Oil Scene  

Syed Rashid Husain

On a sweltering (from European standards) Tuesday in mid-July, in the fields outside Pisa, Italy, a relatively good crowd had gathered to discuss and debate a geological theory, commonly referred to as peak oil. Many out there predicted the imminent end of the "Oil Age".

The peak oil movement — an unlikely alliance of geologists, physicists, oil industry consultants and environmental activists — seems to be gaining momentum and winning new converts. For the first time, some say, peaksters have begun to grab the attention of Washington and Wall Street.

The US Energy Secretary has now asked his advisory body, the National Petroleum Council, to investigate if oil supplies could keep pace with (the rising global) demand. Further, the US government accountability office, a non-partisan congressional watchdog, is due to release a study on peak oil this November. Interestingly, a congressional peak oil caucus has also been formed in the meantime, too.

Naturally with the theory of peak oil coming increasingly under discussion, the focus is bound to shift on Ghawar, the world's super giant well — accounting for more than six percent of the global oil needs and almost 52 percent of the total Saudi output. There are definite question marks in the global energy fraternity about Saudi Arabia, Ghawar in particular, continuing to produce at current levels. Hence when Saudi Arabia says, it is endeavoring to enhance its output capacity to above 12 million barrels a day, there are indeed skeptics to be found and in increasing numbers — everywhere.

Saudi Arabia however, has reasons to be confident about its continued capability in meeting the global needs. Indeed being the world's largest gas station, Saudi Arabia has onerous responsibilities to fulfill, Riyadh fully realizes. Most of the analysts now concur with Saudi Aramco when it says that there are still lots of acreage yet to be explored in the Kingdom and this in itself is of tremendous importance in countering persistent question hanging over the future output levels of Ghawar.

Countering the question marks, an Aramco spokesperson told the weekly MEED, "The Ghawar field is doing exceptionally well and is in a development stage, with decades of steady production to come at current or higher levels. Even in North Uthmaniya, the most mature area of Ghawar, the average well production rates have remained unchanged."

Along with maintaining production potential, average water cuts in the super giant field have also been harnessed. At Ain-Dar and Shedgum — two strategic areas in Ghawar — water cuts have remained steady at 37 percent.

"If we look at the overall Ghawar field, water cuts showed a moderate increase until 1999, approaching 36.5 percent. But our three-pronged efforts have since lowered the (water cut) level to below 35 percent, something that is not commonly seen in the industry," the spokesperson emphasized.

Aramco's efforts have been production optimization through the use of horizontal drilling, multilateral wells and re-entries, application of advanced diagnostics and extensive field surveillance.

Consequently, Ghawar continues to be the Saudi kingpin and would continue to do so, as "an extensive observation and drilling plan is in place at Ghawar and is supplemented with permanent down hole monitoring and intelligent well completions."

Aramco has reportedly two main targets, stemming the rate of decline in production and increasing the reserves recovery period. "Drilling in mature fields and development of new fields with long plateau lives will lower the composite decline rate of producing fields to about two percent," the spokesman added. As part of efforts to maintain reservoir pressure and increase oil recovery rates, Aramco has increased its under-balanced drilling activities. Ten water injectors have been drilled in the Haiwyah and Uthmaniya areas of Ghawar.

Saudi Aramco has also set its eyes on a major offshore development. Many believe the prime drivers of Aramco's offshore ventures (Manifa besides Safaniya, Zulur, Berri, Marjanand Karan), are the need to provide relief to the Ghawar field, in case that becomes necessary. The strategy could also help the Kingdom identify crude feedstock for its recently announced two joint venture refineries.

No one hence is arguing the fact that Ghawar is an aging field and Aramco is alive to the question and is taking steps to counter this rather natural process. Cutting edge technology is now offering new solutions for such fields.

Dr. Fadhil Chalabi of the London based Centre for Global Energy Studies, while talking to this correspondent mid-August emphasized, "Ghawar is not unique.

It is typical of mature fields to decline, yet with innovation and newer available technology, the natural decline could be countered. What is important is how Aramco acts to counter this natural decline."

Stemming the natural decline is thus possible, one can safely argue. The recent glasnost that we witness today, as far as Aramco is concerned, could go a long way in resolving the continued riddle and removing the haze of misconceptions about Ghawar in particular and the future Saudi output in general. The oil story is not coming to an end — soon.