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Does Saudi Arabia really have as much oil as analysts think?



Venezuela has officially the world's largest oil reserves with 303 billion barrels of evidence. But much of this oil is extra heavy crude oil and cannot be economical to produce at current prices. Part of Venezuelan barrels can in fact no longer be in the "proven reserves" category.

Consider that Venezuela's proven reserves jumped from 80 billion barrels in 2005 to 300 billion barrels in 2014. The main reason for this was not & # 39; t a bunch of new oil discoveries. No, it was the fact that oil prices had reached treble numbers, which made Venezuela's extra heavy oil to produce economically. In other words, "resources" (the oil in the ground) was moved into the category of "deliberate reserves" (oil that is economical to produce).

By contrast, Saudi Arabia reported 264 billion barrels of sampled reserves in 2005 and 267 billion barrels in 201

4. Saudi Arabia's barrels were considered to be economical to produce even before oil prices peaked. For this reason, I believe that Saudi Arabia's proven reserves – 16 percent of global sum – are of paramount importance to the global oil market.

But doubts about the amount of Saudi Arabia's reserves have persisted for many years. In 1982, Saudi Arabia quit its license to investigate its oil and gas data. Previously, outsiders had access to information on their reserves. When that availability was closed, Saudi showed that oil reserves were estimated at 166 billion barrels.

However, around 1988, Saudi originated its estimate of proven reserves of 90 billion barrels. Many pundits have suggested that this upward revision was based on internal OPEC policies. Since the reserves were no longer subject to external audit, there was great skepticism about the official figures that Saudis published.

The skepticism deeply deemed that Saudi's reserves in 1990 were 260 billion barrels, and today – nearly 30 years later – they are allegedly 266 billion barrels. Meanwhile, Saudi Arabia produced over 100 billion barrels between 1990 and 2017. How could their reserves be at least unchanged? Related: Is Ocasio-Cortez entitled to reject nuclear energy?

In preparation for a potential IPO, Saudi's national oil company Saudi Aramco said an external audit of its proven reserves. The external audit found Saudi's proven oil reserves to be at least 270 billion barrels.

But doubts continue. For example, oil economist Dr. Mamdouh G. Salameh, a visiting energy economics professor at the ESCP Europe Business School in London, recently wrote:

My calculation of Saudi reserves based on Saudi production since the discovery of Oil in 1938 to date (for which we have figures) and a deduction of an annual depletion of Saudi aging fields on average 5 percent -7 percent over the same period, gives a figure of 70-74 bb of remaining reserves. My characters are more or less in line with the other experts. "

I once did a similar calculation. I started with the assumption that the 1982 estimate of 166 billion barrels was correct, and then I just pulled the Saudi production from then. I've calculated its total production since 1982 as ~ 100 billion barrels, leaving 66 billion barrels of reserves.

But I made a sanitation check that cast this calculation into doubt, I did the same US proven reserve over the same timeframe.

In 1982, the US showed crude oil reserves In 2005 – and before the shale oil boom was on its way the United States reserved reserves showed only 30 billion barrels, but total US production between 1982 and 2005 was 77 billion barrels.

If we are expanding this calculation through the end of 2017, US proven reserves have actually jumped to 50 billion barrels (as of 2018 BP Statistical Review), and there have been 117 billion barrels of US production since 1982.

To repeat, in 1982, the US showed that crude oil reserves were 35 billion barrels. Between then and 2017, the United States produced 117 billion barrels of oil, but proven reserves increased to 50 billion barrels. Related: Can Ukraine Get Energy Independence?

How did this happen? There were new discoveries, technological improvements that allowed more barrels to be extracted from existing fields and higher prices that made extra resources financially to extract.

I think it's reasonable to assume that Saudi Arabia also found several barrels since 1982. They also have access to the same technology as improved recovery in US fields. Therefore, I do not think it is a legitimate task to consider depletion from a historical reserve number to estimate current reserves. Such an exercise would have suggested that US oil production would have fallen to zero in 1991.

Thus, I do not find a reasonable basis for concluding that Saudi Arabia's reserves are much lower than their official figures. Their published reserves are consistent with the independent audit, and they are consistent with the US reserves growth experience despite significant oil production.

Do you learn that the American results are atypical, you can repeat the exercise for some of the world's largest oil producers and find the same. From the proven reserves in 1982 and the deduction of subsequent production, the reserves will not accurately predict at some point in the future. In many cases – as in the US – cumulative production was larger than the 1982-proven reserve number.

So I have so far not found any good reason to doubt Saudi Arabia's official figures.

By Robert Rapier

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