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Did WikiLeaks Confirm "Peak Oil"? Saudi Said To Have Overstated Crude Oil Reserves By 300 Billion Barrels (40%)

Tyler Durden's picture





 

In what can be the "Holy Grail" moment for the peak oil movement, Wikileaks has just released 4 cables that may confirm that as broadly speculated by the peak oil "fringe", the theories about an imminent crude crunch may be in fact true. As the Guardian reports on 4 just declassified cables, "The US fears that Saudi Arabia, the world's largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show. The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom's crude oil reserves may have been overstated by as much as 300bn barrels – nearly 40%." Could the OPEC cartel's capacity for virtually unlimited supply expansion to keep up with demand have been nothing but a bluff? That is the case according to Sadad al-Husseini, a geologist and former head of exploration at the Saudi oil monopoly Aramco, who met with the US consul general in Riyadh in November 2007 and "told the US diplomat that Aramco's 12.5m barrel-a-day capacity needed to keep a lid on prices could not be reached." And yes, that conspiracy concept of peak oil is specifically referenced: "According to the cables, which date between 2007-09, Husseini said Saudi Arabia might reach an output of 12m barrels a day in 10 years but before then – possibly as early as 2012 – global oil production would have hit its highest point. This crunch point is known as "peak oil"." And it gets worse: "Husseini said that at that point Aramco would not be able to stop the rise of global oil prices because the Saudi energy industry had overstated its recoverable reserves to spur foreign investment. He argued that Aramco had badly underestimated the time needed to bring new oil on tap." Look for Saudi Arabia to go into full damage control mode, alleging that these cables reference nothing but lies. In the meantime, look for China to continue quietly stockpiling the one asset which as was just pointed out is the key one to hold, for both bulls and bears, according to Marc Faber.

More from the Guardian:

One cable said: "According to al-Husseini, the crux of the issue is twofold. First, it is possible that Saudi reserves are not as bountiful as sometimes described, and the timeline for their production not as unrestrained as Aramco and energy optimists would like to portray."

It went on: "In a presentation, Abdallah al-Saif, current Aramco senior vice-president for exploration, reported that Aramco has 716bn barrels of total reserves, of which 51% are recoverable, and that in 20 years Aramco will have 900bn barrels of reserves.

"Al-Husseini disagrees with this analysis, believing Aramco's reserves are overstated by as much as 300bn barrels. In his view once 50% of original proven reserves has been reached … a steady output in decline will ensue and no amount of effort will be able to stop it. He believes that what will result is a plateau in total output that will last approximately 15 years followed by decreasing output."

The US consul then told Washington: "While al-Husseini fundamentally contradicts the Aramco company line, he is no doomsday theorist. His pedigree, experience and outlook demand that his predictions be thoughtfully considered."

Seven months later, the US embassy in Riyadh went further in two more cables. "Our mission now questions how much the Saudis can now substantively influence the crude markets over the long term. Clearly they can drive prices up, but we question whether they any longer have the power to drive prices down for a prolonged period."

A fourth cable, in October 2009, claimed that escalating electricity demand by Saudi Arabia may further constrain Saudi oil exports. "Demand [for electricity] is expected to grow 10% a year over the next decade as a result of population and economic growth. As a result it will need to double its generation capacity to 68,000MW in 2018," it said.

It also reported major project delays and accidents as "evidence that the Saudi Aramco is having to run harder to stay in place – to replace the decline in existing production." While fears of premature "peak oil" and Saudi production problems had been expressed before, no US official has come close to saying this in public.

The conclusion:

Jeremy Leggett, convenor of the UK Industry Taskforce on Peak Oil and Energy Security, said: "We are asleep at the wheel here: choosing to ignore a threat to the global economy that is quite as bad as the credit crunch, quite possibly worse."

Obviously, if true, the implications of this discovery are massive, and will have a huge impact on the price of oil imminently.

The four key cables can be found at the links below.

 

 


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Wed, 02/09/2011 - 10:14 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

If you were around in the 70s you'll know that the political class will generate all kinds of "data" to hide what is really happening during hard times.  A favorite theme from that time was "Nasty arabs are driving up the cost of oil and causing inflation.  Blame them." 

The new meme is "Peak Oil", and the argument goes like this: "G-d only gave us so much oil, and you were greedy and used it up.  Now the price of oil and everything else must go up.  If you have a problem with that don't bother us, go confront G-d".

Peak oil is BS.

Wed, 02/09/2011 - 10:34 | Link to Comment alter ego
alter ego's picture

Oil Reserves and Peak Oil are for US and other

countries a matter of National Security.

Sometimes when I see trolls saying that

Peak Oil is bull sh..t and other things without

arguments I think some things:

 

1) Denial ( that is well known psychological trait in this modern world).

2) This people work for big banks, corporations or other institutions that rely in status quo economics, therefore disclosure of this type of information is against their interest.

3) The most far-fetched: Maybe the Department of HSecurity and NSA or any other government organization have people in some important forums in non main stream media outlets in order to misdirect or change the tonic of highly important topics.

 

 

 

Thu, 02/10/2011 - 08:40 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

Nothing from the list  applies to me or most people.  I know BS when I read it.

Wed, 02/09/2011 - 10:39 | Link to Comment GeneH3
GeneH3's picture

Q: why can't the central planners/manipulators just drive down the price of oil in the paper market-- like they do gold. A: Then there will be premiums for physical and/or shortages. Explanation: the market price is beyond control. Even if every government in the world goes totalitarian, following the trend, the market and market price will still be there -- in the black market, with a criminality premium.

Wed, 02/09/2011 - 10:55 | Link to Comment alter ego
alter ego's picture

GeneH3,

Central planners are manipulating the price of oil as we speak.

How do you explain the spread between the West Texas (WTI) vs Brent?

WTI is just a small portion of the Oil market however when you see commodities futures is what basically is shown as the main indicator for the "crude oil price".

Right now WTI is in the lower spectrum of oil prices (87$ something) while Brent is hitting almost 100$ per barrel.

That difference between the two indicate  manipulation.

 

Wed, 02/09/2011 - 11:01 | Link to Comment Flakmeister
Flakmeister's picture

  They are trying, however, driving the price down increases demand (up to a point) as marginal users get priced into the market. Oil is different from gold, you buy it and burn it, and then its gone.

Wed, 02/09/2011 - 14:53 | Link to Comment DaveyJones
DaveyJones's picture

yup..and you need it to do and make oh, everything

Wed, 02/09/2011 - 12:14 | Link to Comment Winston Smith 2009
Winston Smith 2009's picture

This is exactly as predicted by the excellent book "Blood and Oil" and, I'm sure, many other books on peak oil.  The OPEC countres have long been suspected of cooking their books because claimed reserves are not checked by anyone and the more reserves one claims the more oil one can sell.

Wed, 02/09/2011 - 12:21 | Link to Comment Bad Sushi
Bad Sushi's picture

This PDF is a good primer on peak oil without any fearmongering or hyperbole.

http://www.feasta.org/documents/risk_resilience/Tipping_Point.pdf

Do NOT follow this link or you will be banned from the site!