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Robert Rapier

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Saudi Oil Production Lags Behind Peers In The Mid-East

In this final installment of a series (See also Article 1 and Article 2) examining Saudi Arabia’s oil reserves, I want to examine several metrics to see how they stack up against the world’s other oil producers.

To recap, in 1982 Saudi Arabia stopped allowing outside audits of their oil and gas reserves. When that access was shut down, Saudi proved oil reserves were estimated to be 166 billion barrels. Since that time, Saudi has produced about 100 billion barrels of oil, but today claims reserves of 270 billion barrels.

Many people have argued that this is highly unlikely, and that Saudi’s reserves are more likely to be less than 100 billion barrels. This is the 3rd straight article I have written to investigate that question.

Reserves Growth Since 1982

The BP Statistical Review of World Energy provides production and reserves data for many countries. Data for some important oil producers, like Russia, Azerbaijan, and Kazakhstan — are not available all the way back to 1982. But numbers do exist back to 1982 for 44 countries. Of those 44 countries, 77 percent reported increases in proved reserves since 1982. Saudi Arabia reported a 61 percent increase in proved reserves since 1982, but 19 countries reported larger percentage increases than that.

Venezuela’s more than 1100 percent reported increase in proved reserves since 1982 is mostly a result of inclusion of Venezuela’s extra heavy oil. Likewise, Canada’s 319 percent increase in reserves was mostly driven by the growth of the country’s proved reserves of oil sands.

A sampling of countries reporting a larger percentage of reserves growth than Saudi Arabia since 1982 include OPEC countries like Angola (+554 percent), United Arab Emirates (+202 percent), Iran (+180 percent), Iraq (+152 percent), Nigeria (+124 percent), and Libya (+118 percent). Related: The Oil Producer OPEC Is Overlooking

But there were also a number of non-OPEC countries reporting larger percentage increases than Saudi Arabia, including Ecuador (+873 percent), Brazil (+645 percent), Colombia (+173 percent), Norway (+108 percent), and China (+94 percent).

Only 11 countries/regions (e.g.,”Other Europe”) reported lower proved reserves in 2017 than in 1982. At the bottom of the list is Mexico, which has seen proved reserves shrink by 87 percent since 1982. Some other countries seeing reserves decline since 1982 are Indonesia (-70 percent), the UK (-69 percent), and Egypt (-10 percent).

Cumulatively, total global reserves (again, impacted by a big increase in reserves of heavy oil and oil sands) increased by 134 percent since 1982. So, Saudi Arabia’s reported increase is about half that of the global average increase.

On an absolute basis, Saudi Arabia did report one of the largest overall increases in proved reserves since 1982, with just under 101 billion barrels added. That increase trails only Venezuela (+278 billion barrels), Canada (+129 billion barrels), and Iran (+101 billion barrels).

Oil Production Increases Since 1982

Saudi Arabia’s oil production increased by 72 percent from 1982 to 2017. This was slightly ahead of the world’s overall 62 percent increase in oil production, but behind the overall Middle East increase of 135 percent. There were nearly two dozen countries reporting a larger percentage increase in production since 1982 than Saudi Arabia.

Thailand, Angola, and Brazil are all producing at least nine times as much oil today as they did in 1982, while a dozen countries are reporting lower production in 2017 versus 1982. U.S. oil production in 2017 was 28 percent greater than in 1982.

Cumulative Production Since 1982

Finally, let’s consider cumulative production from different countries since 1982 as a percentage of their 1982 reported reserves. In 1982 Saudi Arabia reported 166 billion barrels of proved reserves, and since then (through the end of 2017) they have produced 118 billion barrels. So from 1982 through 2017 they produced oil equivalent to 71 percent of their 1982 proved reserves.

How does that compare to other countries? Only three countries reported a smaller number. Kuwait, Iraq, and Tunisia respectively produced the equivalent of 41 percent, 46 percent, and 49 percent of their reported 1982 reserves between 1982 and 2017. Related: European Oil Demand Is Shockingly Weak

The U.S. was in the middle of the pack, producing 335 percent of their 1982 reserves over that time, while at the top of the scale Thailand, Colombia, and Brazil all produced more than 1,000 percent of their 1982 proved reserves.

Conclusions

Again, as I noted in the previous article, none of this proves that Saudi Arabia has 270 billion barrels of crude oil reserves. I undertook this exercise to see if I could find anything particularly unusual about the history of Saudi Arabia’s claimed oil reserves.

But a comparison to the world’s other oil producers indicates that there is nothing extraordinary about Saudi Arabia’s reserves growth, production growth, or cumulative production since 1982. On a relative basis (i.e., in percentage terms), most of these measures are average for Saudi Arabia when compared to other countries.

In other words, there are no significant outliers that would lead one to suspect that the numbers Saudi Arabia is reporting are fabricated. If there is a metric that would flag Saudi’s reserves as suspect when comparing them to those of other countries, I haven’t found it.

By Robert Rapier

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  • Mamdouh Salameh on February 26 2019 said:
    Saudi reserves had remained remarkably stable between 1980 and 1988 before suddenly and dramatically jumping from 169.59 billion barrels (bb) in 1987 to 254.99 bb in 1988 and then to 264.6 bb in 2009. They remained virtually at that level until 2013 before moving up to 267 bb in 2014 and have been almost at that level since then according to both the 2018 OPEC Annual Statistical Bulletin and BP Statistical Review of World Energy, June 2018.

    Any increase in the proven reserves of a country could take pace in one of three circumstances or all of them. The first is new discoveries. The second is an improvement in the recovery factor (R/F) thus upgrading the already existing reserves. The third circumstance is an increase in the volume of oil initially in place (OIIP). But this can only happen by new discoveries or an improvement in the R/F.

    Oil discoveries in Saudi Arabia peaked in 1965 with no significant discoveries since then. Any small discoveries made couldn’t under any circumstances justify a jump in reserves from virtually 170 bb in 1987 to 266 bb in 2014.

    Saudi Arabia claims an R/F of 52% when the average global R/F ranges from 34%-35% according to the most authoritative sources in the field.

    The third circumstance is an increase in the volume of OIIP. Saudi Arabia claims that its OIIP has risen to 700 bb by 2003 and is projected to rise to 900 by 2025. But the Saudis failed to mention that 200 bb of their claimed OIIP is yet to be discovered. A more realistic estimate of Saudi OIIP is 580 bb rather than 700.

    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 raising the R/F and increasing the OIIP to offset their annual production. The Saudis have been declaring an R/F of 52% or even higher when the global average is 34%-35%.

    However, if Saudi proven reserves were estimated at 170 bb in 1988 and more than 104 bb of oil have been produced since, then their remaining reserves would amount to no more than 67 bb.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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