The Saudis are optimistic. Really optimistic. Ali al-Naimi, minister of petroleum and mineral resources for Saudi Arabia, said last week that “there are at least 14 trillion barrels of reserves in the world,” according to a transcript of a conference hosted by the Center for Strategic & International Studies in Washington. How much is 14 trillion barrels of reserves? Three-and-a-half times more than the highest estimate noted in an historical survey of such guesses by other, as published by 2000 study the Energy Information Administration.
Meanwhile, a new article published by the Reason Foundation references an estimate from the industry journal World Oil, which cites proven oil reserves—defined as oil that is recoverable presently given current economic and business conditions—is 1.1 trillion barrels. BP puts the number at 1.2 trillion, and the Oil and Gas Journal says 1.3 trillion. Last year, the Reason article continues, the IHS Energy consultancy “estimated that the world’s remaining recoverable reserves, excluding unconventional sources such as heavy oil or tar sands, are between 1.3 trillion and 2.4 trillion barrels.”
If there’s one thing that unites the otherwise disparate conjectures about how much oil’s left, it’s the fact that all are lower than Minister Ali al-Naimi’s estimate. Perhaps there’s some play in the difference when it comes to comparing estimates of “recoverable” reserves vs. total remaining reserves otherwise uneconomical. But the minister’s optimism suggests that something close to his belief in the 14-trillion-barrel number is approachable, courtesy of technology. “With advance[s] in technology, I believe our ability to recover more of the 14 trillion is there,” he said at the CSIS conference.
The stakes, of course, are high when it comes to the debate about how much oil is left. The center of the universe for this debate is Saudi Arabia itself, which is the globe’s leading producer of oil and home to the biggest reserves in any one country. Matthew Simmons, chairman and CEO of Simmons & Co., launched a fierce discussion over Saudi reserves last year with his 2005 book Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, which questioned the outlook for raising Saudi Arabia’s future oil production.
But the Kingdom remains optimistic on that front too. “We [in Saudi Arabia] are undertaking a massive investment program to increase our production capacity to 12.5 million barrels per day by 2009 with the potential for more later if market conditions warrant,” the minister promised at the CSIS confab. “This expansion will make a significant contribution to meeting the world’s increasing needs for energy.” If it comes, it would represent a roughly 14% increase over current Saudi production as of March, according to EIA.
Greed and fear may rule in the pricing of oil, but when it comes to official Saudi estimates of black gold, the coin of the realm is optimism. The question is whether that optimism is on steroids.