Here is another perspective of Simmons book similar to that of the previous Wall Street Journal post. This is an excellent review of the book that I have now finished reading.
Found in the last 3/4 of this site:
http://www.tomdispatch.com/index.mhtml?pid=3832
Matt Simmons' Bombshell
The Impending Decline of Saudi Oil Output
By Michael T. Klare
For those oil enthusiasts who believe that petroleum will remain
abundant for decades to come -- among them, the President, the Vice
President, and their many friends in the oil industry -- any talk of
an imminent "peak" in global oil production and an ensuing decline
can be easily countered with a simple mantra: "Saudi Arabia, Saudi
Arabia, Saudi Arabia." Not only will the Saudis pump extra oil now to
alleviate global shortages, it is claimed, but they will keep pumping
more in the years ahead to quench our insatiable thirst for energy.
And when the kingdom's existing fields run dry, lo, they will begin
pumping from other fields that are just waiting to be exploited. We
ordinary folk need have no worries about oil scarcity, because Saudi
Arabia can satisfy our current and future needs. This is, in fact,
the basis for the administration's contention that we can continue to
increase our yearly consumption of oil, rather than conserve what's
left and begin the transition to a post-petroleum economy. Hallelujah
for Saudi Arabia!
But now, from an unexpected source, comes a devastating challenge to
this powerful dogma: In a newly-released book, investment banker
Matthew R. Simmons convincingly demonstrates that, far from being
capable of increasing its output, Saudi Arabia is about to face the
exhaustion of its giant fields and, in the relatively near future,
will probably experience a sharp decline in output. "There is only a
small probability that Saudi Arabia will ever deliver the quantities
of petroleum that are assigned to it in all the major forecasts of
world oil production and consumption," he writes in Twilight in the
Desert: The Coming Saudi Oil Shock and the World Economy. "Saudi
Arabian production," he adds, italicizing his claims to drive home
his point, "is at or very near its peak sustainable volume . . . and
it is likely to go into decline in the very foreseeable future."
In addition, there is little chance that Saudi Arabia will ever
discover new fields that can take up the slack from those now in
decline. "Saudi Arabia's exploration efforts over the last three
decades were more intense than most observers have assumed," Simmons
asserts. "The results of these efforts were modest at best."
If Simmons is right about Saudi Arabian oil production -- and the
official dogma is wrong -- we can kiss the era of abundant petroleum
goodbye forever. This is so for a simple reason: Saudi Arabia is the
world's leading oil producer, and there is no other major supplier
(or combination of suppliers) capable of making up for the loss in
Saudi production if its output falters. This means that if the Saudi
Arabia mantra proves deceptive, we will find ourselves in an entirely
new world -- the "twilight age" of petroleum, as Simmons puts it. It
will not be a happy place.
Before taking up the implications of a possible decline in Saudi
Arabian oil output, it is important to look more closely at the two
sides in this critical debate: the official view, as propagated by
the U.S. Department of Energy (DoE), and the contrary view, as
represented by Simmons' new book.
The prevailing view goes like this: According to the DoE, Saudi
Arabia possesses approximately one-fourth of the world's proven oil
reserves, an estimated 264 billion barrels. In addition, the Saudis
are believed to harbor additional, possible reserves containing
another few hundred billion barrels. On this basis, the DoE asserts
that "Saudi Arabia is likely to remain the world's largest oil
producer for the foreseeable future."
To fully grasp Saudi Arabia's vital importance to the global energy
equation, it is necessary to consider the DoE's projections of future
world oil demand and supply. Because of the rapidly growing
international thirst for petroleum -- much of it coming from the
United States and Europe, but an increasing share from China, India,
and other developing nations -- the world's expected requirement for
petroleum is projected to jump from 77 million barrels per day in
2001 to 121 million barrels by 2025, a net increase of 44 million
barrels. Fortunately, says the DoE, global oil output will also rise
by this amount in the years ahead, and so there will be no
significant oil shortage to worry about. But over one-fourth of this
additional oil -- some 12.3 million barrels per day -- will have to
come from Saudi Arabia, the only country capable of increasing its
output by this amount. Take away Saudi Arabia's added 12.3 million
barrels, and there is no possibility of satisfying anticipated world
demand in 2025.
One could, of course, suggest that some other oil producers will step
in to provide the additional supplies needed, notably Iraq, Nigeria,
and Russia. But these countries together would have to increase their
own output by more than 100% simply to play their already assigned
part in the Department of Energy's anticipated global supply gain
over the next two decades. This in itself may exceed their production
capacities. To suggest that they could also make up for the shortfall
in Saudi production stretches credulity to the breaking point.
It is not surprising, then, that the Department of Energy and the
Saudi government have been very nervous about the recent expressions
of doubt about the Saudi capacity to boost its future oil output.
These doubts were first aired in a front-page story by Jeff Gerth in
the New York Times on February 25, 2004. Relying, to some degree, on
information provided by Matthew Simmons, Gerth reported that Saudi
Arabia's oil fields "are in decline, prompting industry and
government officials to raise serious questions about whether the
kingdom will be able to satisfy the world's thirst for oil in coming
years."
Gerth's report provoked a barrage of counter-claims by the Saudi
government. Their country, Saudi officials insisted, could increase
its production and satisfy future world demand. "[Saudi Arabia] has
immense proven reserves of oil with substantial upside potential,"
Abdallah S. Jum'ah, the president of Saudi Aramco, declared in April
2004. "We are capable of expanding capacity to high levels rapidly,
and of maintaining those levels for long periods of time." This
exchange prompted the DoE to insert a sidebar on this topic in its
International Energy Outlook for 2004. "In an emphatic rebuttal to
the New York Times article [of February 24]," the DoE noted, "Saudi
Arabia maintained that its oil producers are confident in their
ability to sustain significantly higher levels of production capacity
well into the middle of this century." This being the case, we
ordinary folks need not worry about future shortages. Given Saudi
abundance, the DoE wrote, we "would expect conventional oil to peak
closer to the middle than to the beginning of the 21st century."
In these, and other such assertions, U.S. oil experts always come
back to the same point: Saudi oil managers "are confident in their
ability" to achieve significantly higher levels of output well into
the future. In no instance, however, have they provided independent
verification of this capacity; they simply rely on the word of those
oil officials, who have every incentive to assure us of their future
reliability as suppliers. In the end, therefore, it comes down to
this: America's entire energy strategy, with its commitment to an
increased reliance on petroleum as the major source of our energy,
rests on the unproven claims of Saudi oil producers that they can, in
fact, continuously increase Saudi output in accordance with the DoE's
predictions.
And this is where Matthew Simmons enters the picture, with his
meticulously documented book showing that Saudi producers cannot be
trusted to tell the truth about future Saudi oil output.
First, a few words about the author of Twilight in the Desert.
Matthew ("Matt") Simmons is not a militant environmentalist or anti-
oil partisan; he is Chairman and CEO of one of the nation's leading
oil-industry investment banks, Simmons & Company International. For
decades, Simmons has been pouring billions of dollars into the energy
business, financing the exploration and development of new oil
reservoirs. In the process, he has become a friend and associate of
many of the top figures in the oil industry, including George W. Bush
and Dick Cheney. He has also accumulated a vast storehouse of
information about the world's major oil fields, the prospects for new
discoveries, and the techniques for extracting and marketing
petroleum. There is virtually no figure better equipped than Simmons
to assess the state of the world's oil supply. And this is why his
assessment of Saudi Arabia's oil production capacity is so
devastating.
Essentially, Simmons argument boils down to four major points: (1)
most of Saudi Arabia's oil output is generated by a few giant fields,
of which Ghawar -- the world's largest -- is the most prolific; (2)
these giant fields were first developed 40 to 50 years ago, and have
since given up much of their easily-extracted petroleum; (3) to
maintain high levels of production in these fields, the Saudis have
come to rely increasingly on the use of water injection and other
secondary recovery methods to compensate for the drop in natural
field pressure; and (4) as time goes on, the ratio of water to oil in
these underground fields rises to the point where further oil
extraction becomes difficult, if not impossible. To top it all off,
there is very little reason to assume that future Saudi exploration
will result in the discovery of new fields to replace those now in
decline.
Twilight in the Desert is not an easy book to read. Most of it
consists of a detailed account of Saudi Arabia's vast oil
infrastructure, relying on technical papers written by Saudi
geologists and oil engineers on various aspects of production in
particular fields. Much of this has to do with the aging of Saudi
fields and the use of water injection to maintain high levels of
pressure in their giant underground reservoirs. As Simmons explains,
when an underground reservoir is first developed, oil gushes out of
the ground under its own pressure; as the field is drained of easily-
extracted petroleum, however, Saudi oil engineers often force water
into the ground on the circumference of the reservoir in order to
drive the remaining oil into the operating well. By drawing on these
technical studies -- cited here for the first time in a systematic,
public manner -- Simmons is able to show that Ghawar and other large
fields are rapidly approaching the end of their productive lives.
Simmons' conclusion from all this is unmistakably
pessimistic: "The `twilight' of Saudi Arabian oil envisioned in this
book is not a remote fantasy. Ninety percent of all the oil that
Saudi Arabia has ever produced has come from seven giant fields. All
have now matured and grown old, but they still continue to provide
around 90 percent of current Saudi oil output * High-volume
production at these key fields ... has been maintained for decades by
injecting massive amounts of water that serves to keep pressures high
in the huge underground reservoirs . . . When these water projection
programs end in each field, steep production declines are almost
inevitable."
This being the case, it would be the height of folly to assume that
the Saudis are capable of doubling their petroleum output in the
years ahead, as projected by the Department of Energy. Indeed, it
will be a minor miracle if they raise their output by a million or
two barrels per day and sustain that level for more than a year or
so. Eventually, in the not-too-distant future, Saudi production will
begin a sharp decline from which there is no escape. And when that
happens, the world will face an energy crisis of unprecedented scale.
The moment that Saudi production goes into permanent decline, the
Petroleum Age as we know it will draw to a close. Oil will still be
available on international markets, but not in the abundance to which
we have become accustomed and not at a price that many of us will be
able to afford. Transportation, and everything it effects -- which is
to say, virtually the entire world economy -- will be much, much more
costly. The cost of food will also rise, as modern agriculture relies
to an extraordinary extent on petroleum products for tilling,
harvesting, pest protection, processing, and delivery. Many other
products made with petroleum -- paints, plastics, lubricants,
pharmaceuticals, cosmetics, and so forth -- will also prove far more
costly. Under these circumstances, a global economic contraction --
with all the individual pain and hardship that would surely produce --
appears nearly inevitable.
If Matt Simmons is right, it is only a matter of time before this
scenario comes to pass. If we act now to limit our consumption of oil
and develop non-petroleum energy alternatives, we can face
the "twilight" of the Petroleum Age with some degree of hope; if we
fail to do so, we are in for a very grim time indeed. And the longer
we cling to the belief that Saudi Arabia will save us, the more
painful will be our inevitable fall.
Given the high stakes involved, there is no doubt that intense
efforts will be made to refute Simmons' findings. With the
publication of his book, however, it will no longer be possible for
oil aficionados simply to chant "Saudi Arabia, Saudi Arabia, Saudi
Arabia" and convince us that everything is all right in the oil
world. Through his scrupulous research, Simmons has convincingly
demonstrated that -- because all is not well with Saudi Arabia's
giant oilfields -- the global energy situation can only go downhill
from here. From now on, those who believe that oil will remain
abundant indefinitely are the ones who must produce irrefutable
evidence that Saudi Arabia's fields are, in fact, capable of
achieving higher levels of output.
Michael T. Klare is a professor of peace and world security studies
at Hampshire College and the author of Blood and Oil: The Dangers and
Consequences of America's Growing Petroleum Dependency (Metropolitan
Books).
Copyright 2005 Michael T. Klare
Received on Fri Jul 1 11:18:34 2005
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