The Myth Of Saudi Oil - Part 1 Of Interview With Matthew Simmons [View All]

[hatrack]

"We've created a gigantic myth over the last thirty-five to forty years", Matthew Simmons told me from his summer home in Maine, "that effectively said the Middle East has unlimited amounts of oil when it wasn't true". How does he know this? Because he's spent the better part of the last two years carefully combing through a three feet-high stack of Society of Petroleum Engineer technical papers he discovered after attending an industry conference in Saudi Arabia.

"What I didn't realize at the time was I apparently was the first person of any sort of notoriety to ever even raised the issue , which now fascinates me. How did we start so glibly assuming that the Middle East has so much oil that they would, basically, never face a peak amount when, in fact, there was no data to support that other than some numbers that didn‘t have any validity behind them".

And therein lies the kernel of the problem. No one -- with the exception of the Saudis -- knows with any certainty how much oil has been extracted. I wanted to say "pumped", but the fields in Saudi Arabia don't use the traditional "donkey" pumps to extract their oil. Instead, they use reservoir pressure schemes to force the oil from underground petroleum traps locked in ancient strata. In fact, no public data has been released on the fields in Saudi Arabia since Saudi Aramco was nationalized around 1982. So, it's been 23 years since the last reliable production numbers were released.

"The proven reserves, which used to be reported on a detailed, field-by-field basis disappeared, rolled up into just country-by-country. Over the period of the first eight years of the 1980s, all of the Middle East oil producers tripled the amount of proven reserves they said they had. And then, effectively, country-by-country, the number stayed still. It never changed from 1987-88 to 2005; and nobody ever said, What's going on? How do you basically keep producing 15-20 million barrels a day out of the Middle East and the proven reserves never change?"

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