Saudi claims: Plea for transparency
The well-written article by Sadad al-Husseini "Rebutting the critics: Saudi Arabia's oil reserves" (OGJ, May 17, 2004, p. 16) has prepared us for higher oil prices in the future because of maturing fields and smaller sizes of fields yet to be developed. That is understandable. What Dr. Husseini has failed to address, however, is why the outside world should believe in Saudi Arabia's oil reserves and its future production capacity.
Mr. Husseini claims the estimate (260 billion bbl) of the kingdom's proved oil reserves is based on SPE/WPC/AAPG criteria. That may well be so, but where is the evidence? The kingdom's database is closed to public scrutiny, and Saudi Aramco does not report its reserves to SEC. The current oil production by Saudi Arabia does not prove the purported size of the kingdom's reserves.
When the Saudis increased their proved oil reserves by a whopping 50% end-1989, they lost credibility. The increase followed major reserves adjustments by other OPEC countries 1-4 years earlier. Certainly such reserves enhancements could not be attributed to technical factors, e.g., new discoveries, field/performance reviews, improved recovery schemes. Almost irrefutably, the enhancements were politically motivated, being related to OPEC quotas.
It should be recalled that Mexico, while not a member of OPEC, cut its oil reserves substantially (more than 50%) in recent years. The revision, prompted by external reviews, was made to comply with SEC rules.
If the Saudis want to gain credibility, they should open their reserves database to a team of independent international experts for review and let Saudi Aramco publish in a book or post on its website reserves and production histories of major fields. Thanks to the policy of openness by the UK and Norwegian governments ("Brown Book," etc.), at present the North Sea is a rare region in the world where field-by-field reserves and production decline data are available publicly. That kind of transparency is certainly in the interests of the public, and the world at large, as it assists in assessment of world resource constraints in the future. A similar but less compelling plea for transparency applies to all other major oil producing countries, including the US.
Ferruh Demirmen
Houston