Saudi Arabian Oil Is Running Out And That Will Affect Long-Term Oil Markets
SummarySaudi Arabia is one of the most significant players in the oil markets. The country produces more than 10% of worldwide oil. But things aren't as pretty as they seem.
A significant portion of Saudi Arabia's oil comes from its Ghawar Field which appears to be running out. The country might only have 1/3 of the oil that it says.
Despite this, the country is continually thrust into the world spotlight thanks to one reason primarily. The country directly controls more than 10% of the world's oil production, and through its prime position in OPEC, has a significant say in worldwide oil prices.
As a result, anything that affects the oil environment in Saudi Arabia has a profound effect on the worldwide oil markets. And Saudi Arabian oil, as we will see throughout this article, is running out. This will have a significant impact on the oil markets and greatly increase their prices. And this is an impact that will have a profound and upcoming effect on the oil markets.Saudi Arabian Oil ReservesSaudi Arabia has 266.8 billion barrels of oil reserves located under those sandy plains. Saudi Arabia currently produces approximately 0.01 billion barrels of this oil per day, meaning that at the country's present rate of production, its oil should last it roughly just over 73 years. While that is significant production, it is important to keep in mind that the country has already been producing oil for that long.
And that means that Saudi Arabia's oil should run out by roughly 2090, barring no other events.
But there remains skepticism about the true size of Saudi Arabia's oil reserves. The country increased oil reserves by 100 billion barrels from 170 billion barrels in 1987 to almost 270 billion barrels by 1989. Since then, the country's reserves have remained unchanged despite the fact that Saudi Arabia has produced almost 100 billion barrels of reserves since then.Looking at a worst case scenario, and removing both the country's increase in reserves from 1987-1989 along with the country's production since then, and the country might only have 70 billion barrels of oil left.
That remaining oil, in the present environment, would last the country just 19 years. And that doesn't keep into account that the oil is likely much less economical to recover in the present oil environment as compared to where it was two years ago.
And yet we have seen no amendments in the country's economical oil reserves.And yet, Saudi Arabia, seems to be afraid that its oil is running out. The country has recently announced its ambitious Vision 2030 plan to diversify its economy from oil. The country plans to spend many billions of not into the trillions to diversify the country's economy.
Saudi Arabia ProductionLooking past Saudi Arabia's oil reserves and we get a more telling picture of the company's production.
Saudi Arabia's production was increasing from the early-1990s to the late-2000s before balancing out. Since then, the country's production has remained rather constant, and it is expected to remain so for the coming decades. This is anticipated to remain so despite increasing oil demand which the country has not been taking advantage of. That shows that the country plans to be holding on to its existing production without taking advantage of growing markets.
Saudi Arabia's Ghawar Field is the single largest oil producing field in the world producing approximately 5% of the entire world's oil production. The size of this field and its incredible reserves means that it is essential to the entirety of Saudi Arabia's production and strategy going forward. And that means any problems in the fields reserves bode poorly for the country.
The Ghawar Field began water flooding in 1965 and by 2003, the water cut for the field had reached 32%. Before that, the water cut was approximately 27%. Since then, the field's water cut has increased significantly with the North Uthmaniyah water cut reaching 46% by 2006. Other details on the fields water cut are hidden, largely by the Saudi Arabian government, however, it is very plausible that the water cut has increased since then.
ConclusionSaudi Arabia might seem like it has a ton of oil as one of the strongest oil countries in the world. Despite that, the country has significant difficulties coming forward, as it appears its oil is running out, even if it hides it from investors.
While the country says it has 270 billion barrels of oil, looking at the numbers further makes it appear as if it might have just 70 billion barrels of oil.
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Sometimes things just aren't what they seem, Energy is one of those things!!!