NY Times, February 24, 2004 Forecast of Rising Oil Demand Challenges Tired Saudi Fields By JEFF GERTH
When visitors tour the headquarters of Saudi Arabia's oil empire — a sleek glass building rising from the desert in Dhahran near the Persian Gulf — they are reminded of its mission in a film projected on a giant screen. "We supply what the world demands every day," it declares.
For decades, that has largely been true. Ever since its rich reserves were discovered more than a half-century ago, Saudi Arabia has pumped the oil needed to keep pace with rising needs, becoming the mainstay of the global energy markets.
But the country's oil fields now are in decline, prompting industry and government officials to raise serious questions about whether the kingdom will be able to satisfy the world's thirst for oil in coming years.
Energy forecasts call for Saudi Arabia to almost double its output in the next decade and after. Oil executives and government officials in the United States and Saudi Arabia, however, say capacity will probably stall near current levels, potentially creating a significant gap in the global energy supply.
Outsiders have not had access to detailed production data from Saudi Aramco, the state-owned oil company, for more than 20 years. But interviews in recent months with experts on Saudi oil fields provided a rare look inside the business and suggested looming problems.
An internal Saudi Aramco plan, the experts said, estimates total production capacity in 2011 at 10.15 million barrels a day, about the current capacity. But to meet expected world demand, the United States Department of Energy's research arm says Saudi Arabia will need to produce 13.6 million barrels a day by 2010 and 19.5 million barrels a day by 2020.
"In the past, the world has counted on Saudi Arabia," one senior Saudi oil executive said. "Now I don't see how long it can be maintained."
Saudi Arabia, the leading exporter for three decades, is not running out of oil. Industry officials are finding, however, that it is becoming more difficult or expensive to extract it. Today, the country produces about eight million barrels a day, roughly one-tenth of the world's needs. It is the top foreign supplier to the United States, the world's leading energy consumer.
Fears of a future energy gap could, of course, turn out to be unfounded. Predictions of oil market behavior have often proved wrong.
But if Saudi production falls short, industry experts say the consequences could be significant. Other large producers, like Russia and Iraq, do not have Saudi Aramco's huge reserves or excess oil capacity to export, and promising new fields elsewhere are not expected to deliver enough oil to make up the difference.
As a result, supplies could tighten and oil prices could increase. The global economy could feel the ripples; previous spikes in oil prices have helped cause recessions, though high oil prices in the last year or so have not slowed strong growth.
Saudi Aramco says its dominance in world oil markets will grow because, "if required," it can expand its capacity to 12 million barrels a day or more by "making necessary investments," according to written responses to questions submitted by The New York Times.
But some experts are skeptical. Edward O. Price Jr., a former top Saudi Aramco and Chevron executive and a leading United States government adviser, says he believes that Saudi Arabia can pump up to 12 million barrels a day "for a few years." But "the world should not expect more from the Saudis," he said. He expects global oil markets to be in short supply by 2015.
full: http://www.nytimes.com/2004/02/24/business/24OIL.html
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