Update: I’ll leave the blog below in tact, but really I should point out that the reason the oil price hasn’t moved is that the person quoted in the Wikileaked cable, Sadad al Husseini, is a well-known peak oil theorist who has said this in public many times before.
This morning’s story in the Guardian that US diplomats believed Saudi Arabia to have overstated their oil reserves should ring alarm bells around the energy world.
Every time there is a debate about whether Opec should raise production to lower oil prices, many commentators argue it is irrelevant: that the Middle East doesn’t have as much oil as it says and that it can’t raise production enough to bring prices down.
If this is true, it has serious consequences for the oil price. If Opec doesn’t have the slack to up production and bring prices down, they will have a lot further to go above the $100 barrier.
The thing that makes this cable so significant is that the information comes from a former Aramco insider: Sadad al-Husseini, former head of exploration at the Saudi oil monopoly. It says:
According to al-Husseini, the crux of the issue is twofold. First, it is possible that Saudi reserves are not as bountiful as sometimes described, and the timeline for their production not as unrestrained as Aramco and energy optimists would like to portray.
In a presentation, Abdallah al-Saif, current Aramco senior vice-president for exploration, reported that Aramco has 716bn barrels of total reserves, of which 51 per cent are recoverable, and that in 20 years Aramco will have 900bn barrels of reserves.
Al-Husseini disagrees with this analysis, believing Aramco’s reserves are overstated by as much as 300bn barrels. In his view once 50% of original proven reserves has been reached … a steady output in decline will ensue and no amount of effort will be able to stop it. He believes that what will result is a plateau in total output that will last approximately 15 years followed by decreasing output.
These are not the uninformed opinions of a conspiracy theorist, and opinions like this may help to explain why the US has been so gung-ho about deepwater exploration.