Speculation on the role of OPEC

Oct. 30, 2000
Speculation about the role of OPEC in the fluctuation of world oil prices has been well reported by the press in past months.

Speculation about the role of OPEC in the fluctuation of world oil prices has been well reported by the press in past months.

Of some concern is the continuing implication that some OPEC countries, such as Saudi Arabia and others, are endowed with enormous oil reserves ready and primed to be tapped to satisfy world market demands as required. The fact is, these countries have been producing oil for a long time and many of these fields, including Ghawar in Saudi Arabia, the world's largest, are well into their depletion stage.

In order to maintain production rates in depleting fields, continued expensive investments are required such as workover of wells, additional drilling, and infrastructure costs for secondary and enhanced-recovery schemes. Even the reopening of old wells is costly.

Over the years, the international petroleum industry has researched and developed advanced scientific and engineering principles and techniques for efficiently maximizing the ultimate recovery of oil. This involves saving associated solution gas and its liquid components by gathering, processing, and marketing or by temporary reinjection into the reservoir for enhancing the recovery of oil and final marketing of gas. Flaring and sacrificing any associated gas without putting the infrastructure in place to save the gas and concomitant disregard for the accompanying negative environmental impact are not tolerable today.

Nevertheless, demand for oil revenues in certain countries appears desparate enough to permit flaring of gas to some extent, as for example in the West African states of Nigeria and Angola. This is in sharp contrast to the commendable model practice followed in Alaska's huge Prudhoe Bay oil field where produced gas is immediately reinjected into the reservoir for repressuring and later marketing. The writer has studied worldwide petroleum exploration, development, and production activities for years and the conclusion is clear. If good production practices were followed in oil fields throughout the world, there would be excess oil capacity to spare.

John M. Andrichuk
Calgary