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Saudi Oil Reserves May Limit Global Role, an Expert Asserts
Dow Jones Newswires, February 2
By John M. Biers
HOUSTON -- A prominent Houston energy analyst and investment banker is questioning whether Saudi Arabia will be able to continue playing the role of swing producer for the global oil market.
The kingdom, home to the world's largest oil reserves, has long provided a cushion of production that can quickly be called upon in times of tight oil markets. But Matt Simmons, a veteran energy expert best known for drawing early attention to North America's dwindling natural-gas supplies in the late 1990s, is preparing to publish research questioning Riyadh's ability to provide that cushion much longer.
"Any serious energy analysis should be cautionary that Saudi Arabia can always be the swing producer, let alone the biggest source of additional oil fueling global economic growth," said Mr. Simmons, the head of Houston-based energy investment bank Simmons & Co. "Saudi Arabia's oil production as we know it is remarkably fragile," he said in an interview.
Mr. Simmons warns that Saudi Arabia may face a production decline in the next five to 10 years as severe as Russia's early-1990s plunge. Mr. Simmons, a major political donor who informally advised George W. Bush in the 2000 presidential campaign, said his research grew out of his first-ever trip to Saudi Arabia last year.
The kingdom guards its production and geological data closely. But in addition to the limited body of public data available, Mr. Simmons said he reviewed more than 200 analytical papers written by engineers at Saudi Arabia's state oil company, Aramco, and concluded that some of the country's biggest fields may be declining far more quickly than people believe.
"It is impossible to prove that it will or it won't" be a major problem in the future, Mr. Simmons said. "But since it would be catastrophic if they did decline suddenly, it's a scenario we should take seriously."
Aramco officials weren't available to comment.
Aramco officials have acknowledged some decline, but they also have said they are investing heavily to replace lost production.
The company said late last year that capital expenditures were on track to total some $18 billion (€14.44 billion) between 2003 and 2007.
The company is expected to participate in a February forum with Mr. Simmons to be held at the Center for Strategic and International Studies in Washington.
The draft research has generated considerable interest in Houston and Washington. Several industry experts have praised the work for raising the right questions and underscoring the lack of public data available on Saudi production. But other industry insiders said Mr. Simmons likes to be provocative and tends to exaggerate the magnitude of a problem, even if his analysis is directionally accurate. |
