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UFO -

Originally Posted by UFO

I understand the Saudis have been overstating their reserves for a while now. Now they won't be able to hide it anymore, if they can't meet production at current prices.

Yeah, I read the following back in 2006. I apologize that I can no longer find the link :

Middle East at a crossroads - by Richard Heinberg - August 2006

At the fifth annual conference of ASPO (the Association for the Study of Peak Oil), held in July in Pisa, Italy, there were many excellent presentations, one of which I will report on at some length below.
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Questions about the real size of Kuwait’s oil reserves have emerged in the Kuwaiti National Assembly, leading the opposition party to call for production cuts. Remarkably, Kuwait appears to be groping toward implementation of the Oil Depletion Protocol, without ever having heard of it. However, from the standpoint of nations that want to keep the oil flowing so the global industrial party can continue, this is bad news.

Even worse news, potentially, comes from Saudi Arabia, where oil flows have shrunk by some 400,000 barrels per day over the past few months, despite astronomic prices. No one knows for sure what is going on. The Saudis themselves say the production cuts are due to lack of demand, but this hardly seems plausible, unless the kingdom is only able to deliver unwanted heavy, sour crude to market—but even in that case, one would expect flows to increase, with a price discount factored in for resource quality.

At the same time, the Saudis are hiring just about every spare drilling rig in the world, resulting in a dramatically falling rig count in the Gulf of Mexico—a place that would otherwise be seeing an increasing count, given the fact that Mexico’s giant Cantarell field is in now in steep decline, with dire implications for the nation’s economy.

Matthew Simmons (Twilight in the Desert) has been insisting for the past few years that Saudi production is close to peak and that Ghawar, the world’s biggest field, may be in decline. Now many others are speculating that this is the real reason for the falling production figures.

What happens next? It depends on the real condition of Ghawar. Perhaps a heroic drilling campaign could result in a temporary bloom in production, lasting perhaps three years, followed by a swift, terminal collapse. On the other hand, it is possible that the field has been so thoroughly exploited already that we are seeing the irreversible, rapid decline. At the ASPO conference a well-connected industry insider who wishes not to be directly quoted told me that his own sources inside Saudi Arabia insist that production from Ghawar is now down to less than three million barrels per day, and that the Saudis are maintaining total production at only slowly dwindling levels by producing other fields at maximum rates. This, if true, would be a bombshell: most estimates give production from Ghawar at 5.5 Mb/d.
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I have also read that the Saudi's damaged there oil fields over the years with bad/cheap pumping practices.

CarloSW2