would displace about 1.1M BPD equivalent . 50-100GW is more realistic without massive investments in storage capacity

The potential in end use efficiency is massive - switch to LED lighting (most people still use incandescents...) which would cut peak period use directly and indirectly as they only produce a fraction of the heat . The elephant in the room would be switching Saudis to driving vehicles with much better fuel economy. A friend tells me that have actually been promoting Hybrids. 

If they went hell for leather down that route instead of building canals to turn Qatar into an Island in 5 years they might realistically free up 1 MBPD. 

As for exploration there was a quiet panic when I was there in 2010-2012 because they simply were not finding much oil. Gas finds were better but only to the extent they were helping keep production stable. Former colleagues tell me that position hasn't changed since then. 

Thanks, Nick. But your comments suggest that the 30 billion barrels of Safaniya reserves do not exist or cannot be produced. Also the other reported 125+ billion barres of reserves, currently producing at 3.5 Billion barrels a year, will produce at the current rate for thirty more years without doing anything differently. You can see why I am puzzled when the Saudi R/P ratio is thirty or forty while the US rate is 8 or 10. Should we fear a collapse of the US production, or should we cease worrying about Saudi capability?

I realize that reserve figures are mostly undefined guesswork. But if there was any reality to the Saudi figures when the big boys owned and reported the reserves at 150 billion barrels at a $5 price, the current number of 160 billion barres economically produceable at ten times that price would appear to me to be conservative. 

Can you help me out here?

[NickW + 2,714]

7 hours ago, William Edwards said:

Thanks, Nick. But your comments suggest that the 30 billion barrels of Safaniya reserves do not exist or cannot be produced. Also the other reported 125+ billion barres of reserves, currently producing at 3.5 Billion barrels a year, will produce at the current rate for thirty more years without doing anything differently. You can see why I am puzzled when the Saudi R/P ratio is thirty or forty while the US rate is 8 or 10. Should we fear a collapse of the US production, or should we cease worrying about Saudi capability?

I realize that reserve figures are mostly undefined guesswork. But if there was any reality to the Saudi figures when the big boys owned and reported the reserves at 150 billion barrels at a $5 price, the current number of 160 billion barres economically produceable at ten times that price would appear to me to be conservative. 

Can you help me out here?

Safaniyah has been producing since the late 1950's. Its heavy oil so the management don't like to squeeze the field too hard.

KSA is completely different from the USA. The USA is a mature diverse economy whereas KSA is a one trick pony. If oil production in the USA dropped to zero in 10 years it would have economic implications but the USA produced lots of other items it can trade for imports including energy. In contrast KSA only has oil & oil products to sell in exchange for just about everything else including food.

Most Saudi's concern themselves with the future of their children and grandchildren thereafter it really is a matter of Allah will Provide / In-shah-allah.This is one reason behind the longer R/P ratios than you see in western oil producers like the USA, UK, Norway etc. They don't want to see the house come down in their lifetimes.

In terms of reserves I heard a lot of rumours around the 150bn mark. That would tie in with a 40 year R/P. There was a lot of interest in EOR using Co2 as this was thought to be the best way of upping the recovery rate from oil fields. There were also going to plug the idea along the lines that they were sequestering all this Co2 to save the world...

[William Edwards + 708]

2 hours ago, NickW said:

Safaniyah has been producing since the late 1950's. Its heavy oil so the management don't like to squeeze the field too hard.

KSA is completely different from the USA. The USA is a mature diverse economy whereas KSA is a one trick pony. If oil production in the USA dropped to zero in 10 years it would have economic implications but the USA produced lots of other items it can trade for imports including energy. In contrast KSA only has oil & oil products to sell in exchange for just about everything else including food.

Most Saudi's concern themselves with the future of their children and grandchildren thereafter it really is a matter of Allah will Provide / In-shah-allah.This is one reason behind the longer R/P ratios than you see in western oil producers like the USA, UK, Norway etc. They don't want to see the house come down in their lifetimes.

In terms of reserves I heard a lot of rumours around the 150bn mark. That would tie in with a 40 year R/P. There was a lot of interest in EOR using Co2 as this was thought to be the best way of upping the recovery rate from oil fields. There were also going to plug the idea along the lines that they were sequestering all this Co2 to save the world...

Thanks, Nick. Your comments help to explain why the Saudis leave oil in the ground that could be produced at a very low cost while allowing other areas to spend upwards of $50/B to create and utilize new production. By the way, this anomaly is overlooked by most observers. Can you say "Take them for granted?" But it seems to reinforce my point that it is very likely that demand for oil will not be sufficient to ever utilize all of the Saudi reserves. To me the bottom line is that we will always have the Saudi oil available as needed. Peak demand -- Yes! Peak supply -- No!

[NickW + 2,714]

1 hour ago, William Edwards said:

Thanks, Nick. Your comments help to explain why the Saudis leave oil in the ground that could be produced at a very low cost while allowing other areas to spend upwards of $50/B to create and utilize new production. By the way, this anomaly is overlooked by most observers. Can you say "Take them for granted?" But it seems to reinforce my point that it is very likely that demand for oil will not be sufficient to ever utilize all of the Saudi reserves. To me the bottom line is that we will always have the Saudi oil available as needed. Peak demand -- Yes! Peak supply -- No!

Yes- Oil is everything to the Saudis - its not one of many commodities  - its their only commodity. I don't have much faith in their 2030 development vision at best this kicks the can down the road a decade or two. At worst it could be a Potemkin village to fool its resident population. Although many Saudis are gullible they are not so stupid that many would actually believe in Abiotic oil so they know one day the party will draw to a close.

The Arabian Peninsula can support about 1 million people sustainably from an agricultural perspective. Their current resident population excluding expats is about 21 million. Try importing food for 21 million people when all you have is sand and package holidays to Mecca to trade.

BTW - the fact they developed Manifa is quite telling. That oil is horrible - Sulphur rich and full of pipe eating Vanadium. When I was recruited Aramco were offering big money to Metallurgists. I heard it needs a price upwards of $75 to be profitable whereas most Saudi oil lift costs are under $10. Seriously why develop that crud if they had better options on offer.

[William Edwards + 708]

3 minutes ago, NickW said:

Yes- Oil is everything to the Saudis - its not one of many commodities  - its their only commodity. I don't have much faith in their 2030 development vision at best this kicks the can down the road a decade or two. At worst it could be a Potemkin village to fool its resident population. Although many Saudis are gullible they are not so stupid that many would actually believe in Abiotic oil so they know one day the party will draw to a close.

The Arabian Peninsula can support about 1 million people sustainably from an agricultural perspective. Their current resident population excluding expats is about 21 million. Try importing food for 21 million people when all you have is sand and package holidays to Mecca to trade.

BTW - the fact they developed Manifa is quite telling. That oil is horrible - Sulphur rich and full of pipe eating Vanadium. When I was recruited Aramco were offering big money to Metallurgists. I heard it needs a price upwards of $75 to be profitable whereas most Saudi oil lift costs are under $10. Seriously why develop that crud if they had better options on offer.

I must conclude that their arithmetic on Manifa must be different from yours, Nick.

[NickW + 2,714]

Just now, William Edwards said:

I must conclude that their arithmetic on Manifa must be different from yours, Nick.

Their argument was that the development was to gain experience in handling sour oil. Its capex was about $11bn

The gift that just keeps on giving (to highly paid Metallurgists anyway)

https://www.reuters.com/article/us-manifa-aramco-cut-idUSKBN19W1R4

 

Sounds very similar to Eni's Cash-All-Gone (Kashagan) project in Kazakstan.

[DanilKa + 443]

7 hours ago, NickW said:

Their argument was that the development was to gain experience in handling sour oil. Its capex was about $11bn

The gift that just keeps on giving (to highly paid Metallurgists anyway)

https://www.reuters.com/article/us-manifa-aramco-cut-idUSKBN19W1R4

 

Sounds very similar to Eni's Cash-All-Gone (Kashagan) project in Kazakstan. 

Water injection system corrosion has nothing to do with Vanadium, Nick. It is not even exposed to oil. Pretty benign saltwater corrosion stuff, well-known metallurgy or coatings.

And hey, $11B/(900,000*$50/bbl) = 244 days.

[NickW + 2,714]

7 hours ago, DanilKa said:

Water injection system corrosion has nothing to do with Vanadium, Nick. It is not even exposed to oil. Pretty benign saltwater corrosion stuff, well-known metallurgy or coatings.(1)

And hey, $11B/(900,000*$50/bbl) = 244 days.(2)(3)

(1) I never said the two were directly connected however Vanadium in salt form is highly corrosive. 

(2) Have they ever produced anywhere near 900.000 BPD? 

(3) Does that equation assume OPEX is zero?

 

[DanilKa + 443]

24 minutes ago, NickW said:

(1) I never said the two were directly connected however Vanadium in salt form is highly corrosive. 

(2) Have they ever produced anywhere near 900.000 BPD? 

(3) Does that equation assume OPEX is zero?

 

Nick, my bad - making assumptions based on prior discussion. Have no insight on production numbers. Assuming OPEX ~20, which is generous. If Saudi can't make money from their reserves - who can?

 

[energyecon + 5]

They can cash flow with capex as a sunk cost, sure.  But the larger question has been begged, which is why develop such crappy oil unless it is the last super-giant field on the shelf and you need it to maintain volumes?

[Rodent + 1,424]

Manifa makes absolutely no sense. Maybe it made sense in the 50s? Obviously someone thought so, but why they thought so is unclear to me. Was it because there was no other oil available to tap? Is it because they want to tap every ounce of oil the country has? Was it because they wanted to experiment (in a very expensive way) with drilling technology in order to be able to tap other hard-to-get oil in the future?

Sounds like I'm preaching to the choir, but Manifa is a complicated monstrosity. Of course, as @energyeconmentioned above, much of the costs are sunk already and shouldn't be considered going forward. But at some point you are throwing good money after bad. The conspiracy-theorist in me is struggling to come up with a fantastic reason for keeping on keeping on here, but alas, I cannot. Where is @Marina Schwarz 's creative brain when you need it? 

As an aside, didn't this project hit a roadblock late last year? Somewhere I remember reading about how whatever it was (maybe it's what you were talking about, @NickW) had affected the amount of oil they could get out of the project longer-term. Of course, who really knows, what with all of Aramco's lack of transparency and all.

 

[Bhimsen Pachawry + 72]

On 7/16/2018 at 4:45 PM, NickW said:

Safaniyah has been producing since the late 1950's. Its heavy oil so the management don't like to squeeze the field too hard.

KSA is completely different from the USA. The USA is a mature diverse economy whereas KSA is a one trick pony. If oil production in the USA dropped to zero in 10 years it would have economic implications but the USA produced lots of other items it can trade for imports including energy. In contrast KSA only has oil & oil products to sell in exchange for just about everything else including food.

Most Saudi's concern themselves with the future of their children and grandchildren thereafter it really is a matter of Allah will Provide / In-shah-allah.This is one reason behind the longer R/P ratios than you see in western oil producers like the USA, UK, Norway etc. They don't want to see the house come down in their lifetimes.

In terms of reserves I heard a lot of rumours around the 150bn mark. That would tie in with a 40 year R/P. There was a lot of interest in EOR using Co2 as this was thought to be the best way of upping the recovery rate from oil fields. There were also going to plug the idea along the lines that they were sequestering all this Co2 to save the world...

KSA has reserves of 115GBL as of now if my analysis is correct. 150GBL is a stretch. KSA manages the oil well by extracting in limited quantities over different wells to ensure maximum production. Same is the case with other Arab countries. However, the idea that 10.7mbd is the limit while 12mbd is a stress is something that is made up. How did that line be drawn between 10.7 and 12? What is so special about that value that it became a deadline? Technically speaking, if one extracts slowly enough, one may be able to extract even 75% of the oil but it will just take 1000+ years to do that. S, the optimal extraction point exists whereby the stress is not too much to degrade the field nor too little to waste the time and make the operational cost too high.

KSA has three times the reserves of USA (35-40GBL) and yet USA is managing to produce oil at 10-11mbd. It is false to say that USA has other options after oil runs out and hence can afford to be reckless. USA is a petrolist state that uses petrodollars to exert its dominance. USA is able to be a superpower in the first place due to vast reserves of oil. Similarly, USSR also became superpower due to vast reserves of oil. Oil has no substitute and USA can't simply say that they do't care if they don't have oil. Without oil, entire order will collapse.

There also have been evidence that USA deliberately underlayed its oil reserves for lot of time in the past so as to avoid being questioned by Arabs about low rate of extraction. In fact, USA deliberately hid the shale oil reserves by putting environmental restrictions in the 1980s! The very basin is now under full production since 2013. How did the environmental problem be resolved overnight?If USA was really just conserving the field and not indulging in cheating its allies by fudging the reserve quantity, USA would definitely have produced small quantities of oil to ensure most efficient extraction. So, the excuse that USA is being reckless and extracting more than what is ermitted is not fair. USA has made a very calculated move to produce shale oil in large quantity to meet the needs. USA is not an isolated example. Even countries like Norway produce 1.65mbd for a 8 billion barrel reserve which is R/P ratio less than 15, Mexico 8GBL/1.9MBD, R/P of 11, USA, R/P of 10-11, Columbia with 1.7GBL/0.9MBD, R/P of 11, China 25GBL/4MBD with R/P of 16 and so on produce at a much lower R/P ratio. So, KSA producing oil at 12MBD for a reserve of 115GBL is R/P of 26. So, I would not say that as overproducing. Moreover, with current EOR techniques, even the stressed out fields can be destressed to some extent by means of injection of methane to get higher production.

next, if oil production was purely for long term consideration, the production would never have come to the levels we see today. Today's oil is mostly wasted on luxury goods, picnics, tourism, excessive consumption etc KSA produces so much oil that it has got a huge sovereign wealth fund of $500 billion dollars and assets of over a trillion dollars which is simply a waste. KSA could instead produce oil at just 6-8MBD to have enough for meeting its needs and then exporting it for goods like food and other useful items from others instead of wasting it by holding meaningless assets in entertainment companies, real estate, building ghost towns in their land etc. The oil production has a political motive of making large short term gains which will last over the long run.

[NickW + 2,714]

On 7/17/2018 at 8:16 AM, DanilKa said:

Nick, my bad - making assumptions based on prior discussion. Have no insight on production numbers. Assuming OPEX ~20, which is generous. If Saudi can't make money from their reserves - who can?

 

From what I have heard OPEX is a lot higher because the processing costs are so high. The sulphur they strip out is now near worthless as the world is awash with sulphur. 

They make money from Manifa but the profit margin is much thinner than other reserves so the question remains why develop such a low grade reserve if you had others in the bag. 

[NickW + 2,714]

4 hours ago, Bhimsen Pachawry said:

KSA has reserves of 115GBL as of now if my analysis is correct. 150GBL is a stretch. KSA manages the oil well by extracting in limited quantities over different wells to ensure maximum production. Same is the case with other Arab countries. However, the idea that 10.7mbd is the limit while 12mbd is a stress is something that is made up. How did that line be drawn between 10.7 and 12? What is so special about that value that it became a deadline? Technically speaking, if one extracts slowly enough, one may be able to extract even 75% of the oil but it will just take 1000+ years to do that. S, the optimal extraction point exists whereby the stress is not too much to degrade the field nor too little to waste the time and make the operational cost too high.

KSA has three times the reserves of USA (35-40GBL) and yet USA is managing to produce oil at 10-11mbd. It is false to say that USA has other options after oil runs out and hence can afford to be reckless. USA is a petrolist state that uses petrodollars to exert its dominance. USA is able to be a superpower in the first place due to vast reserves of oil. Similarly, USSR also became superpower due to vast reserves of oil. Oil has no substitute and USA can't simply say that they do't care if they don't have oil. Without oil, entire order will collapse.

There also have been evidence that USA deliberately underlayed its oil reserves for lot of time in the past so as to avoid being questioned by Arabs about low rate of extraction. In fact, USA deliberately hid the shale oil reserves by putting environmental restrictions in the 1980s! The very basin is now under full production since 2013. How did the environmental problem be resolved overnight?If USA was really just conserving the field and not indulging in cheating its allies by fudging the reserve quantity, USA would definitely have produced small quantities of oil to ensure most efficient extraction. So, the excuse that USA is being reckless and extracting more than what is ermitted is not fair. USA has made a very calculated move to produce shale oil in large quantity to meet the needs. USA is not an isolated example. Even countries like Norway produce 1.65mbd for a 8 billion barrel reserve which is R/P ratio less than 15, Mexico 8GBL/1.9MBD, R/P of 11, USA, R/P of 10-11, Columbia with 1.7GBL/0.9MBD, R/P of 11, China 25GBL/4MBD with R/P of 16 and so on produce at a much lower R/P ratio. So, KSA producing oil at 12MBD for a reserve of 115GBL is R/P of 26. So, I would not say that as overproducing. Moreover, with current EOR techniques, even the stressed out fields can be destressed to some extent by means of injection of methane to get higher production.

next, if oil production was purely for long term consideration, the production would never have come to the levels we see today. Today's oil is mostly wasted on luxury goods, picnics, tourism, excessive consumption etc KSA produces so much oil that it has got a huge sovereign wealth fund of $500 billion dollars and assets of over a trillion dollars which is simply a waste. KSA could instead produce oil at just 6-8MBD to have enough for meeting its needs and then exporting it for goods like food and other useful items from others instead of wasting it by holding meaningless assets in entertainment companies, real estate, building ghost towns in their land etc. The oil production has a political motive of making large short term gains which will last over the long run.

The USA is not a Petrostate - it is the 2nd the biggest importer on the Planet and oil production only makes up a few 5 of its economy. As I said if the USA went to being zero producer it would have major repercussions for sure but a determined policy to adjust to it is feasible. I can't see this being the case for Saudi which is a centrally planned one trick pony economy build around a kleptocracy. 

Adapt to European size vehicles

Rapid transition to Hybrid, PHEV and EV's

Mass shift towards a nuclear - renewable energy economy 

Major shift towards end use efficiency.

Plenty of coal reserves to fill in the gaps