Sunday, July 20, 2008

Robert Mabro Interview

Pamela Ann Smith interviews Robert Mabro: The Oil Price How Long Can It Go on Rising?
Robert Mabro: On the supply side, there Is a huge controversy about what Saudi Arabia's reserves really are. There is talk of a peak, very soon, In oil supplies worldwide and that after that, we will have to learn to live with much less oil. It's all irrelevant. It's nonsense. When we talk about reserves, we are talking about oil in the ground. The concepts about reserves are metaphysical concepts. They have never been accurate, and they never will be.

Pamela Ann Smith: So, the distinction between proven and probable reserves is meaningless?

Mabro: No, it's not meaningless. But it is one phony number compared to another phony number. I'll give you an example. I tell my students, do the following exercise. 'Go to the BP Statistical Review of World Energy and see what the reserves of the non-Opec countries were 20 years ago. Then, compare them with the reserves of the same countries in the latest issue. Then, they have to make a longer calculation: 'see how much these non-Opec countries have produced in these past 20 years.' Now, if the first estimate is correct, they, the non-Opec countries, would not have a drop of oil left. That's the first point. The second point is, 'Why should I care? Why should anybody on earth care whether Saudi Arabia has 260bn barrels of crude oil reserves, or 100bn?' It doesn't matter, not at all. Because what you can produce today, whether it's 260bn or 100bn, the answer is the same. You cannot produce on the basis of 300bn, or 260bn in reserves. But if you produce at the same rate vis-a-vis reserves that the North Sea has, Saudi Arabia would be now be producing more than the whole world's consumption. Of course, its oil would then run out quickly. So, it's irrelevant unless you are thinking 40 or 50 years ahead. But I will certainly be dead by then...

Smith: And all sorts of things could happen by then?

Mabro: Yes. There is a hysteria about what the reserves are. But there is an even worse hysteria produced by a guy called Simmons. I have met him, he is a fun guy, but he is dangerous.

Smith: You mean Matthew Simmons, the author of Twilight In the Desert: The Coming Saudi Oil Shock and the World Economy? The book that is a bestseller In the States?

Mabro: He has said that the Ghawar field in Saudi Arabia, which is something like 110 miles long and 17 miles wide....

Smith: It's huge. It's the biggest one in Saudi Arabia, isn't it?

Mabro: Yes, and it is well behaved, too. Simmons has said, "It cannot produce anymore. It is declining, and there is water in it." Well, every field has water. If there isn't water in it, the oil doesn't come out! oil is not like a swimming pool, it is in rock, in porous rock. There is water and gas, so when you make the hole, you bring the pressure down, and the water pushes up, so all oil has water in it, and you have to take it out. He claims it's a lot more, and makes a comparison with a field in Oman which is declining. But this is like comparing a calf with an elephant. A small thing with something big. He has written nonsense on Ghawar. Then he said Saudi Arabia has no surplus capacity. In other words, that they don't have the capacity to produce more than they are producing today. Why? I was in Saudi Arabia, and I haven't seen this. Whose leg is he pulling? You can't see any evidence for this. We have lists of the fields that Saudi Arabia has shut down. This is public knowledge. 'Surplus capacity' means that you can produce more, but you keep it in the ground, you shut down certain fields so that you can re-open them when you need it.


Anaconda said...


This writer has repeatedly pointed out that Mathew Simmons is full of shit.

From (OIM) JP Morgan Upgrades Transocean, Wednesday, July 9, 2008 Comment #3, 7/10/08 3:53 PM:


Editorial note: the first comment on this post noted Mathew Simmons' client letter touting "Transocean and deepwater peers," this contrasts with his "Peak" oil mantra for the last several years. Reviewing his speaking schedule: Recent speeches and papers presented by Mathew R. Simmons, it's clear Simmons has been the pied piper of "Peak" oil in the investment community.

And as the previous comment noted, Simmons gathered popular notoriety by authoring the book, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy.

Simmons has been riding that horse ever since.

Simmons main thesis: The Saudis are secretive, data is scare, the oil fields are "mature" and rumors are that "water cut" is increasing at alarming rates.

As recently as April 8, 2008, Simmons made a presentation at Connecticut College, New London, Ct., entitled: Are We Nearing The Peak Of Fossil Fuel Energy? Has Twighlight In The Desert Begun?

"Twilight" is Simmons' euphemism for "Peak" oil.

Interestingly, Simmons mentions Abiotic Oil in the New London presentation:

Beyond Oil Shale Is "Abiotic Oil"

x Over the years, believers in Abiotic Oil arise to refute "Hubbert's Peak."

x Abiotic Oil Theory: Oil is being constantly created from migrations of magma gasses.

x Newest Theory
-- Saturn's Titan
-- Atlantic Trench

Have vast hydrocarbons

x No one, thus far, has figured how to produce Abiotic Oil.

The intellectual pressure to discuss Abiotic Oil must be mounting.

Because the scientific evidence for Abiotic Oil keeps mounting like an "echelon" stacking ever higher.

The question that needs to be answered is whether Simmons is right about Saudi Arabian oil, specifically Ghawar, the largest oil field in the world?

Simmons' evidence: lack of hard data and rumors of "water cut."

Let's look at Ghawar:

Ghawar: The Anatomy of the World's Largest Oil Field* By Abdulkader M. Afifi (2005).

(Partial) Abstract:
Aramco initially discovered oil in Ghawar in 1948, based on surface mapping and shallow structure drilling. Ghawar is a large north-trending anticlinal structure, some 250 kilometers long and 30 kilometers wide. It is a drape fold over a basement horst, which grew initially during the Carboniferous Hercynian deformation and was reactivated episodically, particularly during the Late Cretaceous. In detail, the deep structure consists of several en echelon horst blocks that probably formed in response to right-lateral transpression. The bounding faults have throws exceeding 3000 feet at the Silurian level but terminate within the Triassic section. The episodic structural growth influenced sedimentation of the Permo-Carboniferous sandstone reservoirs, which onlap the structure and the Jurassic and Permian carbonate reservoirs, which accumulated in shoals above structural culminations.

Please review the entire paper, as it's an excellent and informative paper.

Let's focus on the following quotes:

"It is a drape fold over a basement horst, which grew initially during the Carboniferous Hercynian deformation and was reactivated episodically, particularly during the Late Cretaceous."

"In detail, the deep structure consists of several en echelon horst blocks that probably formed in response to right-lateral transpression."

It is these "en echelon horst blocks" that are the point of discussion of this comment.

(This writer has previously commented on Ghawar, pointing out the significance of the "reactivated episodically" horst on this website.)

An "echelon" looks like the "chevron" insignia for a sargent's rank on the sleeve.

So we have a stack of repetitive layered sedimentary rocks.

What we do know is that Ghawar has produced a 19 mile cube of oil over its 50+ years production span.

See a commercial jet at cruising altitude, 33,000 ft. -- looks pretty high up there, doesn't it? Try a cube three times as high -- nearly, a 100,000 feet high.

That's a lot of oil.

What we don't know is how deep have the Saudis drilled into the field?

There are many trapping structures (layers) in the stratigraphic column of Ghawar.

And even if "water cut" has been increased as rumored, is that only at a shallow layer of trapping rock?

How many more layers of trapping rock is left to go?

Are the current well holes drilled down to only a 1000 feet deep?

We don't know, and the point is neither does Mathew Simmons.

There are, undoubtedly, virgin untapped layers in the "echelon" formations in Ghawar, with petroleum flowing up from below constantly all the time.

Mathew Simmons: "No one, thus far, has figured how to produce Abiotic Oil."

Sorry, Mr. Simmons, I got news for you: all the oil in the world is Abiotic Oil.

Ghawar is Abiotic Oil.

But for purposes of this post: Ultra-deepwater, deep-drilled oil is definitely -- Abiotic Oil -- and you just advised your clients to invest in Abiotic Oil.

Mr. Simmons: Get to know it -- and for the world's sake -- like it!

Oil is Abiotic, and it always has been, and always will be.


So, here, we have it -- confirmation that Simmons is full of shit.

You read it here first.

Anaconda said...


The question has always been: What makes the Middle East such a "special" place in terms of oil production?

In other words: How did the Middle East get all the oil?

This is a question "fossil" theory has never been able to answer with any satisfaction or conviction.

"Fossil" theory advocates intuitively realize that simply saying, "that's where the most organic detritus sank to the bottom," just doesn't 'cut it'.

But what is emerging as great news for the world economy is finally there is an answer why the Middle East got all the oil.

The answer is simple enough: The Middle East didn't get all the oil -- it just happened to be the only continental margin that is primarily on dry land.

The Middle East got caught in a "squeeze play" between two continents thus lifting the combined continental margin above sea level.

Almost all other continental margins are in deepwater and until quite recently were beyond man's technical capacity for economic oil production.

Man's ability to reach the oil in the continental margin has increased to the point where record contracts for day-rates have been signed for deepwater, ultra-deep drilling oil rigs.

And there is a race to build these technological wonders of the 21st century.

The oil industry has finally found its Moby Dick in the deep blue sea.

And the oil industry is building a fleet to catch their White Whale.

Ghawar is not alone as oil's Moby Dick: Rare perhaps and maybe still the "biggest whale," but no longer a one of a kind to be feared and envied.

Carioca off Brazil's coast could have as much as 33 billion barrels of oil.

Carioca is a taste of the potential of the continental margin in all its majesty.

And, this "new frontier" has hardly had the surface scratched.

"Peak" oil?

Not until the continental margins have been explored, developed, and exhausted.

Another benefit of continental margin oil -- this maybe the oil that regenerates.

That's right:

The holy grail -- the El Dorado.

An oil field in Northern Iraq has been pumping oil 74 years, yet still pumps out 430,000 barrels a day. Ghawar, itself has been pumping 57 years since 1951, yet still is going strong at 5 million barrels a day.

Continental margin oil, with its "source" faults emanating from areas with active tectonic plates is likely to have conduits into the "belly" of the oil producing beast.

Just like the Middle East.

Move over, "You monster, Ghawar" -- continental margin oil is surely elbowing its way to the front of the trough.

And no country will have a monopoly on continental margin oil.

That's a good thing for the world's economy.

Oil should be a "work horse" and not a "show horse."

Oil is a means to an end: productivity and growth. Oil is not an end in itself.

As long as the world keeps that adage in mind, oil will promote growth: And that's a good thing.

Oil is a mineral, and it's largest deposits are on the continental margin, whether on land or at sea.

"Come on in, the water is fine."