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Robert Rapier

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Does Saudi Arabia Really Have As Much Oil As Analysts Think?

Oil storage

Officially, Venezuela has the world’s largest crude oil reserves with 303 billion barrels of proved reserves. But, a lot of this oil is extra-heavy crude oil, and may not be economical to produce at prevailing prices. Thus, some portion of Venezuela’s barrels may in reality no longer be in the “proved reserves” category.

Consider that Venezuela’s proved reserves jumped from 80 billion barrels in 2005 to 300 billion barrels in 2014. The main reason for that wasn’t a bunch of new oil discoveries. No, it was the fact that oil prices had reached triple digits, making Venezuela’s extra heavy oil economical to produce. In other words, “resources” (the oil in the ground) were moved into the “proved reserves” (oil that is economical to produce) category.

Saudi Arabia, on the other hand, reported 264 billion barrels of proved reserves in 2005, and 267 billion barrels in 2014. Saudi Arabia’s barrels were deemed to be economical to produce even before oil prices spiked. For that reason, I consider Saudi Arabia’s proved reserves — 16 percent of the global total — to be of the most significance to the global oil market.

But doubts about the amount of Saudi Arabia’s reserves have persisted for years. In 1982, Saudi Arabia stopped allowing their oil and gas data to be scrutinized. Prior to that, outsiders had some access to information on their reserves. When that accessibility was shut down, Saudi proved oil reserves were estimated to be 166 billion barrels.

However, around 1988 Saudi raised their estimate of proved reserves by 90 billion barrels. Many pundits have suggested that this upward revision was based on internal OPEC politics. Since the reserves were no longer subject to outside audit, there was a great deal of skepticism around the official numbers the Saudis released.

The skepticism deepened when one considered that Saudi’s reserves in 1990 were 260 billion barrels, and today — nearly 30 years later — they are reportedly 266 billion barrels. Meanwhile, Saudi Arabia produced over 100 billion barrels between 1990 and 2017. How then could their reserves be essentially unchanged? Related: Is Ocasio-Cortez Right To Dismiss Nuclear Energy?

In preparation for a potential IPO, Saudi’s national oil company, Saudi Aramco, commissioned an outside audit of its proved reserves. The external audit found Saudi’s proved oil reserves to be at least 270 billion barrels.

But doubts persist. For example, oil economist Dr. Mamdouh G. Salameh, who is a Visiting Professor of Energy Economics at ESCP Europe Business School, London, recently wrote:

My calculation of Saudi reserves based on Saudi production since the discovery of oil in 1938 till now (for which we have figures) and a deduction of an annual depletion rate of Saudi aging fields averaging 5 percent-7 percent for the same period, gives a figure of 70-74 bb of remaining reserves. My figures are more or less in line with those of other experts.”

I once did a similar calculation. I started with the assumption that the 1982 estimate of 166 billion barrels was correct, and then I just subtracted Saudi production since then. I calculated their total production since 1982 as ~100 billion barrels, leaving 66 billion barrels of reserves.

However, I then did a sanity check that threw that calculation in doubt. I did the same calculation for U.S. proved reserves over the same time frame.

In 1982, U.S. proved crude oil reserves were reported to be 35 billion barrels. By 2005 — and before the shale oil boom was underway, U.S. proved reserves had only fallen to 30 billion barrels. But total U.S. production between 1982 and 2005 was 77 billion barrels.

If we extend that calculation through the end of 2017, U.S. proved reserves have actually jumped to 50 billion barrels (per the 2018 BP Statistical Review), and there have been 117 billion barrels of U.S. production since 1982.

To reiterate, in 1982 U.S. proved crude oil reserves stood at 35 billion barrels. Between then and 2017, the U.S. produced 117 billion barrels of oil, yet proved reserves grew to 50 billion barrels. Related: Can Ukraine Gain Energy Independence?

How did this happen? There were new discoveries, technological improvements that allowed more barrels to be extracted from existing fields, and higher prices that made additional resources economical to extract.

I think it’s reasonable to assume that Saudi Arabia also found additional barrels since 1982. They also have access to the same kinds of technology that improved recovery in U.S. fields. Therefore, I do not believe it’s a legitimate exercise to consider depletion from a historical reserves number to estimate current reserves. Such an exercise would have suggested that U.S. oil production would have fallen to zero by 1991.


Thus, I don’t find a reasonable basis for concluding that Saudi Arabia’s reserves are much lower than their official numbers. Their published reserves are consistent with the independent audit, and they are consistent with the experience in the U.S. of reserves growth despite significant oil production.

Lest you think that the U.S. results are atypical, you can repeat this exercise for any of the world’s major oil producers and find the same thing. Starting with the proved reserves in 1982 and subtracting the subsequent production will not accurately predict the reserves at some point in the future. In many cases — as with the U.S. — cumulative production was greater than the 1982 proved reserves number.

So, I have thus far found no good reason to doubt Saudi Arabia’s official numbers.

By Robert Rapier

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  • Bill Simpson on February 18 2019 said:
    Horizontal drilling and better discovery technology changed everything. Oil that would have remained in the ground forever, is now economical to produce. Who knows how much oil that will unlock before it becomes too expensive to afford. You would need a massive international effort by the best experts from every oil company on the planet, to get an accurate estimate of when peak oil will arrive. Hope it is a long time in the future because soon after oil production begins to decline, the economy will have to shrink, leading to collapse of the banking system.
    Survival will be tough after that happens.
  • Mamdouh Salameh on February 18 2019 said:
    In a paper titled:”Saudi Proven Crude Oil Reserves: The Myth & the Reality Revisited” I gave at the 10th IAEE European Energy Conference in Vienna, 7-10 September 2009, I reached the conclusion that Saudi proven crude oil reserves actually range from 90-125 billion barrels (bb) and not the 264 bb the Saudis were claiming then. That was 2009.

    However, there has recently been claims that an independent audit has put Aramco’s Oil Reserves at $270 billion Barrels”. It transpired that the audit was neither independent nor unbiased since some of the companies that conducted the audit (DeGolyer, MacNaughton, and Baker Hughes’ Gaffney, Cline, and Associates) have or have had service contracts with Saudi Aramco, so it can’t truly be classified as an independent audit.

    Still, I decided to make a new estimate of Saudi proven reserves by adding Saudi production since the discovery of oil in 1938 till now (for which we have figures) and then deducting them from Saudi claimed proven reserves along with an annual depletion rate of Saudi aging fields averaging 5%-7% for the same period. My calculations came to around 70-74 bb of remaining reserves compared with the figure in 2009 allowing for production since 2009.

    The fact that Saudi Arabia’s proven reserves remained virtually constant year after year despite sizeable annual production and a lack of major new discoveries since 1965 is due to the Saudis increasing the oil recovery factor (R/F) and the oil initially in place (OIIP) to offset the annual production. The Saudis have been declaring an R/F of 52% or even higher when the global average is 34%-35%. They have also increased the OIIP from 700 bb to 900 bb on the basis of Saudi Aramco projecting new discoveries which are yet to be discovered.

    Venezuela does have the world’s largest proven reserves estimated at 303 bb and growing. However, the United States Geological Survey (USGS) estimates that there may be more than 513 bb of extra-heavy crude oil and bitumen deposits in Venezuela’s Orinoco belt region. The fact that the bulk of the reserves consists of extra-heavy oil doesn’t detract from the fact that they are proven and have been refined in Venezuela’s own refineries in Texas and sold in the United States as gasoline and diesel. Moreover, it is virtually no different from Canada’s tar sand oil.

    Your argument that the rise of oil prices to triple digits has made Venezuela’s extra heavy oil economical to produce applies also to Canada’s tar sand oil and US shale oil (though shale oil is light).

    Your argument that Saudi barrels were deemed to be economical to produce even before oil prices spiked is a valid one but it misses the point about reserves. Irrespective of whether crude oil reserves consist of light or medium or heavy or extra-heavy crude, once they are proven they are all categorized as oil reserves. Of course, cost of production is a very important factor in the economics of oil and the profitability of production. In this regard, the production of Venezuela’s extra-heavy oil at current prices is not different from an economic point of view from US shale oil production or Canadian tar sand oil production.

    Finally, the claimed audit about Saudi reserves smacks of a blatant attempt by Saudi Aramco abetted by foreign oil companies which are beneficiaries of Saudi Aramco largess to resurrect the IPO of Saudi Aramco. The IPO is dead and buried. We now know that the withdrawal of the IPO was because of risk of American litigation related to the 9/11 destruction of the World Trade Centre in New York and question marks about the true size of Saudi proven oil reserves. However, when Saudi King Salman called off the IPO, he justified his decision by saying that he didn’t want to expose Saudi Aramco’s finances or reserves to be scrutiny. His words speak volumes about Saudi reserves.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • John Di Laccii on February 19 2019 said:
    They do not have more than 80 billion barrels left. As expert in Oil and Gas, I had chances to meet with some of top Aramco geologysts. Aramco is inflating the reserves to keep the influence in OPEC. Liars. Nothing new for Saudis, they are lying as soon as they open their mouths. 266 billion barrels are long time gone, only 70-80 remains, and it will be done with difficulties, for instance Berri field in Saudi Arabia is already almost dead, etc., erc., Safaniyah still has good pressure, etc., Ghawar has difficulties etc....and to be honest I do not feel sorry for sponsors of all the terror on this world.
  • John Di Laccii on February 19 2019 said:
    One more thing, first auditors valued Aramco at 500 billions nothing more. Surely, now after 3 years it can be worth only less than that. Mamdouh, finally we agree on something.
  • Anony Mous on February 21 2019 said:
    Using the Salameh method of calculation, the US would now have negative reserves. Salameh shows a total lack of understanding of the concept of reserve growth and how it has been observed in many many areas (US, California, North Sea, etc.) He doesn't even address the concept but just repeats the trivial error that Rapier pointed out.

    Rapier's article is perfect for people like Salameh. If you can get them to read it and think about it. Versus just repeating the same old peak oil arguments like a knee jerk.
  • Mani Dhiman on April 14 2019 said:
    @ Anony Mous comparing Saudi historic production and oil reserves with USA oil reserves is worst example, there are many onshore and offshore oil discoveries in USA with credible evidences and in case of Saudi Arabia they jumped their oil reserves from 160 to 270 without any big discoveries,they just left with approximate 60 billion barrels of oil, same with Kuwait an UAE already produced hafe of their oil reserves since 1982.

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