Saudi ArabiaCan It Deliver ?

by Jack Zagar

MHA Petroleum Consultants

ASPO Conference – Lisbon, Portugal – May 19-20, 2005

Explanatory text is the Notes section of each slide

Three Key Factors

• Political Will and Economic Incentive10 MM/d capacity for last 30 yearsInternal needs supersede rest of the WorldComplex market

• Security and Access to Technical People“Easy oil” already developedSerious internal problems threaten stability Anti-Western sentiments

• Valid Reserves ???

0

10

20

30

40

50

60

70

80

1935 1945 1955 1965 1975 1985 1995 2005

An

nu

al

Dis

co

ve

rie

s O

IIP

, G

b

0

100

200

300

400

500

600

700

800

Cu

mu

lati

ve

OII

P,

Gb

Cum Producing Disc Cum Static Disc Producing Discoveries Static Discoveries ARAMCO 2004 OIIP

AbqaiqAbu Hadriya

1947

Qatif 1946

GhawarYear on production - 1951

~200

Safaniya1957

Khurais 1964Manifa 1966

Abu Safah 1966Berri 1967Zuluf 1973 Shaybah

1998

Hawtah Trend1994

Khursaniyah1961

Dammam1938

OIIP – Oil Initially In Place

16 Produced Fields – 83% of OIIP10 Producing Fields – 64% OIIP

65 Static Fields – 17% of OIIP

ARAMCO OIIP GrowthCICS 2/04

source: Saudi Aramco 2/2004

Abqaiq FieldOil Recovery

12 Gb Ultimate

Recovery 20 Gb OIIP

J. Laherrere, 1997

Abqaiq and Ain Dar / Shedgum better than 97%

~35

source: Saudi Aramco 2/2004

Depletion TimingStatfjord Field - North Sea

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 10 20 30 40 50 60

Years on Production

An

nu

al R

ate

, % M

ax

.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

% D

ep

lete

d

“First 70% produced quicker and easier than

last 30%”

Forecast

Exploration Wells in Saudi Arabia

source: Saudi Aramco 2/2004

source: Saudi Aramco 2/2004

OIIP Hyperbolic Creaming CurveSaudi Arabia

0

100

200

300

400

500

600

700

0 100 200 300

Cumulative Wildcats

Cu

mu

lati

ve

Dis

co

ve

rie

s, G

b

1974 2000

Saudi Arabia Oil Reserves

-200

-100

0

100

200

300

400

500

. .

Gb

Undiscovered

Possible

Probable

Proved

Produced

105 105

260 165

35303030

70

90

455

255

AramcoPerception

???

MostLikely???

Aramco ??? ML ???OIIP by 2025, Gb 900 660

Proved 52% 45%2P 57% 50%3P 67% 55%

Total, by 2025 62% 55%

Recovery Factor, % OIIP

10 Million Barrels / Day Capacity50-Year Scenario

Proved Reserve Decline Point

0

2

4

6

8

10

12

2005 2015 2025 2035 2045 2055

Oil

Ra

te

Mill

ion

Ba

rre

ls p

er

Da

y

ARAMCO Fcst Most Likely ???

20422025

5 Gb of Prob. & Pos. Reserves

48 Gb of Prob. & Pos. Reserves

0

2

4

6

8

10

12

14

2005 2015 2025 2035 2045 2055

Oil

Ra

te

Mill

ion

Ba

rre

ls p

er

Da

y

ARAMCO Fcst Most Likely ???

12 Million Barrels / Day Capacity50-Year Scenario

Proved Reserve Decline Point

20332020

19 Gb of Prob. & Pos.

73 Gb of Prob. & Pos. & Disc.

2014

Saudi Spare Capacity

• Govt policy goal of maintaining 2 MM/d of spare capacity(only country to do so)Now repeatedly stretched and used

• March 14, 2005 stated prepared to meet increased demand forecast for late 2005 which would use all spare capacity

• Twice in last two yearsMarch 2003 to compensate for loss of Iraq oil2004 to offset USA hurricane losses

Saudi’s Ability to Increase Production . . .

Does it Matter?

Meeting the ChallengeIndustry Outlook - Oil & Gas Demand/Supply

MOEBD

‘80 ‘85 ‘90 ‘95 ‘00 ‘05 ‘10 ‘15 ‘200

40

80

120

160

200

RequiredNew

Production

RequiredNew

Production

Existing ProductionExisting Production

Existing Field Decline ~ 4 - 6%Existing Field

Decline ~ 4 - 6%

World DemandWorld Demand

Real Discovery Trend

0

10

20

30

40

50

60

1930 1950 1970 1990 2010 2030 2050

Gb

Past Discovery

Future Discovery

Production

“ Growing Gap”

Past after ExxonMobil

0

20

40

60

80

100

120

140

Non-OPEC Crude + Condensate

NGL’s, OPEC Condensate, Other

MBD

Canadian Oil Sands

Liquids Demand

OPEC

2823

~30

~41~50

80 90 00 10 20 30

World Liquids Production Outlook

Conclusions• Published critical data is sparse.• Many uncertainties abound• Best in class in terms of quality of fields and

operation of field If successful will have the highest reserves and highest

recovery efficiency of any oil producing country on the planet

It is prudent to be skeptical

• Saudi Aramco has no obligation to try and meet wildly optimistic forecasts by the EIA and IEA of Saudi production increases

• Verifiable production forecasts from exporters would allow for orderly transition to alternative energy forms with fewer oil shocks