Saudi Arabia’s Energy Minister Prince Abdulaziz claimed last week that the Kingdom will be the world’s biggest hydrocarbon producer “even” in 2050.
“I can assure that Saudi Arabia will not only be the last producer, but Saudi Arabia will produce every molecule of hydrocarbon and it will put it to good use … It will be done in the most environmentally sound and safe way and the most sustainable way,” Abdulaziz said when asked about the oil market outlook in 2050 during a virtual conference convened by Saudi Arabia’s Future Investment Initiative Institute (FII-I).
Abdulaziz added that Saudi Arabia “will be the last and biggest producer of hydrocarbon even then,” referring to 2050.
But is Saudi Arabia’s the world’s leading hydrocarbon producer now? And what is its legitimate prospect for being the largest hydrocarbon producer in 2050?
‘Hydrocarbon’ Explained
To unpack what the prince is claiming, we first must understand the hydrocarbon classification. A hydrocarbon is an organic compound that contains only carbon and hydrogen. This encompasses petroleum, natural gas, and condensates.
Is Saudi Arabia the world’s largest hydrocarbon producer?
Saudi Arabia’s oil production in 2019, which includes crude oil, all other petroleum liquids, and biofuels--this would include natural gas plant liquids and condensate--was an average of 11.81 million bpd, according to the Energy Information Administration (EIA). At 12% of the world’s total, it’s no wonder why Saudi Arabia holds so much market sway, especially when in cahoots with the rest of the OPEC members.
Russia, too, is right up there, producing an average of 11.49 million bpd, or 11% of the world’s total. This is also no wonder, then, that when you put Russia and Saudi Arabia together to “stabilize” the world’s oil supply to balance it with demand, it creates a crude oil production powerhouse that is unmatched.
But individually speaking, Saudi Arabia is not king of the oil production hill, for its nemesis--the country that sought to undo every production quota OPEC could come up with, is the United States. On its own, the United States produced 19.51 million barrels of oil (and other petroleum liquids) per day, besting both Saudi Arabia and Russia, and controlling 19% of the world’s oil supplies.
The rest of the countries on their own are significantly further down the list, with not one of them producing more than half of third-place Russia. Still, Canada and China--#4 and #5 respectively--are still worth mentioning.
But Saudi Arabia expects to be the largest hydrocarbon producer “still” in 2050. If they are not so now, what are the chances they will be so thirty years from now?
Perhaps out of step with Saudi Arabia’s grand Vision 2030 plan, The Kingdom is still hoping to be top dog for petroleum production decades from now.
The EIA, in its Annual Energy Outlook 2020, has forecast that global production of crude oil and lease condensate, natural gas plant liquids, dry natural gas, and coal in the United States will reach 90.29 quadrillion Btus in its reference case. For crude oil and lease condensate, the EIA expects that the United States will be on par with where it is today, in its reference case. For natural gas plant liquids production, the EIA anticipates an increase by 2050.
Source: EIA Annual Energy Outlook 2020
The reason for the EIA assuming oil production will level off in 2022 and holding fairly steady through 2045 is the anticipated decline in well productivity, forcing tight oil producers to hunt for oil is less prolific areas.
For Saudi Arabia, its 30-year hydrocarbon plan or abilities are more of an unknown. It has the world’s second-largest crude oil reserves, and it does have plans to add natural gas production in the coming years as it looks to step away from its near-total reliance on crude oil.
For natural gas, Saudi Arabia announced earlier this year that it may actually bring forward its plans to export natural gas by 2030. It did not, however, provide details about this plan, or how it would be implemented.
But its detailless plans may run into some trouble. For starters, while Saudi Arabia has an excess of low-cost associated gas reserves that it could tap, the production of said gas would be limited to the amount of crude it can produce. And crude oil production is periodically--and profoundly so right now--capped by OPEC agreements that keep the Kingdom’s fossil fuel ambitions in check.
But the EIA sees the OPEC countries besting non-OPEC countries on the production front by 2050
By 2050, the EIA sees the production of crude oil, lease condensate, natural gas plant
liquids (NGPLs) and other liquid fuels from 2018 to 2050 reaching 121.5 million barrels per day (b/d) in 2050, or about 21% more than 2018 levels.
For crude oil and lease condensate, the EIA sees OPEC members increasing production by 9.5 million bpd, and nonOPEC countries increasing their crude oil and lease condensate production by 8 million bpd. This translates into a 27% increase for OPEC countries and a 17% increase for non-OPEC countries, according to the EIA’s International Annual Energy Outlook.
Overall, the EIA expects the OPEC countries to produce 56% of total global production in 2050.
Most of that production increase that OPEC nations (27%) will see will come from the Middle East, which is expected to increase by 35% to 2050.
ADVERTISEMENT
Meanwhile, production in Russia (14%) and Canada (123%) are expected to increase at a quicker rate than the United States (8%) and Brazil (50%).
Using historical production figures courtesy of BP and forecasts published by peakoilbarrel, the top four oil producers remain in their positions through 2050.
Toeing the Saudi Line
Prince Abdulaziz’s chest-puffing seems to be in line with Saudi Arabia’s previous assertions that oil will be alive and well in 2050 despite attempts to spur the world along an energy transition. Even as far back as 2007, Aramco said it could boost reserves to as many as 1 trillion barrels by 2027, adding that it would be 2050 or later before production peaks.
But some of Saudi Arabia’s forecasts of fossil fuel’s future were more sober-minded, even seeing a phasing out of fossil fuels by the middle of this century, Ali al-Naimi, Saudi Arabia’s oil minister at the time said in 2015.
“In Saudi Arabia, we recognize that eventually, one of these days, we are not going to need fossil fuels. I don’t know when, in 2040, 2050 or thereafter,” al-Naimi said, adding that Saudi Arabia was therefore planning on becoming a “global power in solar and wind energy.”
By Julianne Geiger for Oilprice.com
More Top Reads from Oilprice.com:
- Supermajors Are Flocking To This Booming Oil Frontier
- Big Oil’s Nightmare Is Coming True
- Turning California’s Biggest Liability Into A Biofuel Boom
EIA: "Nobody gives a damn about science, we will just try it out!"
Well, they could be right, but still astonishing given the Paris Agreement, the renewable and EV megatrend and the sustainable investing megatrend. I mean, even Black Rock is cutting the fossil fuel industry loose.
We'll see how this one plays out, but I think the Saudi official was right when he said "The stone age didn't end because of a lack of stones."
Furthermore, Saudi Arabia will neither be the last oil producer as that honour will go to Iraq and Venezuela nor the largest gas producer as the honour will be kept by Russia, Iran and Qatar. The United States would have shared in that honour if the US shale oil and gas industry was still operational by then but the industry would have gone by the late 2020s.
Judged by its current oil consumption and production and in the absence of diversification of its economy, Saudi Arabia could be relegated to a minor crude oil exporter by 2025 or ceasing to remain oil exporter altogether by 2030 according to my research.
Saudi oil production peaked at 9.65 million barrels a day (mbd) in 2005 and has been in decline since. Saudi Arabia can at best produce some 8.0-9.0 mbd with another 700,000 b/d to 1.0 mbd coming from storage. Current Saudi production comes from five giant but aging and fast-depleting oilfields (Ghawar, Safaniya, Hanifa, Khurais and Zuluf) all of which are more than 70 years old and are being kept producing by a huge injection of water. They have over the years accounted for more than 90% of Saudi oil production with Ghawar accounting for 50% of the total.
Since the early 1980s speculation about Saudi Arabia’s proven oil reserves has been rife. I have allocated years of my research analysing Saudi claims about their proven oil reserves. My conclusion is that remaining Saudi oil reserves couldn’t have been more than 51 billion barrels (bb) by the end of 2019.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
So steady, disciplined moderate quantity producer will the game winner.