Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy Hardcover – Jun 10 2005
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Investment banker Simmons offers a detailed description of the relationship between Saudi Arabia and the U.S and our long-standing dependence upon Saudi oil. With a field-by-field assessment of its key oilfields, he highlights many discrepancies between Saudi Arabia's actual production potential and its seemingly extravagant resource claims. Parts 1 and 2 of the book offer background and context for understanding the technical discussion of Saudi oil fields and the world's energy supplies. Parts 3 and 4 contain analysis of Saudi Arabia's oil and gas industry based on the technical papers published by the Society of Petroleum Engineers. Simmons suggests that when Saudi Arabia and other Middle East producers can no longer meet the world's enormous demand, world leaders and energy specialists must be prepared for the consequences of increased scarcity and higher costs of oil that support our modern society. Without authentication of the Saudi's production sustainability claims, the author recommends review of this critical situation by an international forum. A thought-provoking book. Mary Whaley
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“…a must read for anyone concerned with our culture of ‘conspicuous consumption’” (Lobster, Winter 2005/06)
“…a realistic look at the future of Saudi Arabian oil supplies” (Wexus, 7th December 2005)
"The Texas energy specialist, Matthew Simmons, has suggested that the world derives false comfort from the Saudi Arabian assurances of willingness to increase production to meet consumer shortfalls." (Financial Times, 16th September 2005)
"Oil industry expert Matthew Simmons thinks...claims and forecasts are exaggerations and unrepresentative...the book goes into good detail..." (Lloyds List, 26th August 2005)
"...an analyst who is warning that the end of booming oil production is nigh, or already upon us..." (The Business, 4th September 2005)
"This book by Matthew Simmons comes at a timely moment...[and is] therefore essential reading for industry, government, the investment community and academia. It has a message for everyone." (Times Higher Education Supplement, 9th September 2005)
"...there are many valuable insights in Simmons' book. His basic points are right on target." (BusinessWeek, August 1, 2005)
"...This is a ground-breaking book by an analyst of unimpeachable authority..." (New Statesman, 25 July 2005)
In 1956, Shell Oil geologist M. King Hubbert discovered a grand illusion in the American oil industry. For tax purposes, he noted, American oil companies regularly delayed the declaration of new oil reserves by years and even decades. The result was a false impression that new oil was being found all the time. In fact, discoveries had peaked in 1936.
Based on this observation, Mr. Hubbert predicted that American oil production would peak in 1969. He was wrong by one year. We briefly produced 10 million barrels a day in 1970 but have never hit that level since. Even with the addition of Prudhoe Bay, Alaska, American production has slipped to eight million barrels a day -- which is why we import 60% of our oil.
Across the oil industry, the uneasy feeling is growing that world production may be approaching its own "Hubbert's Peak." The last major field yielding more than a million barrels a day was found in Mexico in 1976. New discoveries peaked in 1960, and production outside the Middle East reached its high point in 1997. Meanwhile world demand continues to accelerate by 3% a year. Indonesia, once a major exporter, now imports its oil.
The Saudis claim to have huge oil reserves. Do they really?
Before an uneasy feeling grows into full-blown pessimism, however, one must consider the supposedly vast oil resources lying beneath Saudi Arabia. The Saudis possess 25% of the world's proven reserves. They routinely proclaim that, for at least the next 50 years, they could easily double their current output of 10 million barrels a day.
But is this true? Matthew R. Simmons, a Texas investment banker with a Harvard Business School degree and 20 years' experience in oil, has his doubts. In "Twilight in the Desert" (John Wiley & Sons, 422 pages, $24.95), Mr. Simmons argues that the Saudis may be deceiving the world and themselves. If only half of his claims prove to be true, we could be in for some nasty surprises.
First, Mr. Simmons notes, all Saudi claims exist behind a veil of secrecy. In 1982, the Saudi government took complete control of Aramco (the Arabian American Oil Co.) after four decades of co-ownership with a consortium of major oil companies. Since then Aramco has never released field-by-field figures for its oil production. In fact, no OPEC member is very forthcoming. The cartel sets production quotas according to a country's reserves, so each member has reason to exaggerate. Meanwhile, OPEC nations are constantly cheating one another by overproducing, so none wants to publish official statistics.
As a result, the world's most reliable source for OPEC production is a little company called Petrologistics, located over a grocery store in Geneva. Conrad Gerber, the principal, claims to have spies in every OPEC port. For all we know, Mr. Gerber is making up his numbers, but everyone -- including the Paris-based International Energy Agency -- takes him seriously, since OPEC produces nothing better.
The Saudis, for their part, obviously enjoy their role as producer of last resort and feel content to let everyone think that they have things under control. Yet as Mr. Simmons observes: "History has frequently shown that once secrecy envelops the culture of either a company or a country, those most surprised when the truth comes out are often the insiders who created the secrets in the first place."
Mr. Simmons became suspicious of Saudi claims after taking a guided tour of Aramco facilities in 2003. To penetrate the veil, he turned to the electronic library of the Society of Petroleum Engineers, which regularly publishes technical papers by field geologists. After downloading and studying more than 200 reports by Aramco personnel, Mr. Simmons came up with his own portrait of Saudi Arabia's oil resources. It is not a pretty picture.
Almost 90% of Saudi production comes from six giant fields, all of them discovered before 1967. The "king" of this grouping -- the 2000-square-mile Ghawar field near the Persian Gulf -- is the largest oil field in the world. But if Saudi geology follows the pattern found elsewhere, it is unlikely that any new fields lie nearby. Indeed, Aramco has prospected extensively outside the Ghawar region but found nothing of significance. In particular, the Arab D stratum -- the source rock of the Ghawar field -- has long since eroded in other parts of the Arabian Peninsula. The six major fields, having all produced at or near capacity for almost 40 years, are showing signs of age. All require extensive water injection to maintain their current flow.
Based on these observations, Mr. Simmons doubts that Aramco can increase its output to anywhere near the level it claims. In fact, he believes that Saudi production may have already peaked. Is he right?
Mr. Simmons's critics say that, by relying on technical papers, he has biased his survey, since geologists like to concentrate on problem wells the way that doctors focus on sick patients. Still, the experience in America and the rest of the world shows that oil fields don't last forever. Prudhoe Bay, which was producing 1.2 million barrels a day five years after being brought on line in 1976, is now down to less than 400,000.
The mystery of Saudi oil capacity bears an eerie resemblance to Saddam Hussein's apparent belief that his scientists had developed weapons of mass destruction. Who are the deceivers and who is the deceived? No one yet knows the answers. But at least Matthew Simmons is asking the questions. (Wall Street Journal, June 28, 2005)
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Mr. Simmons' thesis is that conditions experienced at individual oil wells can be extrapolated to determine the level of depletion of the entire oil field in which the wells are located. As background, Mr. Simmons used old, but comprehensive, data on Saudi oil fields that were compiled prior to when Saudi Arabia nationalized its oil industry. This data establishes which Saudi oil fields are the largest and most productive. Mr. Simmons then analyzed more recent papers written on individual wells within the most important Saudi oil fields to see if these wells were exibiting signs consistent with oil field depletion. For example, oil wells with problems such as "gas caps" or "high water cuts" can be an indication that the entire oil field is in an advanced state of depletion. Mr. Simmons concluded that problems indicative of depletion are occurring at wells in Saudi's most productive oil fields. Mr. Simmons also noted that production increases at smaller fields and the development of newly discovered fields have been barely sufficient to offset the declines at the older fields.
Mr. Simmons is a formidable researcher, but his writing skills leave something to be desired. Rather than condense the complex technical information into coherent conclusions, he simply repeats the same facts over and over, apparently hoping that the reader will "connect the dots" for himself. Because of this, I probably missed many of the points Mr. Simmons was trying to make. Better organization and summary of the complex material could have made the book half as long as twice as understandable.
Simmons digs into a most important subject, i.e. whether optimists (including the Saudi oil ministry) or pessimists are to be believed. He addresses this issue by combining an extensive overview of Saudi resources, capabilities, and history with an interesting and extensive description of what it actually takes to produce oil (especially today). This makes me feel I (finally) understand oil production at a depth suitable for an informed and technically aware citizen, something no other book has helped me do - before, I had to simply believe (or not) the flat statements of others. I also come away convinced beyond any doubt that worldwide oil production is now or soon will be in permanent decline. This is serious, as most readers of this review will probably already know.
I believe all of us need to read as much as we can on the subject. I have read books with titles as follows: Collapse; Overshoot; Energy and Society (first half); The End of Oil; Blood and Oil; and Beyond Oil. I check EnergyBulletin.net every day. I've looked several times at Matthew Simmons' company Web site, which contains presentations by him. I've started to look into economic issues; I found papers by John Michael Greer and Joseph Tainter thought-provoking here. There's a lot to understand, since peak oil may have consequences across any aspect of our lives. Anyway, Simmons' book fills lots of blanks in the picture.
btw, make sure you read Appendix C. And finally, Simmons is conscientious, neither polemic nor self-promoting. Where there is uncertainty on an issue Simmons is forthright in admitting it; and his claims are stated with enough detail that other experts in the field can argue any point. Because of this honesty, the book is probably going to be "the" basis for political action and public awareness.
The book offers the requisite background for the layman to understand the history, context and structure of the Saudi oil industry (his technical notes on oil production are welcoming too). Mr. Simmons weaves together a case from the mystery that surrounds oil in Saudi Arabia-mystery about the quantity of reserves, about production levels, about the true geological condition of the wells. Mr. Simmons scanned over 200 papers published under the Society of Petroleum Engineers that chronicle the problems engineers have faced in Saudi wells-problems that are due to the fields' old age and which prelude a future decline in productivity.
There is little chance that any reader will walk away from this book with more answers than questions. But Mr. Simmons deserves credit for shedding light into a mystery-and the debate that has followed the publication bears testament both to the quality of the work as well as to its necessity. Whether there will come an oil shock made in Saudi Arabia is impossible to forecast; but if it does, the reason will have been well explained in "Twilight in the desert."
1. Rarely does one see a topic so thoroughly researched by someone who is already an expert in the field. Simmons had already spent the bulk of his career in the energy business. He decided to conduct extensive, quality research to shape his hypotheses and conclusions. Any student of research methods would benefit from understanding how this book was crafted.
2. Having such a data-driven body of knowledge means that the discussions surrounding peak oil, environmentalism, conservation, and geopolitics (perhaps the term should be geopetroleopolitics?) can be based on some semblance of fact, not rhetoric. Saudi oil fields are declining. This is a fact. We don not have good data to project when these declines will become irreversible. This is also a fact. How we react to these facts as individuals, as a nation, and as a planet, is vitally important. Simmons has crafted the foundations upon which these discussions can be conducted.
I do have some minor quibbles about the book. The index could be a bit better. Some of the technical terminology could have been defined in the text a bit better with footnotes. Some terms are used early, but not defined until much later. Again, I think these are minor points.
I highly recommend this book.
We do not have much time to figure out Plan B. Because changing to other forms of energy will cost a great deal of money in a very short time, the effect of Plan B will be enormous, complex, and will affect the lives of every person on this planet.
One is left, then, with a question, along the lines of exactly how, and who, will author this Plan B? Since Simmons' book is so thoughtfully well written, I hope that he will write a follow-on volume that adds his insight to the logical question which he raises in Twilight in the Desert.
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