Peak oil is closer than we think? Saudi Aramco reveals a troubling fact about the world's largest oil field

The Ghawar oil field in Saudi Arabia has a mythical status in the world oil markets. Huge and prolific, it has been the country's main source of wealth for decades – and still is – and one of the main reasons the global oil markets have been widely supplied. If Ghawar was not there, refueling would cost a lot more.

Ghawar is the jewel of Saudi Aramco's vast production portfolio. Located in the far east of Saudi Arabia, it is 200 km long and 26 km wide, which makes it smaller than Puerto Rico. Discovered in 1948, when Aramco was an American company, it produced its first oil three years later.

Since then, the deposit has reliably produced five million barrels a day, which in the 1970s accounted for 10% of global oil demand. Demand has almost doubled since then. Yet this single domain provides 5% of world production.

Or so we thought. In fact, Ghawar is not as resilient as we have suggested. We have just discovered that its production has decreased considerably since Aramco had already cleaned up its reserves and production. If Ghawar quickly loses momentum, peak oil – do you remember this theory? – could be closer than we had thought. And Ghawar is only one of the dozens of huge conventional oil reservoirs scattered around the planet that are in various stages of decline.

Aramco is a notoriously secretive public company, making its real size, pumping power and financial strength a guessing game that has always obsessed oil traders and analysts. But Aramco has somewhat lifted the veil this week by publishing a 470-page debt prospectus. The company is raising debts to finance its $ 69 billion US purchase of Sabic, the Saudi chemicals giant.

There is nothing to confirm that Aramco is the most profitable company in the world – net income was $ 111.1 billion last year – there was a curious thing on page 88: the maximum production capacity of Ghawar was 3.8 million barrels a day last year.

To the best of everyone's knowledge, the last official public document on Ghawar's production dates back to 2004, when two senior Aramco officials made a presentation on global oil supply scenarios at Washington's Center for Strategic and International Studies. .

Their slides show that Ghawar produced about five million barrels a day between 1993 and 2003, a quarter more than last year. The slides also revealed that "peripheral water injection" had started in 1965. The injection of water was used to increase the reservoir pressure as more and more people oil was pumped. As tanks age, more and more water is pumped. This seems to be the case of Ghawar. In 1993, his water "cut" was about 25%. Ten years later, it was 33%. This last figure means that for three barrels of fluid raised to the surface, two were oil and one water. The Aramco prospectus does not say what the Ghawar water cut is today, but it is probably higher than it was in 2003.

On paper, Ghawar seems to be able to stay long, the prospectus indicates that its cash reserves are 48.2 billion barrels. The figure suggests that, at current peak production rates, Ghawar still has three or four decades of puffing in his aging body. But in general, conventional reservoirs experience a steady decline, and often quite brutal, after about 50% production. Advances in recovery technology may slow down this decline somewhat.

But the Aramco prospectus does not say why Ghawar's production has declined so much in the last decade, or what percentage of its reserves has been depleted. So we really do not know how long he can continue to pump 3.8 million barrels a day. All that Aramco will say is that more than 80% of its tanks are depleted to less than 40%. But 20% of them are already half gone. Is any of them Ghawar?

The Ghawar downturn, coupled with the measured decline of many other huge discoveries – from the North Sea to Prudhoe Bay in Alaska – sends powerful messages: the American shale boom may not be enough to offset the continuing decline in conventional production. Take the Cantarell Tank in Mexico. In 2004, it spewed 2.1 million barrels a day, which made it huge, even by Saudi standards. Today, its daily output is only 135,000 barrels and Mexico has become a net importer of oil for the first time in half a century.

The Ghawar downturn inevitably recalls the peak oil theory that we have reached the peak oil production stage and that the economic consequences of running the world with less oil would be severe. One of the biggest proponents of this theory was the late American investment banker Matthew Simmons, whose 2005 book, Twilight in the desert, argued that Saudi Arabia in general and Ghawar in particular were less robust than those announced. In his book launch speech, he said that crucial reserves of Saudi oil "came only from a handful of overworked and aging fields that all risked a sudden collapse in production."

Mr. Simmons' advanced warnings had proved false. He did not anticipate the American revolution of shale oil. The Permian shale basin in the southwestern United States alone produces 4.1 million barrels a day, making the United States a non-conventional oil-type powerhouse. But he may not have been wrong about Ghawar. Its production is well below what we had known and if it collapsed, the peak oil would come a little earlier.

the reserves of saudi aramco

The largest fields of the company as of December 31, 2018

Max. Support.

Capacity (MSC)

JOHN SOPINSKI / THE GLOBE AND THE MAIL, SOURCE:

saudi aramco; TILEZEN; OPENSTREETMAP

Contributors HIU

the reserves of saudi aramco

The largest fields of the company as of December 31, 2018

Max. Support.

Capacity (MSC)

JOHN SOPINSKI / THE GLOBE AND THE MAIL, SOURCE: saudi aramco;

TILEZEN; OPENSTREETMAP CONTRIBUTORS; HIU

the reserves of saudi aramco

The largest fields of the company as of December 31, 2018

Max. durable

Capacity (MSC)

(Million barrels of oil equivalent)

JOHN SOPINSKI / THE GLOBE AND THE MAIL, SOURCE: saudi aramco; TILEZEN;

OPENSTREETMAP CONTRIBUTORS; HIU