Saudi Arabia to Become Oil Importer by 2030

According to “BP Statistical Review of World Energy, June 2013”, in 2012- Saudi Arabia had the second largest crude oil reserve (265.9 billion barrels) and the largest producer (11.53 million barrels per day) in the world. However, in mid-2012, a Citigroup analysis had been widely reported in the international media, which forecast that by 2030, Saudi Arabia will have no oil to export!

It says “Saudi Arabia Could be an Oil Importer by ~2030—Saudi Arabia is the world’s largest oil producer (11.1mbpd) & exporter (7.7mbpd). It also consumes 25% of its production. Energy consumption per capita exceeds that of most industrial nations. Oil & its derivatives account for ~50% of Saudi’s electricity production, used mostly (>50%) for residential use. Peak power demand is growing by ~8%/yr. Our analysis shows that if nothing changes Saudi may have no available oil for export by 2030.”

Oil consumption per capita in Saudi Arabia is the highest in the world. It consumes over a billion barrels a year, or approximately 40 barrels per person each year. ‘Saudi per capita consumption is in fact the highest per capita rate in the world, four times more than the United States, five times that of South Korea, and eight times the rate of consumption in Japan. Some estimates for the growth rate have put it as high as 5 percent annually.’

Let’s double check Citigroup’s claim.

Between 1987 and 2011, Saudi Arabia produced 75.93 billion barrels of crude oil. If we assume the 1986 figure of 172.6 billion barrels is reasonable (instead of the dubious 1987 figure). By the end of 2012, Saudi Arabia will be left with 96.67 billion barrels.

If it maintains 5% growth of its domestic crude oil consumption per year from the current level of 1 billion barrels, it would need 33.44 billion barrels between 2012 and 2030. According to Aramco, it exported 2.42 billion barrels in 2011, and if we assume it will remain constant at this level for the next 18 years until 2030, it will export 45.98 billion barrels. Now the total of domestic consumption and export will be 79.42 billion barrels. It will have only 17.25 billion barrels left! However, this scenario assumes a constant 5% crude oil consumption growth, no alternate fuel, no effective energy efficiency/conservation program, no new findings and the 1987 figures being totally wrong (which remains almost unchanged at 260.2 billion barrels in 2012!).

How much oil OPEC countries really have?
Organisation of the Petroleum Exporting Countries (OPEC) countries account for 72.6% of the world’s total oil reserves and non-OPEC countries account for the rest. Venezuela (297.6 billion barrels) has the largest oil reserve in the world followed by Saudi Arabia (265.9 billion barrels), Canada (173.9 billion barrels), Iran (157.0 billion barrels) and Iraq (150.0 billion barrels).

The above figures are based on data from the BP Statistical Review of World Energy 2013[2] – a well-respected source. However, Bently (2006)[3] questions the validity of all such data. He cites the two views of the world crude oil reserves. According to one estimate, we are running out of oil, but the other view does not see any near-term resource limits. It is because they are depending on two different sets of data.

‘The industry “P50” data on oil discovery indicate that the conventional oil peak is imminent‘. According to him, energy analysts rely on ‘P50’ reserve values, which designate 50% probable, and are ‘an industry estimate at a given date for the most likely size of a field’s reserves’. When ‘P50’ discovery data are combined with geological knowledge, we get a view that ‘about two-thirds of the world’s oil-producing countries are now past their resource-limited peak of conventional oil production, and hence in terminal production decline’.

Alternately, if proved reserves are used ‘a very different picture emerges’, this dismisses any near term threat to crude oil supply. ‘Proved reserves generally report only the oil that is just about to be brought to market, rather than the total amount of oil that has been discovered’. However, he points to a serious data quality problem with proved-reserves due to under reporting, over-reporting and non-reporting, which has not been adequately addressed by the energy modelling community.

Under-reporting: Western countries have under reported their reserves according to Bentley (2006). He provides three examples. 1) ‘UK’s ‘P50’ reserves were estimated to be 20Gb in 1980 and 10Gb in 2006. During the same period, its Proved Reserves remained steady at 4-5Gb!’; 2) ‘With little in the way of new finds or improved recovery, Norway had produced far more oil than the proved reserves could account for’; 3) ‘The reserves numbers for the USA have changed hardly at all for decades, staying broadly in the ~30–40 Gb range. The U.S. R/P ratio has also stayed virtually constant over the period, at around 10 years. Proved reserves do not report the total oil discovered, but simply that portion judged close to production under SEC rules’.

Over-reporting: For the OPEC member countries the opposite is true; that is, they are over-reporting their proved reserves. In the late 1980s, OPEC countries linked their allowable production under a quota system which in turn was proportional to the size of a country’s reported proved reserves. The impact was dramatic as shown graph below:

For example, in 1986 Saudi Arabia’s proved reserve was 172.6 GB, which increased to 257.6GB in 1987. Bentley estimates that such over reporting has added 300GB to the global proved reserves.

Non-reporting: According to Bentley, non-reporting of oil reserves is the most serious problem. He says that ‘Each year in recent years proved reserves for the majority of countries have not changed, with these static data sometimes running for a decade or more’.

I also noted that the ‘BP 2013 Review‘ shows Saudi Arabia’s proven reserve in 2010 was 265.9 billion barrels, which was more than 257.6 billion barrels reported in 1987; that is, even after producing about 46 billion barrels in 23 years; its proven reserve has increased instead of decreased! I am quoting the following figures to make my point based on data from Saudi Aramco’s 2012 Annual Review (in italic).

Bentley (2006) concluded that it would be impossible to calculate the date at which a country would be over its production peak simply from its proved reserves data. ‘Overall, the key idea to retain about proved reserves is that for the majority of countries in the world, and especially the large producers, the data have no bearing at all on true reserves’. According to European Commission’s assessment[4] ‘it is impossible to anticipate whether an oil peak will come, since new discoveries have occurred repeatedly’. BP in its ‘BP Energy Outlook 2030’[5] forecasts that the ‘world proved oil reserves in 2010 were sufficient to meet 46.2 years of global production’.

Conclusion:

If we wake up one good morning and hear that OPEC countries are running out of oil to export — should we be concerned? Perhaps it is a question for the future. We may not run out of crude oil but it has to be sourced from other regions.
Rabiul H. Zaki is a BUET and AIT graduate currently working in Australia.

[1] ‘Will Saudi Arabia become an oil importer by 2030?’ [Arab News (Saudi Arabia)]: www.equities.com

[2] BP Statistical Review of World Energy 2013, www.bp.com

[3] ‘Global oil and gas depletion – A letter to the energy modelling community’, Roger W. Bently International Association for Energy Economics, Newsletter, Second Quarter 2006, http://www.iaee.org/documents/06spr.pdf

[4] Energy Roadmap 2050, December 2011, European Commission, http://ec.europa.eu/energy/energy2020/roadmap/index_en.htm

[5] BP Energy Outlook 2030, January 2012, www.bp.com

This article first appeared on bdnews24.com, an online Bangladeshi news platform.