Ghawar field reserves decline overstated, survey says

Eric Watkins
Senior Correspondent

LOS ANGELES, Dec. 10 -- Concerns about global oil peaking due to declining reserves at Saudi Aramco's Ghawar oil field may be overstated, according to Bernstein Research commenting on the results of a recent satellite survey.

In a note to investors, Bernstein Research said satellite images show that a recent rise in Aramco drilling activity has focused on two major expansion developments and not, as earlier assumed, on keeping older parts of the field producing with enhanced recovery techniques.

"The majority of the increased activity in the Ghawar field can be explained by the Haradh-III, and the Hawiyah natural gas liquids recovery megaprojects, which were not designed as a quick fix to Ghawar's supposed rapid decline," the Bernstein Research note said.

The firm said theories of Ghawar's decline may be based on little or incomplete data from Saudi Arabia on the state of its oil sector.

"Without accurate and detailed data on what Saudi Aramco is undertaking, or with a poor understanding of current Ghawar decline rates, many conspiracy theories have arisen, which argue that we are on the cusp of global peak oil production," the research note said.

Bernstein Research conceded that increased drilling in older sections of Ghawar could suggest efforts to halt some declines, but that such drilling does not by itself point to a sudden drop in the field's output.

The firm concluded that "there is life in this old field yet, as its demise has been overly anticipated." Bernstein said its report was an initial analysis of satellite data from 2004-07, with a final conclusion expected in the coming months. It did not detail the source of the imagery.

The Bernstein Research note counters arguments by experts backing peak oil theories who have warned that sharp global declines could happen at any time, and that Saudi Arabia will only be able to keep production flat for several years but not increase output to meet demand growth.

Bernstein Research is a division of Sanford C. Bernstein & Co. LLC which provides investment research to institutional investors.

Contact Eric Watkins at hippalus@yahoo.com.

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