Saudi petroleum expert: the world is heading for an oil shortage

[Louis Proyect <lnp3@xxxxxxxxx>]

NY Times Magazine, August 21, 2005
The Breaking Point
By PETER MAASS

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So whom to believe? Before leaving New York for Saudi Arabia, I was advised
by several oil experts to try to interview Sadad al-Husseini, who retired
last year after serving as Aramco's top executive for exploration and
production. I faxed him in Dhahran and received a surprisingly quick reply;
he agreed to meet me. A week later, after I arrived in Riyadh, Husseini
e-mailed me, asking when I would come to Dhahran; in a follow-up phone
call, he offered to pick me up at the airport. He was, it seemed, eager to
talk.

It can be argued that in a nation devoted to oil, Husseini knows more about
it than anyone else. Born in Syria, Husseini was raised in Saudi Arabia,
where his father was a government official whose family took on Saudi
citizenship. Husseini earned a Ph.D. in geological sciences from Brown
University in 1973 and went to work in Aramco's exploration department,
eventually rising to the highest position. Until his retirement last year
-- said to have been caused by a top-level dispute, the nature of which is
the source of many rumors -- Husseini was a member of the company's board
and its management committee. He is one of the most respected and
accomplished oilmen in the world.

After meeting me at the cavernous airport that serves Dhahran, he drove me
in his luxury sedan to the villa that houses his private office. As we
entered, he pointed to an armoire that displayed a dozen or so vials of
black liquid. ''These are samples from oil fields I discovered,'' he
explained. Upstairs, there were even more vials, and he would have
possessed more than that except, as he said, laughing, ''I didn't start
collecting early enough.''

We spoke for several hours. The message he delivered was clear: the world
is heading for an oil shortage. His warning is quite different from the
calming speeches that Naimi and other Saudis, along with senior American
officials, deliver on an almost daily basis. Husseini explained that the
need to produce more oil is coming from two directions. Most obviously,
demand is rising; in recent years, global demand has increased by two
million barrels a day. (Current daily consumption, remember, is about 84
million barrels a day.) Less obviously, oil producers deplete their
reserves every time they pump out a barrel of oil. This means that merely
to maintain their reserve base, they have to replace the oil they extract
from declining fields. It's the geological equivalent of running to stay in
place. Husseini acknowledged that new fields are coming online, like
offshore West Africa and the Caspian basin, but he said that their output
isn't big enough to offset this growing need.

''You look at the globe and ask, 'Where are the big increments?' and
there's hardly anything but Saudi Arabia,'' he said. ''The kingdom and
Ghawar field are not the problem. That misses the whole point. The problem
is that you go from 79 million barrels a day in 2002 to 82.5 in 2003 to
84.5 in 2004. You're leaping by two million to three million a year, and if
you have to cover declines, that's another four to five million.'' In other
words, if demand and depletion patterns continue, every year the world will
need to open enough fields or wells to pump an additional six to eight
million barrels a day -- at least two million new barrels a day to meet the
rising demand and at least four million to compensate for the declining
production of existing fields. ''That's like a whole new Saudi Arabia every
couple of years,'' Husseini said. ''It can't be done indefinitely. It's not
sustainable.''

Husseini speaks patiently, like a teacher who hopes someone is listening.
He is in the enviable position of knowing what he talks about while having
the freedom to speak openly about it. He did not disclose precise
information about Saudi reserves or production -- which remain the
equivalent of state secrets -- but he felt free to speak in generalities
that were forthright, even when they conflicted with the reassuring
statements of current Aramco officials. When I asked why he was willing to
be so frank, he said it was because he sees a shortage ahead and wants to
do what he can to avert it. I assumed that he would not be particularly
distressed if his rivals in the Saudi oil establishment were embarrassed by
his frankness.

full: http://www.nytimes.com/2005/08/21/magazine/21OIL.html

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