How can Saudi Arabia stave off declines in its wells?

Question

Saudi Arabia admitted its oil supplies are declining by 8% a year, and say they can slow the decline to 2% a year. How can they do this and how long will it last?

Answer 1

Hi legsandgreeneyes78,

It is hard to know with any certainty what the reserves or even the production levels of any national oil company are. Saudi Aramco and the nationals of other OPEC countries had a large jump in their reserves numbers in the late 1980's when OPEC started basing production quotas on reserve amounts. It was in the best interest of every OPEC member to inflate their reserve numbers at that time and most of them did. They do not have to follow the reserve evaluation standards set by the Securities Exchange Commission that controls most corporate oil companies. The numbers revealed by national oil companies are strongly influenced by world politics.

I can see anecdotal evidence of how Saudi Aramco can slow their declining production. For one thing they have been running a worldwide hiring campaign within the industry, attempting to hire some of the best and most experienced staff away from the big oil companies. From a friend I have in Saudi Arabia I know they are using geosteering with directional drilling and are doing a considerable amount of drilling. This type of drilling can target zones of improved porosity based on seismic data and well data from nearby wells. Horizontal wells can intersect more of the reservoir also improving production rates (its sort of like making a bigger straw to suck through). It is likely they are drilling more efficient wells within existing reservoirs to improve recovery and increase production. They are spending lots of money on the best science and technology they can buy. There are still some new discovery wells possible in Saudi, as there are in most parts of the world, but these will likely be smaller reservoirs that will only last a few years, unlike the giant Ghawar field which has been producing for decades. Basically, they can stave off the decline with a combination of improved (and more expensive) drilling technology, and an active drilling program, combined with new exploration wherever possible.

The other technique that can accelerate production from a field that they are probably using (I don't know for certain) is called infill drilling. Some fields I have studied in Saudi Arabia have wells spaced as much as 2 km apart. In west Texas fields it is common to have wells spaced on 40 acre spacing (thats about 0.4 km) and in some fields this is reduced to 10 acre spacing (0.2 km). This type of drilling will allow draining the reservoir at a much higher rate of production because the oil underground does not have to flow as far before it is pumped out.

The challenge for any large producer like Saudi Arabia, or even one of the major multinational companies, is that a 2% decline in production is larger than the total production of some smaller companies. Saudi Arabia is currently producing 9 million barrels per day. Two percent of that is 180,000 barrels per day. To give that some perspective, 180 Mb/d is roughly 15% of the current daily production of the US Gulf of Mexico, or 21% of the daily production of the Alaska North Slope. The much more alarming thing is that it is in decline. This may be the only presently available evidence of the lack of any excess capacity within Saudi Arabia, and numbers like this add considerably to the market speculation that can drive up oil prices at the drop of hat.

Also consider that Saudi Arabia has reported a high internal rate of oil consumption at about 1.7 MMb/day, roughly equal to Great Britain. They can't export everything they produce.

There are some interesting commentaries in this months ASPO (Association for the Study of Peak Oil) newsletter. You can read it here:
http://www.aspo-ireland.org/Newsletter_June%2006.htm
This issue also has an interesting article regarding the Iranian Oil Bourse and the current problems with Iran that you might find interesting.

Ciao.

Answer 2

Every ten years or so, "experts" claim that we will run out of oil in "x" years. And when that time arrives, we still have a big supply. They are constantly finding new reserves.

On the plus side, since oil is now $70 + USD, the largest "reserves" of oil actually exist in the USA. This is not the standard Texas gushers, as we know them, but are "shale" deposits, mostly located in the Montana area (I believe.) It costs roughly $25-30 USD to create one barrel of oil from shale. Now that the cost of oil is high, it is now profitable to "mine" that shale, refine it and sell the oil.

So relax. There is plenty of oil here, but you will never pay less than 2.50/gallon for gas again.

As for Saudi Arabia, they are finding more reserves all the time.

Answer 3

The production of oil from some oil fields will be reduced or discontinued to achieve the slow target of 2%. It will last till the oil resource is active.

Answer 4

They can't. They are trying to calm the oil markets and prevent a total collapse of the world's economies.