How Much Oil Does Aramco Have?

[William Edwards + 708]

11 minutes ago, Jeffrey Brown said:

What is the Real Size of the Saudi Oil Reserves? (Pt 1/2)

http://blog.gorozen.com/blog/what-is-the-real-size-of-the-saudi-oil-reserves-pt-1/2

What is the Real Size of the Saudi Oil Reserves? (Pt 2/2)

http://blog.gorozen.com/blog/what-is-the-real-size-of-the-saudi-oil-reserves-pt-2/2

My comments:

Actually, the data suggest that on a net exports basis, after subtracting out rising domestic liquids consumption,  Saudi Arabia has been supply contained since 2005.

Their net exports of total petroleum liquids (BP data base) increased from 7.1 million bpd in 2002 to 8.7 million bpd in 2005, but their net exports have been below the 2005 level for 12 straight years, through 2017, averaging only 7.9 million bpd for 2006 to 2017 inclusive.

Note the large increase in Saudi net exports from 2002 to 2005 as annual Brent crude oil prices approximately doubled from $25 in 2002 to $55 in 2005.

However, as annual Brent crude oil prices doubled again,  from $55 in 2005 to $110 for 2011 to 2013 inclusive, Saudi net exports averaged only 8.0 million bpd during this three year period of triple digit oil prices, versus 8.7 million bpd in 2005.

You are to be commended, Jeffrey, for looking at historical data and learning from what it reveals. And you have recognized the little secret that most of the world misses -- Saudi production has almost ALWAYS been limited by demand, as you might expect from their role as swing producer. Spare producing capacity has been built in since, at least, the 1960's. I wonder if the industry's thinking ability will ever catch up with yours and place the cart properly after, not before, the horse. The Saudis DO NOT set production levels, they only meet the demand that others present to them. Consumers set production levels, the Saudis merely turn the valves accordingly.

You deserve the "Enhanced Intelligence" award.

[Jeffrey Brown + 208]

William,

Just to clarify, my thesis is that post-2005 Saudi Arabia was unable to exceed their 2005 net export rate of 8.7 million bpd, irrespective of demand.  

As I outlined above, Saudi net exports increased by 23% as annual Brent crude oil prices approximately doubled, from $25 in 2002 to $55 in 2005. 

As annual Brent crude oil prices doubled again, from $55 in 2005 to $110 for 2011 to 2013 inclusive, average Saudi net oil exports fell by 8%, as very high global crude oil prices were clearly showing a significant demand for Saudi exports, circa 2011 to 2013. 

And as outlined in my first post, an extrapolation of the rate of decline in the ratio of Saudi production to consumption suggests that the Saudis have already shipped more than half of their post-2005 Cumulative Net Exports of oil (CNE).  Also, this methodology was too optimistic in estimating post-1995 CNE for the Six Country Case History. 

In any case, given an ongoing--and inevitable--decline in Saudi production, unless they cut their domestic liquids consumption at the same rate as, or at a faster rate than, the rate of decline in their production, it's a mathematical certainty that the rate of decline in their net exports will exceed the rate of decline in production and that the rate of decline in net exports will accelerate with time. 

[William Edwards + 708]

4 minutes ago, Jeffrey Brown said:

William,

Just to clarify, my thesis is that post-2005 Saudi Arabia was unable to exceed their 2005 net export rate of 8.7 million bpd, irrespective of demand.  

As I outlined above, Saudi net exports increased by 23% as annual Brent crude oil prices approximately doubled, from $25 in 2002 to $55 in 2005. 

As annual Brent crude oil prices doubled again, from $55 in 2005 to $110 for 2011 to 2013 inclusive, average Saudi net oil exports fell by 8%, as very high global crude oil prices were clearly showing a significant demand for Saudi exports, circa 2011 to 2013. 

And as outlined in my first post, an extrapolation of the rate of decline in the ratio of Saudi production to consumption suggests that the Saudis have already shipped more than half of their post-2005 Cumulative Net Exports of oil (CNE).  Also, this methodology was too optimistic in estimating post-1995 CNE for the Six Country Case History. 

In any case, given an ongoing--and inevitable--decline in Saudi production, unless they cut their domestic liquids consumption at the same rate as, or at a faster rate than, the rate of decline in their production, it's a mathematical certainty that the rate of decline in their net exports will exceed the rate of decline in production and that the rate of decline in net exports will accelerate with time. 

And my assessment is that driving your numbers is the simple fact that the Saudi reserves will continue to be produced, as needed. Need, or demand, ultimately determines  the numbers, not vice versa.

[Jeffrey Brown + 208]

William, good point.  

After almost 40 years in the oil business, it's frequently been my experience that my need for oil production magically causes the oil to appear in the stock tanks. 

Of course, there is the alternative theory that the finite sum of discrete source of oil that peak and decline will also peak and decline.   

In any case, it goes with out saying that the Saudis voluntarily increased their net exports from 2002 to 2005, as annual oil prices doubled.  

As their net exports fell by 8% in the 2011 to 2013 time frame, as annual oil prices doubled again, one could argue that they chose not to increase their net exports, in contrast to the 2002 to 2005 time period.  But the alternative explanation makes a lot more sense, to-wit, they were unable to increase their net exports as annual Brent crude oil prices doubled from 2005.   

But you are certainly free to argue that triple digit oil prices for three years indicate a lack of demand for Saudi oil, forcing them to cut net exports-- they just couldn't find anyone to buy the extra oil as annual Brent crude oil prices averaged $110 for three years.  But I don't think I've ever heard of high prices being a sign of low demand.  

Incidentally, global net exports oil (GNE, what I define as the combined net exports from the 2005 top 33 net oil exporters) have also been below the 2005 rate for 12 straight years, including the referenced 2011 to 2013 time period. 

By the way, why did the combined net exports from the Six Country Case History go from a net export peak in 1995 to zero net exports in 2007, as oil prices were rising?  They collectively couldn't find buyers for their oil, forcing them to become net oil importers?

The following chart shows normalized post-1995 values for the Six Countries, through 2002:

http://s1095.photobucket.com/user/westexas/media/Slide1_zpsvcwc848w.jpg.html?sort=3&o=11

Edited January 11, 2019 by Jeffrey Brown

[William Edwards + 708]

4 minutes ago, Jeffrey Brown said:

William, good point.  

After almost 40 years in the oil business, it's frequently been my experience that my need for oil production magically causes the oil to appear in the stock tanks. 

Of course, there is the alternative theory that the finite sum of discrete source of oil that peak and decline will also peak and decline.   

In any case, it goes with out saying that the Saudis voluntarily increased their net exports from 2002 to 2005, as annual oil prices doubled.  

As their net exports fell by 8% in the 2011 to 2013 time frame, as annual oil prices doubled again, one could argue that they chose not to increase their net exports, in contrast to the 2002 to 2005 time period.  But the alternative explanation makes a lot more sense, to-wit, they were unable to increase their net exports as annual Brent crude oil prices doubled from 2005.   

But you are certainly free to argue that triple digit oil prices for three years indicate a lack of demand for Saudi oil, forcing them to cut net exports-- they just couldn't find anyone to buy the extra oil as annual Brent crude oil prices averaged $110 for three years.  But I don't think I've ever heard of high prices being a sign of low demand.  

Incidentally, global net exports oil (GNE, what I define as the combined net exports from the 2005 top 33 net oil exporters) have also been below the 2005 rate for 12 straight years, including the referenced 2011 to 2013 time period. 

By the way, why did the combined net exports from the Six Country Case History go from a net export peak in 1995 to zero net exports in 2007, as oil prices were rising?  They collectively couldn't find buyers for their oil, forcing them to become net oil importers?

I am a bit pressed for time at the moment and won't be able to think through the answers to all of your points, but the common theme guiding my thinking is 1) more oil sells at lower prices than high, 2) exports fill the needs, 3) the marginal suppliers meet any increased demand, 4) the idea that instantaneous knowledge by futures traders of the supply demand balance at any point in time is so ridiculous as to be ignored. 5) The idea that demand sets the price, rather than vice versa, can only be accepted by the uninformed (which are ubiquitous).

[Jeffrey Brown + 208]

William,

My point is that irrespective of price, at some point a field, a producing province, a country and the world can't increase its oil production, and in fact IMO actual global crude oil production (45 API gravity and lower) has been on an "Undulating Plateau" since 2005 as global gas production and associated liquids--condensate and natural gas liquids--have so far continued to increase. 

In regard to the Six Country Case History, their 1995 to 2007 net export decline (net export peak to zero in 12 years) corresponded to oil prices increasing from $17 in 1995 to $72 in 2007, a 12%/year exponential rate of increase.   And from 1995 to 1999, the Six Country Case History was characterized by rising production, rising consumption and falling net exports, as the increase in consumption outpaced the increase in production.  But in that four year time period, they shipped 54% of post-1995 Cumulative Net Exports of oil (CNE)--AS PRODUCTION INCREASED.  

Saudi Arabia, IMO, circa 2005 to 2017, is analogous to the Six Country Case History, circa 1995 to 1999--rising production, rising consumption, falling net exports and huge rates of depletion in the supply of post-2005 and post-1995 respective supplies of CNE (cumulative net exports of oil). 

[William Edwards + 708]

5 hours ago, Jeffrey Brown said:

William,

My point is that irrespective of price, at some point a field, a producing province, a country and the world can't increase its oil production, and in fact IMO actual global crude oil production (45 API gravity and lower) has been on an "Undulating Plateau" since 2005 as global gas production and associated liquids--condensate and natural gas liquids--have so far continued to increase. 

In regard to the Six Country Case History, their 1995 to 2007 net export decline (net export peak to zero in 12 years) corresponded to oil prices increasing from $17 in 1995 to $72 in 2007, a 12%/year exponential rate of increase.   And from 1995 to 1999, the Six Country Case History was characterized by rising production, rising consumption and falling net exports, as the increase in consumption outpaced the increase in production.  But in that four year time period, they shipped 54% of post-1995 Cumulative Net Exports of oil (CNE)--AS PRODUCTION INCREASED.  

Saudi Arabia, IMO, circa 2005 to 2017, is analogous to the Six Country Case History, circa 1995 to 1999--rising production, rising consumption, falling net exports and huge rates of depletion in the supply of post-2005 and post-1995 respective supplies of CNE (cumulative net exports of oil). 

I do not have any trouble with your arithmetic, Jeffrey. Maybe, however, I am too dense to click in to the practical meaning of your CNE. For that I apologize. But in spite of my shortcomings, it occurs to me that your treatment has drawn a circle around a sub-set of producing reserves without applying the impact of the new and expanded discoveries. I also get the impression that you are thinking that something other than consumer needs dictate production activity. As I see it, once the oil has been found, successful production requires a consumer to utilize the production. Since, historically, there has always been enough oil to supply the demand at the prevailing prices, various reserve holders fight over who gets to produce their reserves. That can impact the CNE. Am I off base?

One other point: Have you applied your treatment and developed conclusions regarding US production and reserves beginning around the year 1900? Just a thought.

[Jeffrey Brown + 208]

Since 2005, I have been studying net oil exports, and a few years ago, I participated in a meeting with senior EIA/DOE officials, including the EIA Administrator,  in which I briefed them on my work on net oil exports.  

Of course, one could argue that there is no fundamental difference between a consumer in a net oil exporting country and a consumer in a net oil importing country, but the math is pretty straight forward.  Just get a calculator with an exponential function and run various domestic consumption scenarios for a net oil exporting showing a long term production decline.  In addition, many oil exporting countries have domestic subsidies, e.g., Saudi Arabia, and we sometimes see restrictions on exports,  in order to reduce domestic prices, which happened in regard to food exports a few years ago in Russia. 

In any case, take a look at various oil exporting countries showing a long term production decline, with a meaningful level of domestic consumption, and try to find an example of a net oil exporter not showing an accelerating rate of decline in net oil exports. 

As noted above, given an ongoing--and inevitable--decline in production in a net oil exporting country, unless they cut their domestic liquids consumption at the same rate as, or at a faster rate than, the rate of decline in their production, it's a mathematical certainty that the rate of decline in their net exports will exceed the rate of decline in production and that the rate of decline in net exports will accelerate with time.  And if the rate of consumption exceeds the rate of increase in production, a net oil exporting country can become a net oil importer, even as production continues to increase, e.g., the US (in 1948) and China. 

Mexico is a case in point.

Their total petroleum liquids production in 2004 was 3.8 million bpd, versus total liquids consumption of 2.0 million bpd, resulting in 2004 (total petroleum liquids) net exports of 1.8 million bpd (BP data).

Production in 2017 was down to 2.2 million bpd, versus consumption of 1.9 million, resulting in 2017 net exports of 0.3 million bpd.

Mexico’s 2004 to 2017 rate of decline in production was 4.2%/year, versus a net export rate of decline of 17%/year.

Year to date production through October, 2018 was 2.1 million bpd.  Assuming no change in consumption, their 2018 net exports would be down to 0.2 million bpd.  Note that this would be a simple percentage year over year decline in net exports of 33%, versus a production decline of only 4.5%.

At the current rate of decline in their ratio of production to consumption, Mexico will probably hit zero net oil exports in 2020. 

 

[Mike Shellman + 548]

You folks are lucky to have Jeffrey Brown commenting here. I have known him a long time and he is a very smart, very intuitive geologist with a good handle on stuff. He is the author of the Land Export Model, which can be found on Wikipedia and elsewhere. I'd listen up when Jeffrey speaks.

William Edwards is right, the KSA has enough. Whatever it is it is way more than the US has, apples to apples, proven to proven, and will be recovered for 1/20th the cost as expensive shale oil in the US. It will also be very important to America again when US light tight oil resources are drained and exported to China...so the shale oil industry can pay interest on long term debt.

Howdy, Jeff!  Good luck here. 

 

[ronwagn + 6,290]

Saudi Arabia values natural gas for its citizens and as a way to sell more oil to others. Of course, it probably also flares the most.  

http://www.ngvglobal.com/blog/egypt-funds-thousands-of-vehicle-conversions-to-cng-0110

[Jeffrey Brown + 208]

Hi Mike, thanks for the kind words. 

It seems to be a recurring pattern that many people refuse to accept some basic mathematical facts. 

In any case, note that even countries doing a pretty good job of cutting domestic petroleum liquids production, e.g., Denmark, show an accelerating rate of decline in net exports, and I previously have noted how the UK, which taxed energy consumption, and Indonesia, which subsidized energy consumption, both showed accelerating rates of decline in net exports. 

And our global net export supply base consist of countries like these examples, to-wit, it's when, not if, that they show accelerating rates of decline in net exports, unless they cut their domestic liquids consumption at the same rate as, or at a faster rate than, their rate of decline in production. 

And I haven't even gotten to the truly scary chart--the steady decline in the ratio of Global Net Exports of oil (GNE) to Chindia's Net Imports (CNI).  Following is a chart showing the GNE/CNI Ratio for 2002 to 2011.  The extrapolation, showing the ratio falling to about 3.0 in 2017, was based on the 2005 to 2011 rate of decline in the ratio (9.0%/year).  The decline in the ratio slowed somewhat, to 7.8%/year from 2005 to 2017, resulting in the ratio falling to 3.5 (on track to hit 1.0, the Chndia region theoretically consuming 100% of GNE, in about 15 years).  

In any case, here's the problem:  given an ongoing and inevitable decline in GNE, unless the Chindia region cuts their net oil imports at the same rate as the rate of decline in GNE, or at a faster rate, it's a mathematical certainty that the rate of decline in ANE (Available Net Exports, the volume of GNE available to importers other than China & India) will exceed the rate of decline in GNE and that the rate of decline in ANE will accelerate with time. 

Edited January 13, 2019 by Jeffrey Brown

[JoMack + 549]

I always wonder what Saudi Arabias spare capacity is there.  With the so-called Prince trying to develop more industry and a self-reliant population, the Saudi spare capacity may be less than they report for the future.

[William Edwards + 708]

9 minutes ago, JoMack said:

I always wonder what Saudi Arabias spare capacity is there.  With the so-called Prince trying to develop more industry and a self-reliant population, the Saudi spare capacity may be less than they report for the future.

Please explain the significance of spare capacity. When do you recall the Saudis being limited in production by capacity?

[JoMack + 549]

I know you know Mr. Edwards, that it is the amount of oil a country can export over what it uses.  U.S. produces 11 million, imports 4 or 5 million.  We exported 3 million which, I believe is due to the Brent pricing spread.  If the Saudi economy grows as it plans,  perhaps the amount of bbls will not be the millions of bbls they are exporting at this time.  Does Aramco have billions of bbls?  I believe that's a stretch.   

[William Edwards + 708]

5 hours ago, JoMack said:

I know you know Mr. Edwards, that it is the amount of oil a country can export over what it uses.  U.S. produces 11 million, imports 4 or 5 million.  We exported 3 million which, I believe is due to the Brent pricing spread.  If the Saudi economy grows as it plans,  perhaps the amount of bbls will not be the millions of bbls they are exporting at this time.  Does Aramco have billions of bbls?  I believe that's a stretch.   

Aramco just reported 260 billion barrels of reserves. If they were to pump 10,000,000 B/D it would take 50 years to deplete those barrels.

[Auson + 123]

16 hours ago, William Edwards said:

Aramco just reported 260 billion barrels of reserves. If they were to pump 10,000,000 B/D it would take 50 years to deplete those barrels.

Doesn't that depend on if there is a market for sea water in the future ?

[William Edwards + 708]

4 hours ago, Auson said:

Doesn't that depend on if there is a market for sea water in the future ?

Sorry! You are too clever for my simple mind. That went right over my head.

[John Foote + 1,135]

On 1/13/2019 at 1:29 PM, JoMack said:

I always wonder what Saudi Arabias spare capacity is there.  With the so-called Prince trying to develop more industry and a self-reliant population, the Saudi spare capacity may be less than they report for the future.

The issue is putting folks to work. There is very large unemployment in the under 30 crowd. The tradition employment is public sector, or almost public sector, Aramco or SABIC, or Saudi Electric. The Kingdom can't just continue making up jobs in those sectors. Besides, say they triple their oil production (won't get into if it can). What are they going to do, hire another 20,000 into Aramco? Oil and gas doesn't employ massive amounts of people like some industries. It's good work for those in it, and those of the right ilk, but it's not for the average Dick or Jane, Abdullah or Sarah. Of course the great challenge is getting the existing private sector to hire Saudis. 

[Jeffrey Brown + 208]

Mamdouh G Salameh's Comment on the topic follows, and in any case as I noted up the thread, the diametrically opposed Saudi net export response to two annual crude oil price doublings (Saudi net exports circa 2011 to 2013 fell relative to 2005 as annual Brent crude oil prices averaged $110) strongly suggests that Saudi Arabia, post-2005, had some production constraints, i.e., they have ben unable, for 12 straight years to exceed their 2005 net export rate, irrespective of global oil prices and demand. 

New Audit Shows Higher Aramco Oil Reserves
https://oilprice.com/Energy/Energy-General/New-Audit-Shows-Higher-Aramco-Oil-Reserves.html

Mamdouh G Salameh
on January 09 2019

Ms Irina Slav published on the 30th of April 2018 a virtually identical article under the title:


”Audit Puts Aramco’s Oil Reserves at $270 billion Barrels”. The new article comes with a slight variation in the title though the sentiment is exactly the same.



This new article like the previous one contains untruths, bias and deliberate attempts at delusion and I will explain why.



First, the Audit can neither be independent nor unbiased since some of the companies that conducted the audit (DeGolyer, MacNaughton, and Baker Hughes’ Gaffney, Cline, and Associates) have or have had service contracts with Saudi Aramco, so it can’t truly be classified as an independent audit. 



Second, the claimed audit smacks of a blatant attempt by Saudi Aramco abetted by foreign oil companies which are beneficiaries of Saudi Aramco's largess to resurrect the IPO of Saudi Aramco. This attempt is bound to fail miserably because the IPO is dead and buried. Saudi King Salman ordered its withdrawal because of risk of American litigation related to the 9/11 destruction of the World Trade Centre in New York and question marks about the true size of Saudi proven oil reserves.



Third, we need to know the method the companies used to calculate the reserves. To get a relatively accurate figure, they need to count the actual number of Saudi oil-producing wells and the production and recoverable reserves of each. I doubt the would have done that as it takes a very long time to track the production and reserves of each well.



Four, a simpler way of estimating Saudi proven reserves is to add Saudi production since the discovery of oil in 1938 till now (for which we have figures) and have it deducted from Saudi claimed proven reserves along with an annual depletion rate of Saudi aging fields averaging 5%-7% for the same period. When I did exactly that, my calculations came to around 70-74 billion barrels (bb) of remaining reserves. My figures are more or less in line with those of other experts.



Five, the fact that Saudi Arabia’s proven reserves remained virtually constant year after year despite sizeable annual production and a lack of major new discoveries since 1965 is due to the Saudis increasing the oil recovery factor (R/F) to offset the annual production. The Saudis have been declaring an R/F of 52% or even higher when the global average is 34%-35%. 


Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London

[Jeffrey Brown + 208]

Saudis 'may run out of oil to export by 2030’

A report by Citigroup has warned that Saudi Arabia could run out of oil to export by 2030, raising fears that oil prices may rise significantly in coming years.

 

https://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/9523903/Saudis-may-run-out-of-oil-to-export-by-2030.html

[Old-Ruffneck + 1,239]

On ‎1‎/‎10‎/‎2019 at 7:09 PM, Justin Hicks said:

If you're giving 55 gallon barrels at 42 gallon prices,  absolutely😊

Sounds like a "deal" to me.... btw, its a 55 gallon "drum" not to be confused with a 42 gallon "barrel". Don't ask me how and when the terms still apply as such.

[Justin Hicks + 162]

I'd say 277 billion ( it's like the price is right 😊 . $200 Bob.....$201 Bob😊)

Anything north of 268 billion barrels is a plus for ARAMCO as estimates tie closely to their 2030 Vision Plan.

[Justin Hicks + 162]

3 minutes ago, Old-Ruffneck said:

Sounds like a "deal" to me.... btw, its a 55 gallon "drum" not to be confused with a 42 gallon "barrel". Don't ask me how and when the terms still apply as such.

Yes sir!😊

[Justin Hicks + 162]

1 minute ago, Justin Hicks said:

Yes sir!😊

You're correct! A 55 gallon drum is what the wash down detergent comes in 😊

[John Foote + 1,135]

The issue with Saudis running out is pretty old. Not a function of running out, but extrapolating the growth factor of their consumption. The per capita consumption of energy in the Kingdom is pretty astonishing. This was routinely briefed to every new hire years ago. Clearly things will change because that can't happen, insall'ah.