"Saudi Output Growth Can Help Forestall Peak Oil, Bernstein Says
By Greg Walters
April 25 (Bloomberg) -- Saudi Arabian oil output has the potential to rise, helping avoid a peak in world crude production, according to Sanford C. Bernstein & Co.
Oil prices may fall toward the end of this year as worsening economic conditions reduce demand, analysts Neil McMahon forecast in a report today. Prices will probably rise later, beyond 2010, and reach $114 a barrel by 2015 as spare capacity declines, they wrote.
``Saudi and global oil production has the potential to grow slowly going forward,'' the authors wrote. ``We do not believe world oil production supply is peaking today.''
Proponents of peak-oil, the theory that global production has or is about to reach its zenith, say booming demand and dwindling supply are responsible for the rising price of oil. Analysts debate the extent and timing of a drop in crude production in Saudi Arabia, the world's biggest oil exporter. Some argue Saudi Arabian Oil Co., known as Saudi Aramco, is downplaying reservoir declines and that the country may be forced to reduce output.
Sanford Bernstein commissioned a survey by GeoVille Information Systems to use satellites to monitor drilling at Ghawar, Saudi Arabia's biggest oil field. The analysis ``concludes that the Saudi peak oil production conspiracy theories, based on little or incomplete current field data, do not fit with our findings.''
The study processed field data from recent years to try to detect subsidence, or sinking, in the reservoir. Rapidly depleting reservoirs tend to collapse slowly in small ``micro-earthquakes'' if oil and gas are extracted too rapidly for water or other substances to fill the gaps, McMahon told Bloomberg News in December.
The study suggests Ghawar is ``not in significant reservoir trouble,'' the report said. The field may be showing signs of ``mild production decline rates at worst.'' The field has been properly managed, it said. "
It is well known that Saudi Aramco injects several barrels of seawater for every barrel of oil they extract, in order to keep reservior pressure up. Matthew Simmons (author of Twilight in the Desert, a "must read") hasn't been claiming that the fields are mismanaged. He has claimed that water injection will keep production high until the field is near exhaustion, and that production decline will be very abrupt. He also believes that Ghawar is near that point.
I sure wouldn't count on prices in 2015 being lower than today (~$119/bbl). The International Energy Association (IEA), which always predicted demand and assumed production would be there to match out to 2030, now forsees a shortfall by 2012.