Is Saudi Arabia Running Low on Oil?

Is the Ghawar Oilfield Running Out of Oil?

Acknowledging that the worldwide oil supply is rapidly being depleted seems to be a big 'no-no' for leading politicians and industry executives.

However, more and more expert commentators feel that this indeed might be the case. Those who believe this to be true point to the situation in Saudi Arabia, the top oil producer for the past 30 years, or so. It has been rumored for years that its largest oil field, Ghawar, is in permanent decline.

For those uninformed about Ghawar, it is by far the biggest conventional oil field in the world, measuring an estimated 175 miles by 20 miles. Currently, conjecture has it producing between 4.5 and 5 million barrels of oil per day by outside observers, in excess of six percent of worldwide production. The officially stated maximum sustained crude production capacity is 8.5 million barrels per day, though actual daily output is a closely-guarded state secret. Thus far, approximately 60 billion barrels have been pumped out of Ghawar since production began back in 1951.

Ghawar's total proven reserves, also known as 'recoverable' oil, still left in the ground, have been pegged at just over 70 billion barrels by Saudi Aramco, which is the largest nationalized oil company in the world. The word 'recoverable' is extremely relevant, as the gross amount of oil in the ground is much less important than the amount that can easily be harvested at a given level of extractive technology. While modern techniques can certainly boost the amount of oil that can be extracted per oil field, the question of how expensive the operation turns out to be remains extremely pertinent. Once oil extraction becomes too difficult, and therefore expensive, it becomes economically infeasible to attempt to remove the remaining supply.

Saudi Arabia has a lot of attention paid to it because of its importance in the world oil markets. It has long been known as the world's biggest producer of oil, and has acted as a 'swing producer,' regulating oil extraction rates to balance to the global market in concert with the other nations in the Organization of Petroleum Exporting Countries (OPEC).

A significant amount of worrying signs clearly indicate that Saudi Arabia's largest field might be in permanent decline. Early in 2006, a Saudi Aramco spokesman shocked listeners by making the observation that its mature fields are now declining at a rate of 8 percent per year. In other words, Ghawar's production is now most likely past its 'peak.' The spokesman also said that actions were being taken to offset the decline, but that the only valid solution to declining crude supplies is to locate new fields, and it has been frequently noted by industry insiders that oil field discoveries have not kept pace with burgeoning worldwide demand.

Assuming that Ghawar is indeed in decline, it likely means that the entire world is as well. Of the 'super-giant' oil fields, four are officially in decline: China's Daquing, Mexico's Cantarell; Russia's Samotlor; and Kuwait's Burgan. Though Ghawar has not officially been so declared, one can infer as much, from the available facts.

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