http://www.nytimes.com/2005/08/21/magazine/21OIL.html?pagewanted=1&hp
Is this why Halliburton was hired for the RIO contract — to gain visibility into the oil fields?
http://www.nytimes.com/2005/08/21/magazine/21OIL.html?hp
But will such a situation really come to pass? That depends on Saudi Arabia. To know the answer, you need to know whether the Saudis, who possess 22 percent of the world’s oil reserves, can increase their country’s output beyond its current limit of 10.5 million barrels a day, and even beyond the 12.5-million-barrel target it has set for 2009. (World consumption is about 84 million barrels a day.) Saudi Arabia is the sole oil superpower. No other producer possesses reserves close to its 263 billion barrels, which is almost twice as much as the runner-up, Iran, with 133 billion barrels. New fields in other countries are discovered now and then, but they tend to offer only small increments. For example, the much-contested and as-yet-unexploited reserves in the Alaska National Wildlife Refuge are believed to amount to about 10 billion barrels, or just a fraction of what the Saudis possess.
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But the truth about Saudi oil is hard to figure out. Oil reservoirs cannot be inventoried like wood in a wilderness: the oil is underground, unseen by geologists and engineers, who can, at best, make highly educated guesses about how much is underfoot and how much can be extracted in the future. And there is a further obstacle: the Saudis will not let outsiders audit their confidential data on reserves and production. Oil is an industry in which not only is the product hidden from sight but so is reliable information about it. And because we do not know when a supply-demand shortfall might arrive, we do not know when to begin preparing for it, so as to soften its impact; the economic blow may come as a sledgehammer from the darkness.
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The condition of Saudi fields, and those of other OPEC nations, is a closely guarded secret. That’s largely because OPEC quotas, which were first imposed in 1983 to limit the output of member countries, were based on overall reserves; the higher an OPEC member’s reserves, the higher its quota. It is widely believed that most, if not all, OPEC members exaggerated the sizes of their reserves in order to have the largest possible quota — and thus the largest possible revenue stream.
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stated the report, assembled by Science Applications International, a research company that works on security and energy issues. ”If recent trends hold, there is little reason to expect that exploration success will dramatically improve in the future. . . . The image is one of a world moving from a long period in which reserves additions were much greater than consumption to an era in which annual additions are falling increasingly short of annual consumption. This is but one of a number of trends that suggest the world is fast approaching the inevitable peaking of conventional world oil production.”
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‘This is not the first time that the world has ‘run out of oil,”’ he wrote in a recent Washington Post opinion essay. ”It’s more like the fifth. Cycles of shortage and surplus characterize the entire history of the oil industry.” Yergin says that a number of oil projects that are under construction will increase the supply by 20 percent in five years and that technological advances will increase the amount of oil that can be recovered from existing reservoirs. (Typically, with today’s technology, only about 40 percent of a reservoir’s oil can be pumped to the surface.)
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A concerted push for greater energy conservation in the United States, which consumes one-quarter of the world’s oil (mostly to fuel our cars, as gasoline), would hurt producing nations, too. Basically, any significant reduction in the demand for oil would be ruinous for OPEC members, who have little to offer the world but oil; if a substitute can be found, their future is bleak. Another Western diplomat explained the problem facing the Saudis: ”You want to have the price as high as possible without sending the consuming nations into a recession and at the same time not have the price so high that it encourages alternative technologies.”
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In addition, sending less money to Saudi Arabia would mean less money in the hands of a regime that has spent the past few decades doling out huge amounts of its oil revenue to mosques, madrassas and other institutions that have fanned the fires of Islamic radicalism. The oil money has been dispensed not just by the Saudi royal family but by private individuals who benefited from the oil boom — like Osama bin Laden, whose ample funds, probably eroded now, came from his father, a construction magnate. Without its oil windfall, Saudi Arabia would have had a hard time financing radical Islamists across the globe.
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That’s why Ali al-Naimi, the oil minister, told his Washington audience that Saudi Arabia has embarked on a crash program to raise its capacity to 12.5 million barrels a day by 2009 and even higher in the years after that. Naimi is not unlike a factory manager who needs to promise the moon to his valuable clients, for fear of losing or alarming them. He has no choice. The moment he says anything bracing, the touchy energy markets will probably panic, pushing prices even higher and thereby hastening the onset of recession, a switch to alternative fuels or new conservation efforts — or all three. Just a few words of honest caution could move the markets; Naimi’s speeches are followed nearly as closely in the financial world as those of Alan Greenspan.