Peak Ghawar: A Peak Oiler’s Nightmare

Alternate title:

Guest reservoir geology by David Middleton

Saudi Aramco’s recent bond prospectus has generated a lot of media buzz, particularly regarding the production from Ghawar, the largest oil field in the world. Reaction has ranged from “The biggest Saudi oil field is fading faster than anyone guessed,” (not even wrong) to more subdued reactions from Ellen Wald and Robert Rapier, that the prospectus doesn’t really tell us much Ghawar’s decline rate. One thing that the bond prospectus did do, is to paint a picture of the most profitable company in the world and one that is serious when it says it will produce the last barrel of oil ever produced on Earth.

How big is Ghawar? Has it peaked? Is it “fading faster than anyone guessed”? The answer to the first question is: FRACKING YUGE. The answer to the second question was not easily answerable before Saudi Aramco began the process of becoming a publicly traded company. The answer to the third question is: Of course not.

As Saudi Aramco proceeds towards a 2021 IPO, it has had to embrace transparency. This involved an audit of the proved reserves in their largest fields, comprising about 80% of the company’s value. The audit was conducted by the highly respected DeGolyer and MacNaughton firm (D&M). The audit actually determined that the proved reserves are slightly larger than Aramco’s internal estimate.

This is from D&M’s certification letter (Appendix-C in the bond prospectus):

Reserves estimated herein are expressed as net reserves. Gross reserves are defined as the total estimated petroleum remaining to be produced from these properties after December 31, 2017, but before December 31, 2077 (license limit). Net reserves are defined as that portion of the gross reserves attributable to the interests held by Saudi Arabian Oil Company after deducting interests held by others. Saudi Arabian Oil Company has represented that it holds 100 percent of the interests evaluated herein; therefore, net reserves are equivalent to gross reserves for the purposes of this report.

Saudi Arabian Oil Company has represented that it holds interests in certain properties onshore and offshore the Kingdom of Saudi Arabia. Proved reserves have been estimated for 77 reservoirs in 29 fields in this report.

[…]

Definition of Reserves
Estimates of proved reserves presented in this report have been prepared in accordance with the PRMS approved in March 2007 by the Society of Petroleum Engineers, the World Petroleum Council, the American Association of Petroleum Geologists, and the Society of Petroleum Evaluation Engineers. Only proved reserves have been evaluated for this report. The petroleum reserves are defined as follows:

Reserves are those quantities of petroleum anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions. Reserves must further satisfy four criteria: they must be discovered, recoverable, commercial, and remaining (as of the evaluation date) based on the development project(s) applied. Reserves are further categorized in accordance with the level of certainty associated with the estimates and may be sub-classified based on project maturity and/or characterized by development and production status.

Proved Reserves – Proved Reserves are those quantities of petroleum which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under defined economic conditions, operating methods, and government regulations. If deterministic methods are used, the term reasonable certainty is intended to express a high degree of confidence that the quantities will be recovered. If probabilistic methods are used, there should be at least a 90-percent probability that the quantities actually recovered will equal or exceed the estimate.

[…]

Aramco bond prospectus, pages C-1 and C-3

A couple of important clues to Ghawar’s current production rate:

  • Gross reserves are defined as the total estimated petroleum remaining to be produced from these properties after December 31, 2017, but before December 31, 2077.
  • Proved Reserves are those quantities of petroleum which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward… If probabilistic methods are used, there should be at least a 90-percent probability that the quantities actually recovered will equal or exceed the estimate.

D&M’s proved reserve number for Ghawar was 48,254 million barrels of liquids (crude oil, condensate and natural gas liquids). That’s just a shade under 50 billion barrels to be produced from 2018-2077.

Ghawar: “The King of Giant Fields”

Discovered in 1948 and located some 200 km east of Riyadh, Ghawar has produced about five million barrels of oil per day in the past three decades. Last year, output from Ghawar accounted for 62.5% of Saudi Arabia’s crude production (about 8 MMbopd) and 6.25% of the world’s total oil production (about 80 MMbopd).

Sorkhabi 2010, “Ghawar: The King of Giant Fields”

Ghawar is “big”…

Figure 1. Ghawar relative to the State of Louisiana (Afifi, 2005)

Dr. Abdulkader Afifi described the geologic setting in his 2004 AAPG Distinguished Lecture…

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.

The main oil reservoir is the Upper Jurassic Arab-D limestone, which improves upward from mudstone to skeletal-oolitic grainstone, reflecting successive upward-shoaling cycles. The excellent reservoir quality is due to the preservation of the primary porosity, the enhancement of permeability, and the presence of fractures in the deeper and tighter parts. The oil was sourced exclusively from Jurassic organic-rich mudstones and is effectively sealed beneath massive anhydrite. The general absence of faults at the Arab-D level maintained seal integrity. Current production is almost 5 million barrels per day under peripheral water injection. The southernmost part of the field remains under development, with a final increment of 300,000 barrels per day on stream in 2006.

Afifi, 2005

The structural/stratigraphic setting couldn’t have been better if it was designed for the purpose of becoming a super-giant oil field. The presence of a positive paleo-structure, episodic reactivation of uplift and buried fault system provided for a high-energy depostional environment, critical to the formation and preservation of carbonate porosity and provided pathways from the underlying prolific Silurian source rocks. The Jurassic Arab-D formation is covered by a thick sequence of anhydrite, forming a very effective seal.

Figure 2a. Ghawar Jurassic stratigraphy. Sorkhabi (2010)
Figure 2b. Ghawar Paleozoic stratigraphy. Sorkhabi (2010)
Figure 2c. Ghawar E-W Cross Section. Afifi (2005)

The Arab-D carbonate is an incredible reservoir, particularly the skeletal-oolitic grainstone.

Figure 3a. Ghawar Arab-D litho-facies. Afifi (2005)
Figure 3b. Ghawar Arab-D litho-facies. Afifi (2005)

Ghawar is subdivided into five segments: Ain Dar, Shedgum, Uthmaniyah, Hawiyah and Haradh.

Figure 4a. Arab-D structure map originally published in Levorsen 1954. Greg Kroft, Inc.

The 1954 structure map holds up pretty well today.

Figure 4b. 3d representation of Ghawar structure. Afifi (2005).

In 1980, Aramco published all of the data anyone would ever need to calculate the original oil in place (OOIP) for Ghawar:

Figure 5. Arab-D reservoir properties. Sorkhabi (2010)

I planimetered the areas of the five segments and then calculated to OOIP using this equation:

Figure 6. Basic volumetric equation. AAPG

This is what I came up with:

Figure 7. Ghawar OOIP.

About 183 billion barrels of oil. I also estimated approximate recoverable volumes:

OOIP    182,773,625,918 bbl
Primary Water Drive 40%      73,109,450,367 bbl
Secondary Waterflood EOR 50%      91,386,812,959 bbl
Tertiary CO2 injection EOR 60%   109,664,175,551 bbl

In order to estimate Ghawar’s current production rate, I needed three numbers:

  1. Original oil in place.
  2. Current proved reserves.
  3. Cumulative production

We have estimates of OOIP and proved reserves, but the cumulative production is a bit “fuzzy”.

Beydoun in his book (The Middle East, 1988) reports that Ghawar had produced 19 Bbo by 1979. According to an article on Ghawar in the AAPG Explorer (January 2005), the cumulative production from the field was 55 Bbo. The International Energy Agency in its 2008 World Energy Outlook states that the oil production from Ghawar reached 66 Bbo in 2007 and that the remaining reserves are 74 Bbo.

Data on Ghawar reported in the past issues of Oil & Gas Journal indicate that when Ghawar came on stream in 1951 it produced 126,000 bopd but production steadily rose with a major boost soon after the 1973 oil shock so that the field’s 1975 output was 4.2 MMbopd; this reached a maximum production of 5.7 MMbopd in 1981. From 1982-1990, the Saudis lowered their oil production for market considerations (most notably the oil crash of 1985) and thus Ghawar’s production was 2.5 to 3 MMbopd during that decade. A senior geologist with Saudi Aramco, A. M. Afifi, in his 2004 AAPG Distinguished Lecture, reported production values of 4.6-5.2 MMbopd for Ghawar from 1993 through 2003. These data indicate that 50-65% of Saudi Aramco’s oil production has traditionally come from Ghawar. Apparently, one half of Ghawar’s production (2.0 to 2.7 MMbopd) comes from the Ain Dar and Shedgum areas, while Uthmaniyah provides 1 MMbopd, and another million barrels or so comes from Hawiyah and Haradh combined.

Sorkhabi (2010)

For my estimate, I used the AAPG number of 55 billion bbl as the cumulative production through 2004. I then used the production data cited in Afifi (2005) as a starting point for a decline curve.

Figure 8. Saudi Arabia and Ghawar oil production. Crude = Crude oil and natural gas condensate, NGL = Natural Gas Liquids other than wellhead condensate, MSC = Maximum Sustained Capacity, Rpt. Ghawar = Published reports of Ghawar’s production rate, DCA = Decline Curve Analysis

The Aramco bond prospectus noted that Ghawar’s MSC (maximum sustained capacity) was 3.8 million barrels per day (bbl/d) in 2018. Based on Aramco’s definition of MSC, it’s difficult to determine if that is a current value or an average value over the Saudi planning period (which appears to be 50 years). A 2% decline rate, typical of giant oil fields (Höök et al, 2009), fits a current MCS of 3.8 million bbl/d. A 1% decline rate fits a long-term average MCS of 3.8 million bbl/d. Based on the cumulative production and proved reserves, a 2% decline rate seems likely.

A 2% decline rate would lead to Ghawar producing just over 100% of its proved reserves (1p) from 2018-2077 (50.7 billion bbl). Recall that proved reserves (1p) is a >90% probability volume. Proved + probable reserves (2p) is the most likely volume (>50%). 2p is always a little (or a lot) bigger than 1p. As far as I know, Aramco has not published a 2p volume.

A 2% decline rate would lead to a recovery of approximately 65% of the OOIP from 1951-2077.

People have often asked, “How could Saudi Arabia ever replace Ghawar, the largest oil field in the world?” They already have replaced it… and Ghawar is not “fading faster than anyone guessed.” It’s declining as gracefully as befits the world’s super-giant oil field.  Aramco plans on being able to produce 12 million bbl/d as for more than 50 years and they have the capacity to do so.

Figure 9. With a relatively minor contribution from probable reserves and proved reserve replacement, Aramco can produce 12 million bbl/d until at least 2060. Abdulbaqi & Saleri (2004).

The Peak Oiler’s Nightmare

Almost all petroleum reservoirs exhibit exponential decline curves. They don’t fall off of a Seneca Cliff into the Olduvai Gorge. In aggregate, regional and global oil production has and/or will follow the same pattern, because it is just the sum of the individual reservoirs. Hubbert’s logistic function is an approximation of this basic principle of reservoir depletion.

Reality…

Reality… I can do this for any field in the Gulf of Mexico because I have easy access to the production data. I could also do it for just about any oil reservoir on Earth; I just don’t have those data literally at my fingertips. EI 330 is just the biggest field on the shelf (<500′ water depth), almost 500 million bbl of oil and 1.9 TCF of gas from September 1972 through January 2019. The field averaged 820 bbl/d in 2018. A rate vs time plot would look very similar; however rate vs cumulative production is what matters. EI 330 has also been cited as an example of abiotic oil… ROTFLMFAO!!!

Peak Oiler Fantasy…

Fantasy.

About the author

David Middleton has 38 years of experience as a geophysicist and geologist in the oil & gas industry, including a six-year exile into management. The vast majority of his career has been spent working the Gulf of Mexico. He has been a member of the Society of Exploration Geophysicists since 1981 and the American Association of Petroleum Geologists since 2004.

A note on comments: Abiotic oil aficionados are more than welcome to waste their time posting gibberish, but they won’t waste any of mine. Peak Oiler’s are also welcome to babble about Seneca Cliffs and Olduvai Gorges… And that might just merit wasting some of my time.

References

Abdulbaqi, Mahmoud, M. & Nansen G. Saleri. Fifty-Year Crude Oil Supply Scenarios: Saudi Aramco’s Perspective. CSIS, Washington D.C. February 24, 2004.

Afifi, Abdulkader. (2005). Ghawar: The Anatomy of the World’s Largest Oil Field. Search and Discovery Article #20026 (2005). Adapted from AAPG Distinguished Lecture, 2004.

Bardi, Ugo. “The Seneca Effect.” The Seneca Effect, thesenecatrap.blogspot.com/.

Blas, Javier. “The Biggest Saudi Oil Field Is Fading Faster Than Anyone Guessed.” Yahoo! Finance, 3 Apr. 2019, finance.yahoo.com/news/biggest-saudi-oil-field-fading-113434887.html.

Croft, Greg. The Ghawar Oil Field, Saudi Arabia. Greg Croft Inc.
http://www.gregcroft.com/ghawar.ivnu

DiChristopher, Tom. “Saudi Arabia’s Massive Oil Reserves Total 268.5 Billion Barrels, Even Bigger than Previously Known.” CNBC, 9 Jan. 2019, https://cnb.cx/2DaWzRv.

Höök, Mikael & Hirsch, Robert & Aleklett, Kjell. (2009). Giant oil field decline rates and their influence on world oil production. Energy Policy. 37. 2262-2272. 10.1016/j.enpol.2009.02.020.

Hubbert, M. King. “Nuclear Energy and the Fossil Fuels. Presented before the Spring Meeting of the Southern District, Division of Production, American Petroleum Institute, San Antonio, Texas, March 7-8-9, 1956.” Nuclear Energy and the Fossil Fuels. Presented before the Spring Meeting of the Southern District, Division of Production, American Petroleum Institute, San Antonio, Texas, March 7-8-9, 1956, 1956. http://bit.ly/2VBzJK2

Levorsen, A. I. Geology of Petroleum. Freeman, 1954.

Middleton, David H. “No… ‘The Biggest Saudi Oil Field Is [NOT] Fading Faster than Anyone Guessed’…” Watts Up With That?, 5 Apr. 2019, wattsupwiththat.com/2019/04/04/no-the-biggest-saudi-oil-field-is-not-fading-faster-than-anyone-guessed/.

Middleton, David H. “Demand for Aramco Bond Offering Breaks Records… Tops $85B.” Watts Up With That?, 9 Apr. 2019, wattsupwiththat.com/2019/04/09/demand-for-aramco-bond-offering-break-records-tops-85b/.

Paraskova, Tsvetana. “Saudi Arabia: We’ll Pump The World’s Very Last Barrel Of Oil.” OilPrice.com, 23 Jan. 2019, oilprice.com/Energy/Crude-Oil/Saudi-Arabia-Well-Pump-The-Worlds-Very-Last-Barrel-Of-Oil.html.

Peak Oil. “The Seneca Cliff of Oil Production”. Exploring Hydrocarbon Depletion. June 7, 2016. http://bit.ly/2D7pQwx

Rapier, Robert. “The Permian Basin Is Now The World’s Top Oil Producer.” Forbes Magazine, 5 Apr. 2019, http://bit.ly/2VzDVdb.

Saudi Arabian Oil Company (Aramco). Global Medium Term Note Programme. Base Prospectus dated 1 April 2019.

Sorkhabi, Rasoul (2010) The King of Giant Fields. GeoExpro, vol. 7, no. 4 (January-February 2010), pp. 24-29). Published, 09/2010.

Wald, Ellen R. Investing.com. “What Saudi Aramco’s Bond Prospectus Reveals About Its Oil Reserves.” Investing.com, 4 Apr. 2019, http://bit.ly/2D7pTbH.

via Watts Up With That?

http://bit.ly/2VwQvtI

April 10, 2019 at 12:07PM

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