Michael Lynch: Just how vast are Saudi Aramco Reserves?

Analysis

The above is an extract from an article by Michael C. Lynch (not me) that appeared in the Saturday-Sunday, February 26-27 issue of the International Herald Tribune (and the New York Times). So do we have a reasonable estimate of Saudi Aramco reserves or not? This is what we have and what we can hang our hat on. Up until 1976, Aramco put out an annual reserves report. We have on record an official report that showed Aramco had, as of 12/31/1975 proved reserves (P-1) of 107.832 billion barrels. In addition, probable reserves were 175.579 billion barrels. Cumulative production at 1975 year end was 24.432 billion barrels. Therefore the total ultimate recovery for all of the Saudi fields added up to 307.411 billion barrels. The account that I have in my files was composed by Richard C. Hasson (Mobil) , John F. Mason (consultant) and Quentin M. Moore (Weeks Natural Resources). But the report itself (and all of the calculations) was the work of the Aramco Reservoir Engineering Department and it was widely published elsewhere. The estimates were made on a field by field basis and included 31 fields. The Aramco Reservoir Engineering Department consisted of petroleum engineers from The Standard Oil Company of California, The Standard Oil Company, New Jersey, Socony Mobil Oil Corporation and the Texas Company. They were the best that modern engineering schools could produce and they were people of great experience calculating reserves for oil fields all over the world. In 1975, they would have likely used a recovery factor of 35% which would have reflected both primary and secondary recovery. By 1975, all of the Saudi Arabian oil fields were producing under hydraulic drive, either natural or artificial. As of year end 2010, cumulative recovery from the Saudi fields amounts to about 114.534 billion barrels which means that using the 1975 estimates, 193.308 barrels of reserves remain. But an event happened in the 1980s that has influenced reserves calculations ever since. That event was ,of course, horizontal drilling. Horizontal drilling commenced in Saudi Arabia in 1991. Since that time, every major field on the 1975 list except Manifa has been redeveloped using what is now called “maximum reservoir contact” horizontal wells. A redeveloped Manifa field is expected to go on line in 2013. That will be the last of the Mohicans. A more likely recovery factor today for the Saudi fields is 50% which means that redevelopment adds some 15% to previous estimates. On that basis, we can estimate that reserves as of January 1, 2011 are somewhere in the neighborhood of 276 billion barrels which is in fairly good agreement with the Saudi official estimates. In the April 29,1991 edition of the Oil & Gas Journal, an article appeared written by L.F. (Buzz) Ivanhoe (independent consultant) and George G. Leckie (British Petroleum alum). Their article, a classic was titled “Data on field size useful to supply planners”. They pointed out that in any given province there would be one or two huge fields, perhaps four or five large fields and then a greater number of smaller sizes. The Saudi Arabian peninsula is an accurate example of their work. The 70 or so said-to-be-undeveloped fields are tiny, perhaps with recoverable reserves of 25 million barrels – like the remaining undeveloped North Sea fields. Nothing to shout about.

So the situation in Saudi Aramco today is that the reserves are large but for every barrel of oil produced, they have to inject between 1.5 and 2.0 barrels of water. Water cut increases daily and with it, production rate falls.

WikiLeaks trove of diplomatic dispatches continue to trickle out. A recent release has excited the the “peak oil” theorists because it suggests that Saudi Aramco reserves are overstated by 40% and production may collapse. The Saudi official estimate of proved reserves is 267 barrels. Over the decades, recovery factors have advanced from 10% to 35% today and sometimes higher. Officials have discovered 70 major oil fields that are not on production. Last year the Saudis drilled about 500 wells.AnalysisThe above is an extract from an article by Michael C. Lynch (not me) that appeared in the Saturday-Sunday, February 26-27 issue of the International Herald Tribune (and the New York Times). So do we have a reasonable estimate of Saudi Aramco reserves or not? This is what we have and what we can hang our hat on. Up until 1976, Aramco put out an annual reserves report. We have on record an official report that showed Aramco had, as of 12/31/1975 proved reserves (P-1) of 107.832 billion barrels. In addition, probable reserves were 175.579 billion barrels. Cumulative production at 1975 year end was 24.432 billion barrels. Therefore the total ultimate recovery for all of the Saudi fields added up to 307.411 billion barrels. The account that I have in my files was composed by Richard C. Hasson (Mobil) , John F. Mason (consultant) and Quentin M. Moore (Weeks Natural Resources). But the report itself (and all of the calculations) was the work of the Aramco Reservoir Engineering Department and it was widely published elsewhere. The estimates were made on a field by field basis and included 31 fields. The Aramco Reservoir Engineering Department consisted of petroleum engineers from The Standard Oil Company of California, The Standard Oil Company, New Jersey, Socony Mobil Oil Corporation and the Texas Company. They were the best that modern engineering schools could produce and they were people of great experience calculating reserves for oil fields all over the world. In 1975, they would have likely used a recovery factor of 35% which would have reflected both primary and secondary recovery. By 1975, all of the Saudi Arabian oil fields were producing under hydraulic drive, either natural or artificial. As of year end 2010, cumulative recovery from the Saudi fields amounts to about 114.534 billion barrels which means that using the 1975 estimates, 193.308 barrels of reserves remain. But an event happened in the 1980s that has influenced reserves calculations ever since. That event was ,of course, horizontal drilling. Horizontal drilling commenced in Saudi Arabia in 1991. Since that time, every major field on the 1975 list except Manifa has been redeveloped using what is now called “maximum reservoir contact” horizontal wells. A redeveloped Manifa field is expected to go on line in 2013. That will be the last of the Mohicans. A more likely recovery factor today for the Saudi fields is 50% which means that redevelopment adds some 15% to previous estimates. On that basis, we can estimate that reserves as of January 1, 2011 are somewhere in the neighborhood of 276 billion barrels which is in fairly good agreement with the Saudi official estimates. In the April 29,1991 edition of the Oil & Gas Journal, an article appeared written by L.F. (Buzz) Ivanhoe (independent consultant) and George G. Leckie (British Petroleum alum). Their article, a classic was titled “Data on field size useful to supply planners”. They pointed out that in any given province there would be one or two huge fields, perhaps four or five large fields and then a greater number of smaller sizes. The Saudi Arabian peninsula is an accurate example of their work. The 70 or so said-to-be-undeveloped fields are tiny, perhaps with recoverable reserves of 25 million barrels – like the remaining undeveloped North Sea fields. Nothing to shout about.So the situation in Saudi Aramco today is that the reserves are large but for every barrel of oil produced, they have to inject between 1.5 and 2.0 barrels of water. Water cut increases daily and with it, production rate falls.

GL Group

Michael Lynch: Just how vast are Saudi Aramco Reserves?

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