From the Guardian – Feb 8, 2011

by John Vidal

US diplomat convinced by Saudi expert that reserves of world’s biggest oil exporter have been overstated by nearly 40%

The US fears that Saudi Arabia, the world’s largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show.

The cables, released by WikiLeaks,
urge Washington to take seriously a warning from a senior Saudi
government oil executive that the kingdom’s crude oil reserves may have
been overstated by as much as 300bn barrels – nearly 40%.

The
revelation comes as the oil price has soared in recent weeks to more
than $100 a barrel on global demand and tensions in the Middle East.
Many analysts expect that the Saudis and their Opec cartel partners
would pump more oil if rising prices threatened to choke off demand.

However,
Sadad al-Husseini, a geologist and former head of exploration at the
Saudi oil monopoly Aramco, met the US consul general in Riyadh in
November 2007 and told the US diplomat that Aramco’s 12.5m barrel-a-day
capacity needed to keep a lid on prices could not be reached.

According
to the cables, which date between 2007-09, Husseini said Saudi Arabia
might reach an output of 12m barrels a day in 10 years but before then –
possibly as early as 2012 – global oil production would have hit its
highest point. This crunch point is known as “peak oil“.

Husseini said that at that point Aramco would not be able to stop the rise of global oil prices because the Saudi energy
industry had overstated its recoverable reserves to spur foreign
investment. He argued that Aramco had badly underestimated the time
needed to bring new oil on tap.

One cable said:
“According to al-Husseini, the crux of the issue is twofold. First, it
is possible that Saudi reserves are not as bountiful as sometimes
described, and the timeline for their production not as unrestrained as
Aramco and energy optimists would like to portray.”

It went on:
“In a presentation, Abdallah al-Saif, current Aramco senior
vice-president for exploration, reported that Aramco has 716bn barrels
of total reserves, of which 51% are recoverable, and that in 20 years
Aramco will have 900bn barrels of reserves.

“Al-Husseini disagrees
with this analysis, believing Aramco’s reserves are overstated by as
much as 300bn barrels. In his view once 50% of original proven reserves
has been reached … a steady output in decline will ensue and no amount
of effort will be able to stop it. He believes that what will result is a
plateau in total output that will last approximately 15 years followed
by decreasing output.”

The US consul then told Washington: “While
al-Husseini fundamentally contradicts the Aramco company line, he is no
doomsday theorist. His pedigree, experience and outlook demand that his
predictions be thoughtfully considered.”

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