Matthew Simmons, the energy investment banker whose analysis we have cited here numerous times on GCC, suggests in an interview with Aljazeera that the world may already have passed peak production of oil.
“If Saudi Arabia have damaged their fields, accidentally or not, by overproducing them, then we may have already passed peak oil. Iran has certainly peaked, there is no way on Earth they can ever get back to their production of six million barrels per day (mbpd).”
The technical term for damaging an oilfield by overproduction is rate sensitivity. In other words, if the oil is pulled out of the ground too fast, it damages the fragile geological structure of the field. This can make as much as 80% of the oil within the field unextractable. Of course, at the moment, virtually every producer is at full tilt. The most important among them is Saudi Arabia; their Gharwar field is the world’s biggest.
The idea that Saudi Arabia could force its production up to 12 mbpd or higher is met with scorn by Simmons.
“This is dangerous stuff,” warns Simmons. “If we say they have not peaked and then they choose to further increase production, they will only hasten their field decline, and waste huge amounts of valuable oil into the bargain.“
The Saudis—not surprisingly—scoff at such forecasts. Unsettlingly, however, Simmons bases his analysis, which he pursued in great detail beginning last year, on a thorough review of a large number of engineering and government documents, from both the US and Saudi Arabia.
The Saudis have proven adept at the geopolitical management of their position as lead global supplier. It remains to be seen whether they will prove as adept at the long-term geotechnical management of their reserves. Releasing a more detailed accounting of reserves and production on a well-by-well basis would be an excellent place to start, and a way to put to rest concerns such as Simmons’.
Unless, of course, Simmons is correct.