Twilight in the Desert

I read Matthew Simmons “Twilight in the Desert” this past week. In the world of Peak Oilers, Matthew Simmons is sort of the mainstream guy that the rest of the authors love to point to as means of validating their positions. He is, after all, pretty well validated . He runs a successful energy investment firm and is respected throughout the industry.

You can check him out here to get a sense for the guy:http://www.youtube.com/watch?v=4IwtAQzrfiw

Simmons asserts that Saudi oil reserves are not as plentiful as the Saudis have led us (with a mimimum of persuasion) to believe.

Back in the 70’s when the United States oil production was peaking, Saudi Arabia was on the upswing. They have since been the dominant exporter of oil and very much the lead player in OPEC. They have produced between 5 million and 13 million barrels of oil a day, every day, since then. They have done so however with relative secrecy. 

For me, the single most enjoyable page in the book is Simmons description of the how the rest of the world goes about guessing Saudi’s actual production. As he tells it, the most often cited source on oil is a Swiss company Petro-Logistics, which is run by a man in a second floor apartment above a grocery store who employs “port spies” that actually monitor and report on Saudi oil tanker departures and their estimated volumes/destinations. Actually, to update things, Conrad Gerber is dead: http://blogs.ft.com/energy-source/2009/05/01/opec-oil-supply-guru-conrad-gerber-has-died/

Since KSA’s (Kingdom of Saudi Arabia) rise to oil exporting preeminence, there has been speculation among energy analysts and pundits of all sorts that KSA  is sitting more oil that it knows what do to do with. Some have even gone so far as to claim that the Saudis could, if they wanted to, produce up 20 million barrels of oil per day and basically flood the market.

The assertion Simmons makes in the book, which are compelling, is that KSA is not capable of vastly increasing their current rate of production (9 million barrels per day) and that they might very well be peaking. He comes to this conclusion after a thorough review of ~200 techincal papers available for reading via the Society of Petroleum Engineers (http://www.spe.org) .

lThe book get’s very in-depth in its analysis. Frankly, to deep for me. I could have done with less detail. But the facts presented by Simmons certainly lend credibility to his assertions that KSA’s oil boom is fast approaching its twilight.

I was able to read the book page for page until about 2/3 through it at which point it was so tedious that I had to skim entire chapters. The other annoying part of the book is that it’s predictive premise didn’t really jibe well with the fact that I was reading 4 year’s after its publication. I couldn’t help but want to hit the internet to see how Saudi Arabia’s oil situation was doing, eager to see if Simmons had been right (not that he offered any set dates for when Saudi oil would peak).

So apart from this being a boring book review, here’s what we know about Saudi oil production for the past 30 years. http://tonto.eia.doe.gov/country/country_energy_data.cfm?fips=SA