Jul 28, 2022 at 9:15 am, updated Jul 28, 2022 at 4:25 pm
Reading time: 4 minutes
world of energy
The information received less comment than the “check” exchanged between Joe Biden and Mohammed bin Salman. However, it is more important for the energy future of humanity. During his meeting with the US President on July 16, the Crown Prince of Saudi Arabia announced that the country’s oil production is set to peak at 13 million barrels per day, meaning it will plateau before gradually declining. Once that level is reached, “the kingdom will no longer be able to increase its production any further,” the prince said in a speech.
According to a recent statement by the Energy Minister, the announced threshold should be reached in 2027. It is lower than what Saudi Arabia previously thought possible. In 2004, national oil company Saudi Aramco promised a US think tank, the Center for Strategic and International Studies, that it could produce 10 to 15 million barrels a day “at least by 2054.”
100 million barrels a day
Mohammed ben Salman’s surprising statement raises questions in a context where demand for oil continues to rise. Around 100 million barrels are gobbled up every day worldwide. From industry to chemicals to transportation, our societies remain extremely dependent on oil, the true “blood” of the global economy. Without rapid and sustained decarbonization efforts, demand is expected to reach 104 million barrels in 2026, according to projections by the International Energy Agency (IEA).
Saudi Arabia plays a key role in supplying the world with black gold. The country is the second largest oil producer in the world after the United States. In 2021, its production reached 10.7 million barrels per day (Mb/d). It also has the largest reserves of conventional oil on the planet.
An oil field operated by Aramco in 1981. Public domain/Ray Stevens via Wikimedia Commons
In a column for Bloomberg, journalist and energy specialist Javier Blas puts forward two hypotheses about the reasons that may have prompted the kingdom to revise its ambitions downwards. The country could expect a drop in demand due to the fight against climate change and therefore be reluctant to invest billions in expanding its production. But this explanation seems unlikely since the prince presented this threshold as “irrevocable”. “If money is not the obstacle, then geology must be,” says the journalist.
The kingdom is struggling to find enough oil fields to offset the decline in its aging fields. Prince Mohammed bin Salman’s announcement may reflect his concerns about his ability to profitably ramp up production. “If it is geology and not some form of pessimism about the future of oil demand that is holding back rising Saudi production, the world could face a difficult situation if consumption is stronger than expected,” warns the journalist.
Inevitable demise
Without an increase in Saudi production, “it is doubtful whether world oil supplies can keep pace with ever-increasing demand in the coming years,” he commented on twitter Energy specialist Maxence Cordiez, Head of European Public Affairs at the French Alternative Energies and Atomic Energy Commission (CEA). One may wonder if Saudi Arabia […] will even manage to reach 13 Mb/d in 2027 and sustain that production. »
The global landscape is hardly more reassuring. Half of the existing oil production comes from “mature” fields, which will therefore decline in the next few years. Many oil-producing countries – such as Algeria, Nigeria or Angola – have already been seeing their production fall for several years, while others – such as Russia – are expected to decline in the 2020s an inevitable peak in oil production in the 2030s due to lack of reserves.
For both Javier Blas and Maxence Cordiez, Mohammed ben Salmane’s announcement provides an additional reason to decarbonize our economy. “If the prospects for supply decrease, we either adjust our demand voluntarily and by design, or it has to be forced to adjust by the price,” says the French engineer. This last option, he explains, promises to be “economically painful, especially for the humblest.”
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Jul 28, 2022 at 9:15 am, updated Jul 28, 2022 at 4:25 pm
Reading time: 4 minutes